Description
In 1992, one of the authors of this report published a book entitled La máquina de Guerra económica.
Spanish
Institute for
Strategic
Studies
MINISTRY OF DEFENCE
Strategic Dossier 162 B
Economic intelligence
in a global world
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Publishes:
MINISTERIO
DE DEFENSA
SECRETARÍA
GENERAL
TÉCNICA
© Author and plublisher, 2013
Publication date: february 2014http://publicaciones.defensa.gob.es/
NIPO: 083-13-250-1 (e-book edition)
ISBN: 978-84-9781-896-4 (e-book edition)
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5
ÍNDICE
Página
Introduction
Strategic intelligence and economic security ..................................................... 9
Introduction................................................................................................................. 9
Economic globalization and geo-economy ........................................................... 11
Strategic and economic intelligence ...................................................................... 15
Models of economic intelligence ............................................................................ 18
Strategic intelligence and economic security ...................................................... 22
In?uence as an essential element in economic intelligence............................. 25
Economic intelligence and cyber security ............................................................ 27
Goal of this strategic dossier .................................................................................. 29
Chapter I
The role of strategic intelligence in the modern world .................................... 33
Introduction................................................................................................................. 34
There are no longer any blue or red draughts on the new board .................... 39
The redesigned Kent trinity ..................................................................................... 45
Organisation: the Matrix has already been created .................................... 45
A truly strategic new product .......................................................................... 51
Strategic process: the new plan ...................................................................... 54
Conclusions................................................................................................................. 57
Chapter II
A study on economic warfare and associated problems ................................. 63
Introduction................................................................................................................. 64
Emergence of the founding principles of economic warfare ............................ 64
Violence and survival ........................................................................................ 65
Resources and territories ................................................................................ 65
The difcult dynamics linked to colonisation ............................................... 66
Página
Control of trade routes ...................................................................................... 67
The overlapping of war and the economy............................................................. 70
The in?uence of economic con?icts on the war’s direction....................... 70
Ideological ?ght and strong economic relationships between powers ... 71
Creation of structures dedicated to economic warfare .............................. 73
The geopolitical justi?cations of conquest ........................................................... 75
The conquest against commercial imperialism ........................................... 75
Conquest of living space ................................................................................... 77
Covering up economic warfare ............................................................................... 79
Dominance strategies ....................................................................................... 80
Recovery strategies ........................................................................................... 84
Change in the paradigm of economic warfare ..................................................... 86
Economic security policies ............................................................................... 86
The impact of economic strategies on increasing power .......................... 88
Limits of western ethnocentrism ........................................................................... 89
The contradictions between the United States and Europe ....................... 90
The bad efects of the liberal model ............................................................... 92
Conclusion ................................................................................................................... 93
Chapter III
Legal intelligence: the strategic value of the law in economic security ....... 97
Approach ..................................................................................................................... 99
The law as a collection of regulations ................................................................... 101
The law as an object of intelligence ....................................................................... 105
The law as an intelligence tool ............................................................................... 110
Conclusions................................................................................................................. 118
Chapter IV
Competitive intelligence: a new paradigm in the strategic direction of or-
ganisations in a globalised world .................................................................. 127
Executive summary ................................................................................................... 129
Introduction................................................................................................................. 130
CI and strategic direction ......................................................................................... 132
CI ?eld of activity ....................................................................................................... 133
Bene?ts that ci provides to the organisation ....................................................... 133
CI as a process ........................................................................................................... 134
CI as an organisational function or management approach ............................. 137
Essential stages in the ci working process .......................................................... 138
Planning ............................................................................................................... 139
Obtaining information ....................................................................................... 140
Analysis ................................................................................................................ 141
Communication, application of what has been provided and evaluation 142
How CI is organised ................................................................................................... 143
Reference countries in the CI practice. The situation in Spain. The range of
training. ................................................................................................................ 144
CI promoted from institutions .......................................................................... 145
Training ofer ...................................................................................................... 147
CI basics. The state of the art .................................................................................. 147
6
7
Página
Implications for organisations. Their use vs. Their protection ......................... 150
In?uence and security inside companies. ............................................................. 155
The illegal nature of industrial espionage and its negative consequen-
ces on CI in companies .............................................................................. 156
Implications for territories: territorial intelligence............................................. 159
Development perspectives ...................................................................................... 160
Chapter V
The economic risks of cyberwar ............................................................................ 167
Cyberwar and Cyber Con?ict: the Economic Dimension .................................... 169
Cyber as the Agent of an Economic Paradigm Shift ........................................... 173
The Cyber World of Tomorrow ................................................................................ 176
Threat Development – the New Economic Reality of Cyber Insecurity ........... 177
Evolving Attack Modes .............................................................................................. 178
The New Enemy: Collective Actors of Cyber Con?ict .......................................... 182
Measuring the cost of cyber con?ict: is quantifying possible? ......................... 184
Limits on Cyberwarfare Proper .............................................................................. 186
Active and Passive Cyber Defense ......................................................................... 190
An Emerging Comprehensive Information Security Management System .... 191
Creating a harmonized legal framework to combat cyber crime and cyber
con?ict .................................................................................................................. 191
Self-Protection ........................................................................................................... 192
Designing for Security .............................................................................................. 193
Standard-Setting and Best Practices .................................................................... 194
Protection of Critical Infrastructures ..................................................................... 195
Resilience in Cloud Computing and Mobile Computing ...................................... 196
National and International Cooperation in Cybersecurity.................................. 198
A Culture of Cybersecurity: Norms of Behavior for the Cyber Age .................. 200
Composition of the working group ........................................................................ 205
Strategic Dossier ....................................................................................................... 207
9
Introduction
Strategic intelligence and economic security
Eduardo Olier Arenas
Introduction
In 1992, one of the authors of this report published a book entitled “La
máquina de Guerra económica”
1
. In the ?rst pages the author warned about
the importance of economy in international relations, from the end of the
Second World War to the early stages of globalization, and its exchanges
that were changing the notion of con?ict itself. The author also warned
about the repercussions of the economic war which, unlike traditional
war, implies actions that are frequently invisible and decisive.
When the Cold War was over, Harbulot focused on the end of global polar-
ization and on the increasing American hegemony. After the collapse of
the Soviet Union, there was only one player left. A fact that worried Jean-
Jacques Servan-Schreiber
2
, who many years before, in 1968, categori-
cally stated: “We are neither witnessing a classical political imperialism
nor a wish to conquer, but a power that surpasses all limits because of
the diference of “pressure” between North America and the rest of the
world, including Europe”. In another passage of the book he said, “Acting,
how? Against whom?...General Motors is not Wehrmacht, the Bull case is
1
Harbulot, Christian. La machine de guerre économique. Etats-Unis, Japon, Europe.
Ed. Economica.
2
Servan-Schreiber, Jean-Jacques. El desafío americano (The American Challenge).
Plaza y Janés. 1968.
Eduardo Olier Arenas
10
not Munchen and the Concorde is not Sedan. We are witnessing the ?rst
great war without weapons or forti?cations”.
The French were not the only ones to be aware of this problem. The Jap-
anese also became aware of the importance of economy as a new niche
of dominance. Almost since the end of the Second World War, with their
armed forces destroyed and without any capability to rebuild them, they
started their way to industrial reconstruction to become one of the world
economic powers. Therefore, as time went by, in the early nineties, they
started their third industrial revolution with the powerful MITI conducting
ofensive and defensive economic operations. Along with Japan, other
nations also developed strategies to expand their economic, technolog-
ical or commercial power to other places. This expansion proved to be
defensive in some cases, especially in smaller countries such as Sweden.
Shortly before the publication of the above-mentioned book by Harb-
ulot, the Romanian US-based Edward Luttwak, an expert on geopolitics,
launched a new concept in The National Interest
3
magazine. The term
geo-economy emerged for the ?rst time. For Luttwak, “geo-economy is
maintaining old rivalry among nations using economic means instead of
military ones”. He expanded on it in his book The Endangered American
Dream
4
by saying “geo-economy measures progress considering the per-
formance of a product in the market instead of focusing on the advance
of a military force on the map”. And thus a connection emerged between
economy and geopolitics. Economic wars become an integral part of the
economic fact. Economics and politics joined in new war scenarios far
from traditional military con?icts.
As new scenarios, they become more and more complex. These new wars
become increasingly sophisticated. A fact rati?ed by another geo-econo-
my theorist, Pascal Lorot, in the early nineties.
Lorot, founder and editor of the French magazine Géoéconomie, de?ned
geo-economy in 1990 as “the analysis of economic strategies – espe-
cially commercial ones – designed by the States within the context of
those policies aimed at safeguarding national economies and some of
the elements inherent to them, mastering certain key technologies and/
or conquering certain sectors of world market regarding the production
or marketing of a sensitive product or set of products which provides its
holders (State or domestic company) with some power or international
projection and contributes to reinforcing their socioeconomic power”. A
power that would be exerted according to the “soft power” concept devel-
oped by Joseph S. Nye
5
.
3
Luttwak, Edward. ”From Geopolitics to Geoeconomics: Logic of Conflict, Grammar of
Commerce”. The National Interest, Summer 1990, pp.17-23.
4
Luttwak, Edward. The Endangered American Dream. Simon & Shuster, 1994.
5
Nye, Joseph. Soft Power. The Means to Success in World Politics, Public Affairs, 2004.
Strategic intelligence and economic security
11
The soft power strategy needed new techniques. One of them, old as the
war arts, was the use of intelligence services. In order to anticipate the
enemy, it was necessary to know its strategy and movements in advance.
Therefore, it was necessary to ?nd new methods in line with the new
times. Economic intelligence strongly emerged as the use of intelligence
services in the economic sector. The States needed to know what to do in
the new global world that was approaching.
Intelligence activities took a new turn with the emergence of the concept
“economic intelligence” as a set of coordinated actions for investigating,
processing and distributing information in order to make economic deci-
sions in the ?eld of economy. These actions focus both on the domestic
economy and on the business sector since the market globalization chal-
lenges companies. The defense of economic interests, on the one hand,
and the need to achieve economic advantages against competitors – at
state or business level – have been a decisive driving force for the devel-
opment of powerful economic intelligence tools at the service of national
interests and powerful transnational companies which nowadays control
the global economic scene.
The Institute of Strategic Studies’ report falls within this frame of refer-
ence since the defense of national interests must also include economic
aspects which are essential in the current world. A fact that Spain has ig-
nored for a long time and is now dealing with: the importance of economic
intelligence services beyond the protection of people or critical premises.
Economic globalization and geo-economy
We have brie?y mentioned geo-economy above. Let’s go back to this
concept.
While Edward Luttwak and Pascal Lorot did not expressly afrm it, they
insinuated that something had changed in the world scene to have econ-
omy as a determining element. Perhaps the authors, both experts in
geo-politics, were not able to notice the economic globalization move-
ments which were, in fact, the focal point of these changes because,
since the end of the Second World War, especially with the Bretton Woods
Agreements, a new world economic order was emerging. This new world
order was controlled by the US and this fact worried Servan-Schreiber.
The ongoing economic globalization is a movement, perhaps spontane-
ous, by which nations have become increasingly interdependent. In fact,
similar situations took place many years ago. For example, the Phoeni-
cians traded throughout the Mediterranean and the Romans expanded
their dominions by building impressive stone roads to move their troops
and extend their economy far away from their borders, from Egypt to
England. Egypt, for example, was the Empire’s granary for decades. Also
Eduardo Olier Arenas
12
Spain, the United Kingdom and Holland extended their dominions almost
throughout the entire world. But we should underline that, as far as econ-
omy is concerned, trade transactions and ?nancial movements were quite
limited. To such an extent that economic crises have been always limited
to certain areas and have not expanded all over the world. A fact that
still remains nowadays since globalization only makes sense within the
?nancial world. As far as trade is concerned, the world moves towards
globalization and basic commercial activities are carried out among bor-
dering countries or speci?c regions.
However, we should underline that globalization is not limited to the com-
mercial and ?nancial sectors but also includes cultural, social and polit-
ical aspects which give rise to a new order characterized by four main
features
6
:
• Important transfers of people from one country to another;
• Large capital ?ows across borders;
• Increasing international trade; and, especially
• Strong technological innovation.
Since 1945 we can identify six stages
7
towards globalization. The last one
has entered a new phase after the ?nancial crisis which started in the US
in 2008 and we do not know how it will evolve.
1945-1960. The great industrial machinery. After the Second World War,
the USSR, the United States and some European countries had power-
ful industries emerge during the con?ict: automobiles, railroads, avia-
tion, electronic industries, etc. In parallel, there was a real estate boom
coupled with a huge demographic growth: the so-called baby boom. GDP
doubled in all industrialized countries, as did purchasing power and con-
sumption of the middle class.
1960-1973. Geopolitical turmoil. It was a period of economic prosperity
and tensions caused by the Cold War. The period ended with the OPEC oil
embargo (Organization of Petroleum Exporting Countries). It was a dec-
ade of intense decolonization in a large part of Africa where more than
30 new countries emerged. It was a period of great changes that wit-
nessed the landing of the ?rst man on the moon, the revolutions in South
America, the assassination of Kennedy, the Vietnam War, and a series of
developments that ended in the French events in May 1968. The Pales-
tinian Liberation Organization (PLO) was also set up in this timeframe
and the Six Days War broke out in 1967 leading to the Israeli occupation
of the Palestinian territories of Gaza and the West Bank and of the Golan
Heights in Syria.
6
Olier, Eduardo. Geoeconomía: las claves de la economía global. Pearson-FT-Prentice
Hall. 2011.
7
Olier, Eduardo. Ibíd.
Strategic intelligence and economic security
13
1973-1982. Energy stan?ation. Economic stagnation plus heavy in?ation
is called stan?ation. The OPEC oil embargo provoked a 70% increase of
oil prices which caused high in?ation, economic stagnation and unem-
ployment. Post-war wealth came to an end. Many public companies were
privatized, especially in the USA. In this period, the Iranian revolution and
subsequently the Iran-Iraq war broke out.
1982-1989. Economic liberalism and market economy prevail. US President
Ronald Reagan formed his government in 1981. The supply-side econom-
ics started. It was an economic strategy aimed at encouraging the pro-
duction of goods and services based on the idea that supply generates
its own demand, according to Say’s Law, one of the economists from the
Classical School. This was followed by economic liberalization and tax
cuts. The US government’s revenues increased almost automatically due
to the rise in productivity and the boost of savings which led to a higher
rate of employment and sharp economic growth. Decreasing in?ation in-
creased consumption and reactivated bank credits. In England, Margaret
Thatcher, appointed prime minister in 1979, followed the same line of
action. A liberal wave spread all over the Western countries. Post-Sec-
ond World War Keynesian policy was no longer valid. The Berlin Wall col-
lapsed in 1989 and the two superpowers’ polarization came to an end. A
period, however, that witnessed one of the most serious ?nancial crises
of the century, the so-called debt crisis of many Latin American countries
that declared themselves unable to pay of their debts owed to interna-
tional bodies, especially the FMI (International Monetary Fund).
1989-2000. The interconnected society. On the night of 9-10 of November,
1989, the Berlin Wall fell down. It did not take too long until consequenc-
es were noticed; on 25 of December, 1991, Mikhail Gorbachov, known as
the Father of Perestroika, resigned. The Soviet Union and the “system of
blocs” collapsed as well. This phenomenon led to the opening of world
borders, the intensive use of information technologies and telecommu-
nications, the emergence of the Internet and the de?nite starting of eco-
nomic globalization. The world trade quickly ?ourished and there were
great technological achievements in every ?eld, particularly as a result
of the development of electronic microprocessors that revolutionized in-
dustry, particularly medicine. The world economy began to grow leading
to the globalization of the ?nancial markets. The world witnessed a soar-
ing economic growth which was halted by the so-called dot-com crisis,
technological companies that prompted a serious although controlled
capital crisis.
2000-2010. A globalized world amid a global ?nancial crisis. Japan, the
second largest economy in the world behind the United States, showed
signs of exhaustion in the early nineties, when the Japanese banks were
not able to withstand the loss of value of the real estate assets they had
several years before. Then, the subprime crisis emerged and the 2007
Eduardo Olier Arenas
14
global ?nancial crisis began to spill over from the United States into the
Western world in 2008. Economic wars became evident and the world
economic center of gravity shifted to the East. The Asian economy, which
accounted almost for 20% of global economy in 1970, exceeded 28% in
2007, the European community’s economy fell from 34% to 25% during
the same period, and the US economy remained at 33%. The 11-S bomb-
ings also changed power relations. The bipolar world preceding the fall of
the Berlin Wall led to a multi-polar world including regional actors such
as Brazil, China, India, Russia (BRIC countries), Turkey and Iran. Islamic
pressure as a very in?uential religious and cultural movement should not
be forgotten.
The post-crisis world will be diferent from the previous one; however it
is still too soon to forecast how it will evolve. In the economic ?eld, the
situation will be quite diferent. Geo-economy has become evident. The
current situation is marked by the convergence of political interests and
dominance of markets. Previous military actions led to more sophisti-
cated eforts; strategic capital investments, manufacture and technologi-
cal innovations of interest for the state, a leading position in the markets
instead of invading territories, custom duties, regulatory measures, de-
valuation of foreign currencies and other similar actions mark current
strategies.
In this new context, the previous elements have become obsolete and
the value of information no longer provides a competitive advantage. At
present, knowledge is necessary to anticipate the moves of countries
and businesses. Currently, intelligence is one of the keys, i.e. structured
knowledge for decision-making. Hence, economic intelligence is es-
sential for businesses and institutions in the geoeconomic context and
should allow us:
• To describe the competitive environment, i.e. to identify its factors
and elements. Competitors, products, regulatory requirements,
etc.; price structures and technologies included in this environ-
ment that may provide an alternative.
• To forecast the evolution of those competitive factors, including
disruptive technologies, new competitors, etc.
• To verify if the foundations of this strategy prove solid, if they have
been laid properly in accordance with the present environment
and the foreseeable one.
• Intelligence should respond to those aspects questioning the strat-
egy. In this context, proper assessment and monitoring technolo-
gies will be needed to collect the necessary information.
• To thoroughly identify threats and weaknesses, as well as strengths
and prospects according to the classic DAFO chart.
• To identify if the agreed strategy is no longer sustainable. This deci-
sion should be dynamic in order to be consistent with further actions.
Strategic intelligence and economic security
15
Strategic and economic intelligence
The term intelligence usually leads to mistakes, to confusion. And con-
fusion increases as adjectives are added. Each expert or group in this
?eld understands intelligence in a diferent way. We have identi?ed four
categories.
Apart from the intelligence services, which are well-known and identi-
?able bodies, there are other ?elds and concepts that interrelate with
each other. In the ?eld of intelligence, we have identi?ed ?ve categories
according to their technological nature (see Figure 1):
• Arti?cial Intelligence
• Knowledge Management
• Economic Intelligence
• Competitive Intelligence, and
• Strategic Intelligence
Figure 1.- Hierarchy of Intelligence Systems
The ?rst two categories are highly reliant on commonly used technol-
ogies. Arti?cial intelligence has been developing since the ?fties and is
mainly aimed at understanding how human beings think, learn and rea-
son in order to develop techniques and computer programs that try to
emulate human behavior. This was the origin of robotics, expert systems
and systems to help decision-making. All of these systems rely on tech-
nologies capable to learn.
Knowledge management systems, mainly related to expert systems,
were a breakthrough. These systems gave rise to a branch of engineer-
ing currently known as Knowledge Engineering that uses techniques fo-
Eduardo Olier Arenas
16
cused on several elements, including acquisition of knowledge, coding of
knowledge, assessment and tests of the coded system and implementa-
tion of the system. Coding is usually based on rules that, as they become
more complex due to multiple chains, they can turn into neuronal net-
works. This is another way of emulating how the human brain works and
the starting point for implementing other functions, including language
comprehension systems, computerized vision, etc. These techniques do
not represent what is understood as Economic, Competitive or Strategic
Intelligence but help to develop them.
There is a myriad of ways to de?ne Economic Intelligence, and its ap-
plications will be diferent depending on the country and on who in-
terprets it. In the United States and other Anglo-Saxon countries, the
term business intelligence refers to the activities related to knowledge
management, particularly the methods and models designed to ?nd
“hidden” information in databases for decision making. These include
marketing intelligence, which deals with the trade and marketing as-
pects of businesses within their competitive environment. The behav-
ior of current and potential clients is “standardized” that way in order
to increase sales or just to prevent those clients from looking to rival
companies.
The French de?ne
8
economic intelligence – intelligence économique – as
a series of coordinated actions aimed at investigating, processing and
disseminating useful information for the economic actors to be able to
exploit it. According to the authors, this de?nition includes two aspects.
On the one hand, scienti?c intelligence aimed not at “coming up with the
greatest possible invention” but at investigating accessible scienti?c
sources in order to ?nd new scienti?c ?elds which may provide further
economic advantages. On the other hand, competitive intelligence aimed
at tracking the activities of laboratories or plants of rival countries or
businesses in order to become aware of their breakthroughs and improve
one’s own competitiveness; for instance, pharmaceutical laboratories of
other countries.
Other non-Anglo-Saxon countries understand economic intelligence as
the state’s activities designed to defend its economic interests at interna-
tional level. Therefore, these activities are run by intelligence services, as
is the case in Spain.
Competitive intelligence, as the term suggests, is aimed at improving the
competitive position of countries or enterprises in the markets. However,
competitive intelligence has further developed within enterprises, where
it focuses on increasing their knowledge in order to improve their po-
sition. While knowledge provides an added value, intelligence provides
8
Martre, Henri. Intelligence Économique et Stratégie des Entreprises. La Documentation
Française. February 1994.
Strategic intelligence and economic security
17
power, as Helen Rothberg and Scott Erickson state
9
. In other words, com-
petitive intelligence looks for what is needed based on what is known.
Nevertheless, those authors do not consider other circumstances which,
in our opinion, should be included as essentials of competitive or even
strategic intelligence. The four essentials of the rhombus of intelligence
shown in Figure 2 should be established for efcient decision making:
determining assumptions (what we know that we know); latent knowl-
edge (what we don’t know that we know); information vacuum (what we
know that we don’t know), and the blind points (what we don’t know that
we don’t know). We can conclude that intelligence activities, regardless
of how they are labelled, must provide knowledge in every vertex of what
we de?ne as rhombus of intelligence. These aspects of intelligence are
interrelated. We must point out that if we link the vertical points, i.e. “the
things that we know”, we will be within the strategic environment of an
organization; if we link the horizontal points, i.e. “the things that we don’t
know”, we will be in the axis of intelligence. “Working” in both directions,
we would be able to provide intelligence with its strategic nature, which
is what makes the competitive diference.
Figure 2.- Intelligence Diamond
Strategic intelligence will therefore encompass the above-mentioned,
with the aim of providing information and knowledge in order to help de-
cision-making processes of a strategic nature. It should be born in mind
9
Rothberg, H. and Erickso, S. From Knowledge to Intelligence: Creating Competitive Ad-
vantage in the Next Economy. Butterworth-Heinemann/Elsevier. 2005.
Eduardo Olier Arenas
18
that some pieces of information may lead to non-desired rumours or con-
fusion, as shown in Figure 3
10
, instead of knowledge.
Models of economic intelligence
the concept of economic intelligence and strategic intelligence will be
used from now on without distinction, but assimilated to the French con-
cept, i.e. to the intelligence strategies for decision making in defence of the
State or companies’ economic interests. It is in this context that we can
make a foray into the situation of some of our neighbouring countries.
The situation in those countries could be assessed according to their
potential positioning – Figure 4, which shows the diferent intelligence
levels according to the objectives to be reached and their strategic level.
Strategic intelligence appears in those areas where this view is fostered.
Nevertheless, a summary description of the diferent systems will be
10
Olier, E. La inteligencia estratégica al servicio de la competitividad. Global Security
Magazine. Choiseul Institute, Spain. Summer of 2011.
Figure 3.- Information, Rumor and Knowledge
Strategic intelligence and economic security
19
made, taking into consideration the most developed countries: the U.S.,
Japan, Sweden, Germany, France and China.
Figure 4.- Strategy vs Economic Intelligence Goals
In its global economic expansion, the U.S. developed a strategy of domina-
tion based on four pillars: military, technology, economy and culture, with
the ?rst two and the last two somehow interconnected. Its ?nancial dom-
ination has been essentially based on currency. With the disappearance
of the pound as a currency of reference at the dawn of the Second World
War, the dollar decisively imposed itself on the markets. Firstly, because
of its reference with gold: the price of gold as against the dollar is $35
per ounce. Secondly, for US preponderance in Bretton Woods Agreements
and, especially, in the newly-born International Monetary Fund. With re-
gard to its cultural domination, the Hollywood ?lm industry, and even rock
music, have been strong soft power tools capitalized on by Americans.
All that encompassed by a perfect economy intelligence network linking
the Pentagon with other multiple actors: federal agencies that involved,
apart from traditional ones, the National Science Foundation or the Naval
Research Ofce; powerful think tanks and even prestigious universities
such as the MIT; security and intelligence companies such as Kroll or SRI
International; transnational companies and even legal ofces and lobbies.
All under the formula that “national security” equals “?nancial security”.
Eduardo Olier Arenas
20
The Japanese, for their part, as previously mentioned, developed their
economic intelligence strategy around the Ministry of International
Trade and Industry (MITI). It is a “glocalization” concept that implies the
need to protect its domestic market while fostering the expansion of
international trade. The Japanese market has been traditionally very
difcult for foreigners, and the large Japanese companies dominated
the electronic or car international markets. It was a system of econom-
ic intelligence developed in seven strategic lines perfectly coordinat-
ed from “top to bottom”, which involved companies and government
services:
• Global and local approach to markets.
• Commercial penetration tailored to the economic context and each
country’s way of life.
• Very selective information policy, also with the participation of
companies, on a daily reporting system basis.
• Long-term economic strategy.
• Integrated approach and coordination between large industrial
conglomerates.
• Selective release of information according to levels.
• Training programmes in companies for young professionals, on
a country-by-county-specialization basis, even mastering foreign
languages and understanding local cultural events.
Sweden is a small European country that, however, understood the
need to develop an economic protection system to boost the crea-
tion of large multinational corporations, while developing an inter-
national educational system based upon knowledge of at least three
languages per student; a means to compensate their geoeconomic
difficulties. In 2010, Sweden already had 30 companies in the Forbes
2000 ranking list: AstraZeneca in biotechnology, Telia Sonera in tel-
ecommunications, Ericsson in technology, Ikea in furniture and oth-
er household accessories, ABB in energy and capital goods, and so
on. This would not have been achieved if it had lacked a policy and
economic intelligence systems able to overcome many difficulties. A
“bottom to top” plan opposed to the Japanese one, since the State is
not the one to boost the system or the criteria to be applied, but com-
panies and their information systems, which aim at improving their
competitiveness.
The German system meets the characteristics of the German State: it
has a federal structure, and there is intertwined three-level coordina-
tion: administrations, financial institutions and industries, a scheme
that has given rise to natural alliances between industries and fi-
nancial institutions, where trade unions take part as active agents in
the march of economic progress. Agents that participate and do not
protest, since their power lies not in the former postulates of class
Strategic intelligence and economic security
21
struggles, but on becoming elected delegates in the definition of eco-
nomic policies. Thus, it is possible to establish government alliances
between parties competing from social democratic or Christian dem-
ocratic positions, and also alliances between very different trade un-
ions and businessmen, as well as with federal governments, where
consultancy firms and political or cultural foundations also partici-
pate. A plan that leads to:
• A permanent coordination among the diferent economic commu-
nities: banks, industrial groups, etc.
• Flexibility and a coordinated approach to diferent markets.
• A coordinated use of German immigrants abroad.
• A search for German common interests beyond disagreements,
which boosts intelligence activities.
In France, economic intelligence is a State issue. The well-known Carayon
Report, presented in 2004 by the deputy M Bernard Carayon before the Fi-
nance Commission of the National Assembly, under the title “Strategy of
National Economic Security”, is a clear sign of the importance that these
techniques and services have for French political forces. .
It was not the ?rst time that the French State took the implementation
of a national economic intelligence system very seriously. Nevertheless,
deputy Carayon’s report included some diferences. In its introduction, it
already mentioned a new situation:
“11-March attacks in Madrid – it said – have painfully reminded it to us: Eu-
rope is a privileged target for terrorists. If the bombs represent an essential
threat in our collective subconscious, the reach of the threats to our societies
is even greater. After twenty years, our country – without being fully aware –
has entered the age of information society. The production of national wealth
currently lies, apart from in the quality of the people, in the bulk of legal,
?nancial, commercial, scienti?c, technical, economic or industrial informa-
tion. The threats against our productive structure have also evolved. Now,
these are vaguer”.
He proceeded:
“The exacerbation of international competence transforms the strategic in-
formation of companies into a real “economic war”.
The French system, for many years now, is perfectly designed and tailored
to the new circumstances and needs. Apart from state agencies, leading
companies on strategic intelligence, and a whole network of Chambers
of Commerce that try to defend French interests inside and outside the
country, participate in this system. It is a “top to bottom” structure, sim-
pler than the Japanese one. It is an intelligence structure well interwoven
in a context of very powerful and well-developed soft power all around
French-speaking countries; a context of 58 Member States, along with
Eduardo Olier Arenas
22
another 20 observer states. A clear commercial power supported by the
hard power that comes from French military capabilities.
I will ?nish this review with a comment on China – a new and signi?cant
player. However, this country is always involved in international con?icts,
and the US and England have systematically charged it with illegal prac-
tice before the WTO.
Moreover, China has a powerful and sophisticated economic intelligence,
which integrates the following aspects:
• It is focused on the search of intangible properties: copyright, pat-
ent rights, etc.
• It includes networks of executives from Chinese multinational
companies who work with big corporations selling them technol-
ogy and services.
• It has a group of ofcials highly trained in cyber security (both
for defense and attack) which works in close cooperation with
universities.
• A decentralized system, with well-de?ned control commands and
a vague division among intelligence services, companies and mili-
tary defense structures.
• It has services to speci?cally protect strategic industries.
Strategic intelligence and economic security
Intelligence systems — particularly those of strategic intelligence — are
essential in today’s complex world. However, these systems and the or-
ganizations responsible for them usually focus on security. Thus, most of
them focus on defensive espionage or on protection of facilities or ser-
vices very valuable for the State, companies or other organizations. To
this aim, they follow the intelligence cycle and underscore analysis as
a means of specifying information and knowledge in order to make de-
cisions. The scheme in Figure 5 is applied, taking the available data as
a base to reach the knowledge that will make decisions easier, if made
according to the intelligence cycle (Figure 6).
Figure 5.- Data to Knowledge Process
Strategic intelligence and economic security
23
Figure 6.- Intelligence Cycle
However, a question which is obviated most of the time is that intelligence
results from a strategic process; a model of economic intelligence cannot
be implemented without strategy. If intelligence is the capability of under-
standing and interacting with the milieu in order to act to obtain competitive
advantages, it could not be tackled without a de?ned and ?exible strategy
to adapt to the variations in the milieu. This process should take into ac-
count, at least, the following aspects:
• To de?ne the strategy, including the approach and the task of the
organization.
• To have the capability for abstract reasoning and understanding of
the multiple interactions existing in complex environments, includ-
ing a capability of judgment and knowledge development.
• To have the capability to detect substitute products or disruptive
technology and to understand cultural or demographic changes.
• To develop the capability to be ahead of changes in regulatory or
economic conditions of market dealers in order to launch ofensive
or defensive actions.
Intelligence must be ?rstly strategic and then economic. Then, it will be
competitive or solely reduced to the analysis previous to knowledge ac-
quisition through the appropriate techniques and technologies. These
state level techniques will be diferent depending on the terminology:
SIGINT, signals intelligence — the process of tapping electronic commu-
nications transmitted through radars, radio, or weapon-control-systems;
Eduardo Olier Arenas
24
HUMINT, human intelligence that obtains information through persons;
MASINT, that is to say, the use of intelligence to make reports on the tar-
gets; GEOINT, images acquisition including those coming from satellites;
OSINT, intelligence from open sources, especially from mass media and
the Internet and IMINT, or image creation through electronic systems
such as radars or electronic optics-based systems, etc.
The strategic intelligence, then, will focus on the established strategic in-
terests and on de?ning the goals to be achieved. These goals, in a geoeco-
nomic context will be aimed at
11
:
• Making analyses of economic forecasts in complex competitive sit-
uations and understanding the political and geostrategic circum-
stances involved.
• Knowing the legal and regulatory aspects in detail and assessing
foreign policy interests and international relations that could con-
dition them.
• Developing strategic programs and monitoring the achievement of
goals.
• Making a detailed analysis on economic and commercial forecasts
in times of market changes or new political situations.
• Making assessments on threats and risks, and establishing time-
ly criteria and security systems, both real ones and those coming
from the Network.
Figure 7.- Strategic Intelligence Methodology
11
Olier, Eduardo. Geoeconomía: las claves de la economía global. Pearson-FT-Prentice
Hall. 2011.
Strategic intelligence and economic security
25
This scheme cannot be isolated from the analysis of the milieu, and
should make a STEEP analysis considering all the elements: political and
geostrategic factors, regional circumstances, strategic challenges, etc.,
as shown in ?gure 7.
12
Here is where intelligence activities connect to security — economic in this
case —. This would be the Swedish case. A small country, though leader in
strategic and competitive intelligence, since it does not consider econom-
ic intelligence as a military category but as a means to ensure peace and
economic prosperity. Therefore, Swedish multinational companies, banks
and the government (and diplomatic missions abroad) share information
and establish strategies to improve the country’s competitiveness. Also
universities, like Lund University, develop doctorate programs on these
issues. Moreover, other small and middle-sized companies develop dis-
ruptive technologies while sharing information as an economic security
and competitiveness strategy. This methodology shows the success of
combining intelligence and economic security.
In?uence as an essential element in economic intelligence
However, all the above-mentioned facts are not enough to develop an
efective program on economic or strategic intelligence. Currently, the
powerful countries and the most important companies stake their in-
?uence capabilities that go beyond what is commonly understood by
lobby. In this sense, in?uence included within the context of strategic
intelligence has three components that should not be implemented
separately.
Therefore, strategic intelligence, regardless of its goals, is based on de-
?ning a strategy and is achieved by implementing coordinated actions in
line with a program based on goal-achievement. If these goals are com-
plex, they should not be considered a series of short-term actions, since
strategy is not only that. Thus, the diference between lobby, corporative
diplomacy and strategic in?uence can be expressed this way:
• Lobby, characterized by punctual, very short-term actions and that
should never be used.
• Corporative diplomacy, characterized by actions carried out to de-
velop a concrete in?uence program and uses of lobbies and biased
information with the intention of misinforming.
• Strategic in?uence, characterized by a long term strategic pro-
gram and carried out through lobbying coordinated actions (if nec-
essary), social learning (actions in the socio-cultural ?eld), advoca-
cy (actions of public political in?uence), development of in?uence
12
Olier, Eduardo. Ibíd.
Eduardo Olier Arenas
26
networks, alliances, communication policies (and counter-commu-
nication or counterintelligence), and the large-scale use of social
networks (under a de?ned strategy).
Thus, in?uence should be understood as the combination of perfor-
mances — either direct or indirect, open or closed — regarding persons,
groups, organizations and/or States with the aim of obtaining more credit
or in?uence, and channeling decisions towards the desired direction
13
.
In?uence is, therefore, a power strategy that takes advantage of diverse
tools, with communication strategy being of paramount importance,
since communication helps to pass on messages based on arguments,
far away from merely “transmitting news”. In?uence is, above all, a ques-
tion of content: in order to be able to in?uence there must be a message,
especially a coherent message.
And here is where diferent techniques and procedures come into play.
In?uence is part of the intelligence strategy. It is not an out-of-the-meth-
od activity. So, tools like economic diplomacy will have to be used. That is
to say, a series of activities aimed at achieving favorable positions in the
international economic ?eld, including complex investment structures,
markets, institutions, protection and economic security, and the whole
global economic framework. This framework cannot be improvised; on
the contrary, it requires structured and constant activity and medium to
long term actions.
Likewise, social learning techniques are essential; they are aimed at
achieving a socio-cultural in?uence and developing a soft power program
that can be implemented in the ?eld of Universities, NGOs and social
networks. Social learning has not been designed only for states. Large
companies like Microsoft, Google, Twitter, etc., use it profusely, especially
in market-oriented techniques; this has resulted in the new concept of
social marketing and in the appearance of network communicators: the
community managers.
We are talking about a strategy of power. That is, a capability to “domi-
nate” others through the capability to exert in?uence on their conducts
and feelings. This has resulted, in the economic intelligence ?eld, in a
“soft” way of imposing a strategy aimed at achieving some commercial
or economic control goals. And it has also resulted in a way of defending
oneself earlier from the “attacks” of other competitors. All in all, this is a
sophisticated implementation of the soft power, and considering the case,
of the smart power or the hard power, according to Joseph Nye
14
, who con-
nects leadership with power under the three following meanings.
13
Revel, Claude. France, a country under influence? Vuiver. 2012.
14
http://www.hks.harvard.edu/netgov/files/talks/docs/11_06_06_seminar_Nye_HP_
SP_Leadership.pdf.
Strategic intelligence and economic security
27
• Leadership based on soft power, which transmits values on three
levels:
• Political view: attractive for the followers and efective concerning
ideals and capabilities.
• Communication: persuasive, both for close and distant people,
through symbols and messages.
• Emotional: from the personal point of view: self-con?dence and
self-control and with regard to others by managing relations with
charisma.
• Leadership based on hard power, which is directed toward a trans-
actional leadership with:
• Organization capability: managing rewards, information systems
and external and internal in?uence circles, both bureaucratic and
institutional.
• Political skills: intimidation, pacts, purchase and competence.
• Leadership based on smart power, which will be a combina-
tion of the two above-mentioned. Deeply based on emotional
intelligence to understand the development of the environment
(which will require wide political capability) and make the most
of the situation by anticipating the likely trends and, at the
same time, adapting the style to the context and the needs of
the followers.
Economic intelligence and cyber security
The current economic world cannot be understood without Internet tech-
nologies and developments. It is the environment where a real and true
economic – or better said, ?nancial – globalization occurs. It is where
movements of capitals or ?nancial operations are made in real time,
moving foreign currencies and all kinds of ?nancial operations from one
place to another on the planet.
However, the Net is not just the virtual environment of economic afairs.
It is also the virtual environment of the criminal afairs. Where attacks
can be launched against critical infrastructures or where patents can be
stolen or just where one can steal from unprotected or scarcely protected
bank accounts.
As a reference, we can mention that one study carried out in 2011
about the situation in the United Kingdom
15
showed that the economic
losses caused by the cybercrime reached as much as £27 billion the
15
The Cost of Cybercrime. A Detica Report in partnership with the Office of Cyber Security
and Information Assurance in the Cabinet Office. February 2011.http://www.detica.com/
uploads/press_releases/THE_COST_OF_CYBER_CRIME_SUMMARY_FINAL_14_Fe-
bruary_2011.pdf
Eduardo Olier Arenas
28
previous year. The cases ranged from industrial espionage to patent
stealing, commercial bids stealing in international tenders, opera-
tions to acquire or sell companies, industrial design stealing, market-
ing campaigns, and a long list of information valuable in the business
world. According to this study, the computer services companies were
the most attacked, with losses reaching up to £2.5 billion, followed
by financial services, with £2.3 billion and electronic companies, with
£1.7 billion.
Actually, the exact economic cost of losses caused by the espionage from
the Net is unknown. A former study prepared for the US Congress in
2003
16
raised the ?gure to US$226 billion all over the world; and add-
ed that losses due to attacks from the Net of highly valued companies
could reach 5% of their value in the days following the intrusion. All this
deployment materializes in diferent practices, all of them punishable,
such as:
• Cyber-attacks on sensitive information of countries. This was the
case of the “virus” Stuxnet that prevented the Iranian nuclear plant
from coming into service.
• Information stealing by employees. The case of soldier Bradley
Manning and the leakage of data to the page Wikileaks.
• Attacks on browsers as a means to access users’ systems.
• File and database stealing, including bank phishing, carding or
skimming systems and other similar techniques.
• Security in the cloud. All the systems placed in the Cloud Comput-
ing services add to the concern on the security of the “traditional”
cyber space.
• Risks for smart telephones and tablets.
• Attacks on corporate networks.
More recently, in January 2012, the prestigious magazine Wired
17
pub-
lished an amazing piece of news concerning the dimension of what
they called cyber-crime. The piece of news referred to a lecture given in
July 2011 in the American Enterprise Institute, Washington, by General
Keith Alexander, director of the National Security Agency and Interna-
tional Security and the U.S. Cyber Command, in charge of protecting the
country from cyber-attacks. The General warned about cyber-attacks
that caused “the greatest transfer of wealth in history”, and mentioned
?gures of statistics of computer safety companies as Symantec Corp.
that insisted that stealing copyright in US companies caused an eco-
nomic loss of US$250 billion yearly. He estimated that, at a global lev-
16
Cashell, B., Jackson, W. D., Jickling, M. and Webel, B. The economic impact of cyber-at-
tacks. CRS Report for Congress. Government and Finance Division, April 2004. http://
www.cisco.com/warp/public/779/govtaffairs/images/CRS_Cyber_Attacks.pdf.
17
http://www.wired.com/threatlevel/2012/08/cybercrime-trillion/all/.
Strategic intelligence and economic security
29
el, such a cost could reach a trillion dollars, nearly the amount of the
Spanish GDP; urging the US Congress to develop an active strategy
with enough means to ensure a cyber-defense program in the United
States. Another report by the digital security ?rm McAfee Inc.
18
was
also mentioned. This report shows the dangers of criminal activities in
the Net for the economy.
Once again, China was mentioned as one of the most feared origins of
these cyber-attacks; talking even about a digital Pearl Harbor that could
paralyze the entire country. And the Bloomberg agency was told that a
group of Chinese hackers, known as Byzantine Candor, had allegedly sto-
len classi?ed information from about twenty organizations, including the
renowned company Halliburton Inc.
This situation recently prompted the Spanish Ministry of Defense to es-
tablish, on the Minister’s initiative, the Mando Conjunto de Ciberdefensa
de las Fuerzas Armadas (MCCD), the Armed Forces’ Joint Command for
Cyber Defense. Other less developed countries, such as Colombia, have
long been sensitive to these threats that are a reality today. Thus, it was
there where the Minister of Defense was entrusted with the leadership of
all the activities related to the defense of cyber space, creating under its
command the colCERT (Equipo de Respuesta a Emergencias Informáticas
de Colombia) in 2009
19
.
This whole scenario afects the economic interests of any country or even
company and has to be taken into account whenever a consistent strategy
of economic intelligence is to be developed.
Goal of this strategic dossier
For the ?rst time, the Instituto Español de Estudios Estratégicos tackles the
problem of economic intelligence. Besides, the title of this Dossier leaves
little room for doubt about its purpose: The economic intelligence in a glo-
balized world. The globalization and the geoeconomic problems demand
special attention to be drawn on this issue. Furthermore, this issue is also
related to the needs of the national defense of any State. Economic intel-
ligence is not only an issue of intelligence or diplomatic services posted
abroad, it is an issue that, as we mentioned at the beginning of this article,
is linked to any country’s geoeconomic strategy and, therefore, establish-
es a new scenario of con?icts where the economy is set as the scenario
of confrontation.
18
Unsecured economies: Protecting vital information.http://www.mcafee.com/us/re-
sources/reports/rp-unsecured-economies-report.pdf.
19
http://www.mindefensa.gov.co/irj/go/km/docs/Mindefensa/Documentos/descar-
gas/estudios%20sectoriales/Notas%20de%20Investigacion/Ciberseguridad%20y%20
ciberdefensa.pdf.
Eduardo Olier Arenas
30
However, although the issue of economic intelligence is wide, in this ?rst
Dossier, all problems are presented; the reader can ?nd highly quali?ed
authors on the subject we are dealing with.
Therefore, this Dossier starts with a general overview of the problem,
focusing on the most complex element, which is strategic intelligence.
Professor Díaz Fernández presents the historical evolution of strategic
intelligence, moving deeper into the current situation, particularly in
the new context aroused after the 11S attacks on the Twin Towers in
New York.
Professor Harbulot, already mentioned in these pages, director of l’École
de Guerre Économique, and acknowledged international expert on eco-
nomic intelligence, widely certi?ed economic con?icts, their causes and
their context. In a chapter entitled Estudio de la guerra económica y las
problemáticas relacionadas (Study of the economic war and related prob-
lems) he masterly clari?es this relation. Not only does he refer to the
economic space, but he also frames it within the ideological ?eld – a key
geoeconomic aspect – since cultural and ideological factors are essential
pieces in the movements of command and in?uence. It is a deep and very
detailed study of all the context of economic war that gives authorized
justi?cation for the Armed Forces to take seriously this new dimension of
non-armed but determining con?icts that occur in globalization.
Under this situation of economic intelligence, we will now deal with three
essential aspects. The ?rst one, mainly forgotten on many occasions, re-
fers to the role that the Law has to play in these new scenarios. It is es-
sential that, as in armed con?icts, economic war has its rules. Professor
González Cussac stresses the “value” of the Law within the context of
economic intelligence. This implies – according to his words – develop-
ing self-protection and cooperation rules, apart from a regulation capable of
ofering a greater capability to compete on equal terms with the other coun-
tries. In accordance with what González Cussac de?nes as a fourth-gen-
eration war. An interesting and new concept to be taken into account.
With this outlook, more focused on the legal aspect, the problems of com-
petitive intelligence are dealt with. La Inteligencia para Competir, nuevo
paradigma en la dirección estratégica de las organizaciones en un mundo
globalizado (The Intelligence to Compete, a new model of strategic manage-
ment of the organizations in a globalized world) is the title of Professor Fer-
nando Palop’s chapter. Once Professor Palop reviews the state of the art,
its meaning and what is made in other environments, he also tackles the
issue of in?uence, above-mentioned in this introduction as an essential
tool in the practice of economic intelligence. This in?uence is connected
to security, given that, as Professor Palop states, exerting in?uence is not
only an activity of ofensive nature, but essentially a defensive attitude on
many occasions.
Strategic intelligence and economic security
31
This Dossier ends with the contribution of Ambassador Henning Wegener.
His knowledge of the problems occurred in the fourth space puts cyber
security and the new concept of cyber peace into context.
We believe that the reader has this issue at sight, although being a ?rst
step in the way to better understand the context of economic intelligence
achieves the goals set: providing a global perspective on such an impor-
tant problem like this one in the current world.
33
Chapter I
The role of strategic intelligence in the modern world
Antonio M. Díaz Fernández
University of Cádiz
Abstract
The aim of this chapter is to explore what is meant by strategic intelli-
gence in the early twenty-?rst century. Created during the Cold War, de-
cision-makers’ intelligence needs were faced by intelligence structures
focused on avoiding strategic surprises. Generating real knowledge of
the global scenario and even trying to modify it is a task that is now re-
quired by the intelligence agencies. Monitoring the environment without
falling into the fallacy that technology can work by itself without the as-
sistance of the policy maker, who must tell them where and what to look
at, would be a fundamental error in the construction of a new model of
intelligence. This new model will have economic intelligence as one of its
key elements and will represent the struggle between nations and global
corporations at the beginning of this century.
Key words
Intelligence, strategy, planning, strategic surprise.
Antonio M. Díaz Fernández
34
Introduction
I hope that the reader who begins reading this section of the Strategy
Dossier comes previously equipped with their own de?nition of strategic
intelligence. If intelligence is based on prior warnings I honestly believe
this should be the ?rst of them. As Heidenrich states
1
, although we all use
the term ‘strategic intelligence’ extensively we would be no better of if
we had to give a more or less re?ned de?nition of it. Probably, after a brief
thought, we would say that it has something to do with decision making
and strategy, in order to go on to de?ne it by its opposite, that is, it is not
the intelligence that is aimed at solving today’s problems, it is not tactical
intelligence, but it is that which goes further, that which is focused on
giving support to a country’s national strategy.
I also hope the reader will permit me not to enter into the usual accu-
mulative relationship of de?nitions of the word intelligence that other
authors in the past have already done so well
2
, because the challenge
of this chapter is two-fold: on the one hand, to de?ne what strategic in-
telligence is in order to subsequently re?ect on what its future will be,
and on the other hand, in this regard, what place economic intelligence
should occupy. Therefore, as a starting point, we can basically assume
that information is equivalent to data and that intelligence is a prepared
product that enables decision making with the least possible uncertainty.
This re?ection on strategic intelligence begins from here.
However, I do believe it necessary to begin with some prior re?ection on
what strategy, planning and management are. States are complex organ-
isations that manage innumerable resources with a purpose and a use,
the most basic of them all being to guarantee security and a food supply
for its citizens. But even to guarantee these basic functions a strategy is
needed, given that resources are limited and there will be other organisa-
tions (States or not) in continuous competition for them.
Paraphrasing the disappearing Cheshire cat in its dialogue with Alice, if we
do not know where our organisation is going it makes no diference which
path (strategy) we take. That is why I understand that strategy has to re?ect
the thoughts and actions of an organisation regarding its environment. That
said, an organisation or a country can plan its future without necessarily
having to commit to a formal plan; even though plans are made they do not
have to be activated and turned into the path to be followed.
1
Heidenrich, John G., The State of Strategic Intelligence. The Intelligence Com-
munity’s Neglect of Strategic Intelligence, 2007https://www.cia.gov/library/cen-
ter-for-the-study-of-intelligence/csi-publications/csi-studies/studies/vol51no2/
the-state-of-strategic-intelligence.html
2
Richelson, Jeffrey, A century of spies. Oxford, Oxford University Press, 1997; Lowen-
thal, Mark Intelligence: From secrets to policy, Washington DC: CQ Press, 2006.
The role of strategic intelligence in the modern world
35
But after a strategy is accepted its management – which is what a State
does – would not have to be any more than putting the organisation at the
service of the strategy; therefore the management itself does not consti-
tute a strategy. Lesourne
3
maintained that “a strategic decision is either
one that creates an irreversible situation for the entire organisation or
one that anticipates an environmental change apt to provoke such an ir-
reversible situation”, although I do not believe that this assimilation is
immediate, as the Theory of Organisations covers, it is certain that the
variety of options available after choosing is successively limited. Hence
the idea that “strategic management” is almost a pleonasm and that “pro-
spective strategy”, if not an oxymoron, is at least a contradictory although
compatible term, since some prospects are strategic and others not. I am
not speaking about strategic decisions, but about decisions taken consid-
ering that we have “strategic” intelligence, because without intelligence,
strategy is merely an abstract game with blue and red teams on a board
without de?ned limits.
We are so eager to label a concept or phenomenon with a new name –
as if ?nding it a name would make all the qualities for understanding it
stick – that we do not pay the necessary attention to its de?nition, inter-
action and functioning. That is why I consider the use of the term “strate-
gic” inappropriate as an adjective to classify any concept, idea, process,
relationship or product that is relatively important. Although this is al-
most impossible to get around, what we can do is prevent its immediate
association with irreversible decisions that an organisation adopts. Be-
hind this suspicion there lies a certain mistrust motivated by the difcul-
ty that I have qualifying the word “intelligence” with complements that
are already typical, which are inherent to it; because if it is not proactive,
what is it if not intelligence? The problem with “strategic”, as Heidenrich
states
4
, is that it is difcult to abandon decades of routine during the Cold
War of abusing the use of the strategic concept and, what to say about its
direct assimilation in the “long term”.
The always helpful ofcial documents do not throw any light on what
strategic intelligence is. From the few ofcial de?nitions that we can ?nd,
that of the Pentagon tells us that it is “the intelligence that is needed for
the formulation of strategy, policy, plans and military operations at a na-
tional level and on the battle?eld”
5
. However, this de?nition stands alone
in the American government outlook since not even the two basic docu-
ments for North American consumers of intelligence include a de?nition
3
Lesourne, Jacques, “Plaidoyer pour une recherche en prospective”, Futuribles, No.
137, November 1989.
4
Heidenrich, opus cit.
5
Entry “Tactical Intelligence”. Joint Publication 1-02 (JP 1-02), Department of Defense
Dictionary of Military and Associated Terms, Washington, Department of Defense, 12 April
2001, p. 526.http://www.dtic.mil/doctrine/new_pubs/jp2_01.pdf
Antonio M. Díaz Fernández
36
of this concept
6
. In addition it has an essence very near to that which we
might have found during the Cold War, an era with very diferent ?gures
and needs to those at the beginning of the 21st century.
Nor does a text that, a priori, should re?ect it, ONCIX: Foreign Spies Steal-
ing US Economic Secrets in Cyberspace: Report to Congress on Foreign Eco-
nomic Collection and Industrial Espionage (2009-2011) of October 2011,
?nd space to de?ne it
7
. Even an academic such as Jan Goldman
8
, who
dedicated one of his works to specifying the terminology used in the study
of intelligence, does not provide clarity in his dictionary Words of Intelli-
gence. The word strategic intelligence says to us that it is intelligence that
is needed for the formulation of political and national plans at a national
and international level and that its components would include aspects
such as biographical, economic, sociological, transport, telecommunica-
tions, geographical, political and scienti?c and technical intelligence data
but does not provide added value that may be relevant for the debate that
I am trying to establish.
A representative case of the changes in the last decade, at the time,
appears in Spain’s very famous Defence White Paper of 2000
9
that
brought us into the group of countries that were developing these types
of thoughts. In our baptism into publicised defence planning we can see
how reference is made 217 times to the words “strategic” and “strategy”.
From here I would conclude that we will ?nd an intense and extensive
reference to intelligence as an essential tool to deal with its development;
however the word “intelligence” does not appear in the entire text and we
have to be content with the 66 times where the term “information” ap-
pears. Without doubt, use of the word “intelligence” was not usual more
than a decade ago, still very marked by the Cold War halo of secrecy,
but its non-existence and therefore how our policy makers thought that
“strategy” should be carried out is still remarkable.
Perhaps the White House National Intelligence Strategy of 2010
10
pro-
vides us with a clue, in which the only reference, indirectly, suggests to
us that: “strategic intelligence [...] informs executive decisions since this
is support for the decisions on internal, national and local security, tribal
governments, our troops and essential national missions. We are work-
6
Neither U.S. National Intelligence: An Overview, 2011.http://www.dni.gov/files/docu-
ments/IC_Consumers_Guide_2011.pdf nor the older CIA: A Consumer´s Guide to Intelli-
gence, 1999 include it.
7
ht t p: //www. dni . gov/f i l es/document s/Newsroom/Report s%20and%20
Pubs/20111103_report_fecie.pdf
8
Goldman, Jan, Words of Intelligence: A Dictionary, The Scarecrow Press, Oxford, 2006.
9
White Paper on Defencehttp://www.defensa.gob.es/politica/seguridad-defensa/
marcolegal/
10
National Intelligence Strategy. White House 2010, pp. 15http://www.whitehouse.
gov/sites/default/files/rss_viewer/national_security_strategy.pdf
The role of strategic intelligence in the modern world
37
ing to improve integration into the intelligence community at a time of
strengthening the capacities of our intelligence community members. We
are strengthening our collaboration with foreign intelligence services and
maintaining strong links with our nearest allies”. But above all because it
includes an important element when it maintains that “the security and
prosperity of our country depends on the quality of the intelligence we
gather and the analysis we conduct, our ability to evaluate and share this
information over time and our ability to counteract threats”.
It includes two aspects such as security and prosperity. Regarding the
?rst, we can assume a certain impact of a preventive nature attributed
decades ago to intelligence, that is, to avoid the strategic surprise that
Posner
11
analysed so well, but the second has always carried less weight,
signi?cantly less. However, we can ?nd ofcial documents from the sev-
enties in which it is assumed that “our foreign policy can bene?t if a more
careful and analytical examination is conducted on the reality of other
States”
12
. And it is speci?cally in economic intelligence where develop-
ment makes more sense, although not in a peaceful way as we will see
later. This document to which I refer, declassi?ed in 1976, about econom-
ic intelligence states that a systematic and periodic review of high-level
consumer needs is necessary, which shows that at a strategic and eco-
nomic intelligence level we are speaking about high-level “civil” consum-
ers, in other words the government.
I anticipate that for me the key to the present and future of strategic intel-
ligence is in the debate that Kent and Kendall maintained at the end of the
forties in the last century. Kendall
13
maintained that strategic intelligence
consisted of “helping politically responsible leaders to reach their foreign
policy goals, by identifying the elements susceptible to North American
in?uence”. At the same time, Sherman Kent was accused by Willmoore
Kendall of having a “compulsive preoccupation with prediction and with
the elimination of surprise from foreign afairs”. What emerged from this
and other accusations were difering visions of this new political element
as intelligence was then.
In essence, Kendall saw intelligence as support for political decision
makers to help them afect the progression of events so they could un-
derstand the operational factors on which the United States could have
a certain impact. And this is what we speak about at the beginning of
11
Posner, Richard A., Preventing Surprise Attacks: Intelligence in the Wake of 9/11, Row-
man & Littlefield, New York, 2005.
12
Letter from E. Richardson to W. Simon. “Re: Intelligence support for economic po-
licymaking” (5 pp. in Frank Zarb Personal Papers. 12/20/76. DECLASSIFIED MATERIAL)http://www.whitehouse.gov/sites/default/files/rss_viewer/national_security_strategy.
pdf
13
Kendall, Willmoore, “The function of intelligence”, World Politics, vol. 1, No. 4, July
1949, pp. 542-552.
Antonio M. Díaz Fernández
38
the 21st century if we want to speak about something that is strategic
intelligence, not preventing strategic surprises but understanding the en-
vironment to plan ahead for it and to some degree, con?gure it so that our
foreign policy – and its economic dimension – can be developed and can
generate prosperity for our country.
The other great theorist of the era, Washington Platt
14
, focused on a mil-
itary intelligence model, at a strategic level and not of a tactical nature,
and therefore it does not help us in our current discussion, despite hav-
ing been his most important contribution. In 1980, Harry Ransom
15
asked
whether it was speci?cally “strategic” intelligence that guided the United
States foreign policy, a question which only recently could begin to get a
positive response.
There was a ray of light on the role of strategic intelligence in the 1993
National Performance Review
16
coordinated by vice-president Al Gore,
where the then director of the CIA, John Deutch, con?rmed that “the Unit-
ed States eforts in intelligence must provide decision makers with the
necessary information on which to base their decisions with regard to
defence abroad, economic policy and protection of the United States’ na-
tional interests against foreign attacks”. This agreed with Swenson and
Lemozy
17
in that “strategic” attached to “intelligence” breaks down the
most comprehensive concept – broad and widespread – of “intelligence
for foreign policy”, but I cannot agree with them that strategic intelligence
excludes or supersedes the contribution of the diplomatic body in this
process, although its role and structure evidently would have to be mod-
i?ed as the report by the ambassador Melitón Cardona, to which I will
refer later, stated.
If we assume that strategic intelligence helps to provide context, devel-
ops national interests and delimits our problems and goals, the fact is
that the current rapid cycles of political events mean that the political
consumer requires an intelligence product that is not typical of strate-
gic intelligence, that is, long-range, meaningful products, but rather early
warnings against potential strategic surprises. In other words the recur-
ring cycles mean that there is no space for strategic thought and that
analysts and consumers are focused on the quanti?cation of a product
with little space for re?ection. Therefore, in my opinion, a much more
14
Platt, Washington, Strategic intelligence production: Basic principles, New York. Prae-
ger, 1957.
15
Ransom, Harry Howe, “Being Intelligent about Secret Intelligence Agencies”, The
American Political Science Review Vol. 74, No. 1 (Mar., 1980), pp. 141-148
16
National Performance Review, 1993,http://www.fas.org/irp/offdocs/npr_sep93/in-
dex.html
17
Swenson, Russell G. and Lemozy, Susana C. “Democratización de la función de in-
teligencia. El nexo de la cultura nacional y la inteligencia estratégica”, National Defense
Intelligence College, Washington DC., 2009.
The role of strategic intelligence in the modern world
39
intense presence should be demanded from strategic intelligence at the
beginning of policies, at agenda setting and the prioritisation of goals, in
other words at the design phase and not limiting it to implementation,
because that way we will be using it mainly as an early warning against
strategic surprises.
This complaint is covered in the report issued by the Commission on
Arms of Mass Destruction in Iraq in 2005 that indicated that “managers
and analysts of the intelligence community have, on repeated occasions,
expressed their frustration at their inability to spend time on research
and thought in the long term. This problem is intensi?ed with the cur-
rent incentives system for analysts where they are often rewarded for the
number of reports they produce more than for the substantial knowledge
or depth of their output
18
. A more recent episode we have is with the so-
called “Arab spring”, where the confusion it created in foreign ministries is
only understandable due to the absence of quality strategic intelligence,
of reliable knowledge about its roots and determining factors, not about
tomorrow, not even about the day after tomorrow but about the essence
of a phenomenon that will assist us in understanding its appearance and
progress.
As a result, when we speak about the state and therefore the future
of strategic intelligence we should not concentrate on the econom-
ic or military nature: strategic intelligence remains above these di-
mensions because it is more than a type of intelligence from signals,
open resources or technique; I understand it is as evolution of this.
Perhaps it will be better to proceed to understand how it has evolved
and what its elements are in order to understand its possible future.
And to understand what we are referring to and to try to conceptu-
alise strategic intelligence and suggest a future for it, bear in mind
the Kent Trinity: intelligence as an organisation, product and process,
but firstly it is important to comment, however superficially, on the
scenario in which strategic intelligence and its economic dimension
should occur.
There are no longer any blue or red draughts on the new board
There are no doubts about what the current threats are, nor that they are
diferent from a decade ago and from what they will probably be in the
future, even though they may be reduced. And what is certain is that the
markets – in that vague name – are the threats now. In modern democra-
18
Commission on the Intelligence Capabilities of the United States Regarding Wea-
pons of Mass Destruction, Report to the President (Washington, DC: Government Prin-
ting Office, 2005), Chapter Eight: Analysis, p. 175.http://www.gpo.gov/fdsys/pkg/GPO-
WMD/pdf/GPO-WMD.pdf
Antonio M. Díaz Fernández
40
cies, as Barry Buzan
19
saw, military con?icts lack logic so the polyarchies
do not suggest military confrontation between themselves. However, it is
entirely rational to put pressure on your business partners, suppliers of
raw materials, bet against your public debt and ensure that your compa-
nies are at a bargain price on the stock exchange and can be bought by
foreign capital; which without doubt Clausewitz would certainly consider
a kind of “war using other means”.
The European Security Strategy (ESS)
20
adopted by the European Council
in December 2003 took responsibility for the European project in relation
to global security, the axis of a security strategy for Europe. It pointed out
that “the security context that gave rise to the end of the Cold War is char-
acterised by ever greater opening of borders that permanently link inter-
nal and external security aspects”. The ESS supports preventive agree-
ment, an efcient multilateral strategy and the extension of the rule of
international law. This strategy – that is more a policy paper – deals with
how to make the European Union more capable, supporting an “ascend-
ing” approach, in other words, the focus is on how to increase the security
of people considered individually in diferent parts of the world. The re-
port develops both a set of principles on which European security policy
should be based, and the skills needed to make a credible contribution to
global security, on which its own security depends, but little attention is
paid to the instruments to make this contribution efective.
The European Union brings the concept of Human Security to the table –
as it is called in the ESS – and which is still another security concept; a
narrative that re?ects the goals and means of foreign policy and of highly
diversi?ed security and that is focused on diferent ?gures and aimed
at varied audiences that, ultimately, would be too vague and difcult a
concept. However, those who from the middle of the nineties defended
Human Security maintain that unilateralism is not possible and they un-
derstand the need to develop new instruments as well as persistence
with internal and foreign dimensions. If the European Union wishes to
continue with this using this security concept, intense thought will be es-
sential about how to use intelligence, not only strategic intelligence any
more, but others in full development such as police-criminal.
However, ultimately, at a European level we do not have an operational
concept such as that of Homeland Security which the Americans are
consolidating; that is why, from Europe, they have continued to use
others such as internal security, public security or domestic security.
Going deeper into this concept should not lead us to close the con-
19
Buzan, Barry, Security: A new framework for analysis. Boulder, London, Lynne Rien-
ner Publishers 1998.
20
A Secure Europe in a Better World. European Security Strategy, 12 December 2003.http://www.consilium.europa.eu/uedocs/cmsUpload/78367.pdf
The role of strategic intelligence in the modern world
41
cept without fully understanding it. Therefore, some extensively speak
about “protection space”. This is how the European Union is perceived,
its security perspective and the scenario from which to protect the Eu-
ropean citizens.
Therefore, we would be advocating comprehensive security, de?nable
as a system of defensive and proactive action that goes well beyond the
classic dimension of national security, highlighting the need to in?uence
– to guarantee said security – the energy, sanitary, food, environment, in-
frastructure, technological, military and internal security systems, which
must be created in coordination using public management instruments
in the political-institutional, technical, diplomatic and intelligence ?elds
for the development of preventive strategies as well as the executive re-
sponses of varied scope with the ultimate goal of guaranteeing the meet-
ing of people’s basic needs and consumers’ security, defending human
rights and protecting the exercise of democratic rights.
Therefore, we have not only a national focus, but a global one. The major-
ity of threats that the powers confront are global in origin and in results.
That is why global cooperation has clearly been regionalised. The 2004
report A Human Security Doctrine for Europe
21
maintains that European
citizens’ security cannot be separated from human security in any part of
the world and that the European Union therefore has a key interest in the
development of capabilities that contribute to human security worldwide.
They maintain that Europeans cannot be safe whilst millions of people
live in unbearable danger. Where people live with anarchy, poverty, ex-
clusive ideologies and daily violence there is fertile ground for criminal
networks and terrorism and drugs and arms are exported or transported
to the European Union from these regions in con?ict.
Therefore, it is not difcult to conclude that we are dealing with more ex-
tensive security requirements than intelligence had to report on scarcely
two decades ago. Using the diferent White Papers and reports on se-
curity scenarios, various States, the same as the European Union, have
been re?ecting on their future. In a kind of self-analysis these documents
enable us to see how threats are seen from the Union and the member
States. For example, in March 2008 the United Kingdom made public its
new National Security Strategy
22
, which comprehensively included a re-
vised version of previous reports and initiatives. This new initiative will be
considered original and welcome in the British approach to international
21
A Human Security Doctrine for Europe: The Barcelona Report of the Study Group on
Europe’s Security Capabilities, 15 September 2004,
http://www2.lse.ac.uk/internationalDevelopment/research/CSHS/human-
Security/barcelonaReport.pdf
22
A Strong Britain in an Age of Uncertainty: The National Security Strategy, 2008.
http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@
dg/@en/documents/digitalasset/dg_191639.pdf
Antonio M. Díaz Fernández
42
security but doubtful whether it will efectively overcome the traditional
visions of certain aspects of international security and its consequences
for the internal security of the country.
This National Security Strategy of the United Kingdom with the suggestive
general heading of: Security in an Interdependent World establishes that
the threat from the Cold War has been replaced by a series of diferent
but interconnected risks and threats, at that time, international terror-
ism, weapons of mass destruction, con?icts in fallen States, pandemics
and international organised crime. These would be interconnected by a
series of underlying factors, including climate change, ?ghting for ener-
gy sources, poverty and weak governance in some States, demographic
changes and globalisation, which does not diferentiate it from other na-
tional reports.
The vast majority of powers have developed their strategic security
scenarios to run for an average of 20-25 years. A review of them indi-
cates that they are all based on comprehensive security but they ?nd
it difcult to move away from the design and the mechanisms of a tra-
ditional military threat, although they are beginning to do so. The Na-
tional Defence Directive 2012 was drawn up clumsily, as analysed by
Arteaga
23
, who continues re?ecting on the evolution that has occurred
in recent years when the limited planning focused on defence eforts,
understood as purely military. This has changed since the purely mil-
itary threat has been eliminated and a plethora of others have now
appeared.
The 2011 Spanish Security Strategy is joined to this vision of speci?c
risks but also of general goals when it indicates that “we also have stra-
tegic interests that are related to the achievement of a peaceful and safe
environment: consolidation and good operation of the European Union,
establishment of a stable and just order, of peace, security and respect
for human rights, preservation of freedom of exchange and communica-
tions and constructive relationships with our neighbours”
24
.
This Spanish Strategy speaks about risk stimulators (globalisation mal-
functions, demographic imbalances, poverty and inequality, climate
change, technological hazards and radical non-democratic ideas) that co-
incide with others such as “La Seguridad Interior: España 2020” (“Internal
23
Arteaga, Félix, “La Directiva de Defensa Nacional 1/2012: tiempos de cambio para
cambiar a tiempo”, ARI 58/2012, Real Instituto Elcano.http://www.realinstitutoelca-
no.org/wps/portal/rielcano/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_es/
zonas_es/ari58-2012
24
Estrategia Española de Seguridad: Una responsabilidad de todos, Gobierno de España
(Spanish Security Strategy. A responsibility for all, Spanish Government), p. 16http://www.
lamoncloa.gob.es/nr/rdonlyres/d0d9a8eb-17d0-45a5-adff-46a8af4c2931/0/estrate-
giaespanoladeseguridad.pdf
The role of strategic intelligence in the modern world
43
Security: Spain 2020”), published some time before
25
. At the same time, it
develops the threats that Spain must confront, such as: armed con?icts,
terrorism, organised crime, economic and ?nancial insecurity, vulnerabil-
ity in energy, increase in weapons of mass destruction, cyber threats, un-
controlled migratory ?ows, emergencies and catastrophes and infrastruc-
ture, supplies and critical services. But these “national” goals match the
international ones such as that of the Re?exion Group for the Future of the
European Union, chaired by Felipe González in 2010 and therefore we are
not faced with a myriad of new threats but, in any case, with an increase or
decrease of them on state security agendas, if they exist as such.
Beyond the relevant cases of the great powers that place an extra empha-
sis on the global interests that they have, a necessary review of the White
Papers and national security doctrines since 2001 show us agreement on
four great threats: i) terrorism ii) organised crime iii) an increase in weap-
ons of mass destruction and iv) energy-climate problems. It is true that,
to a large extent, all of them try to avoid an approach based exclusively on
defence-military terms and almost entirely connected to direct threats to
the State. As López Espinosa
26
indicates, a new National Security concept
is emerging in this direction, as a better concept that would move the
centre of attention to others such as national defence or internal security.
A new policy has not been created, nor have others been broadened in a
sectorial nature – as a main feature – all the existing ones are adapted to
the directions of the new strategy in a process of adjusting instruments,
capabilities and State resources, including the economic element.
But within this clear change in national, international scenarios and,
closer to home, Europe, the content of the most recent European Union
documents does not appear to assign a new role to intelligence. There-
fore, in the Stockholm Programme
27
, we see how the European Council
calls upon the Council and the Commission to de?ne a strategy based on
“re?ection of a proactive and intelligence-led approach”; without a doubt
this is positive but it is essentially the same approach. The 2010 Draft
Internal Security Strategy for the European Union
28
indicated that “our
25
Jaime Jiménez, Óscar and Díaz Fernández, Antonio M., La Seguridad Interior: España
2020, Fundación Alternativas, Madrid, 2009,http://www.falternativas.org/la-fundacion/
documentos/libros-e-informes/la-seguridad-integral-espana-2020
26
López Espinosa, María de los Ángeles, “Inteligencia y terrorismo internacional. Un
panorama de cambios”, La inteligencia, factor clave frente al terrorismo internacional,
Cuadernos de Estrategia No. 141, Instituto Español de Estudios Estratégicos, Ministerio
de Defensa 2009, pp. 197-239.
27
The Stockholm Programme: An open and secure Europe serving and pro-
tecting citizens, 2010.http://eur-lex.europa.eu/LexUriServ/LexUriServ.
do?uri=OJ:C:2010:115:0001:0038:en
DF
28
Draft Internal Security Strategy for the European Union: “Towards a European Securi-
ty Model”, 8 March 2010,http://register.consilium.europa.eu/pdf/en/10/st07/st07120.
en10.pdf
Antonio M. Díaz Fernández
44
strategy must therefore emphasise prevention and anticipation, which is
based on a proactive and intelligence-led approach as well as procuring
the evidence required for prosecution. It is only possible to bring success-
ful legal action if all necessary information is available”.
To this re?ection, which extends the security scenario at a global level,
we can add that of the National Intelligence Council, which has updated its
previous precautions by producing those with a time limit of 2030
29
. The
three diferences compared to the previous report would be the strong
appearance of three key variables: i) the globalised economy, ii) demog-
raphy and iii) new players (China and India). The report also suggests four
possible scenarios that would be more important for a world power than
for other countries, at that time:
– Scenario I entails a world in which the new powers replace the
West as world leaders (food shortages, post-petroleum era, geo-
politics of energy, water and food and climate change)
– Scenario II “surprise” or impact of the lack of attention to world-
wide climate change (con?icts over power, reduction in instability,
nuclear weapons, new con?icts over resources, terrorism, Afghan-
istan, Pakistan and Iraq, etc.)
– Scenario III, intense rise in emerging powers (BRICS) entering into
a dispute over vital resources as a source of con?ict (preparation
for changes, multi-polarity without multilateralism, world net-
works, etc.)
– Scenario IV, expansion of policies that will no longer be domestic,
and therefore the establishment of the environment on the inter-
national agenda overshadows governments.
And the most appropriate thing would be to ?nish this scenario into which
strategic intelligence should be moved with the 2008 French report. This
document has few conceptual novelties and is, in my opinion, the best in
the “strategic” planning of documents of its kind. The Défense et Sécurité
Nationale: Le Livre Blanc
30
states that: “development of knowledge and
the capacity for anticipation is our ?rst line of defence. [...] The battles
of the 21st century will take place within the ?eld of information, knowl-
edge, people and societies. [...] Politicians must have access to all data
that will serve as a basis for their decisions and to evaluate situations
with full sovereignty. [It must be assumed that] public powers are doing
everything possible on risks analysis for the future and trying to prevent
them by preparing the means to confront them.” Therefore, it is closer to
the role that I understand must be assigned to strategic intelligence at the
beginning of the century.
29
Global Trends 2030: Alternative Worldshttp://www.dni.gov/index.php/about/
organization/national-intelligence-council-global-trends
30
Défense et Sécurité nationale: Le livre blanc 2008, p. 66.http://www.ladocumenta-
tionfrancaise.fr/var/storage/rapports-publics/084000341/0000.pdf
The role of strategic intelligence in the modern world
45
The redesigned Kent trinity
Organisation: the Matrix has already been created
Intelligence organisations have had to sufer in the evolution process
from the ?rst intelligence system the world relied on: the Cold War model
that was also very similar on both sides of the Berlin Wall. From then
on and until today all intelligence models have been based on synthesis,
with diferent roles and commitments from the armed forces, the police
and the intelligence services although, obviously, with the latter having a
central role as the more specialised structure. More speci?cally, the main
characteristics that, in my opinion
31
, de?ned the intelligence model that
arose during the Cold War – and its speci?c understanding of “strategy” –
were: i) the practice of misinformation, ii) the mass use of technology for
controlling citizens, iii) the precedence of efciency over citizens’ rights
and freedoms, iv) the presence of the intelligence services in all walks of
life and v) the carrying out of covert actions.
This was clearly not a structural model for the challenges that would
come at the end of the Cold War. The fall of the Wall meant an objective
modi?cation in intelligence requirements and the volatility of the Eastern
Bloc produced two diferent dynamics. One of them wanted to understand
that it was time to collect the “dividends of peace” and to use the funds
invested in security and intelligence to other commitments even support-
ing the abolition of the army. The other united those who saw the need
to change existing systems to meet the new reality full of threats that
of necessity had to replace those that expired. Various commissions and
working groups were set up, mainly in the United States, to discuss and
deal with the emerging situation. Other countries did not think about the
subject beyond some minimal contributions from some thought centres
and the voluntary signing of limited cooperation agreements between
the intelligence services of diferent countries to control the increase in
weapons of mass destruction and the nuclear suitcases that might come
out of the old Soviet Union.
During the decade between 1989 and 1999 the intelligence services
were overloaded with a multitude of new and emerging commitments:
the veri?cation of arms reduction treaties, investigation into genocides,
protection of communication networks, money laundering, organised
crime, terrorism, etc. This responsibility that was so disproportionate to
the intelligence services’ goals was not planned but occurred gradually
through a need, given the lack of alternative structures to which to assign
them. Structurally the necessary thought had not taken place so that the
31
For a more extensive analysis see, Díaz Fernández, Antonio M., “La adaptación de
los servicios de inteligencia al terrorismo internacional”, ARI 52/2006, Real Instituto
Elcano, 2006.
Antonio M. Díaz Fernández
46
services could undertake these missions with the necessary guarantees,
leading to an incredible saturation of time commitments that wasted the
chance to adjust to the developing scenario. This meant a delay of ten
years for the services to adapt to the anti-terrorist ?ght. This decade was
the key time for adapting intelligence to meet the requirements of the
21st century. But after this delay there was no longer the chance to think
about whether it was more appropriate to undertake an evolutionary or
revolutionary intelligence process; now the reaction time was too mini-
mal to consider revolutions whose transition cost could only be accept-
able when there is a truly peaceful scenario ahead and, unlike now, there
were no individuals ready to sacri?ce themselves at any time in the very
heart of our cities.
This lack of an updated intelligence model led to 9/11 2001, tragically
representing the end of the brief and super?cial period of stability that
came with the fall of the Wall. The new intelligence model that should
have replaced that of the Cold War to contend with the threats relating to
the era was still not ready, nor had the window of opportunity opened so
that any of those designed by congressmen and the agencies could be im-
plemented. To a large extent its absence was because it had been worked
on in such an unhurried way that the State ended up being incapable of
anticipating the new type of threat.
But all this meant – and means – a regret that the urgency of the mo-
ment does not allow us to spend time on. What is certain and obvious
is that given the absence of a ?nished model the States had to turn to
a refuge model which they were aware of from the Cold War and apply
an incrementalist element to it in the hope that this would be useful for
adapting it to the new situation. Both the greater number of resources
and the technological skills that have appeared since this model was fully
in force during the previous decades would have to be that incrementalist
element that some considered sufcient for updating this model. In short,
this signi?ed that all the model’s characteristics in the Cold War appeared
again but with greater intensity. This model was scarcely useful for the
needs of politicians during those years and would hardly, and only then by
pure chance, be able to help in the growing anti-terrorist ?ght.
This emergency model applied after the attacks against the United States
are characterised, in my opinion, by the following elements: i) the practice
of misinformation, ii) the mass use of technology for controlling citizens,
iii) the precedence of efciency over citizens’ rights and freedoms, iv) the
presence of intelligence services in all walks of life, and v) the carrying
out of covert actions. Structural reforms aimed at improving the “con-
necting the dots” that the report of 9/11 marked as one of the intelligence
community’s errors; that is, the State had the data but internal wars and
lack of coordination prevented their appropriate treatment and resulted
in the failures that led to the September attacks. But again, the underlying
The role of strategic intelligence in the modern world
47
idea is to improve the intelligence that prevents surprises; a physical or
virtual Pearl Harbour, as this will be what we will see within a few years.
It is true that some opinions, including those of the 9/11 report, proposed
the importance of a better understanding of the world at the beginning
of the century to be able to organise intelligence in the most appropriate
way. It is also true that in the period immediately after the 9/11 attacks
some reforms occurred in some countries such as Austria, Holland, Spain,
Latin American States and the Eastern Bloc. However, their dynamics and
motivations were diferent to those generated by those attacks and re-
late to typical national contingencies. In some cases, such as Holland,
going back to decisions taken years before that had led to dismantling
foreign intelligence, in Spain a system generated during the transition to
democracy had to be adapted and regulated within the range of the law
without a prior model and by mutual agreement of bureaucracies. The
Latin American countries sought to coordinate their domestic and foreign
security agencies under a system that usually has the name “National
Intelligence System”, a structure already established in Portugal in 1986,
but with similar and limited results.
Eastern Europe modernised its intelligence structures and gave them
professional status after the culmination of its democratisation process-
es and they also reproduced this “National Intelligence System”. However,
Eastern Europe has a peculiarity since they keep police powers, the same
as in Colombia until 2012 and as the Dominican Republic considered es-
tablishing. In addition, some States used the fact that they had to make
their own reforms to introduce some original elements into their systems,
such as making their units ?exible and reducing the vertical nature of the
service’s structure so as to deal with more changeable environments.
It is this lack of adaptation that explains the failures of 9/11 and subse-
quently led to the attacks in Bali, Madrid and London, highlighting the lack
of an alternative model and the overriding need to redevelop intelligence
systems. The prevention strategies therefore turned into the basis for
security in the 21st century, in the ?eld prepared for the intelligence ser-
vices and, without any doubt, into the basis for future security systems.
Therefore, it is a fact that the intelligence services must snap out of their
inertia and turn into structures more adapted to the changeable needs
the 21st century brings, and be, shall we say, more strategic?
Reorganising the intelligence community so that it can adapt more quick-
ly not only requires changes in organisational systems. In the United
States, since 1947, when the intelligence system was established, nine-
teen commissions, committees and panels have tried to modify the role
of the centralised authority of the director of the intelligence community
and even proposed the creation of a director of intelligence. As early as
1985, the Turner proposal suggested the creation of a director for the in-
Antonio M. Díaz Fernández
48
telligence community and what has happened since then has been more
or less feeble support for this option. In fact, the reforms proposed by
Boren-McCurdy in 1992 did not manage to get approval due to rejection
by the Department of Defence; this is something that the members of the
subsequent Aspin-Brown commission learned from. They avoided pro-
posing it with too much bluntness and so softened this aspect by propos-
ing the creation of two deputy directors to directly assist the director of
the intelligence community with his tasks. Finally, the 9/11 Commission
recommended the creation of a new authority, coordinating all the agen-
cies and creating the position of National Intelligence Director. In short,
many of the debates that are taking place today are another wave of pro-
posals that have taken more than thirty years to occur.
Even when managing to introduce major advances in the construction of
the intelligence community, the problem is that both the 9/11 Commission
and the opinions and studies conducted in diferent countries have based
the adoption of measures on preventing another attack similar to 9/11
but not to adapting structures to a new type of threat, organised crime for
example. Without doubt this focusing of intelligence on counter-terrorism
has taken attention and eforts away from other no less serious and long-
term threats such as organised crime. It has to be understood that the
incentive of intelligence reforms is the ?ght against terror, but it cannot
be their only goal
32
.
A potential loss of budget and in?uence by opening up intelligence work
to other agencies from a broader intelligence community largely explains
the Department of Defence’s opposition to any change. What is very re-
markable is that the great failures in military intelligence during the ?rst
Gulf War led American politicians and military to wish to transfer re-
sources of “strategic” intelligence to the tactical, which is applied to com-
bat; that is, not to redirect but to have more tactical intelligence. It has to
be understood that during these years the Pentagon had put the majority
of its total budget into intelligence, something that it did not want to give
up and that would subsequently condition the de?nition of counter-ter-
rorism as a military problem, for example. The Department of Defence’s
in?uence on the modi?cations that could have been undertaken to the
intelligence system should not be underestimated.
The main study about the necessary evolution of the intelligence commu-
nity occurred under the auspices of the Aspin-Brown commission (1994-
96). This was a very ambitious task of great interest that covered all those
dimensions that had to be modi?ed or adapted into the intelligence sys-
tems. However, the lack of political leadership and, once again, strong
opposition from the Department of Defence prevented their application.
32
Díaz Fernández, Antonio M., Revenga, Miguel and Jaime, Óscar, Cooperación Europea
en Inteligencia: Nuevas preguntas, nuevas respuestas, Aranzadi, Pamplona, 2009.
The role of strategic intelligence in the modern world
49
However, Holshek
33
makes a personal interpretation of the North Ameri-
can intelligence community evolution when he states that:
“The national security system the United States had ?nally adopted
was more anticipatory, collaborative, agile, and innovative. It was more
capable of combining all elements of national strength and power, inte-
grating intelligence, making timely and informed decisions, and taking
decisive action. It went beyond whole-of-government to whole-of-na-
tion. American leaders had learned to think globally and act locally
– strategically rather than operationally. They prioritized investments
in strengths and opportunities over threats while lowering costs and
risks. They placed economic development and diplomacy out in front
of defence. Echoing changes in the business community, agencies be-
came leaner and ?atter, less redundant, more adaptive, teamed and
networked. Resources were driven ?rst by strategic goals, jettisoning
the wasteful mindset of a surplus mentality. Shaped for collaboration
among departments and between the public and private sectors, the
system was more inclusive, engaging much more of America’s still
considerable soft power.”
Organisations must look towards the outside to be more competitive
34
and this logic means that the system has to be a part of our activity out-
side of our organisation but one we must know about and try to imitate.
As Baumard
35
states, business intelligence is more structured in Western
countries whilst, for example, in Japan it is more structured at the level
of organisational culture.
We cannot conceive today of organisations – or intelligence communities
– without their technological dimension, a burden that Mintzberg
36
has al-
ready warned would continue to increase. Technology is, however, a term
mistakenly used since what we understand by technology is no more
than a part of it, in our case the internet and data processing software in
its many varied dimensions. Human beings have always been technolog-
ical and this is what has enabled them to solve the problems with which
they are confronted; technology is both the ?re and the wheel and the in-
tercontinental ballistic missile. And we must bear in mind that technology
has always been an essential element in intelligence. Therefore, during
33
Holshek, Christopher, America’s first Quarter Millennium: Envisioning a Transformed
National Security System in 2026, Project on National Security Reform (PNSR), 2011,http://0183896.netsolhost.com/site/wp-content/uploads/2011/12/pnsr_americas_
first_quarter_millennium.pdf
34
Arroyo Varela, Silvia, Inteligencia competitiva: una herramienta en la estrategia em-
presarial, Madrid, Ediciones Pirámide, 2005, p. 106.
35
Baumard, Philippe, “From noticing to ‘sense-making’: The use of intelligence in stra-
tegizing”, The International Journal of Intelligence and Counterintelligence, vol. 7, No. 1,
1994, pp. 29-73.
36
Mintzberg, Henry, La estructuración de las organizaciones, Ariel, Madrid, 1979.
Antonio M. Díaz Fernández
50
the world wars knowing what ships were crossing the Strait and their
possible cargo was a key security element. In the same way, the Sherman
Kent analysis was a success, impressing the military commanders to de-
sign spectacular scenarios as a result of the texts available in the Library
of Congress that were sought and processed, as Davis
37
states.
Some writers
38
maintain that strategy has been very focused on the me-
chanical process and a model more focused on people should be devel-
oped. Although this is true, technology has increased the possibilities to
prevent being surprised “strategically” while meaning an increase in the
threat potential to us and our interests. To advance towards strategic in-
telligence also means understanding scenarios and being clear about how
to carry out the processing and fusion of available data from the available
multiple and enormous information sources. The necessary data fusion
that it generates would refer, therefore, to the means not the purpose and
has to include an entire series of techniques such as networks of sensors
for data management, data collection with the machine-person interac-
tion, organisational optimisation or the analysis of a large volume of data.
This data fusion at a high level is to a large degree intuitive for human be-
ings but is a formidable challenge for computer systems. I will not go into
aspects such as the Bayesian analysis, metadata or the use of ontologies,
as it is not an area where added value can be contributed, nor would this
be the right place for it. I’m focusing attention on the fact that strategic
intelligence requires knowing what we are looking for to be able to ?nd
operation standards, if not, the emerging science of analytical reason-
ing that makes interactive interfaces
39
easier for analysts and decision
makers will make them fall into a Minority Report style illusion. Willing
to use resources and modify legislation relating to rights and freedoms,
political decision makers would delegate authority to the powerful auto-
mated computer systems that track online and that would know how to
deactivate threats before they materialise.
Combining automated analysis techniques with interactive viewing spe-
ci?cally designed to give support to analysts and political decision mak-
ers means an interaction should be achieved between the political deci-
sion maker’s goals with real data for efective understanding, reasoning
37
Davis, Jack, “The Kent-Kendall Debate of 1949”, Studies in Intelligence, 1991, 35, No. 2.
38
Martín Barbero, Isaac “Inteligencia economica. Tan lejos, tan cerca”, Inteligencia y Se-
guridad: Revista de análisis y prospectiva, No. 2, 2007, pp. 107-120; Service, Robert W. “The
Development of Strategic Intelligence: A Managerial Perspective”, International Journal
of Management, vol. 23, No. 1, 2006, p. 61; Solberg Søilen, Klaus, “Management Imple-
mentation of Business Intelligence Systems”, Inteligencia y Seguridad: Revista de análisis
y prospectiva, No. 9, 2010, pp. 41-65; Porter, Michael and Victor E. Millar (1985) “How
information gives you competitive advantage”, Harvard Business Review, July, pp. 1-13.
39
Cook, K., Earnshaw, R. and Stasko, J., “Discovering the Unexpected”, IEEE computer
Graphics and Applications, September/October, 2007, pp. 15-19.
The role of strategic intelligence in the modern world
51
and decision making on the basis of enormous and complex databases
40
.
This view is not so clear, for example, in the ?ght against terrorism, which
seems dominated by an obsession for massive data collection and their
exploitation through integrated platforms, some under development by
large IT companies. The debate again goes back to the old one of a more
basic nature such as the discussion between what emphasis needs to be
put on the HUMINT (Human Intelligence) vs. SIGINT (Signals Intelligence)
vs. OSINT (Open Source Intelligence) cocktail, but here is not the place to
discuss this and its in?uence on strategic intelligence if we do not want
to fall into commonplace themes which Rosales
41
studied some time ago.
A truly strategic new product
Economic intelligence existed in the past
42
and therefore under no cir-
cumstances is it a new concept. Beginning with Marco Polo, interest in
broadening markets and obtaining commercial, industrial or economic
information is well documented. For some time, as Rousseau published
in 1925
43
, economic intelligence was included as a complement to mili-
tary intelligence, which made it possible to know the enemy’s capabilities
but was not a tool for the discovery of the potentials of others outside the
sphere of war. However, this approach is no longer predominant.
According to the CIA, 40% of the information obtained from analyses con-
ducted in the middle of the nineties was already about economic matters.
The end of the Cold War meant that a lot of economic and commercial data
was available and today no less than 95% of it comes from open sourc-
es. In theory the North American intelligence agencies are not involved
in espionage for the bene?t of their national industries. However, they
are more and more involved in situations that entail identifying situations
abroad where North American companies are in a disadvantageous situ-
ation due to unscrupulous actions such as bribery by foreign competitors.
Few doubt that intelligence services have usually focused on threats of
a military and political nature or more recently on terrorist activity. That
the intelligence services can supply a product of an economic nature, be-
yond its use to discover the enemy’s capability in war, is also undeniable.
40
Keim, D. Kohlhammer, J., Ellis, G and Mansmann, F (eds.) 2011, Mastering the infor-
mation age: Solving problems with visual analytics, Konstanza, www.vismaster.eur/book/
41
Rosales, Ignacio, “La inteligencia en los procesos de toma de decisiones en la Se-
guridad y Defensa”, El papel de la inteligencia ante los retos de la seguridad y la defensa
internacional, Cuadernos de Estrategia No. 130, Instituto Español de Estudios de la De-
fensa, Ministerio de Defensa, 2005, pp. 35-59.
42
Díaz Fernández, Antonio M., Los servicios de inteligencia españoles, Alianza Editorial,
Madrid, 2005.
43
Rousseau, “Economic intelligence”, Journal Royal United Service Institution, vol. 70,
1925, pp. 701-709.
Antonio M. Díaz Fernández
52
In fact, they have been doing it for years, as Zelikov and Levet
44
explain.
In my opinion, with all logic and sincerity, what Brander asks is whether
the State must be involved in these tasks and, to support his questions,
he puts forward three arguments in favour
45
. Firstly, failures in the mar-
ket mean that the State must intervene, secondly, intelligence is public
property that can only be borrowed by it, and thirdly, it has a role to play
in protection the same as other State institutions.
Sherman Kent de?ned strategic intelligence as “the type of knowledge
that a State must possess in order to guarantee that its interests do not
sufer nor its initiatives fail due to the fact that its political decision mak-
ers or soldiers plan and act in ignorance”
46
. This de?nition is equally ap-
plicable to the business world but speci?cally there is one of the most
essential diferences in my opinion. Companies not only prevent their
competitors stealing market share from them but they study thoroughly,
and improve and try to attain it, about which Rodenberg
47
has written.
The potential for intelligence agencies that have adapted their instru-
ments and resources to this new task is impressive. As Fraumann
48
states,
this is because current economic espionage conducted by foreign powers
goes beyond classic industrial espionage. Because “we cannot politically
spy on an ally” some cases could be innocently justi?ed, but what about
economically? Both elements are subject to the action of intelligence but
in the case of economic espionage, assuming that we spy on the economy
of others, this means dividing this intelligence into two large dimensions,
public-private and ofensive-defensive, which I will discuss below.
On the one hand, globalisation has changed the concept of “ours” and
“theirs”, nationally and internationally. Markets are no longer strictly
local, national or international but globalised, yet the governments and
their instruments continue to be national. Therefore, the distinction be-
tween public and private that now is in itself more complex joins some
States that have lost part of their regulatory and police power both at a
State level and beyond their frontiers. It is in this environment where eco-
nomic intelligence would operate, as an instrument for the strategy and
44
Zelikov, Philip (1997) “American Economic Intelligence: Past Practice and Future
Principles”, Intelligence and National Security, vol. 12, No. 1, pp. 164-177; LEVET, Jean-
Louis (2001) “L’intelligence économique: Mode de pensée, mode d’action”, paperback
edition.
45
Brander, James A. “The Economics of Economic Intelligence”. Commentary, Cana-
dian Secret Intelligence Service. Reprinted in Evan Potter, ed. Economic Intelligence and
National Security, Carleton University Press, Ottawa, 1998, pp. 197-217.
46
Kent, opus cit.
47
J.H.A.M. Rodenberg, Competitive Intelligence and Senior Management, Eburon Publi-
shers, Delft, 2008.
48
Fraumann, Edwin (1997) “Economic espionage: Security missions redefined”, Public
Administration Review, 5 (4), pp. 303-308.
The role of strategic intelligence in the modern world
53
management of companies and the State in a global world, although of
course the latter accepts that it must have a pre-eminent role in it.
The second line of discussion is, therefore, not if the State can but if it
must involve itself in direct economic espionage or exclusively develop
its capacities for defence purposes
49
. But nor should we spend too much
time on thought, since really the topic is the connection and balance be-
tween the two. If espionage exists it is due to need and reciprocity and
therefore if we are developing a capacity for protection against threats
it is because we assume what other States are actively doing so. And
this is not only an assumption. The annual reports about the control and
management of parliamentary control committees and intelligence ser-
vices, respectively, unhesitatingly point to China and Russia as very active
agents in economic espionage, including industrial espionage. Maybe that
is why it is interesting that the two countries with the greatest interest in
economic espionage make no reference to the importance of economic
intelligence in their defence White Papers or in similar texts.
Therefore, in my opinion, although there is undeniable theoretical justi-
?cation for the State to thoroughly research and establish itself in this
area, the question is whether it should adopt an ofensive-defensive role.
Although we could speculate that if intelligence services worldwide were
so successful at stealing commercial secrets, then research and devel-
opment would drop rapidly since the private players would not be able to
recoup their investments. On the other hand we would be speaking about
information as public property – as Seiglie
50
mentions – in the sense that
a product that because of its nature can only be provided by the State, and
if this fails the private world cannot generate it since it is not produced
by the private sector. But information is not property in the pure sense,
although it is very close, as seen by the existence of private intelligence
companies and their incredible expansion in the last ?ve years.
Claude Revel
51
supports an ofensive option for economic intelligence.
This French expert says that economic security consists of prevention
and avoidance of any situation that can interrupt the existence of both
companies and the State. Without doubt it is a strange way of understand-
ing “ofensive”. Economic counter-espionage is well known but not that
of an ofensive nature. The Canadian strategy, which is explained it its
Securing an Open Society: Canada’s National Security Policy of 2004
52
, con-
49
Brander, opus cit. 1998:205
50
Seiglie, Carlos; Coissard, Steven and Échinard, Yann, “Economic Intelligence and
National Security”, War, Peace and Security. Contributions to Conflict Management, Peace
Economics and Development, vol. 6, 2008, pp. 235-248.
51
Revel, Claude, “Economic Intelligence: An Operational Concept for a Globalised
World”, ARI, Real Instituto Elcano, No. 134/2010.
52
Securing an Open Society: Canada’s National Security Policy, April 2004,http://publi-
cations.gc.ca/collections/Collection/CP22-77-2004E.pdf
Antonio M. Díaz Fernández
54
nects intelligence with foreign espionage, that is, as a threat from other
powers from which they should protect themselves.
Without doubt one of the most astute re?ections on how to maintain bal-
ance was made by Mark Lowenthal – although extendible to all the par-
ticipants – before the American Congress
53
and which Claude Revel
54
dis-
cusses in his last report Développer une in?uence normative internationale
stratégique pour la France. In it Revel supports “the need for a national
economic intelligence structure that will be a nerve centre for warnings,
promotion and support and for monitoring strategies on information, se-
curity and in?uence that must be inextricably linked”. The French writer
continues by indicating that “there should be inter-ministerial coopera-
tion, inevitably maintained at a State level, with access to all useful data
from any of the State services and private players. The structure must
centralise the data, direct strategy, tactics and action in international en-
vironments and monitor evaluation”. He states that all this must be car-
ried out in full coordination with all the State centres so that it can antici-
pate and make decisions on complex matters.
Returning to the debate between Kent and Kendall, here we would ?nd an
essential diference: either we want an organisation that wishes to an-
ticipate threats – essentially attacks – or wishes to regulate the environ-
ment, something that is perfectly acceptable in (strategic) management.
And the Carayon report shows, in my opinion, the evolution decided upon
from this debate. On page 37 it states that a true economic security policy
must impose on the State anticipation of threats and the active process-
ing of attacks that its companies sufer. It is time to go from a static and
reactive position (defence) to one of an active nature (economic security)
including all the State’s services and in the ?rst instance the intelligence
and security services.
Strategic process: the new plan
Russel Ackof con?rmed that the plan was “to conceive the desired future
as well as the necessary means to achieve it”
55
. Shared strategic analy-
ses make it possible to produce a synthesis of collective agreement, con-
trary to that which Henry Mintzberg
56
proposed. The most difcult thing
53
Hearing before the Select Committee on Intelligence of the United States Senate, One
Hundred Third Congress, First Session on Economic Intelligence, Thursday, 5 August,
1993http://www.intelligence.senate.gov/pdfs103rd/103650.pdf
54
Revel, Claude, Développer une influence normative internationale stratégique
pour la France, 2013,http://proxy-pubminefi.diffusion.finances.gouv.fr/pub/docu-
ment/18/14133.pdf
55
Ackoff, Russel L. (1973) Méthodes de planification dans l’entreprise, Paris, Les Edi-
tions d’Organisation.
56
Mintzberg, 1979, opus cit.
The role of strategic intelligence in the modern world
55
would not be making a good choice but being sure that the right questions
had been asked. This problem has been well considered and collectively
shared by those whom this problem concerns; we can say that it is an
almost resolved problem. Therefore, we can say that we plan to resolve
problems, in our case, the State in its diferent dimensions, including eco-
nomic ones.
But time is and will be a key variable. Neither the analysts can use all
they want in order to obtain deep knowledge, nor do political decision
makers have enough to understand complex afairs for which they are
responsible daily. The planning process starts from the clear allocation
of commitments, and therefore leadership – in our case political – is es-
sential for planning. Decision makers want information that helps them
to prevent unpleasant surprises and, therefore, political decision makers,
although they do not request strategic intelligence, need it. But the certain
fact is that our future is planned by people who want to feel comfortable
with their decisions but do not support receiving strategic intelligence
that predicts difcult events that do not ?t in with their politics, that is,
they want to prevent strategic surprises but rarely develop “strategic”
actions that go beyond the term during which they will be in ofce.
The ?ow of information from top to bottom is usually the traditional for-
mula used by the State which coordinates, stimulates and ?nances these
structures. However, the past shows us that the bottom to top approach
comes from successful experiences that boost feedback in which the
participation of the State is pragmatic and in response to initiatives that
emerge from the ?eld
57
. These preliminary elements, in my opinion, indi-
cate that the role senior civil servants, who give permanence to a coun-
try’s politics, have to play is key, although this is not the time to discuss it.
Maybe that is why an important document that passed unnoticed such
as the report from the Commission for the Reform of the Foreign Service
of the Spanish Cabinet Ofce, led by the ambassador Melitón Cardona in
2005
58
, should be recovered. It is interesting because of its comprehen-
sive approach, because of the date and because of the fact that Spain
rarely produces this type of document. It was already established in it
that the Foreign Service, on the one hand, had problems of an organisa-
tional nature that were re?ected in problems with planning, coordination
and the delimitation of capabilities and problems in the consular area.
Among the planning problems was the limited capacity for planning and
57
Marco, Christian and Moinet, Nicolas “L´intelligence économique”, Paris, Dunod,
2006, p. 120
58
Comisión para la Reforma Integral del Servicio Exterior. Ministerio de la Presidencia
(Commission for the Integral Reform of the Foreign Service. Cabinet Office), 2005, chaired
by ambassador Melitón Cardona,http://www.maec.es/SiteCollectionDocuments/Docu-
mentos/informe_CRISEX.pdf
Antonio M. Díaz Fernández
56
strategic preparation for action abroad. The report mentioned that “this
problem, which Spanish foreign policy has been sufering for decades,
means that that our country’s activity is moving within a new interna-
tional context with a short-sighted approach. Also, the design for the net-
work of Spanish missions abroad is inadequate. This problem is due to
the limited planning for Spanish foreign policy and a lack of ?exibility for
opening and closing diplomatic missions, a result of the existing complex
administrative procedures”.
The report also adds:
“There is a failure to de?ne the goals of Diplomatic Missions. The li-
mited planning together with our foreign policy means that Spanish
Diplomatic Missions do not have goals that make it possible to direct
and control their activity. This means that they work in a reactive way
and it is difcult to evaluate their actions objectively. The lack of Sec-
tion Heads in certain areas means a lack of prompt monitoring of these
topics, given that the Director of the Diplomatic Missions who is res-
ponsible for these issues must also be occupied with many other mat-
ters. The non-existence of certain Section Heads also means a need for
continuous travelling by civil servants from ministries with the skills in
these matters and as a result, a high cost in secondment”.
But ambassador Cardona also spoke about coordination problems.
Speci?cally:
“about the lack of sufcient inter-ministerial coordination, due in part
to the inefectiveness of the collegiate bodies responsible for such pur-
poses, such as the Foreign Policy Council which is the area where the
government’s general policy should be compatible with the priorities
of all ministries with foreign activity. Also, there is a lack of systematic
information ?ows which cause a large part of the coordination pro-
blems both in the Central Services and in the Diplomatic Missions. The
information is not transmitted from top to bottom nor horizontally be-
cause no guidelines have been set so that the information circulates
in all directions. There is a lack of coordination between the Mission’s
diferent departments, both due to poor circulation of information and
the erratic regularity of the coordination meetings. There is a lack of
suitable coordination of other national players with foreign activity”.
In France the Carayon
59
report, successor to the Martre
60
report, prepared
a decade before, marked a starting point in the development of strategic
intelligence that will be needed in the 21st century. Carayon explained
59
Intelligence économique, compétitivité et cohésion sociale, July 2003.http://www.
ladocumentationfrancaise.fr/var/storage/rapports-publics/034000484/0000.pdf
60
Intelligence Economique et Stratégie des Entreprises, February 1994.http://www.
ladocumentationfrancaise.fr/var/storage/rapports-publics/074000410/0000.pdf
The role of strategic intelligence in the modern world
57
that competitiveness needed economic intelligence policies and that
these have to be coordinated in order to be efcient. However, although
neither of the two reports establishes a unique de?nition of economic
intelligence, the ?rst does indicate that it should be based on four pillars:
i) encouraging this practice at company level, ii) optimising information
transfer between the public and private sectors iii) constructing databas-
es based on users’ needs and iv) mobilising the world of training and
education. A series of challenges that are slowly being developed in most
countries, including those where there is a clear wish to develop this type
of intelligence.
In Spain economic intelligence is included in the Spanish Security Strat-
egy (Estrategia Española de Seguridad). But, previously, the 11/2002 Act
of 6th May, regulating the National Intelligence Centre (Centro Nacional
de Inteligencia, CNI) included a key verb for developing the potentiality
of strategic intelligence and clearly, of economic intelligence. Its article
4 indicates that “to ful?l its goals the National Intelligence Centre will
carry out the following duties: a) Obtain, evaluate and interpret data and
disseminate the necessary intelligence to protect and promote Spain’s
political, economic, industrial, commercial and strategic interests and be
able to act within or outside national territory.” The verb ‘to promote’ is
key since it implies that the CNI can move from being an instrument fo-
cused on preventing threats to an instrument for development, including
economic intelligence, without doubt an evolution in the development of
our “strategic intelligence”.
Conclusions
The excessive use of the description “strategic” is widely accepted and
not only in the world of intelligence but also in that of marketing, per-
sonnel management and business decisions, among many others. The
end of the Cold War, in the ?eld of intelligence, generated the need to
redirect the function of some structures created speci?cally to ?ght in
eastern areas after the Second World War. And this is crystal clear. The
forced evolution of intelligence agencies is a reason for them to be con-
ceived and developed to basically ?ght against strategic surprise, no
matter how much the word “strategic” ?lls reports and declarations and
even leads to speaking about “strategic” nuclear arms, where we can
?nd little that is strategic. Overnight, a world that was almost surgically
divisible in half has been shown as plural, multi-faceted, complex and
strange. This scenario is where true strategic intelligence has its place;
intelligence that helps understanding, in its etymological sense, to ena-
ble political decision makers to understand what the challenges are in
the medium and long term, accepting the inevitable existence of strate-
gic surprises that, by de?nition, will always exist because uncertainty is
inseparable from life on Earth.
Antonio M. Díaz Fernández
58
To understand the world means evolving the Kent Trinity in its three di-
mensions. Organisations must be more adaptable, have analysts who are
allowed extensive and extended thought over time, away from the man-
agement of goals that destroys this type of human capital based on know-
how gained during years of experience and study. The product must also
change. Beyond continuous updates, greater awareness by political deci-
sion makers and what their needs are is required, which means greater
planning and monitoring by inter-ministerial coordination organisations,
something almost unknown, at least, in the Spanish approach. Finally,
processes must be modi?ed, mainly through a new relationship that has
to be established between intelligence consumers and producers, but
above all by making use of technology’s potential and escaping from con-
tinuous monitoring of the environment that will give us a lot of data, pro-
vided we know what we are looking for, and that is something that does
not exist without a true strategic approach to intelligence.
The State often plays a pioneering role because it includes activities that
are expensive or complex but that it usually abandons when the private
sector comes into play. In the case of economic intelligence this approach
is slightly more disputable since economic intelligence was important
centuries before the Cold War produced the ?rst intelligence services. We
could say that the State – once the Machiavellian Prince – is returning to
one of its original goals: economic information. The role that it will adopt,
either ofensive or counter-espionage to prevent other powers or compa-
nies draining its economic secrets, will be a debate that each state must
have with its own businessmen in deep discussions, since we cannot
speak directly about national companies as globalisation broke the “us-
them” reasoning that worked for many years. However, the duty to help
companies to protect themselves against economic espionage leaves us
with few doubts.
Therefore, without including the privatisation of intelligence, a very no-
ticeable rhetoric from the late nineties, there is a need not to duplicate re-
sources and to let organisations such as universities, centres of thought,
centres of analysis, computer centres and open sources take responsibil-
ity for part of the discourse about the new threats. We are not forgetting
that although intelligence needs are now very short-term, the intelligence
services’ true role is long-term strategic support and they should concen-
trate the majority of their eforts there; to forget this aspect in the interest
of daily efectiveness could lead to subsequent strategic surprises within
a decade.
Although it is true that we cannot associate the future of strategic intelli-
gence with that of economic intelligence, nor can we identify the current
delay in some facets as being due to oversizing the intelligence appara-
tus to focus it on terrorism, in the same way that we are not looking at
organised crime as the great threat that the parliamentary committee on
The role of strategic intelligence in the modern world
59
control of intelligence services 2001-2002 warned. But, ultimately and in
conclusion, the key factors for the success of economic intelligence pol-
icies, both for the State and for companies, will have to be their skill in i)
anticipating and not just comparing old scenarios ii) adapting structures
and laws to increasingly rapid processes and iii) establishing cooperation
networks mainly between the public and private sectors, especially be-
tween States that share the same general interests.
A visit to the oracle at Delphi in the centre of Greece is an illustration
about how to understand intelligence. The fortune tellers only gave their
predictions once a month and their preoccupation with the everyday was
diluted since their vision was about life, about essential elements, and to
do this they needed to dedicate time to thought. Various cities had their
own sites in Delphi, where they also kept their treasures and oferings,
a kind of meeting point for all those with an interest in knowing the fu-
ture and who attended to hear the predictions. And ?nally, the predic-
tions were not sure plans, they indicated how events or a person’s life
could progress and based on that, the integration between that “strate-
gic thought” and a correct reading of the everyday, the traveller to Del-
phi could have a map to follow for perhaps whole years of his life. This
means that it had a “reality” that could be known in advance. And for
years this was the belief of politicians; that with more resources they
would have the intelligence that would reduce uncertainty almost to
zero, and of intelligence communities which put their emphasis on re-
sources as an argument for achieving better analyses without acknowl-
edging that what they did not want was to issue reports through which,
inevitably, the next strategic surprise would be leaked. It is also true that
in Delphi there were hidden passages and smoke that rose out of the
subsoil that enabled magical appearances and disappearances but, the
rhetoric of the occult will always have its small element of mystery be-
yond the strategic element.
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63
Chapter II
A study on economic warfare and associated problems
Christian Harbulot
Abstract
The history of mankind is dominated by the power relationship of an
economic nature, identi?able at the diferent stages of progression: the
struggle for survival, colonization and slavery, territorial conquest and
trade, economic competition, the geoeconomic and competitive ?ghting.
But there is no recognized written culture on economic warfare in the
academic world. This gap can be explained by the lack of legitimacy of
the concept due to the desire to conceal the purpose of economic ?ghting.
The most visible expressions and irrefutable economic warfare as the
most contentious phases of colonization or the two opium wars have not
led to the beginnings of a reading grid. This article aims to ?ll this gap
in thinking about a reality that everyday becomes more demonstrative.
Unlike other countries such as the United States, South Korea and China,
Europe is powerless to address this problem.
Keywords
Economic war, survival, colonization, conquest, read gate/obliged read-
ings, concealment, strategy, increase in power.
Christian Harbulot
64
Introduction
Economic warfare is becoming an undeniable reality in international re-
lations, although it was considered for a long time as something exotic
by the university community. The intellectuals that criticise the strong
relationships between powers
1
have been obliged to give in, bearing in
mind the clear development of international relationships. In addition to
geopolitical events (such as the gas used by Russia as a weapon to rein-
force their status as a power or the questioning of the ?nancial suprem-
acy of the dollar by Iran) there have also been geoeconomic events such
as the diplomatic tensions between China and Japan over resources
or the protectionist policy defended by the United States against China
regarding the solar power industry. This diversity in situations empha-
sises the importance of a deeper reading of the con?icts linked to eco-
nomic warfare.
The beginning of the 21st century was marked by a questioning of the
positive vision of the development inherited from industrial revolutions
and from the relative peace from the globalisation of exchanges, as the
majority of liberal economists have stated. Similarly, the Pax Americana
that became ofcial due to the disappearance of the USSR, the begin-
ning of the end of history myth
2
, leaves room for risks of multi-polarised
con?icts due to the progressive limitation of resources, growing tensions
over the issue of energy, the structural crises of the Western world caused
by de-industrialisation and the desire for commercial conquest by new
players. In fact we are starting a long period of diferent tensions whose
monitoring cannot be limited to a mere comforting discussion about the
search for growth.
To analyse economic warfare
3
entails going from the implicit to the ex-
plicit, a difcult exercise taking into account the warring factions’ almost
universal desire to conceal the nature of their non-military con?icts. The
works carried out in the last sixteen years under my direction at the School
of Economic Warfare of Paris have enabled us to lay the foundations for
some compulsory reading to decipher the strategies for increasing power
through the economy and the strong relationships they generate.
Emergence of the founding principles of economic warfare
The history of humanity has been de?ned since our origins by two key
stages: the priority given to survival and the opposition between seden-
1
Badie, Bertrand, L’impuissance de la puissance, Paris, Fayard, 2004.
2
Fukuyama, Francis, La fin de l’histoire et le dernier homme, Paris, Flammarion, 1992.
3
Harbulot, Christian, Comment travailler sur l’absence d’histoire, report of 7th No-
vember 2012, www.lesinfluences.fr.
A study on economic warfare and associated problems
65
tism and nomadism. The theme of survival had been a predominant situa-
tion for the greater part of the world population until the beginning of the
industrial revolutions. It gave rise to the use of often systematic violence.
Violence and survival
Survival is one of the structural stages of the nature of economic con?icts
without having to refer to economic warfare, given the mainly individu-
al level of con?ict that was therefore limited collectively. Opposition be-
tween sedentary and nomadic towns has entailed regular con?icts such
as the origin of old Russia
4
shows.
“The Russian steppe is the extension of the Asian steppes and founded in
the Hungarian steppe. This continent of steppes – from the yellow sea to
Lake Balaton – is populated by nomads that, since pre-history, have trav-
elled vast distances searching for pastures. Coming from the depths of
Asia the nomads arrive at the steppe in waves. They expel the inhabitants
who, in turn, occupy the pastures of weaker villages.”
This warlike dance between the “barbarians” of the east and the town
populations in the west arose from the river and land trade between the
Baltic Sea and the Black Sea that lasted several centuries and played
a decisive role in the construction of Russian geopolitical space. Simi-
larly, the history of ancient China is marked by repeated invasions of
Turkish-Mongolian nomad villages. The ?rst version of economic warfare
came from this dialectic nexus between the accumulation of wealth of
the sedentary village and the rapid incursion of the nomad into foreign
territory to carry out pillaging.
Resources and territories
The issue of resources is at the centre of the problem of developing civi-
lisations. In the 15th century BC the Pharaohs of the new empire
5
needed
three natural resources: wood for constructing monuments and ships,
along with copper and tin, whose alloy in the form of bronze was used in
those days to make tools and weapons. The maritime (the Mediterranean,
the Channel and the Baltic) and land (the silk and tin routes) trade routes
became sources of recurring con?ict.
The progress of humanity between the Ancient and Modern Eras widened
the spatial ?eld in the process of economic con?ict. Thus piracy became
4
Heller, Michel, Histoire de la Russie et de son empire, Paris, Champs, collection his-
toire, 1999, p. 55.
5
Grandet, Pierre, Les pharaons du Nouvel Empire: une pensée stratégique (1550-1069
av JC) Paris, éditions du Rocher, 2008.
Christian Harbulot
66
a real power lever. Attracted by the gains of the triangular trade
6
, the
English pirates were warriors, precursors of future British Royal Navy. At
sea and on land, the warring factions integrated the economic dimension
to their military and diplomatic strategy.
At the end of the Middle Ages some monarchs turned to the economic
weapon
7
to support military action. In his prolonged ?ght against Charles
the Bold, Louis XI mobilised his ?eet to disrupt supplies of grain and her-
rings from Flanders, belonging to the House of Burgundy. The king of
France also pressured bankers to dissuade them from ?nancing the cost
of his rival’s war and promote the creation of trade fairs in Lyon to reduce
the income from the trade fairs in Geneva, which was an exchange point
for the trade routes between Germany, Italy and Burgundy.
The security of territory and of its urban and rural wealth was perceived in
the 17th century as a strategic priority for certain states in the process of
constitution. The seven United Northern Provinces
8
against Spain produced
the ?rst survival model made up of a network of bastions, reinforced by the
use of streams and rivers as a natural defence. The France of Vauban made
its own by creating forti?cations along the new frontiers that emerged af-
ter the conquest of territories in the north of the kingdom. This defensive
barrier led to the “Pré carré”
9
concept that has a modern signi?cance by
including the external area of in?uence (diplomatic, military and economic).
Security of territory was also defended indirectly through economic con-
cessions given to an ally State, taking advantage of its military suprem-
acy. In 1373 Portugal signed a treaty with England
10
to bene?t from its
protection. Through this diplomatic act Portugal sought to escape volun-
tary annexing to Castile. This alliance rati?ed under equal conditions was
gradually transformed into an English protectorate, as the English gave
their military support in exchange for ?nancial and commercial domi-
nance over Portugal that lasted several centuries.
The difcult dynamics linked to colonisation
The constitution of empires is inseparable from the processes of coloni-
sation that marks the history of humanity. Military con?icts that originate
6
Triangular trade flows from the early stages of colonisation of America. It covered
the slave trade between Africa and the U.S. as well as trade between the colonies and
the European continent.
7
Favier, Jean, Louis XI, Paris, Fayard, 2001, p. 754.
8
Cornette, Joël, Le roi de guerre, essai sur la souveraineté de la France du Grand Siècle,
Paris, Petite Bibliothèque Payot, 2010, p. 42.
9
Bitterling, David, L’invention du pré carré. Construction de l’espace français sous l’An-
cien Régime, Paris, Albin Michel 2009.
10
Lacoye Mateus, Alice, Harbulot, Christian, La complexité des rapports de force écono-
miques, Paris, Revue Française de Géoéconomie, April 2008.
A study on economic warfare and associated problems
67
from them are strongly related to economic challenges. Colonisation is the
basis of empire creation that serves, in particular, to ensure dominance
over underground riches and resources as well as over trade routes. The
capture and exploitation of human beings was one of the clearest man-
ifestations of the strong relationships generated by the desire for prof-
it. As Jane Burbank and Frederik Cooper
11
, lecturers at the University of
New York, con?rm: “In Great Britain, France and certain regions of the
Portuguese and Spanish empires slavery was pro?table to the empire
and the empire made slavery possible”. Economic warfare was present in
all phases of colonial development, regardless of whether it referred to
the dynamic of expansion of the Roman Empire or the construction stag-
es of the European maritime empires starting from the 16th century. The
most paradoxical element, from my point of view, about the formation of
this principle is that it is not acknowledged as one of the recurring ele-
ments in con?icts linked to the globalisation of exchanges.
The colonisation of North America shows in a very educational way the
superposition of con?icting rationalities created by economic challeng-
es. The Thirteen Colonies, established along the Atlantic coast between
French Canada and Spanish Florida, were ?rmly settled from 1733. The
settlers had begun to plant cotton in the 17th century. This planting pol-
icy developed on a mass scale at the end of the 18th century, producing
what would later be called “the triangular trade”. The British ships car-
ried manufactured products and spirits to West Africa to exchange them
for slaves who were ofoaded in the West Indies and in the south of the
Thirteen Colonies. The ships later returned to Great Britain with a cargo
of cotton, rum, sugar and tobacco, a result of the slaves’ work.
The American settlers considered themselves as harmed by their relation-
ship with England due to tax pressures and the trading restrictions with the
rest of the world imposed by the Crown. Great Britain had the advantage in
all cases since a substantial proportion of the merchandise imported from
the New World was re-exported to continental Europe by the island’s trad-
ing companies. The pro?ts obtained from these transatlantic trade trans-
actions contributed to the development of the British Empire’s Asian trade.
The accumulated wealth intensi?ed desires that gradually turned into
tensions, into strong relationships and into armed con?icts between Eng-
land and its colonies, between them and the native Indians and between
the two rival kingdoms of the time, England and France.
Control of trade routes
England built its power through the sea and trade. Initially the England
of the 16th century was a poor country without any real military capac-
11
Burbank, Jane and Cooper, Frederik, Empires, De la Chine ancienne à nos jours, Paris,
Payot 2011, p. 246.
Christian Harbulot
68
ity for expansion abroad. Its power was much less than the kingdoms
of Spain and Portugal, which at that time dominated the seas thanks
to their navigation techniques, to their pioneering marine cartography
and to their naval strength. Unlike the Spanish and Portuguese, the
English were not missionaries or settlers. When the English decided
to use the sea as a medium for expansion they had to ?nd immediate
pro?ts. Their situation of weakness compared to their opponents’ war
?eets led them to turn to piracy. English pirates and buccaneers stole
precious metals being transported by the Spanish and Portuguese
from South America. During the reign of Elizabeth I the British trade
networks extended towards Turkey and Russia. If the demand for sug-
ar attracted the English merchants to the Caribbean, the demand for
spices, tea and cloth led them towards Asia. The incorporation of the
kingdom of Scotland into the kingdom of England, which gave rise to
the birth of Great Britain in 1707, led to the creation of a major sector
of the era’s free trade and also to the appearance of the world’s ?rst
mass consumer model for imported products, such as tea, cofee, to-
bacco and sugar.
During the 17th century the English made use of the enormous commer-
cial potential of their overseas acquisitions. The creation of the British
East India Company (BEIC) opened the way for colonisation in India. Com-
mercial aggression by the English company from the East Indies led it to
progressively adopt a political-military position on the Indian subconti-
nent. It had to recruit local troops to be able to carry out armed operations
against regional sovereign states that protested against its supremacy.
The increase in the colonial military framework was also the result of
rivalry between the diferent European empires.
The development of exchanges between the continents thanks to trian-
gular trade encouraged the English to take control of the main sea routes
beyond Western Europe, not only towards the East Indies but also to-
wards the Baltic, North America, the Mediterranean and West Africa. The
origin of the economic challenges of the Anglo-Dutch wars between 1684
and 1784 was:
• Control of the main trade routes.
• Con?scation of trade trafc with the British colonies.
• Questioning of the dominant position acquired by the Dutch East
India Company (Vereennigde Oost-Indische, VOC
12
)
The Dutch had established the basis of a trade empire from one private
dynamic. The VOC was a trading company that emerged from the matri-
monial alliances of family and provincial groups. In two centuries it built
12
Burbank, Jane and Cooper, Frederik, Empires, De la Chine ancienne à nos jours, Paris,
Payot, 2011, p. 219.
A study on economic warfare and associated problems
69
a true commercial empire
13
that made it the most in?uential company
among the European companies founded in the 17th century to exploit
Asian wealth. But the private nature of VOC did not enable it to confront
the warlike versatility of the Spanish and Portuguese empires that were
seeking to gain control of the spice trade from the Indonesian archipel-
ago. It had to incorporate the mechanisms of armed conquest inspired
by the Portuguese model into its commercial development. In 1699 the
VOC was the major private economic force in the world and had military
strength in line with forty warships and ten thousand soldiers. Great Brit-
ain entered into the con?ict with it to break its strategy of a monopoly on
the trade between America and Asia.
Great Britain’s protection of the trade routes and with it its economic
prosperity de?ned British foreign policy and brought with it military oper-
ations during the empire’s duration. Numerous examples of armed ?ghts
illustrate these events:
• From the time when Great Britain felt its interests were threatened
in India by the Russians’ expansion to the south and east, protec-
tion of India against them via land and sea became the main axis
of Victorian foreign policy. Hence the military con?ict with Tsarist
Russia in central Asia that was still a “weak point”, far from Euro-
pean colonial expansions. The two Anglo-Afghan wars, the ?rst be-
tween 1839-1842 and the second between 1878-1880, show this
strategy.
• The opium wars
14
(1839-1842 and 1856-1860) between the United
Kingdom and the Quing Empire had an economic purpose. Great
Britain wanted to force the Chinese Empire to open up to interna-
tional trade. One of the goals of the British Empire was to obtain
the cession of the territory of the city of Hong Kong from China, in
order to store opium and trade with it in China. This is a clear ex-
ample of a military act in service of an economic goal.
• Prime Minister Disraeli’s decision to acquire part of the Suez Canal
titles in 1875 was intended to stop France from taking control of a
key trade route.
• The occupation of Egypt ensured the British Empire’s maintenance
and control of the strategic platform of Cairo.
13
The VOC was a real State within a State. It ensured the main regulatory functions
(police, defence, justice) in its business offices of the East Indies. It decided on war or
peace with the native princes, therefore having autonomous diplomacy.
14
In the mid-19th century westerners sold several tens of thousands of boxes of
opium a year in China. The British demanded payment in silver ingots to recover part of
the funds they paid the Chinese in the tea trade. This opium traffic enabled the British
Empire to reverse the imbalance of the exchanges with this country in its favour. The
opium war raised an unfair relationship that generated greater and greater corruption
between Chinese civil servants and caused problems among the population.
Christian Harbulot
70
• The war declared by the British Empire against the Boers was jus-
ti?ed by control of the strategic point that the city of Cape Town
represented. The British prepared this base at the tip of Africa with
the aim of setting up an emergency maritime route in the case of
Suez closing. Consequently part of the territory governed by the
Boers was revealed as one of the greatest gold reserves in the
world.
The British example showed how predominance of a power in the control
of trade routes becomes a decisive weapon in geo-strategic con?icts.
The overlapping of war and the economy
The revolutionary and Napoleonic wars, spread out between 1792 and
1815, emphasised the in?uence of the economy on the development
of strong relationships between the countries involved in this series of
con?icts under alliances. In this regard, the economic repercussions of
blockades were a great in?uence on the strategic changes in France and
Russia.
The in?uence of economic con?icts on the war’s direction
The Prime Minister William Pitt, whose family fortune came from An-
glo-Indian trade, was ?xed on a line of action to preserve Great Britain’s
dominant position in the trading world through control of the seas. His
strategy was to support the Royal Navy that represented the only major
force, compared to the military capacity of revolutionary and subsequent-
ly Napoleonic France. Whilst the Prussian alliance with Great Britain
fought the French and their allies in Europe, the Royal Navy undermined
the economic potential of the common enemy by preventing France from
trading by sea. The key point of the policy followed by Pitt was to establish
an indisputable maritime advantage. He obtained parliamentary support
in London to increase the British ?ghting ?eet up to 105 ships. This naval
arms race gave England a decisive advantage since the French ?eet only
had 70 ships.
For the ?rst time in history an economic war became global with the
appearance of two blocking systems used by the warring factions:
England’s Maritime blockade against France’s continental blockade
15
to cut British exports to Europe. Previously the blocking actions only
had any efect on port cities. The origin of the two blockades was the
reciprocal desire of the French and English to use economic reprisal
15
The blockade was effective in countries allied to France and in countries occupied
by its troops (Italy, Spain, the Netherlands, Lower Germany and Denmark).
A study on economic warfare and associated problems
71
measures strategically to achieve a favourable outcome to the con?ict.
This is what happened but not exactly as Napoleon had expected, since
the removal of Russia from the “continental system” sought by France
triggered the Russian campaign, which was so disastrous for the Na-
poleonic Empire.
This overlapping of war and economy gave rise to the birth of the ?rst
mechanisms in economic warfare that extended into peace time. At the
end of the 18th century France was very weakened industrially by the
war efort made during the revolutionary wars against Europe of the
monarchies. Napoleon con?ded to Jean-Antoine Chaptal
16
, a scientist,
about a mission to ?nd a way to revitalise French industry and protect it
from British trade threats. This desire for revival in production required
a recovery in terms of innovation. Napoleon wanted to know above all
the strong and weak points of the British economy and con?ded this mis-
sion to a Society for the Stimulus of National Industry (Société d’Encour-
agement pour l’Industrie Nationale, SEIN) that organised a mechanism for
observing discoveries on the other side of the channel. With a handicap
of between ?fteen and twenty years in technical knowledge, the French
manufacturers had to imperiously cover that disadvantage through all
media, including the use of illegal practices of smuggling in machines
either bought or stolen on British soil.
In the context of the ban on the importing of English products that be-
gan in 1793, Napoleon consolidated this economic defence system by the
militarisation of Customs
17
. His minister Chaptal considered this admin-
istration as “a guarantor of French industrial independence”. Customs
represented 20% of the administration’s total staf in 1815 (excluding the
army). This trade exclusion policy regarding Great Britain was extended
in the Restoration period under the management of Saint Cricq, the Direc-
tor General of Customs, who was kept in this position until 1824, the year
in which he became Minister of Commerce under Charles X.
Ideological ?ght and strong economic
relationships between powers
Despite the enormous economic cost of the wars against France, Great
Britain stayed in a position of strength. The industrial revolution, which
began many years prior to that on the continent, put its manufactured
products in a very advantageous competitive position. Its colonies guar-
anteed a large supply of raw materials and its naval supremacy enabled
it to block the main maritime trade routes. Consequently, London was
16
At that time Chaptal held the roles of Minister of the Interior and of Industry.
17
Todd, David, L’identité économique de la France, Libre échange et protectionnisme,
(1814-1851), Paris, Grasset, 2008, p. 64.
Christian Harbulot
72
interested in promoting the disappearance of customs barriers in order
to sell its products in other countries, especially in Europe.
To break the protectionist barriers maintained by France, the British gov-
ernment granted a greater strategic dimension to the techniques emerg-
ing from economic warfare in times of peace. The press and publishing
18
performed a decisive role in that strong relationship. London sent the po-
litical economist John Bowring
19
to Paris as head of the British commis-
sion responsible for negotiations on free trade. The reasons that led the
university student David Todd
20
to present John Bowring as an in?uential
agent at the service of the Crown were his working methods whose main
goals were, ?rstly, to create pressure groups in France supporting British
arguments and secondly, to use the local press so that his ideas would
reach the circles of economic and political power. His management was
summarised as follows:
“In 1834, through a series of letters sent to Lord Auckland, president of
the Board of Trade, Bowring explains in detail the strategy he is devel-
oping in France on his travels. In each city he visits he tries to gather
and form a group of supporters of free trade. Then he continues intense
correspondence with these supporters to direct them towards a common
goal: overthrowing the monopolies. The groups are responsible for the
liberal ideas in the local press and formulating solemn declarations sup-
porting a free market. Thus, they managed to favourably in?uence pub-
lic opinion: the opinion, the illustrated opinion – is the best instrument for
achieving our goal – without it we will not have the least progress; with it we
will achieve everything”.
John Bowring started to attack Saint Cricq’s ideas, considering that he was
an enemy of England
21
. He focused his activity on the exporting regions
(silks in Lyon, wine in Bordeaux). The goal of his numerous interventions
in the French circles of power was to encourage them to denounce the
prohibitive French system. He sought support in regions snatched from
the English in the 100 Years’ War, such as Aquitaine, where many wine
producers opposed the customs duties
22
. Another form of approach used
by Bowring was the dialogue he established with French liberals such
as Benjamin Constant and Jean Baptiste Say with whom he maintained
contact as a politician. Bowring knew how to take advantage of the inter-
nal contradictions of the French political world, supporting organisations
18
In 1834, in Paris, 6,500 copies of liberal economy treaties and manuals were printed.
19
He was also involved in Switzerland, Italy and Germany.
20
Ibid. p. 183.
21
Ibid. p. 199.
22
French wine growers were very powerful at that time, representing a tenth of the
population actively involved in either main or secondary grape producing activities, that
is, two million people.
A study on economic warfare and associated problems
73
of anti-government republican press that ranged from the centre left to
the extreme right. He knew how to collect the results of his labour on the
ground and encouraged his supporters to draw up collective petitions,
demanding the abolition of the protectionist barriers imposed by France.
Creation of structures dedicated to economic warfare
The First World War
23
established bases of economic weapons as a way
to achieve a de?ned goal. From 1914, aware that the con?ict would be
long, the involved powers conceived a strategy for economic warfare, as
the French note
24
below sent to the military attaché of the United States
in Paris certi?es:
“After the battle of the Marne, faced with the new movement from the war
the high command understood that it would be long and it would not be
enough to ?ght the enemy on the ?eld of battle but it also had to be fought
on their own terrain; preventing enemy armies having material available,
morally and physically undermining the entire population, cutting of the
necessary raw material supply for their industry, collapsing the economy,
blocking their ?nances, even afecting the food supply. These are the ba-
sic ideas on which economic warfare is based”.
In 1915 the French War Ministry organised a system dedicated to eco-
nomic information. A Control Section was created, managed by Jean
Tannery
25
, a senior public ofcial at the Court of State Auditors (Cour des
comptes). This section organised the collection of information required to
put into practice the activities of economic warfare:
• Identi?cation of the axes for German supplies and study of the ar-
rangements that would have to be made to hinder this supply.
• Monitoring of the organisation and development of the German
war industry.
• Preparation of plans for destroying industrial centres.
• Preparation of lists of companies connected to the enemy.
• Application of restrictions and quotas.
• Control of economic ?ows in order to prevent German foreign eco-
nomic relationships.
Great Britain organised itself diferently using an independent body, the
War Trade Department Intelligence, which in turn reported to the Foreign
Ofce. In 1916 the Italians created the Ufcio di raccolta e controllo di noti-
23
Soutou, Georges-Henri, L’or et le sang, les buts de guerre économiques de la Première
guerre mondiale, Paris, Fayard, 1989, p. 566.
24
Revue Historique des Armées, Paris, No. 4, 2001.
25
Bourlet, Michaël, Guerres mondiales et conflits contemporains, Jean Tannery (1878-
1939) à l’origine de la guerre économique, Paris, PUF, 2004.
Christian Harbulot
74
zie economiche, linked to its War Ministry. These structures were coordi-
nated by an Inter-Allied Bureau with its headquarters in Paris.
Throughout the war the activities of economic warfare were already fo-
cusing on international goals such as rationing the countries of Northern
Europe, in order to force them to stop exports to Germany or with military
operations carried out thanks to developments in aviation, such as bomb-
ing selected stations in Lorraine that, while occupied, provided three
quarters of the iron ores needed in the German iron and steel industry.
In 1918 the French, British and Americans agreed on the criteria for the
goals that had to be achieved. For Paris, the economic weapon was not
only a weapon of war to force Germany to sign for peace but also the pos-
sibility of preserving the advantages won in the event of victory. France
wanted to reach an understanding between the allies on how to keep Ger-
many in a weakened economic situation by jointly controlling raw mate-
rials. For Washington the economic weapon took the role of a strategic
and political in?uence that would force Germany to sign an acceptable
peace treaty and put an end to its economic expansion
26
. Raising the prin-
ciples of economic liberalism, the United States sought to ?nd itself a
place within the world market whilst London followed Washington’s line
although maintaining its own interests (protection of main industries,
special relationships with the Dominions on the question of control of raw
materials).
Economic warfare structures disappeared at the end of the war. At the
beginning of the Second World War, in September 1939, Neville Chamber-
lain, the British Prime Minister, created a Ministry of Economic Warfare
with similar powers to the structures developed during the First World
War. In July 1940 Winston Churchill gave this Ministry a very ofensive
role by allocating it a new service, the Special Operations Executive, which
was responsible for sabotage operations on the continent and for prompt-
ing rebellion and resistance in territories occupied by the German ar-
mies. The notoriety of this new organisation meant that speci?c aspects
of economic warfare shifted onto a second level. This Ministry ceased its
activity after the defeat of Nazi Germany.
If the overlapping of the economy and war was obvious, for some decades
the problem of economic warfare in the second part of the 20th century
again became invisible for the following reasons:
– The cold war forced the Western Bloc countries to squash or dis-
guise their economic disagreements, prioritising the image of an
ideological unit facing the Communist Bloc.
– The United States, the new world superpower, made the British
strategy of applying pressure to end the protectionist barriers on
26
Hauser, Henri, Les méthodes allemandes d’expansion économique, Paris, A. Colin, 1919.
A study on economic warfare and associated problems
75
continental Europe its own. The texts on free trade and free com-
petition became obligatory reading in the economic reality of the
Western political world. Strong economic relationships between
powers were silenced or were considered within the university
community, in particular by the majority of liberal economists, as
unrepresentative anomalies of the competitive relationship be-
tween companies.
The geopolitical justi?cations of conquest
The search for obligatory reading on economic warfare involves simulta-
neously analysing the progress of the conquest mechanisms (territorial
and commercial) and the States’ methods of power development.
Commercial conquests began to replace territorial conquests during the
19th century. Unlike territorial conquest often carried out turning to tradi-
tional war, commercial conquest tends to increase the State’s supremacy
by expanding its circles of power over foreign markets.
Historically some powers did not hesitate, almost publicly, to discuss
their expansion, which was necessary for their survival. This was par-
ticularly the case with Japan and Germany, which on several occasions
spoke about their living space in terms of territorial conquest or commer-
cial conquest.
The conquest against commercial imperialism
From 1853
27
, Japan was under the control of Western countries. In the be-
ginning the Japanese bowed to initial Western pressure, signing a treaty
on 31st March 1854 in Kanagawa that con?rmed the opening of Shimoda
and Hakodate ports to commercial ships under the American ?ag. In the
following years England and the main European powers obtained equal
privileges. In 1867 when the young emperor Mutsuhito (whose reign
would be called Meiji Tenno) came to the throne he modi?ed the terms of
the strong relationship. Listening to reformists the young king wanted to
avoid falling back under the domination of the West (as was the case with
China during the same period under the “unequal treaties
28
”).
27
This was the year during which an American fleet made up of four warships sent by
Commodore Perry appeared in the Bay of Tokyo. He was carrying a “friendly” letter from
the President of the United States for the shôgun of the Tokugawa family. After a second
layover in 1854 Commodore Perry demanded the shôgun to open Japanese ports up to
American merchant ships and whalers.
28
The result of the Chinese military defeats against Western troops, the unfair treaties
signed in the 20th century between China and Western powers as well as Russia tried
to force China to open up its domestic market.
Christian Harbulot
76
The strategy applied by Japan took a very signi?cant slogan: rich country,
strong army. The Naimusho, founded in 1873, was the ministry responsi-
ble for industrial development planning. It built state factories inspired by
European manufacturer models and discreetly fought to prevent foreign
capital taking over the strategic economic points of the emerging Japa-
nese market (port infrastructure, naval shipyards, armaments industry).
The modernisation of Japan was carried out within a policy framework of
all types of knowledge acquisition acquired abroad, following the exam-
ple of countries more experienced in the ?eld.
At the beginning of the 20th century, Japanese expansion (the annexation
of Korea, acceptance of a responsibility over China) caused antagonism
with the United States, who wanted to leave a door open in China. Be-
noit Meschin
29
summarised the report on the strengths between the two
countries after the Washington
30
Naval Conference in 1921 like this:
“Linked by the Washington agreements, excluded by the United States
with its new immigration law, complicated in its economic development
by the increasingly severe restrictions imposed by the American cus-
toms service on the importing of Japanese products into the United
States; what could Japan do so as not to be con?ned to their islands
and solve the dramatic problems originating from the ever faster rise
in its population?”
After initially seeking to break isolation by turning to a kind of colonisa-
tion of Korea, Japan considered that it would be essential to build up an
area of shared prosperity at a regional level
31
that would regroup all the
countries occupied by the Japanese Imperial Army during the empire’s
expansion phases. The occupation of Manchuria in 1931 is included in
this perspective.
The founding of the State of Manchukuo, a year later, is an example of
the reproduction of militarised conquest systems invented by the Portu-
guese and imitated by the Dutch and English at the beginning of colonial
processes in Modern History. The Japanese copied the model of the old
India Company but were also inspired by the development produced by
the American railway companies that built an industrial empire by con-
necting the East to the Paci?c coast. At the end of the thirties Manchukuo
was under the Manchu railway company administration
32
that governed
29
Meschin, Benoit, Histoire de l’armée allemande, volume 1, Paris, Robert Laffont, col-
lection Bouquins, p. 847.
30
The United States rejected marine equality with Japan and made it disarm part of
its war fleet.
31
The shared prosperity area project of eastern Great Asia was proposed by General
Hachir? Arita, Minister of Foreign Affairs from 1936 to 1940.
32
Over 75% of the company’s income came from exporting soybean to Japan and
Europe. In 1927 half of the world’s soybean came from Manchuria.
A study on economic warfare and associated problems
77
this territory in a relatively autonomous way with regard to Tokyo. It di-
rected the occupying Japanese troops, managed its own police force, ran
a local administration of over 200,000 employees and had its own issuing
bank as well as merchant ?eet. The State of Manchukuo was used as an
experimental laboratory for a new supremacy concept of power by using
the economy.
Conquest of living space
German history is marked by the search for new territories to be con-
quered, whether peacefully or by using force. From the beginning of time
Roman writings gave accounts of particularly difcult living conditions
in German villages. Covered in forests and not very suitable for agricul-
ture, the territories in Northern Europe did not enable its population’s
subsistence. To survive, German villages had to conquer more prosper-
ous territories for subsistence. This conquest strategy was carried out
on the land and by sea. At the end of the Middle Ages German colonies
had started to be established in the east of Bavaria. Bankers, such as
the Fugger family from Augsberg had ?nanced the exploitation of Czech
mines and forests. This commercial exchange enabled them to peaceful-
ly conquer the old markets of the Slav princes with this being the begin-
ning of the development of the territories of Bohemia and Moravia. This
colonisation was not always peaceful. The Polish rejected it and opposed
the Teutonic Knights.
The foundation of the Hanseatic League
33
opened the path for maritime
conquest. The expansion of the Baltic ports gave Germany as well as the
cities in Northern Europe the resources to become established peacefully
on the Polish coasts between the 16th and 17th centuries. Military cam-
paigns carried out by the Prussian family Hohenzollern completed the
creation of a sphere of in?uence to the east of Germany.
This constant search for living space outside borders permanently
shaped a sharp sense of distribution of strengths in the spirit of the
elite Germans. The debate about the strategic opportunity of territo-
rial conquest or commercial conquest dominated political life in the
Second Reich. Bismarck’s preparation of Germany enabled the coun-
try to take on an influential global role. Germany’s increase in power
at the end of the 19th century was not limited to the movement by
the German economy into the industrial era. The mobilisation of Ger-
man economic figures is inseparable from the geostrategic positions
of the Second Reich that were strongly determined by the attitude of
the British and French colonial empires. The strategic German heart
33
Association of German merchants and later of North German cities and Northern
Europe that dominated Baltic trade between the 12th and 17th centuries.
Christian Harbulot
78
(Konzern
34
, banks, insurance companies) shaped in that era wanted to
dominate other European powers.
This dimension to the debate did not escape German adversaries such
as Georges Clémenceau who, from 1915, estimated that the danger from
Germany was worse in peacetime than in war, due to the way in which
Germany had discovered how to develop a competitive economy capable
of competing on a worldwide level with the British Empire economy.
The First World War caused disputes to arise about how to manage hy-
pothetical military victory in geoeconomical terms, once peace had been
achieved. The result of this re?ection on Germany appeared in 1915 with
a work that can be considered today as the draft of an economic warfare
manual. It was translated into French under the provocative title of “The
German Business War Plan
35
”. From the beginning of the book the conno-
tation is obvious: “all business is a war, the world is a battle?eld”. It was
later called by the Americans the Bernhardi
36
of Business; Herzog de?ned
the economic action resources to be put into operation against the Reich’s
enemies. There were two types:
– The factors that may in?uence or control exports in commercial
war.
– The factors that would enable Germany to overcome the passive
resistance in defeated countries.
In the event of victory against the allies Germany knew that it had to face
“world hate”. Then it would have to face all kinds of reprisals in the de-
feated countries (supply or raw materials stopped, boycott on its exports,
censure of its scientists at international meetings or the poaching of their
cutting-edge technology). To justify its fears Herzog quoted an English
technical magazine that, at the beginning of hostilities, insisted on the
need to launch an economic war against Germany based on science. The
British still held resentment from Victorian times due to the stealing of
their techniques by the Europeans and Americans. The secret nature of
inventions and therefore control of science was for them the basis of all
economic warfare. To keep the economic wealth of his country Herzog
suggested state control be applied “to the industries that foreign coun-
tries have not yet stripped of their capacities”. Despite defending this
measure he did not question the market economy. Private initiative had
to be protected without prejudicing the nation’s economic interests. The
pro?t motive encouraged businessmen to relocate their companies to
countries which appropriated manufacturing secrets and so became po-
tential competition.
34
Association of companies that were developed through horizontal and vertical
concentration.
35
S. Herzog, Le plan de guerre commerciale de l’Allemagne, Editions Payot, Paris, 1919.
36
German General (1849-1930), theorist of Pan-Germanism.
A study on economic warfare and associated problems
79
As soon as the work of Herzog became known, the Americans had it
translated and they spread it extensively. Herbert Hoover, the American
Supplies Minister and future President of the United States, stated in
the preface of the book’s American version that the threat of economic
con?ict had been clearly understood in this book at the beginning of the
century: “not satis?ed with military supremacy, Germany was intrigued
by commercial supremacy, with an insulting snub towards the rights of
others and use of bad faith that has characterised its entire policy since
Frederick the Great”.
Covering up economic warfare
From ancient times until the time of industrial revolutions, economic su-
premacy was a constant in the nature of strong relationships between in-
dividuals, groups and States. Professor Edward Mead Earl of the Institute
for Advanced Study has recalculated the dialectic relationship between
the political and economic dimension of power
37
:
“If it were possible to separate economic and political power this would
only occur in the most primitive societies. In modern times (with the
emergence of the National State, expansion of European civilisation
throughout the entire world, the industrial revolution and constant
progress in military technology), it has been necessary to face the is-
sue of the interdependence between commercial, ?nancial and indus-
trial strength on the one hand and political and military strength on
the other. This correlation is one of the trickiest problems in the art of
government. It afects a nation’s security and, to a great degree, de-
termines the quality of life, freedom, property and happiness that an
individual can have”.
The same is true with the realist theory of international relations: despite
having ignored the economic aspect in the search for power, the “animus
dominandi” is described as a constituent element of all human associa-
tions and social relationships and therefore of national and international
political life. Hans Morgenthau
38
emphasised that international policy is
a ?ght for power. But power is not only military. However, unlike military
war, economic warfare did not become a subject for debate in political
and academic circles.
How to explain such an omission of strong relationships in compulso-
ry reading with regard to the con?ictive relationships between peoples?
From the early Middle Ages the nature of the historical phenomenon that
is economic warfare has been denied on the pretext that the political jus-
37
Mead Earl, Edward, Les Maitres de la Stratégie, volume 1, Paris, Flammarion, 1986.
38
Morgenthau, Hans, Politics Among Nations. The struggle for Power and Peace, New
York, Mac Graw-Hill, 1948, p. 29.
Christian Harbulot
80
ti?cations of economic warfare are perceived as actions of illegitimate
aggression. The debate on war, barely started by Saint Augustine and
Saint Tomas Aquinas, established the bases for the reasoning that iden-
ti?ed economic warfare with “a negative vision of war triggered by greed
and the desire to get rich at the cost of others
39
”. The idea of injustice
was quickly associated with wars of conquest. During the discovery of the
New World the conquerors had to justify the use of arms against towns
that opposed the conquest of their territories. The text De jure belli from
the Salamanca School (16th-17th centuries) classi?ed the indigenous re-
bels as disloyal enemies for adopting an impossible attitude against their
conquerors. In this way, through the seizure of property and the capture
of indigenous rebels (the spoils of war), punishment was justi?ed in the
eyes of the Christian world.
The results of this ideological debate, strongly instilled in the history of
political ideas, encouraged state ?gures in economic con?icts to hide their
strategy by using diferent pretexts such as the spreading of religious
thought, the modernisation of third world countries and, the most recent
way, the development of democracy. This policy, almost systematic in its
concealment of the true goals of conquest, distorted the interpretation of
the strong relationships linked to a people’s survival process or caused
by the search, maintenance and increase of a country’s power. Maybe a
relationship could be found in the fact that, today, there is no doctrine
on economic warfare within international military organisations such as
NATO (North Atlantic Treaty Organisation). Within the global focus de?ned
by the new doctrine (NATO) 2010
40
, the use of economic weapons never
appears as an ofensive option but as a factor for understanding the en-
vironment. This type of omission can be explained by the diferences in
domestic economic challenges within the community of member states
41
.
The disguising of economic warfare is applied both to domination strat-
egies put into operation by colonial empires and recovery strategies by
countries that wanted to avoid colonisation or that later sought power.
Dominance strategies
The religious question contributed to hiding the true purpose of con?icts
that involved considerable economic bene?ts. A papal bull of 1452 gave
39
“Où en est la notion de guerre juste?”, François Rigaux, Emeritus professor of inter-
national law at the Louvain Catholic University, published in the work Colère, Courage,
Création politique, volume 1, Paris, L’Harmattan, 2011, pp. 163-177.
40
OTAN “Concept et doctrine “, official site.http://.www.nato.int/nato_static/assets/
pdf/pdf_publications/20120203_strategic-concept-2010-fr.pdf.
41
Mazzucchi, Nicolas, “Alliance militaire et guerre économique”, Revue de la Défense
Nationale, No. 752, Paris, 2012, pp. 1-3.
A study on economic warfare and associated problems
81
carte blanche to the Portuguese to attack, conquer and subdue the Sara-
cens, pagans and other in?dels. A second papal bull of 1454 recognised
the Portuguese acts of conquest in Africa by contemplating the possi-
bilities of converting the local populations to Christianity and ratifying
the Portuguese commercial monopoly in a territorial area on the Guinea
coast as well as all the territories presumably located on the silk route.
In 1494 the Treaty of Tordesillas
42
was negotiated under the authori-
ty of the Catholic Church with the Spanish-born pope Alexander VI. He
was looking for a resolution of con?icts caused due to the discoveries of
Christopher Columbus and established the distribution of the lands of the
New World between Spain and Portugal, which were the two emerging
colonial powers. The Portuguese also obtained papal recognition of their
conquests of African territories and claimed the right to inspect any ship
in African waters. This treaty was not recognised by any other European
kingdom. Above all, it explained the reality of the strong relationships
between the two dominant maritime powers in that era.
After having been hidden under the pretext of evangelisation of peoples
that were considered primitive, the disguising of economic warfare was
the consequence of a new phase of development of power at the dawn of
the industrial revolutions. If military war had evolved thanks to technical
inventions, the notion of power had been the subject of an authentic met-
amorphosis under the impact of the creation of economic empires. The
birth of liberalism championed a new way of increasing power through
commercial conquest that in turn became an alternative to traditional
territorial conquest. The Victorian empire integrated the dynamic of eco-
nomic warfare, legitimising its reason for being and hiding its purpose
through a debate on the opening up of markets supported by the theory
of free trade. The imperialist dynamic of the British Empire represented
a decisive decrease in the logic of territorial conquest, necessarily politi-
cised, towards a system of commercial conquest, in other words, of con-
trol by markets. Therefore, free trade was transformed into the standard
for the Empire
43
:
“In short, the ?rst economic strategies for increasing power appea-
red through the creation of an economy-world under British in?uence.
Great Britain, by multiplying economic relationships – based on the
leitmotif of Adam Smith “laissez faire, laissez passer” (‘let men do, let
goods through’) – with state units operating both inside and outside its
42
Almost all the Americas belonged to Spain, except Brazil. The Portuguese secured
control of various coastal territories in Africa, the Middle East (Eritrea, Somalia), sou-
th-east Asia (Goa, Colombo, Malacca, Timor), except the Philippines that were claimed
by Spain along with the Canary Islands (Atlantic).
43
Blanot, Harold; Boyer, Adrien;, Kûhl, David and Spiess, Margo, La guerre économique
comme explication structurante de la construction d’un pays, EGE, Paris, éditions de la
Bourdonnaye, 2013.
Christian Harbulot
82
economy-world, created a free trade zone in which liberalism spread
and the market was institutionalised, even managing to venerate itself
as a means of paci?cation in international relationships and the deve-
lopment of participating nations. Consequently the British Empire ob-
tained great bene?ts from this system which was its great power cen-
tre, enabling it to in?uence the circulation of capital, merchandise and
manpower. Aware of its supremacy, the centre of the economy-world
(London) could therefore de?ne or even impose commercial policy in
accordance with its interests. In this way, between 1840 and 1860 the
volume of trade between England and the rest of the world trebled:
English industrialists exported their goods to the rest of the world in
English ships with the support of English insurers and banks. In addi-
tion, the trade balance was approximately 10% in favour of England
between the years 1870 and 1914. This growth enabled England to be
at the head of those countries on the road to industrialisation, to be
the leading maritime power and above all to control almost 25% of the
world in 1901. The theoretical application of this change in the way of
conquering was in the displacement of imperialist rationale – military
and vertical – to that of economic supremacy, with the latter being the
capability of one policy to exercise efective sovereignty over foreign
political societies without absolutely controlling them
44
. The transfor-
mation of power lead Benjamin Constant to con?rm that, “war is no
more than a savage impulse whilst trade is civilised calculation”. The
colonial empires meant the distribution of land in diferent spheres of
in?uence.
Commercial conquest could result in commercial war by turning into a re-
source for coercion when the countries coveted by the British merchants
were opposed to voluntarily allowing the penetration of its domestic mar-
kets. To impose their products on the Middle East and East Asia markets,
the British established the practice of “gunboat diplomacy” that reached
its peak during the blockade of the Port of Alexander by the Royal Navy
in 1840-1841 and, later, in the two opium wars that, successively, pitted
China against Great Britain and China against a coalition of Western coun-
tries. It was at that point when the Western world commanded the drug
trade through military means on a theoretically independent country.
William Jardine, who managed the opium company Jardine & Matheson
in Hong Kong, legitimised this action by making himself the protector of
“the freedom of the independent company without restrictions
45”
. It is
advisable to remember that the pretext given when using force by the
British was the embargo and destruction by the Chinese authorities of
44
Battistella, Dario, “La notion d’empire en théorie des relations internationales “,
Questions Internationales, No. 26, July-August 2007, pp. 27-32, p. 30.
45
Brizay, Bernard. Le sac du palais d’Eté. Seconde guerre de l’opium, Paris, éditions du
Rocher, 2011.
A study on economic warfare and associated problems
83
20,282 boxes of opium unloaded at Canton in 1839. The Chinese emper-
or Daoguang decided to suspend trade with the English and condemn to
death any foreign merchant engaged in the opium trade. The British con-
sidered the Chinese reprisals as a crime of “commercial treason
46
”and
began hostilities that resulted in adopting unequal treaties that “were
unfair and whose conclusion left, in the Chinese conscience, the germ
of a desire for vengeance that would only increase through successive
generations and would take its strength from the resentment that stirred
the memory of humiliation
47
”.
The opium wars gave such visibility to economic aggressiveness that it
took countries like Japan
48
to mould national identity with a power policy
based on economic expansion symbolised in the slogan “a rich country,
a strong army”.
The coming to power of the emperor Mutsuhito in 1868 was the beginning
of a series of reforms whose goal was to catch up with the West. Japan
took over a century to prepare the basics of an economy in the service
of power. At the end of the eighties, the Central Intelligence Agency pub-
lished the report Japan 2000
49
drawn up by a working group made up of
?gures from the civil and military worlds. This document was one of the
few written contemporary examples of a governmental text on the strong
economic relationships between two powers. The most explanatory part
of the text condemned “Japanese propaganda” of disguising protection-
ist measures that the country applied to other market economies and
its lack of respect for economic liberalism. Some passages in the report
stigmatised the Japanese power strategy in these terms: “The members
of the Chrysanthemum Club (who joined the elite Japanese political and
industrial resources) considered that the Western system was doomed
to disappear and they acted, as much as possible, in a way that brought
forward its end.” The Japanese recovery strategy pursued since the Meiji
era enabled it to reach second place in the world economies in little more
than a century of efort. At the end of the eighties, voices of complaint
were heard regarding Japanese expansion and the use of economic war-
fare techniques in political and economic media by the United States and
Europe.
Commercial aggressiveness in the ancient empire of the Rising Sun with
regard to the West stopped with the adoption of diferent measures by the
46
Brizay, ibid. p 35.
47
Leger, François, Les influences occidentales dans la révolution de l’Orient. Inde, Malai-
sie, Chine. 1850-1950, Paris, Plon, 1955.
48
Souyri, Pierre-François, La nouvelle histoire du Japon, Paris, éditions Perrin, 2010.
49
The report Japan 2000, rapidly withdrawn from circulation due to protests from the
Japanese authorities, announced the tension in negotiations between the United States
and Japan over the opening up of its domestic market and access to shareholdings in
its largest companies.
Christian Harbulot
84
North American authorities (repeated attacks to break Japanese protec-
tionism, the destabilisation of its banking system by the refusal to grant
a currency snake during the Asian ?nancial crisis, a blockade of its tech-
no-globalism strategy
50
, limitation of the Japanese games of in?uence in
the North American political administrative system). The fall of the Ber-
lin Wall deprived Japan of its implicit blackmail of the United States. If
the United States did not grant Tokyo enough room to manoeuvre for the
construction of its economic potential, the North American governmental
authorities no longer had anything to fear from the instability of this ally/
ancient adversary within the sphere of Soviet in?uence. Despite this, the
brutal blockade of Japanese economic potential did not stop its strategic
opportunities for recovery.
Recovery strategies
Recovery strategies were organised around elementary goals strongly
dependent on geographic and cultural context. In the case of Japan, as
a priority its insularity forced it to equip itself with an infrastructure for
maritime purposes (shipyards, ports) and secondly, to establish bases
for an industrialised economy. Several countries such as South Korea,
India, Brazil and China later followed its example without having to copy
its model. South Korea followed the Japanese style by favouring naval
construction and the formation of large private industrial conglomerates,
chaebols, the Korean equivalent to Japanese keiretsu or the ancient zai-
batsu dissolved by the American occupying authorities after the Japanese
defeat in 1945.
India followed other models to position itself as a dominant player in the
worldwide IT industry. The authorities in New Delhi pursued educational
reform between 1993 and 2004 to create a reserve of human resources
needed for the development in the ?eld of information technology. For
a while the federal government decided to remove from the secondary
education programme literary subjects to increase the number of hours
spent on mathematics. The goal was to support guidance of the maxi-
mum number of students towards technical and IT engineering profes-
sions. Gradually from 2004, literary subjects were reintroduced by the
authorities considering that the goal had been reached. This policy was
also based on transforming the city of Bangalore into the high tech capi-
tal. The reasons for its selection were its climate conditions, with it being
one of the few places in India where the monsoon’s range is weak. In this
50
Drawn up in 1987 by the Japanese Ministry of Industry and Commerce (MITI), te-
chno-globalism sought to prevent parasitism of research due to competitive practices
and thereby fulfil the separation between North and South, creating a common asset
of humanity. This occurred after the American tightening up in the field of patents and
scientific exchanges with Japan.
A study on economic warfare and associated problems
85
way a framework adapted to the return of Indian engineers was created
and the life of Western expatriates made easier.
Brazil developed recovery strategies by supporting the energy sector
(non-conventional petroleum thanks to its ofshore deposits and its Am-
azon reserves, water for its hydroelectric dams, renewable energies).
The Brazilian State
51
made the company Petrobras the vanguard for its
strategy of geoeconomic in?uence. Brazil sought to acquire regional
superiority in the energy sector, mainly by adopting numerous bilat-
eral agreements signed with neighbouring countries that gave them a
predominant in?uence in energy provision on the Latin American con-
tinent. Regarding soft power
52
, Brazil was also improving its image as
an emerging power in terms of sustainable development as well as
claiming to be one of the cleanest countries in the world thanks to its
electrical production.
China has built its recovery strategy by supporting opening up (crea-
tion of special economic zones and strong policies for attracting foreign
investment), unlike Japan, which sought to gain knowledge by closing
access to its domestic market. The meeting point between the two coun-
tries consisted of the priority given during their phases of mutual devel-
opment to the conquest of foreign markets. In both cases this form of
commercial aggressiveness resulted in hostile reactions by the United
States and high pro?le debates about the problem of economic warfare
53
in the Western world. China was accused of pursuing a strategy of in?l-
trating the standardisation organisations for the purpose of imposing its
own standards
54
. It has active members on 82% of the technical commit-
tees in the International Organisation for Standardisation (ISO) whose
headquarters is in Geneva. This participation is higher than France
(80%), Japan (79%) and the United States (75%). Suspicion towards Chi-
na generated diferent types of reactions difcult not to compare with
forms of economic con?ict. As an example, let us use the protectionist
measures of the Obama Administration regarding photovoltaic technolo-
gies and the refusal to allow shareholdings in Western industrial groups,
such as the refusal to the request by the Chinese company Minmetal to
own part of the Australian company Oz Metal by the Australian govern-
ment in Canberra.
51
Mazzucchi, Nicolas, L’énergie, source de la nouvelle puissance brésilienne, Nouvelle
Revue Géopolitique, No. 3, Paris, 2012.
52
Indirect action that seeks to place a power in a strong relationship that is to its ad-
vantage with regard to the topic of international interest under debate. The soft power
strategies also delimit the influence strategies intended so that certain countries agree
with the same positions of a power in accordance with its own interests.
53
Dossier 2013, l’année de la guerre économique, l’Expansion, No. 780, December 2012,
Paris.
54
Ibid. p. 44.
Christian Harbulot
86
Change in the paradigm of economic warfare
The control methods and economic domination devised by colonial em-
pires sufered a mutation under the efect of geopolitical, military and
commercial supremacy that the United States assumed at the beginnings
of the Second World War. Contrary to the coercive methods applied by
the colonial empires in their territorial occupations, the United States es-
tablished a new model for expressing economic power on the basis of
the following principle: a superpower that seeks to dominate an allied
country on economic or cultural issues must seek the best position at the
top of a hierarchy of values, regulations and arbitrations of the market
economy. This manoeuvre for monopoly from the summit entails a new
method of understanding economic con?icts. The United States imposed
this practice of silent economic warfare in peacetime on the industrial-
ised countries of the Western Bloc. But a geopolitical factor and another
of a geoeconomic nature modi?ed this period of stability from economic
con?icts:
• Opening of new spaces in the market emerging as a result of the
disappearance of the Eastern Bloc.
• Commercial aggressiveness generated by the recovery strategies
of emerging economies.
The tightening of worldwide competition caused by the joining of these
two factors meant that the United States took economic con?icts into
consideration in an almost ofcial way.
Economic security policies
The growth of Asia and the construction of a European economic space
afected the geoeconomic predominance of the United States from the
end of the Second World War. This rede?nition of strong relationships
re-launched the problem of economic warfare from a new paradigm:
the ally/adversary relationship replaced direct or indirect con?ict be-
tween two enemies. Economic warfare practiced since ancient times had
demonstrated direct con?ict: the power that gained territories was di-
rectly opposed to the country that tried to resist this conquest. The centu-
ries of colonisation were its clearest example.
The globalisation of exchanges modi?ed the unsettled economic
framework both in industrialised countries and in emerging econo-
mies. Competition went hand in hand with co-opetition (cooperation +
competition). Strategic interests of the powers were diversi?ed and be-
came more complex. Military or geopolitical interest could clash with
an economic interest or vice versa. In other words, a country could ally
with another from a military viewpoint and clash with it on economic
matters. In this way a new type of ally/adversary strong relationship
A study on economic warfare and associated problems
87
emerged. In practice, it resulted in a reduction in the strong economic
relations that had been shown in the past. But this formal reduction did
not erase the intensity of rivalry between the powers, in particular in
geographical areas where new markets were organised and in areas
rich in resources.
The leading economic world power felt legitimised during the nineties
to make an economic security policy already started in the seventies,
ofcial with the establishment of section 301
55
of the Trade Act of 1974
and the super
56
and special 301
57
of the Omnibus Trade and Competi-
tiveness Act of 1988. The American authorities used the pretext of ?ght-
ing against unfair competition sufered by North American companies
in some parts of the world. If the expression “economic warfare” was
not mentioned in ofcial texts the comments of some ofcial represent-
atives of the North American executive power underlined a hardening of
their positions in their analyses of commercial exchanges. Carla Hills
58
,
trade representative from 1980 until 1993, expressed it in her own way
using the inverse expression of the carrot and the stick, “we will open
foreign markets with a stick if necessary but with a handshake when-
ever possible.”
Despite protests from numerous countries, this unilateral regulation was
not abolished. The United States used it from then on as a means of pres-
surising the body for solving diferences in the WTO. The representative
of the State Department
59
was equally explicit when commenting on the
report on the gas pipeline between Thailand and Burma, “The Total Com-
pany has practically replaced Conoco and has obtained a contract that
would have been more bene?cial for Conoco. We want to punish those
companies that have this attitude in the future”.
The Torricelli (1992), Helms-Burton (1996) and D’Amato (2001) Acts com-
pleted these measures of commercial reprisal stopping hostile countries
having access to the United States in order to prevent their companies
being able to gain markets in those regions, thereby making them compe-
tition to North American companies. With the exception of Cuba, subject to
a North American embargo since 1962, countries afected by these acts
such as Iraq, Libya, Iran and Nigeria had major oil resources.
55
Section 301 enables the United States to oppose commercial barriers that penalise
North American exports.
56
The Super 301 fights against the set of unfair practices registered by the Office of
the United States Trade Representative.
57
The Special 301 was conceived to protect North American companies against viola-
tion of their intellectual property by foreign competition.
58
Jacob, Yvon and Guillon, Serge, En finir avec la mondialisation déloyale, Paris, La
Documentation française, January 2012.
59
Revel, Claude, Pedron Liou, Isabelle, La diplomatie exportatrice des Etats-Unis, Ob-
servatoire du Marché International de la Construction, Paris, 1997.
Christian Harbulot
88
The Clinton Administration completed this legislative regulation by cre-
ating the National Economic Council
60
in 1993, which worked closely with
the National Security Council. The North American Secretary of State,
Warren Christopher, emphasised the importance of the matter, “North
American economic security must be the ?rst priority in foreign policy”.
Various countries followed the North American example with difering
results. Firstly France created a Committee for Competition and Econom-
ic Security in 1995, chaired by the Prime Minister, Edouard Balladur. The
life of this committee was short-lived. However, the adopted economic
security measures were made permanent under the direction of the Min-
istry of the Interior. From the ?rst presidency of Vladimir Putin the Krem-
lin reinforced the role of certain state organisations in the protection of
economic wealth and made the governors of the states in the Russian
Federation aware of this new mission. China had also followed this path
in the previous decade.
The impact of economic strategies on increasing power
Can the mutation in strong economic relations of the ally/adversary con-
frontational kind be called into question by the economic strategies for in-
creasing power of new ?gures in the Western world in the global market?
Economic weakening of the Western world may emphasise, if con?rmed
in the medium/long term, tensions between the new conquering powers
and industrialised countries that have dominated the global economy in
the last century. Various factors might make the problems of con?ict and
domination reappear:
• Acquisition of energy and mining resources.
• Territorial challenges linked to geographical location.
• Problems of economic dependence.
• New forms of cultural colonisation by the information society.
• Possibilities of investment in alliances.
Currently there is an imbalance between the dynamics of power of the
new ?gures and the way in which the Western world has become accus-
tomed to managing its economic power without real rivals. The priority
of new players is the conquest of foreign markets to ?nance their policy
of increasing power whilst the countries of the Western world have sep-
arated the problem of power (mainly military and diplomatic) from the
rationalities of economic warfare, silenced from the second half of the
19th century. The policy of deregulation that began in the Western world
emphasises this paradox. National leaders are being broken up in Europe
whilst the new players build their competitiveness focusing on the pow-
60
Initially it was going to be called the National Economic Security Council but this
name seemed too aggressive to European countries.
A study on economic warfare and associated problems
89
er of consortiums ?nanced by banks, directly or indirectly controlled by
the country’s political power. This type of operation is incompatible with
the competitive system of the Western world. A competitive imbalance
originates from this that weakens the industrialised countries that have
separated the question of increasing power from the problem of eco-
nomic competition. Such an imbalance is reinforced by the importance
of ?nances in the operation of the Western market economy. Financial
markets in?uence the de?nition of strategic challenges to the extent that
politicians prefer the short term as the criteria to de?ne their timing in
the construction and preservation of power.
Chinese leaders who have managed to adapt a communist dictatorship to
the rules of the market economy have some more ambitious goals than
the simple desire for pro?t. Aware of the hostile reactions that the growth
of China might generate, ofcials of the Chinese People’s Liberation Army
have invented the term of-limits warfare
61
. The balance of the failure of
the USSR in its weapons race against the Western world encouraged
them to put a preference on methods of con?ict that went outside the
strictly military framework and that, in part, are a result of economic war-
fare. The concept of unrestricted warfare applied to the geoeconomic ?eld
is a way of diverting the rhetoric prepared by the Anglo-Saxon business
?eld. It opens the path to another form of perceiving economic con?icts.
During a Franco-American seminar in April 2012 in the United States,
representatives of the Pentagon reminded their French counterparts of
the sensitive report on computer hacking by China. Taking into account
the range of the phenomenon they were asked whether it would be ap-
propriate to classify this type of aggression as an act of war instead of
an act of industrial espionage. This change of vocabulary reopened the
debate on the issue of denial or validation of economic warfare. The Unit-
ed States managed to guide the debate in the direction of the denial of
economic con?icts between powers (see the economists’ dominant dis-
cussion). This paci?cation speech on the exchanges in the global village
of globalisation is justi?ed by the bene?ts obtained from its status as a
superpower since 1945.
Limits of western ethnocentrism
The West has dominated the world thanks to the colonial empires and
later to the North American superpower. The questioning of colonisation
(the clearest example of economic warfare of all time) opened a geopo-
litical
62
split that remained hidden by the victory of the Western Bloc over
the Eastern Bloc as a result of the collapse of the USSR. The promotion
61
Liang, Qiao and Xiangsui, Wang, La Guerre hors limites, Paris, Payot et Rivages, 2003.
62
The loss of colonies had political repercussions in some countries. In Belgium the lin-
guistic conflict between the Flemish and Walloons became a national problem from 1962.
Christian Harbulot
90
of emerging economies opened a geopolitical split shown by the process
of deindustrialisation and the weakening of some Western market econ-
omies. These two splits emphasised the limits of Western ethnocentrism
that caused strong relationships to be analysed, starting from the princi-
ple that the strong could only be from the Western side.
The contradictions between the United States and Europe
In this game of cards the Western world is weakened by numerous con-
tradictions. The ?rst recalls the tale of the “sprinkler sprinkled”. Great
Britain and later the United States used liberalism to legitimise the dis-
mantling of protectionist systems of countries-clients in order to support
the sale of their goods and their domination on international ?nancial
mechanisms. Today it is difcult to reverse this policy because it would
mean delivering a fatal blow to the validity of the discussion. The sec-
ond contradiction is American. Important private interests on the other
side of the Atlantic, both industrial and ?nancial, try in the short term to
make use of opportunities that the globalisation of exchanges ofers. The
?exibility of liberal discussion enables them to legitimise relocations and
the efects of deindustrialisation. The debates in the United States Con-
gress show the often unfair ?ght between the power groups supporting
the opening up of markets and the forces that prioritise the safeguarding
of the interests of the resident population in America. The third contra-
diction is the inability of the European Union to be con?rmed as a power
that is aware of the importance of the challenges in economic warfare.
Since the post-war era, negotiations on the compensation for bene?ciar-
ies of the Marshall Plan opened strong debates in France on some of the
American economic conditions such as the tax on American soybean used
as animal feed or Hollywood cinema distribution in its cinema market.
When he returned to power in 1958, General de Gaulle de?ned the criteria
for a national independence policy that opposed American interests:
• The creation of Elf Aquitaine, an oil consortium, to reduce France’s
dependence on the seven Anglo-Saxon oil companies.
• The setting of quotas to limit the establishment of multinational
American companies.
• The end of the argument about the predominant role of the dollar
as the global reference currency.
The Gaullist vision of national independence did not resist the liberal al-
legation with regard to the opening up of markets. The liberal doctrine
eliminated any possibility of structural discussion about the nature of
economic con?icts despite there being commercial diferences between
the United States and Europe that occasionally disrupted the GATT and
World Trade Organisation negotiations. The European market construc-
A study on economic warfare and associated problems
91
tion served as a pretext even for marginalising intellectual thought on the
role of the economy in the construction of power.
In 1976, Giscard d’Estaing and Raymond Barre dismantled the instru-
ments designed to provide French industry with the capability to respond
in terms of economic power. This was how the Plan’s Permanent Com-
mission on Electronics was abolished. This commission was the meeting
point for the general managers of the sector’s large companies, repre-
sentatives of professional organisations, SMEs and Ministries. The top-
ics submitted for debate referred to French strategy in strategic sectors
such as IT, telecommunications, aeronautics and electronics. This com-
mission originated from the raising of awareness in the sixties about the
essential need to provide France with a sufciently powerful electronics
industry in order to free it from North American domination. The Plan’s
Commissioner had even created an IT system called Mars that was a da-
tabase created from information ?ows generated by 250 companies, 30
administrative services and 23 trade unions. Information ?owed in both
directions since the industries could access it under certain conditions
and thereby improve their contribution to innovation et leur approche du
marché mondial. On the state side, the Mars system enabled the meas-
urement of the efectiveness of the credit injected into the electronic sec-
tor. Extending it to all French industry was considered. On that occasion
Le Monde newspaper emphasised that French multinationals had nev-
er accepted playing the role of a power strategy focused on France and
preferred to cooperate with American companies. In this way a fracture
line arose between those who were in support of a globalised market
and the defenders of an economic territory. This contradiction, despite
being fundamental, was not taken into account when the Prime Minister,
Dominique de Villepin, reopened the debate on economic patriotism at the
beginning of 2000.
Far from being an arti?cial or obsolete debate, the topic of economic pat-
riotism was fed by the negative efects of the emerging economies’ re-
covery possibilities. Their appeal, represented by cheap labour, did not
serve as an explanation for everything. Certain emerging countries have
been transformed into combat economies to now be on the same level as
Western economies. They have done nothing more than reproduce the
techniques started centuries ago in the Western world. You only have to
reread history. After the revolutionary wars France did everything pos-
sible to try to make up for its technical shortcomings compared to the
United Kingdom, turning to the trafcking of machinery imported clan-
destinely from Great Britain and to industrial espionage on British man-
ufacturers. The ofensive strategies of the emerging economies have
completed this panoply of ofensive techniques using an engineering of
information gathering, greatly ampli?ed thanks to the internet, the theft
of patents, the practice of dumping, to the industrialisation of imitations,
without forgetting the illicit trafcking of metals such as copper due to
Christian Harbulot
92
global demand. These unfair actions contribute to the degradation of the
economic supremacy in the Western world and it is becoming a topic of
concern in the United States. In Europe it is relegated to the category of
exceptions that prove the rule, in other words there is a blind belief in the
supremacy of the liberal model.
The bad efects of the liberal model
The United States did not hesitate to provide itself with a coercive sys-
tem for the penalisation of acts of pillage or economic isolation by hostile
countries. Brussels sometimes imitates Washington’s behaviour but it
does not usually put theory into practice. In 1984 the European Union was
provided with an instrument of commercial reprisal
63
inspired by sec-
tion 301 of the American Trade Act. Equipped with this weapon against
the illicit practices of third party states in sectors not regulated in the
GATT agreements, the European Union only exceptionally
64
resorted to
this type of pressure that can be compared to a kind of economic warfare
in peacetime.
The impossibility of a uni?ed idea about the geoeconomic priorities of
the country emerging in a country like France is not a result of a cultural
blockade. The European Union is limited to agreeing the preventive regu-
lations that the member states can take against risks of economic pillage
and unfair competition. Protection of the perimeter of national defence
and public order is the only room for sovereign manoeuvre recognised
by the Brussels Commission. In 2006 the European executive decided on
some infraction procedures that penalised attitudes contrary to the rules
of the internal market by copying the decree against the French takeo-
ver, which required the request for prior authorisation from the French
authorities by foreign investors that wished to take control or have a mi-
nority share of 33.33% in companies in 11 sectors of activity considered
strategic.
Unlike Great Britain, the Netherlands or Germany, which integrated the
disguising of economic warfare in their modus operandi, France sought
validation of its room for manoeuvre through ofcial texts recognised at a
European level. During the ?rst year of his term
65
, Alain Juillet, the Senior
Executive for Economic Intelligence, took months to convince his repre-
sentatives on the European Commission to accept the industrial energy
63
This type of tool made it possible to fight against countries that practiced unfair
competition, imposing penalty measures on exchanges with European Union countries:
quantitative restrictions on export, and an increase in customs duties.
64
Used on six occasions within a ten-year period.
65
His mission regarding commissioning of Economic Intelligence in the National De-
fence Secretary-General (Secrétariat Général de la Défense Nationale, SGDN) will last
from 2003 to 2009.
A study on economic warfare and associated problems
93
sectors that France had wanted to protect better. To justify its refusal, the
European Union claimed the exemplary application of liberalism stand-
ards as a pacifying element in the exchanges. This attitude was far from
unanimous on the Eurasian continent. In December 2008 the Russian
government established a list of 295 companies considered as strategic,
without omitting those in the energy sector
66
. Vladimir Putin added 1500
companies that were essential for the national economy and quali?ed
to receive state assistance, tax amnesties and customs privileges. The
warning from the Russian Head of State to his European counterparts
about the risk of a cut in the gas supply demonstrated the strategic fra-
gility in Europe when providing energy during this period. On this speci?c
topic the liberal doctrine that focused European thought on the deregu-
lation of a market open to competition did not seem suitable for the situ-
ation. However, this defect did not force the search for a uni?ed position
between the European members
67
.
Conclusion
Globalisation has long been rightly regarded as the carrier of positive fac-
tors such as rising living standards of the populations of industrialised
countries, the process of negotiating trade disputes, progressive regula-
tion of trade and the strengthening of protection thanks to the recognition
of international patents. But this “mixed” world product of globalisation
has not paci?ed the economy. The geoeconomic balance in the world play-
ing ?eld is much more deeply multipolar now that the market is global.
The growing rivalry between the Western world and the new actors weak-
ens the dynamics of appeasement driven by a dominant Western world.
The question could be asked of whether Europe has learnt its lesson from
world wars that made it lose its supremacy or whether it has managed to
correctly measure the importance of the threats that hang over its geopo-
litical and geoeconomic future. Devoid of analysis on economic con?icts
and incapable of drawing conclusions on its strategic development over
centuries, today Europe is still lagging behind the United States. Despite
appearances it is more divided than ever by a co-existence that it does not
want to name. Northern Europe is led by Germany, which plays a double
game in discreetly supporting the rebirth of its power whilst projecting
an image of a deeply paci?st country due to its previous military errors.
Southern Europe is trying to overcome its infrastructure crisis. The Eu-
rope made up of former socialist countries is trying to ?nd a path that is
still heavily in?uenced by the strategies of America, Germany and Russia.
To escape this cul-de-sac without a strategic exit it is important to con-
sider new obligatory reading on economic warfare. It seems logical to
66
The gas group Gazprom and the oil companies Lukoil and Rosneft.
67
Germany had signed a bilateral agreement with Russia in 2000.
Christian Harbulot
94
consider a new political economy based on proper coordination between
the construction of power in a state, command in the conquest of mar-
kets and the development of territories. These three strategic dimensions
are not naturally compatible. Political power must be provided with the
resources to de?ne a programme of the challenges and priorities in the
short, medium and long term. Today the European Union is incapable of
doing so. However, this is an absolute priority.
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97
Chapter III
Legal intelligence: the strategic value
of the law in economic security
José L. González Cussac
Abstract
In the present context of globalization, where new technologies have tak-
en on prime importance, the idea of legal intelligence is developed. In ad-
dition, in this area there has been a development in the idea of geopolitics
towards the idea of geoeconomics, with the rise of the notion of ”econom-
ic warfare” or ”fourth generation warfare”. The basic premise is that all
human activity is subject to regulations that in?uence the economy and
intelligence. On this basis, the paper examines the law as a matter of in-
telligence and the law as a tool of intelligence. The conclusion is that the
law is strategically valuable. The one who is capable of creating and im-
posing rules commands a decisive advantage, and the competitors who
do not know the meaning of those rules are not in a position to compete
on equal terms.
Key words
Legal intelligence, regulatory Trojan horse, economic security, legal se-
curity, national security, economic and competitive intelligence, rules and
law.
Legal intelligence: the strategic value of the law in…
99
Approach
Politics, Law and Economics show diferent patterns of marriage through-
out history. They are actually ways of exercising power. Power is domina-
tion, within a scenario of confrontation or competition, and in the frame-
work of the rules of the game. In the past century we witnessed a model
of colonial domination, and later another post-colonial domination during
the Cold War. Currently we are witnessing a new geopolitical scenario
in which domination is exercised by other mechanisms. Globalisation is
the key, and in the words of Juillet brings together two types of economy
that are far from coincidental: the market and the state. However, the
end of the “East-West” confrontation has led the confrontation towards
economic competition, which has placed the “market economy” in the
geoeconomics of the Great Powers. This universal competition in which
both traditional and emerging powers participate, reaching over two hun-
dred countries, requires new rules, both national, regional and interna-
tional, to referee the game between multiple interests and to determine
the distribution between dominant and subordinate countries. And in this
great game of power, interests and rules, and new technologies play a
fundamental role
1
.
In this context, various authors (following Clausewitz) now speak of the
economy as a continuation of the war, so that we would be dealing with
a “covert economic war” (Harbulot)
2
. Therefore, we would have gone
from geopolitics to geoeconomics
3
. Countries gamble their sovereignty
and the citizens their welfare. On this new board, non-state factors and
actors with exclusive economic motivations (?nancial markets) are also
involved, but there are also actions of in?uence and destabilisation led
by government actors. And closely linked with this starting point is the
idea that the “new war” is playing out, mainly, on the World Wide Web
(cyber war)
4
, and largely, within what we usually call economic espionage
(Clarke and Knake)
5
.
The economy and its resulting economic and competitive intelligence
are today more than just an essential component of national security
1
Juillet, Alain (2006), “Principios de aplicación de la inteligencia económica”, Intelli-
gence and security: Journal of Analysis and Prospective, No. 1, December, 2006, p. 123.
2
Harbulot, Christian (1992), La machine de guerre économique: États-Unis d’Amérique,
Japon, Europe, Paris, Economica. Also Carayon, Bernard (2006), Patriotisme économique:
De la guerre à la paix économique, Monaco, Editions du Rocher.
3
An excellent development and explanation at Olier Arenas, Eduardo (2011), Geoeco-
nomía, Pearson Prentice Hall.
4
Olcott, Anthony (2009), “Revisiting the Legacy: Sherman Kent, Willmoore Kendall,
and George Pettee - Strategic Intelligence in the Digital Age”, Studies in Intelligence Vol.
53, No. 2 (Extracts, June 2009), pp. 21-32.
5
Extensively in Clarke, Richard A. and Knake, Robert K (2011), Guerra en la red: los
nuevos campos de batalla, Barcelona, Ariel.
José L. González Cussac
100
as we used to know it (Potter)
6
. And as Juillet might warn, globalisation
and lack of regulation have essentially de?ned the geopolitical arena, in
addition to traditional state actors, companies and other subjects of civil
society
7
.
Perhaps by sharing this analysis, although from diferent angles, authors
such as Joseph Stiglitz, Paul Krugman and Alain Touraine, among others,
believe that the initial ?nancial crisis of 2008 has become not only a glob-
al economic crisis, but a real political and social crisis. In a way, we are
witnessing a true and complete global paradigm change: geoeconomics
has entered the scene. And with it the development of various models
of “economic security” (Buzan, Waever, Wilde)
8
. National security can no
longer be reduced to its classical content, or economic security, without
a human dimension. Thus, economic security as a component of national
security is not only measured by traditional economic criteria of wealth
(also the availability of goods and services, stability, levels of protection,
etc.) and transfers the centre of gravity from the idea of security of States
to the security of people.
However, the deregulation of trade and investment, that is, certain efects
of globalisation, involves a progressive loss of the ability of nation states
to regulate these activities and in turn to deliver goods and services to its
citizens. Therefore, States, including all their domestic legislative frame-
works, have lost decision-making capacity but continue to support the
security demands of their citizens.
The current global economic crisis must be added to this aforementioned
panorama of profound change, which has revealed (when not caused), a
serious instability and insecurity throughout the international system,
and not just in economic terms. The availability of strategic resources
and raw materials, capital ?ows, the burden of the welfare state and
institutional operations are to some degree determining factors in re-
gions and countries, which are now at the crossroads. And like any great
economic crisis this causes a deep expansion with efects (with varying
degrees of impact) in all areas and actions, and therefore carries an ad-
ditional risk of utmost importance for political stability. We know that the
evolution of these factors accentuates social diferences and therefore
represents an ideal scenario for social unrest, the rise of populist move-
ments and the rise of radicalism. All of which, combined and agitated,
6
Potter, Evan H (1998), editor, Economic Intelligence and national security, Carleton Uni-
versity Press. Cfr. Arnett, Dennis, Menon, Anil and Wilcox, James B. (2000), “Using Com-
petitive Intelligence: Antecedents and Consequences”, Competitive Intelligence Review,
Vol. 11, Issue 3, pp. 16-27.
7
Venegas González, Álvaro (2008), “Inteligencia económica: un componente estratégi-
co por desarrollar”, in AA Intelligence, Year 1, No. 2, Chile, pp. 10-19.
8
Buzan, Barry, Weaver, Ole and De Wilde, Jaap (1998), Security. A new framework for
Analysis, London, Lynne Rienner Publishers, pp. 95 et seq.
Legal intelligence: the strategic value of the law in…
101
constitutes the greatest of dangers to the democratic systems and the
Rule of Law
9
.
The above demands a need to change, update and revise regulatory mod-
els, in order to strengthen their own institutional system of democratic
Rule of Law, which is the only system capable of ofering minimal legal
security to guarantee civilised coexistence.
This task involves the development of standards and interpretive practic-
es of self-protection and cooperation, as well as legislation likely to pro-
vide a greater capacity to compete on equal terms with other countries in
its sphere. The law is viewed from this perspective as a ?rst-rate strategic
weapon to deal with a “fourth generation” war, where asymmetric actors
alone or in alliance with other states, can coordinate attacks on countries,
companies or ?nancial systems with serious damage to national security,
in which the economic rights of citizens are an essential component.
In this scenario, economic intelligence, as part of the global economic
policy and a basic component of national security, should organise its
strategy in a regulatory system that allows it to achieve its objectives.
These speci?c objectives are focused on the following basic aspects:
a) to ensure strategic surveillance in order to facilitate public and private
decision making; b) to sustain the competitiveness of companies and the
ability to transfer technology from research centres, and c) to ensure
the economic security of companies and research centres.
Consequently, an economic intelligence system must today be based on
an adequate regulatory policy, both nationally and internationally
10
. That
is why we can speak about the need to develop a legal intelligence with
value and a strategic projection.
The law as a collection of regulations
Wittgenstein staged an authentic revolution in philosophical thinking of
the twentieth century, particularly towards a “conceptual clari?cation”.
This thinking has led to a decisive turn in philosophy, social science and
the Law
11
. Therefore, for the purposes of this work, I wish to underline
that I take as a starting point one of its central ideas: that all activity
9
González Cussac, José Luis and Larriba Hinojar, Beatriz (2011), Inteligencia Econó-
mica y Competitiva: Estrategias legales en las nuevas agendas de Seguridad Nacional, Va-
lencia, Tirant, pp. 13-14.
10
Pooley, James and Halligan, R. Mark (2000), “Intelligence and the Law”, in Miller,
Jerry (ed.) Millennium Intelligence: Understanding and Conducting Competitive Intelligence
in the Digital Age, CyberAge Books, Medford, NJ, pp. 171-187.
11
A masterful development and application of criminal Law from the thinking of Witt-
genstein can be seen in Vives Antón, Tomás Salvador (2010), Fundamentos del sistema
penal, 2nd Edition, Valencia, Tirant lo Blanch.
José L. González Cussac
102
is subject to rules – beginning with language itself – or better yet, that
activities only have meaning and signi?cance from their understanding
through rules. The law, economics, economic security and economic in-
telligence are no exception: without rules it is not even possible to speak
of them
12
.
The law is a positive collection of regulations, i.e. imposed by the author-
ity that has the power to do so. Therefore, the Law also regulates the
economy and intelligence: all human activities are regulated, subjected
to the “Rule of Law”, this is the essence of democracy.
Therefore, the constant tendency in the last decades of the policies of
deregulation, self-regulation and “codes of good governance” in certain
economic areas, have from the start represented a thorny issue, to say
the least.
A second central aspect lies in the emergence of a new global legal or-
der, with spatial and temporal conditions diferent to the traditional ones,
framed within the globalisation process. The central categories of law
such as sovereignty, nation-state, and the constitution are facing new
challenges and restructurings (Jáuregui)
13
. In particular, this highlights
the need to structure time, taking into account not only the present but
also the future, a major challenge for the Law that will involve the draft-
ing of a new “social contract”. And secondly, the transition from one
scenario of nation states to another of supranational scenarios, which
in turn demands a conceptual change from the idea of ”government” to
“governance” that is broader and less formalised. This emphasises the
impossibility, in an era of globalisation, of states not subject to external
restrictions. To this must be added a lack of international order, an un-
bearable asymmetry in international relations and therefore a constant
delegitimisation process of all existing institutions. In short, we are faced
with the need to transform legal institutions to adapt them to new social,
cultural, political and economic parameters.
Therefore, in this new context, economic intelligence also cannot be bur-
dened with the macroeconomic analysis of regions, sectors and coun-
tries, or directed solely to the scrutiny of organised crime in its many
facets, or only ofer protection of industry and technology in a dual use,
12
On the ambiguities and difficulties of language, and in particular applied to the legal
environment of industrial secrecy, espionage and competitive intelligence, can be seen
the magnificent exhibition of Horowitz, Richard (2011), Competitive Intelligence, Law and
Ethics: The Economic Espionage Act Revisited Again (and Hopefully for the Last Time), SCIP,
Vol. 14, No. 3, July/September 2011, pp. 45-46.
13
Jáuregui, Gurutz (2011), “La emergencia de un nuevo orden jurídico-institucional:
el Estado y la Constitución de la era de la globalización”, in Innerarity, Daniel, and Sola-
na, Javier, editors, La humanidad amenazada: gobernar los riesgos globales, Barcelona,
Paidós, pp. 237 et seq.
Legal intelligence: the strategic value of the law in…
103
or even just trying to stabilise the ?nancial system
14
. When speaking of
economic intelligence we normally stress the risks associated with the
pro?tability of an investment, but often ignore both the examination of
the political risks associated with the investment itself (although these
are increasingly taken into account), such as the risks associated with its
legal insecurity. Both risks being, as evidenced by recent world events,
much more important than ?nancial ones.
Consequently, to transfer this approach to the Law intelligence can also
not stop at providing legal tools in all these areas, or by adding the need
to develop counterintelligence work. It should also encourage, for exam-
ple, rules that stop or reduce external actions aimed at altering the nor-
mal functioning of markets and of course it has to enable the deployment
of actions of in?uence within and outside of national borders.
In this sense, the proven experience of the legislation on the defence indus-
try and the regulation of technologies of “dual use”, that speci?es a strong
link between seemingly diferent matters, such as military and commer-
cial, are an excellent example of the path to follow. But they are just good
guidelines or necessary indicators of a sophisticated regulatory policy.
In any event, the Law is the only instrument that provides an essential val-
ue in the coexistence and human relationships of all kinds: legal security.
The measurement of this essential concept, with its complex interweav-
ing of rights and guarantees, of times, delays, procedures, of a legal in-
dependent power, of the quality of legislation, stable applicable practices
and, ultimately, order and guaranteed formalised institutional functioning,
decisively in?uences the actions of the various economic, political and so-
cial interests. Legal insecurity has a high economic cost. And this cost is
also related to the degree of corruption in a state and its association with
transnational criminal organisations and groups
15
. And of course we must
not forget the cost of social exclusion, with its levels of con?ict and conse-
quent risk of instability
16
. This is a tremendous political risk.
Thus, the Law, as a collection of regulations of mandatory compliance, is
crucial in any human activity, especially in the following ?elds speci?c to
this problem.
14
Bégin, Lucie, Deschamps, Jacqueline and Madinier, Héléne (2007), Une approche
interdisciplinaire de l´intelligence économique. Cahier de Reserche No. HES-SO/HEG-
GE/C--07/4/1-CH, Haute École de Gestion de Genève, 2007.
15
All indicators show a significant increase in prosperity in Latin American countries
and the consolidation of an emerging middle class. However, this progress is hampered
by social inequality and civil insecurity. Serrano Monteavaro, Miguel Ángel, La nueva
clase media Americana. Hacia una mayor seguridad económica y social, Information do-
cument, IEEE 02/2013, December 2012.
16
Essential explanation by Stiglitz, Joseph E. (2012), El precio de la desigualdad, Ma-
drid, Taurus.
José L. González Cussac
104
Firstly, the collection of regulations applicable to the intelligence cycle,
in particular, to intelligence and economic and competitive counterintel-
ligence
17
, and especially to covert actions and in?uence
18
. What is par-
ticularly important here is the serious problem of industrial, commercial
and technological espionage
19
, and all the new problems associated with
cyberspace and its regulation
20
.
Secondly, the Law must ofer sufcient and efective protection to com-
panies and research centres, preserving their security and competitive-
ness. This involves coordinated regulation from various government bod-
ies with competency in areas as diverse as foreign afairs, international
relations and cooperation, security and justice, tax, industry, tourism, ag-
riculture, ?sheries, public works and infrastructure, education, culture,
science, research, technology, entertainment, and the environment. But
besides a protective regulation of all these ?elds, states must also imple-
ment another policy capable of increasing the transfer capacity of public
and private research centres to companies and also ofering regulated
encouragement to companies.
Ultimately, economic policy must be translated into efective laws that
support sustainable economic development, which is not incumbent sole-
ly on institutions and companies but also on individuals. And intelligence
should also be applied to this task, and to do this we need to have difer-
ent organisational models
21
. This is about the understanding of regula-
17
Bradford, William (2007), The three faces of competitive intelligence: defection, collu-
sion and regulation, University of Florida, Warrintong College of Business, 19th February.
18
Extensively in González Cussac, José Luis and Larriba Hinojar, Beatriz (2011), cit.,
pp. 89 et seq.
19
As stated by Horowitz, Richard (2011), Competitive Intelligence, Law and Ethics: The Eco-
nomic Espionage Act Revisited Again (and Hopefully for the Last Time), SCIP, Vol. 14, No. 3,
July/September 2011, p. 43, one of the biggest problems in this area is that although theo-
retically there is a difference between espionage and the lawful obtaining of information,
in legal practice it is very difficult to draw the difference between legal and illegal methods.
20
Larriba Hinojar, Beatriz (2013), “Ciberespionaje Económico: Una amenaza real para
la Seguridad Nacional”, in Nuevas amenazas a la seguridad nacional. Terrorismo, crimi-
nalidad organizada y tecnologías de la información y la comunicación, (Directors José L.
González Cussac and María Luisa Cuerda Arnau; Coordinator Antonio Fernández Her-
nández), Valencia (Tirant) 2013, where the author emphasises that economic cyber
espionage is one of the most serious threats to national security in the twenty-first
century. Also see González Cussac, José Luis, “Estrategias legales frente a las cibera-
menzas”, in Ciberseguridad. Retos y amenazas a la seguridad nacional en el ciberespacio;
Instituto Español de Estudios Estratégicos, Ministerio de Defensa, Strategic Dossier No.
149 (Madrid 2010), pp. 85-127; and also see: “Tecnocrimen”, in Nuevas amenazas a la
seguridad nacional. Terrorismo, criminalidad organizada y tecnologías de la información
y la comunicación, (Directors José L. González Cussac and María Luisa Cuerda Arnau;
Coordinator Antonio Fernández Hernández), Valencia (Tirant) 2013.
21
Ugarte, José Manuel (2005), La relación entre inteligencia y política, y sus consecuen-
cias en las estructuras y normas de los Sistemas de Inteligencia, Brasilia.
Legal intelligence: the strategic value of the law in…
105
tions that govern any human activity. This involves not only quantitative or
descriptive analytical work regarding laws, but essentially a qualitative
understanding or interpretation of their signi?cance and their efects and
consequences.
The law as an object of intelligence
In the previous section we assumed that all activity, as if it were a game,
including economic and correlative intelligence activities, is subject to
rules: for better or worse, de?ned or vague, sufcient or insufcient.
Even the absence of rules expresses the application of a rule: that of the
strongest. But at the end of the day there are always rules. Therefore, it
is obvious that the player who produces, creates and enforces rules has
more advantages. And in any case, the player who does not know the
rules of the game properly is a daredevil and a more than likely a loser.
Both aspects, creation and knowledge of the rules, must be present and
will be dealt with separately.
Whatever is the objective to be reached, the players or competitors must
try to impose their rules. In legal theory the efect is distinguished be-
tween the material sources and the formal sources of creating regula-
tions. The ?rst, the materials, refers to the diferent social powers with
the ability to drive, to in?uence or to condition legislation. The second,
the formal sources, allocate the diferent procedures formalised regard-
ing the creation and manifestation of the Law. Both state and non-state
actors operate on this plane. And the playing ?eld is basically limited to
two spatial environments: the territory where a state has sovereignty (do-
mestic legislation) and beyond its borders, in the international scenario.
In principle, within its territory the state is sovereign to produce the Law
that it deems appropriate and necessary, reconciling diferent con?icts
of interest. On this plane the state has potestas and autoritas to decide,
at least theoretically, the relevant law according to its national interests
and according to its material and formal procedures of legislative output.
From the outside, their international commitments are only bound and
conditioned when transferred and included in internal regulations (trea-
ties, conventions, agreements, associations, etc.). Naturally the degree of
real sovereignty will depend on multiple internal and external factors,
which does not exclude the need to monitor and control them sufciently
in order to avoid external regulation causing dependency and subservi-
ence to outside interests.
In the international circuit the state and non-state actors also play an es-
sential role in the material and formal production of legal rules. Hence the
need for the presence of any state in all international institutions of deci-
sion or deliberation. Equally essential is to have a regulation that makes
José L. González Cussac
106
it possible to exercise in?uence on foreign actions, within internation-
al law. Therefore, states should encourage proactive action legislatively
over any organisation or actor capable of generating an impact on eco-
nomic activity, either through communication, public relations, in?uence
or lobbying. For many authors, the global economy is determined by the
power of no more than 120 large multinational corporations. Combining
this material power with that deployed by states is what today constitutes
the major challenge in this ?eld.
The second aspect to be developed lies in the need to utilise legal intelli-
gence resources to know the best possible laws and legal practices of a
country or of international regulations, for without knowledge of the rules
it is impossible to compete on equal terms, let alone at an advantage.
Knowledge of legislation, case law and other practices and customs is
essential to ensure an investment in a foreign country. It is not enough to
know or master employment, commercial, criminal or tax laws. A funda-
mental task of economic intelligence, developed by both public and pri-
vate services, is to detect highly unstable environments that are depend-
ent on the total discretion of their governments, or those managed by
pressure groups or even corrupt groups. This is not just to provide merely
descriptive information, but genuine legal intelligence, that is, qualitative.
This also implies the knowledge of the parties involved.
Legal intelligence in general we could de?ne as the type of intelligence
that deals with the collection, processing and protection of strategic in-
formation that is useful for all legal economic acts. It is a process that
includes among its key objectives giving strategic and legal meaning to
environmental information. This means that the value added to the in-
formation comes precisely from the capture of its meaning, interpreted
from a strategic perspective. The “search, treatment and transformation
of information of regulatory use in legal knowledge” and their purposes
include:
– Protecting individuals and companies from litigation, or at least,
to deal with it in the best possible conditions. This demands a pre-
cise knowledge of applicable rules and practices, and in any event
requires deploying preventive or defensive strategies through the
anticipation of the search and consolidation of evidence.
– Guaranteeing the recognition and legal protection of social or cor-
porate rights and intangible assets of companies and citizens. The
protection of sensitive information of a company is achieved, ?rst-
ly, through profound and accurate knowledge of the regulations
and practices on intellectual and industrial property. Secondly,
recognition and proper legal protection of a company is obtained
through “lobbying” awareness of all actors involved (legislative,
administrative, economic, media, etc.) to the needs of a company.
Legal intelligence: the strategic value of the law in…
107
These types of actions of in?uence cannot be confused with undue
in?uence or corruption, as it is limited to expressing the opinion of
the company about the type of laws and the applications that they
favour
22
.
– Defence of the company image, reactive communication, and cam-
paigns exposing the agreement to practices that are always legal
and ethical. Here the key lies in internal action protocols designed
to prevent or mitigate destabilising actions through various mech-
anisms of use of the Law. The need to provide specialised means
with internal protocols of reactive legal strategies that are imme-
diate, compared with media campaigns orchestrated by a com-
petitor, by initiating legal processes that, although risky, make it
possible to denigrate or diminish the value of a company (“infor-
mational risks”), for example, before a market exit or entrance. Or a
search in legal proceedings to obtain sensitive information about a
company or individual. Remember that also in the legal sphere the
advantage is always with he who attacks, who demands or claims.
Hence the need to reduce the possibilities of surprise
23
.
– Legal surveillance ofered by competent and reliable advisors to
safeguard tangible and intangible equity, contractual con?dential-
ity rules, a patents policy, that is, deciding whether to patent or to
operate the invention before but with an adequate protective sys-
tem, tackle fraudulent practices like “bait patents” or the ?ooding
of patents on the market to confuse them compared to the genu-
inely useful, etc
24.
– Before negotiation processes with other companies, and possible
takeover attempts by larger competing companies, they should
organise agreements between shareholders that reinforce these
22
In the last few months we have seen a strong debate on various legal initiatives
by countries such as the United Kingdom, Spain, France, Germany and Italy, in order to
reduce “tax competition” between several European countries. Indeed, for several mul-
tinationals, such as Amazon, Microsoft, Apple, Facebook, Inditex, Samsung, Starbucks
etc., imitating the giant Google, took advantage of the opportunities provided by the
different domestic tax laws, to avoid or reduce the payment of taxes. Therefore, the pro-
fits are attributed to subsidiaries, which act as intermediaries, declared in states with a
low tax rate, such as Ireland, Luxembourg, Netherlands and even Bermuda. To prevent
this leakage of revenue, these countries are trying to standardise their domestic laws
with the intention of fixing the obligation of contributing to the place of business and
generation of profits, and not in the place of corporate residence.
23
A recent good example is the surprise legal attack suffered by the Argentinean
frigate “Freedom” in Ghana, triggered by a foreclosure lawsuit filed in a New York court
by NML Capital investment fund, which persuaded the Tribunal of the Law of the Sea,
based in Hamburg (Germany) to instruct the courts of the African country to confiscate
the Argentinean Navy Training Ship, due to a debt of $300 million, unpaid since 2002.
24
Cfr. Larriba Hinojar, Beatriz (2006), La tutela penal del diseño industrial, Valencia,
Tirant lo Blanch.
José L. González Cussac
108
foreign entries of new partners, that on occasions seek the control
and destruction of the brand, or at least the corporate domain.
Therefore, the fundamental mission of the Law is “to ensure economic
security” by identifying the risks of interference in national companies
and research centres. In this sense it must develop procedures which
ofer sufcient protection and deterrence. Legislation must tackle com-
petition in an open global economy, which faces advantages in terms of
growth but must also confront established powerful actors and emerging
ones.
It is essential, therefore, to develop a concept of economic security linked
to the broader category of security and in particular national security,
detecting threats and thus promoting regulation that is both preventive
and penalises noncompliance. This would include economic security in
a strict sense (commercial deregulation, tarifs, protectionism, in?ation,
?nancial instability, market volatility, lack of transparency in investment),
commercial security (international crime, terrorism, espionage, cyber-at-
tacks, corruption), food security (food reserves, agricultural and ?sheries
subsidies, genetically modi?ed foods, bio fuels), energy security (reserves
and continuity of supplies, rising prices), environmental security (global
warming, nature reserves, prevention of natural disaster emergencies),
consumer safety and health (infectious diseases, genetically modi?ed
foods, biotechnology), social security (employment, coverage and assis-
tance, pensions).
In fact, the economic security category would include a broader one to-
gether with other more established ones such as the aforementioned
national security, collective security, common security, human security,
cooperative security and sustainable security
25
.
Legal intelligence must cover both the domestic market as well as over-
seas, and it must encourage a regulation that allows ?uid coordination
between central, regional and local administrations with diferent types
of companies. Here lies the convenience of the creation or improvement
of public companies in strategic sectors, as well as the promotion of sta-
ble cooperation forums between the public and private sectors.
New information technologies also make work in this ?eld easy, quick
and in real time by enabling knowledge about the Law and applicable
practices that is both quick and accurate. Its combination with the use of
highly-trained human sources allows the bringing together of unlimited
technical capabilities that provide detailed analyses for decision making,
and at the same time also enable the deployment of multiple actions of
25
Ballesteros Martín, Miguel Ángel and Joyanes Aguilar, Luis (2011), “Los efectos de la
globalización en el ámbito de la seguridad y defensa”, in Inteligencia y Seguridad: Revista
de Análisis y prospectiva, No. 10, pp. 14 et seq.
Legal intelligence: the strategic value of the law in…
109
in?uence through social networks, media, specialist publications and pro-
fessional forums, and, of course, also access to decision-making circuits.
Legal Intelligence must enable knowledge about contracts, opportunities,
projects, needs, and even pro?les of the competition, accompanying na-
tional ofers domestically and abroad. This work involves the study and
promotion of regulations that promote research and enhancement of
public research, whose priority is to bene?t domestic companies by ofer-
ing legal advantages to technological inventions to open or established
markets and promote exports. Similarly, they must organise contractual
models to ensure a return on the investment.
Patents, brand notoriety, contractual basis (conditions, applicable law and
jurisdiction) are indispensable elements. Today the key issue in economy
lies, more than the productive process such as simple manufacturing, in
design and in added value. Hence the importance of investment in tech-
nology, innovation and in the regulation and instruments for their protec-
tion (anti-espionage)
26
and operating in secure conditions.
The preference is for strategic contracts: attracting “direct investments”
to encourage investment overseas and especially exports in priority sec-
tors. The creation, knowledge and legal handling of these areas are at
present absolutely decisive.
And in this context of international competition it must be assumed that
domestic laws are not identical, as is obvious between the Europeans,
the Americans and the Asians; therefore the legal treatment of compa-
nies is very diferent from one place to another
27
. Nor is the degree of
compliance with international treaties reciprocal, as we can see with the
anti-corruption convention of the OECD, signed by all European coun-
tries and that reduces competitiveness against other states that have not
signed and therefore cannot apply it to their companies.
Consequently, the national security strategy must contain the national
and international regulatory policies that support its growth and stability,
as well as the mechanisms of external in?uences
28
.
26
A significant example can be seen in National Counterintelligence Center (USA, 1997),
The Economic Espionage Act of 1996: A Brief Guide. Cfr. Szott Moohr, Geraldine (2009),
“The problematic role of criminal law in regulating use of information: The case of the
Economic Espionage Act”, Public Law and Legal Theory Series, 2009-A-5, University of
Houston Law Center.
27
Illustrating these differences is the current acrimonious debate within the Euro-
pean Union on the implementation of a tax on financial transactions. Cfr. Montoya Cerio,
Fernando, Sambeat Vicién, Andrés and Fabra Rodríguez, Óscar, La tasa Tobin europea.
Un impuesto sobre las transacciones financieras, Opinion document, Instituto Español de
Estudios Estratégicos (IEEE), 06/2013, 16 January.
28
In the matter of international business alliances, the development of The Trans Pa-
cific Partnership (TPP) undoubtedly represents a global change of the first order, to
José L. González Cussac
110
The law as an intelligence tool
At present, economic intelligence includes any information that could
have an in?uence on the results of company activity and from there can
transcend the common welfare (national security). And knowledge about
laws and legal practices is a substantial part of these data with a poten-
tial impact on the social order, as it is part of the competitive environment
in an economic sector. Regulation is one of the key elements of decision
making.
The use of the Law as an intelligence tool is shown openly within the
framework of covert actions and actions of in?uence.
The North American model of the OSI (Ofce of Strategic In?uence)
29,
that
since 2001 has begun the creation of regulatory lobbying, represents one
of the best examples in this respect.
As a paradigmatic example, we can study the regulations on companies
about “information gathering”, particularly Google. These corporations
hoard multiple ways of obtaining information and data from consumers
and economic actors from anywhere in the world. Once acquired this also
raises its hypothetical communication, within a strategy of U.S. economic
intelligence, to competitor companies of this nationality - even just one set
of miscellaneous data in order to build pro?les of Internet users. Knowl-
edge is power
30
. But not only in the sense of acquiring mass information
now bring together the United States of America, Canada, Mexico, Peru, Chile, Australia,
New Zealand, Malaysia and Singapore, and the likely inclusion this year of Japan and
South Korea.
29
It should be noted that the existence of the OSI as such is so far unknown. Apparent-
ly it was a section created by the Department of Defence of the United States in October
2001 to support the war against terror through “psychological operations” in target
countries, including the United States. Although initially its closure was announced in
2002 by the then Secretary of Defence Donald Rumsfeld - once its existence became
public knowledge - various sources claim that the OSI continues operating - under ano-
ther secret name - and that it only removed its name, passing the majority of its “public”
powers to the Information Operation Task Force. But obviously, being secret activities
nobody really knows if they are now still being carried out and if so what the competent
body is. The OSI was originally authorised to employ what is called military deception of
public opinion, presenting information, images or false declarations in order to deceive
enemy armies or agencies and civilian populations through disinformation.
30
Solove, Daniel, J (2006), A Brief History of Information Privacy Law, George Washin-
gton University Law School, Public Law Research Paper, No. 215. Ibid. (2006), “A Taxo-
nomy of Privacy” in University of Pennsylvania Law Review, Vol. 154, No. 3, January, pp.
484-486; p. 478. Without doubt the obtaining of information has a strategic value, but
likewise constitutes an interference with the fundamental right to privacy of citizens;
therefore these activities should be carried out in strict compliance with the Law, even
in situations concerning national economic security. González Cussac, José Luis and
Larriba Hinojar, Beatriz (2011), Inteligencia Económica y Competitiva: Estrategias legales
en las nuevas agendas de Seguridad Nacional, Valencia, Tirant lo Blanch, pp. 89 et seq.
Legal intelligence: the strategic value of the law in…
111
from around the globe, also from the standpoint of bene?ting through
legislative coverage. A similar capability of the creation and enforcement
of the rules applicable to these large information companies expresses
an intelligent power
31
. Here we could launch an eloquent discussion on
the territorial and extraterritorial application of the domestic law of the
United States of America and on its nebula and diferent regulations re-
garding cloud computing
32
.
We are actually talking about what NYE baptised as “soft power”
33
. In this
case the export of legal systems, the ability to apply domestic law outside
its borders (extraterritoriality), the power to create protectionist rules in
a domestic market, a dominant position in international organisations,
or the in?uence on the process of the creating of laws of other states
34
.
These regulatory capabilities allow real advantages and in many cases
absolute ones, and have been ingeniously called real “regulatory Trojan
horse”. Some clear examples are the following:
• Promotion from the United States of America of IFRS (Internation-
al Financial Reporting Standards). Some analysts understand that
these rules are applied with great ?exibility in the U.S., while in Eu-
rope they are more rigorously regulated in terms of accounting
35
.
• However, we cannot lose sight of the ?nal objective: the contin-
ued convergence between U.S. GAAP and International Accounting
31
Geradin, Damien and Sidak, J. Gregory (2008), European and American Approaches
to Antitrust Remedies and the Institutional Design of Regulation in Telecommunications,
Howrey LLP and Criterion Economics, L.L.C., Working Paper Series, Liége, April 07.
32
González Cussac, José Luis (2012), “La verificación de los ordenamientos internos
en los países de localización como garantía de la seguridad y la confidencialidad de la
información”, in Derecho y Cloud Computing (Ricard Martínez Martínez editor), Madrid
(Civitas), pp. 289-307.
33
Nye, Joshep S. Jr (2011), The Future of Power, New York Public Affairs (ed.).
34
The ability to influence other states legally bears a close link with those conventio-
nally called “cultural norms”, and hence the relevance of the term “geoculture”. Cfr. Me-
jía Velásquez, Hernán (1998), “La geopolítica de la geoeconomía”, Revista Pensamiento
Humanista, No. 4, Medellin.
35
Since the promulgation of the stable platform of International Financial Reporting
Standards (IFRS) in 2005, subsequently revised and modified, a large number of com-
panies and countries around the world have adopted these standards (formerly called
IAS) as a basis for their financial reports. This collection of accounting standards of a
global nature, approved by the Council of International Accounting Standards, is inten-
ded to require comparable, transparent information and of a high quality in the financial
statements and other types of financial information, in order to help participants in the
capital markets around the world and other users to make economic decisions. Today,
one of the main challenges faced in this area is the development of a commitment for
convergence established between IFRS and generally accepted accounting principles
in the United States of America (U.S. GAAP). See, in detail, Peñalva Acedo, Fernando
(2007), “NIFF versus US GAAP: resumen de las principales diferencias”, in Revista de
Contabilidad y Dirección, Vol. 4, Year 2007, pp. 55-69.
José L. González Cussac
112
Standards. Certainly today it is carrying out a convergence project
to further align the rules included in the International Financial
Reporting Standards (IFRS) and Generally Accepted Accounting
Principles (US GAAP).
• The SOX, abbreviation of Sarbanes Oxley Act
36,
is an American law
passed in 2002 in response to ?nancial scandals such as ENRON,
undermining the con?dence of investors and the American State
itself on the data contained in the ?nancial accounting reports of
companies. The name of the law is derived from the surnames of
its two main sponsors, Representative Michael G. Oxley and Sena-
tor Paul S. Sarbanes.
• The main objective of this Act is to promote greater transparen-
cy and accountability in relation to the data of the reports issued
by both public companies in the United States and its worldwide
subsidiaries, such as the foreign companies that are listed on any
stock exchange in the United States. Speci?cally, and amongst oth-
er things, it establishes a new supervisory board, supervised by
the Security Exchange Commission (SEC) and includes new report-
ing requirements and more severe punishments regarding corpo-
rate fraud.
• In reality it is an American regulatory addition (Sarbanes Oxley
Act) of the IFRS that allows the PCAOB (Public Company Account-
ing Oversight Board) to extend research on companies in terms of
?nancial and strategic data beyond its borders
37
.
• The Patriot Act, which requires ?nancial institutions such as the
PCAOB, to transmit ?nancial reports to the intelligence services
(CIA, NSA etc.) without the permission of the companies and with-
out their knowledge
38
. After which, the CFIUS (Committee of For-
eign Investment in United States) evaluates the sensitivity of the
company to American interests according to its elastic National
Security Act
39
.
s Zunzarren sharply summarised, “if CFIUS believes that the data held by
oogle are sensitive to American interests by the Sarbanes Oxley Act and
Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745, 30 July, 2002.
For a more detailed analysis of this rule, see: Romano Roberta (2004), “The Sarba-
es-Oxley Act and the Making of Quack Corporate Governance”, in NYU, Law and Econ
esearch Paper 04-032; Yale Law & Econ Research Paper 297; Yale ICF Working Paper
4-37; ECGI - Finance Working Paper 52/2004.
Phillips, Heather, A (2005), “Libraries and National Security Law: An Examination of
e USA Patriot Act”, Progressive Librarian, Vol. 25, Summer.
A supplement to this legislation, in the sense of attributing federal jurisdiction to the
nited States of America to investigate and prosecute any business, is found in the Eco-
omic Espionage Act in this sense, extensively and critically in HOROWITZ, Richard (2011),
ompetitive Intelligence, Law and Ethics: The Economic Espionage Act Revisited Again (and
opefully for the Last Time), SCIP, Vol. 14, No. 3, July/September 2011, p. 41 et seq.
A
G
36
37
n
R
0
38
th
39
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Legal intelligence: the strategic value of the law in…
113
by the Patriot Act, they can obtain them without the agreement of Google
and without the knowledge of the company under investigation even if not
American. And let us not forget that the company Concileo is one of the gi-
ants in terms of moderation of Web content, which some dubbed as censor-
ship; and is American. There are those who can cut to the chase regarding
the contents of the Web; but under what criteria?”
40
.
Juillet has already highlighted the importance of the Law and its use, say-
ing, “Americans, inspired by the world of business, have chosen to modify
the environment leading to a new con?guration system, turning to techno-
logical innovation. The aim is to change the game, to dictate new rules, af-
ter taking the lead in a competition that is currently lopsided. Technological
power linked to the de?nition of the battle?eld means the adversary can only
choose the type of defeat and speed of realisation”
41
. This is the model that
leading countries, particularly in the West, are trying to emulate.
Indeed, as the aforementioned author continues to underline, the basis
of sovereignty of a state is not just the standard of living, gross domestic
product or export capacity. Nor even its nuclear capacity. The global sce-
nario has changed and there are a small group of strategic technologies
that ensure real independence of nations. But the scienti?c expertise re-
quired to work in these ?elds and the volume of investment required will
prevent many countries remaining in the technological race. Therefore,
the launching of communal programmes at European level is essential,
since, “for more than ?fteen years, Americans have had a clear and perfect-
ly identi?ed strategy. They invest relentlessly in information technology as
well as in the development of knowledge and learning, elements that are
at the heart of power and modern independence. Encouraged by its state,
American industrialists have no hesitation in establishing partnerships and
in buying companies, throughout the entire world, when they want to acquire
a technology, complete their experience or neutralise a competitor”
42
.
On the international level there are countless examples
43
, sufcient for
our purposes here to cite the ongoing con?ict in Nigeria, where the ap-
40
Zunzarren, Hugo, inhttp://idinteligencia.wordpress.com/archivos-2/
posts-precedentes/inteligencia-juridica-en-los-eeuu/
41
Juillet, Alain (2006), “Principios de aplicación de la inteligencia económica”. Inteli-
gencia y seguridad: Revista de análisis y prospectiva, No. 1, December, pp. 123-132.
42
Juillet, Alain (2012), this text is a summary of his speech to the Coloquio Indepen-
dencia de Europa y Soberanía Tecnológica, held in April in Paris and titled “Cambian
las bases de la soberanía mundial. Se desplazan de factores económicos y de seguridad
a algunas tecnologías clave que Europa no ha cultivado”. Reproduced with permission
from the author. French translation: Eduardo Martínez.http://www.tendencias21.net/
Cambian-las-bases-de-la-soberania-mundial_a337.html.
43
González Cussac, José Luis and Larriba Hinojar, Beatriz (2011), Inteligencia Eco-
nómica y Competitiva: Estrategias legales en las nuevas agendas de Seguridad Nacional,
Valencia, Tirant, pp. 72 et seq.
José L. González Cussac
114
proval of a law is being debated that would enable the imposition of heavy
?nes on oil companies for damages caused in the Niger Delta in its crude
oil extraction activities. But naturally, the powerful lobbies of these multi-
nationals, supposedly supported by the institutions and services of their
home countries, are trying to in?uence to stall the proposal, delay it, or at
least limit its application.
The recent French military intervention in Mali is also analysed not only
as a determined curb to terrorism, but also with a geoeconomic purpose:
to protect their investments in neighbouring Nigeria (it produces 8% of
worldwide uranium), where its multinational AREVA, with 80% of public
ownership, extracting uranium that imports to France and which repre-
sents around 40% of its consumption. Energy security has undoubtedly
also been in?uential in China not opposing this intervention, which also
protects its giant companies CNIUC and CNPC with interests in uranium
and oil.
The importance of rules in the global economy has a remarkable expo-
nent today in the regulation of so-called “sovereign wealth funds”. Their
strategic importance is clear from the fact that they are treated as public
funds, i.e. handled by governments, but invested in the private sector. But
just one of the major criticisms of these ?nancial instruments is their
lack of transparency, besides some signs of protectionism, the cession of
strategic control to particular sectors (banking and technology) and their
possible use by some states as an instrument of political and economic
pressure on other countries.
All this controversy gave rise to the creation in April 2008 of the Inter-
national Working Group of Sovereign Investment Funds (IWGSIF), which
culminated in October 2008 in Chile, with the approval of a code of profes-
sional ethics. This agreement was called “Generally Accepted Principles
and Practices” (GAPP) or “Santiago Principles”. Yet despite its decisive
importance in the twenty-?rst century global economy, they remain a
model of self-regulation and not authentic binding legal rules. Therefore,
although their purpose is said to be purely economic and ?nancial, it is not
expressly excluded that their use is subject to “other considerations”
44
.
Here is a large calibre geoeconomics weapon to consider as central to any
analysis of legal and economic intelligence.
This panoramic view should also underline the so-called “Basel Accords”
and the World Trade Organisation (WTO).
In 1974, the Basel Committee, composed of central bank governors of the
G-10 countries, approved the ?rst “Basel Accord”; a collection of recom-
mendations aimed primarily at establishing the minimum capital a bank
44
Coronas Valle, Daniel and López Jiménez, José Mª (2013), Crisis y Fondos Soberanos:
¿El abrazo del oso?, Opinion document, IEEE 14/2013, 5 February 2013.
Legal intelligence: the strategic value of the law in…
115
should have taking into consideration the risks it faces. It was a simple
recommendation, so that the signatory states were not obliged to incor-
porate it into their laws, or they could do so with modi?cations. Over a
hundred countries signed it. However, two major drawbacks were detect-
ed: their insensitivity to the variations of risk and the lack of assessment
on credit quality.
To overcome these criticisms the “Basel II Accord” was adopted in 2004,
creating the subgroup responsible to drive its international implementa-
tion (Accord Implementation Group, AIG). Today it applies throughout the
European Union (mandatorily imposed by directives), in Japan, Australia
and in more than 95 diferent countries by the members of the Commit-
tee. This shows the extent of its unquestionable progress towards a uni-
?ed international practice, and its possible technical de?ciencies, once
again called attention to its legal nature, which allows a diferent degree
of compliance worldwide. This in spite of its implications in the genesis of
the current ?nancial crisis and its extraordinary value in a strategic mar-
ket such as the ?nancial one. Once again we are faced with a shortage of
obligatory regulations and a notable lack of transparency.
The World Trade Organisation, although not forming part of the UN, or of
the “Bretton Woods” organisations (the IMF, World Bank), includes more
than 158 countries and 26 in an observer capacity. Its objective is the
multilateral regulation of international trade, and currently administers
about 60 agreements. The original provisions, called “GATT 1947”, were
expanded from the celebrated “Uruguay Round”, known as “GATT 1994”,
i.e. “General Agreement on Tarifs and Trade”. It is known that the initial
impetus was the result of an agreement between the most developed
countries, especially the United States of America and the European
Community, with the aim of deregulating international trade, reducing
customs tarifs, subsidies and other instruments of “trade distortion”.
However, it was objected that they only covered sectors that suited
their interests, but exempted those that needed to maintain protection-
ist measures (textiles and agriculture). From the “Uruguay Round” this
situation began to change. However, the ?exibility measures were in-
sufcient in the opinion of the least developed countries, and also, as
compensation, they would introduce new sectors such as Trade Services
and particularly relating to intellectual property, as required by North
America
45
.
The WTO requires adherence to all its agreements, without exception.
This way trading rules apply to all, exactly the same, irrespective of the
level of human, technological and social development. This contrast rais-
es the essential critique, demanding special and diferential treatment
45
In this respect, see Arcos Martín, Rubén (2010), La lógica de la excepción cultural,
Madrid (Cátedra).
José L. González Cussac
116
commensurate with the degree of development of each country. The so-
called “Doha Round” of 2001 (“Doha Development Agenda”) pursued this
objective, which was still very distant and abandoned with the outbreak
of the great crisis of 2008. Consequently at present, the most developed
countries afected by the crisis maintain agreements that clearly favour
them in international trade and do not seem very willing to make con-
cessions to either the emerging countries or the underdeveloped. Once
again we can see the value of law, the advantage of who has the capacity
to create the rules and therefore its strategic value
46
.
In the Spanish case, among others recently, we could cite the dispute
over REPSOL-YPF in Argentina, which is highly signi?cant regarding
what we are discussing. Also very controversial was the reform of 27th
September 2011 of art. 135 of the Constitution. For some this consti-
tutes a manifestation of a loss of economic sovereignty, in?uenced by
the interests of international creditors and something that guaranteed
the maximum regulatory level. For others, however, it was a need to cor-
rect the public budget de?cit (structurally of 5% of GDP and that soared
after the current crisis), with the introduction of a limit on spending and
borrowing or a principle of budgetary stability
47
. Indeed, the determina-
tion to impose strict rules on budget de?cits should also be extended to
the imbalances in trade balances, to reform tax laws towards a ?exible
and adaptable understanding to periods of expansion or recession of the
economy
48
.
The strategic importance of a strong alliance between technological inno-
vation and regulatory accompaniment is nowadays expressed as a para-
digm in the energy industry
49
. According to the report of 12th November
2012 of the EIA (Energy Information Administration), the United States
of America will in 2017 be the largest oil producer and in 2030 the larg-
est exporter. This is thanks to what has been allowed legally (in spite
of obstacles and environmental risk warnings); the development of an
innovative technology of horizontal drilling and of “hydraulic fracturing”,
which allows the extraction of crude oil and gas through water pressure
(fracking). This change is already having decisive geopolitical efects and
multiple consequences on other countries as diverse as Saudi Arabia
46
Reynaud, Julien P. M. and Vauday, Julien, (2008), IMF Lending and Geopolitics, (14
November 2008). ECB Working paper No. 965, International Monetary Fund.
47
Worth considering is the theory that advocates a classification between countries
which accumulate wealth (favourable trade balance, technology and savings) and coun-
tries that accumulate debt.
48
For a more complete view about the geopolitics of oil today, see MAUGERI, Leonardo
(2012), Oil: The Next Revolution Discussion paper 2012-10, Belfer Center for Science
and International Affairs, Harvard Kennedy School, June 2012.
49
Youngs, Richard (2007), Europe’s External Energy Policy: Between Geopolitics and
the Market, (20 November 2007), Centre for European Policy Studies Working Docu-
ments No. 278.
Legal intelligence: the strategic value of the law in…
117
(and other Asian Gulf countries), Russia, China, Venezuela, Ecuador and
Bolivia
50
.
These “regulatory Trojan horses” express the allegorical construction
of Bentham’s panoptic, masterly description of the form of power under
which we live, and especially in the digital age. Moreover, new technolo-
gies may even dispense with the central monitoring tower and any other
material tool, as with these infrastructures they exercise complete con-
trol. The large ?nancial, energy, internet service and telephone compa-
nies are more than just good examples. Their alliance or collaboration
with the governments increases their powers and extends the watched
and the watched over. However, the Internet presents a problem for vig-
ilantes, since to watch leaves traces of their observation and in turn can
be watched. But to make this two-way possibility real, regulations must
be implemented. In the international environment, treaties that limit and
regulate global monitoring. At the domestic level, freedom of information
laws and especially regarding transparency, where citizens can control
the vigilantes.
In short, it is essential to have national and international law that enables
a powerful organisation that will deter external hostile actions. This will
update the doctrine of deterrence, as it becomes clear that the negative
consequences for those who try will outweigh any bene?t. We need spe-
cial and exceptional rules for times of profound change in social relations,
or if you prefer, in times of “economic war”. The rules should contribute to
diminishing or abolishing the vulnerabilities and to generating common
wellbeing. It could be stated as the necessity of a new economic Law for
a new global context.
To achieve basic results to improve institutions, providing them with
real capacity to implement a protective and penalising law to attacks on
economic, scienti?c, technological, historical, artistic, cultural and envi-
ronmental wealth, of a special guardianship against data espionage sen-
sitive to intrusions. To organise public mechanisms of control over the
capital of strategic companies, and surveillance on investors, especially
over those unwanted ones.
This complex regulation should extend especially to SMEs, permitting
the development of networks that will allow them to defend their rights
throughout the world, contributing to the reduction of oligopolies, to the
impositions of large multinational companies and, in short, enabling the
old liberal aspiration of free competition. Along with this it is necessary
to provide incentive rules to encourage implementation abroad and
domestic consolidation, and to implement formalised advisory mecha-
50
Nye, Joseph S. Jr (2010), “American and Chinese Power after the Financial Crisis”,
The Washington Quarterly, 33:4, Center for Strategic and International Studies, October
2010, pp. 143-153.
José L. González Cussac
118
nisms to eliminate bureaucratic obstacles, lack of data or misinforma-
tion actions.
Conclusions
The ?rst conclusion is to support the value of the Law, both as the pow-
er to create rules and its knowledge and application to economic intelli-
gence. The interplay between the three levels outlined above is therefore
essential. Thus, if today the dependence between national security and
economic prosperity is obvious, it is also obvious that both are proxies for
the current rules.
The second is to point out the hitherto insufcient attention which, regard-
ing economic security as an integral part of national security, has been
paid to the phenomenon of organised crime, its close links with corrup-
tion and its tremendous institutional impact. Very recently this attitude has
been corrected, as shown, for example, by the attention paid to diferent
strategies of national and regional security, or the European Parliament in
its report of 2011 on international organised crime in the European Union.
The third and essential point refers to the underlying causes of the cur-
rent international crisis. In this panorama the predominance of policies
of “non-Law” is rightly highlighted, using euphemisms such as deregula-
tion, self-regulation, or state anti-interventionism. Obviously these poli-
cies are part of an ideology behind which are hiding notorious economic
interests, and in no way express any kind of “natural law of markets”.
Supported by large ?nancial energy and new communication and infor-
mation technology oligopolies, they make it possible to impose their par-
ticular interests above general interests, whether in collusion with some
states or even against the wishes of other weaker ones
51
. The result is the
burden of the constant impoverishment of these countries and of their
citizens. But they also cause an erosion of institutions and a continual
loss of legitimacy. Better for them, because the weaker public institutions
are, the more power they accumulate.
This state of afairs, together with direct damage to the quality of life of
millions of people, feeds the discourse of radical and extremist ideolo-
gies. And it also resurrects the historically failed discourse of economic
protectionism. Hence proposals arise for de-globalisation. In particular,
some are in favour of a return to protectionist state regulations
52
.
51
Of great interest is knowledge of the operation of the global financial market, espe-
cially the so-called “Credit Default Swap”. Cfr. Álvarez Rubial, Gregorio Pablo: “El Credit
Default Swap como agente transformador del paradigma financiero internacional”, Opinion
document, IEEE, 04/2013, 9 January.
52
Todd, Emmanuel (2010), Después de la democracia, Madrid, Akal; MONTEBOURG, Ar-
naud (2011), ¡Votad la desglobalización!, Barcelona, Paidós.
Legal intelligence: the strategic value of the law in…
119
Certainly capitalism exercises its economic control by allowing govern-
ments, through the Law, to satisfy speci?c social demands. However,
with the fall of the counterweight represented by the communist states,
this balance was broken. The neoliberal ideology of modern capitalism
has been built on a dual argument: state intervention reduces individual
freedom and restrains the initiative of civil society. From this assumption
there was unleashed a constant and systematic process of reductionism
of the public sphere towards the “minimal state”. The explicit message
was simple: all state intervention is synonymous with domination, of re-
striction of freedom. Therefore, any product of the state is negative: thus,
legal regulation, with its formalities and requirements of control and pub-
licity is presented as useless bureaucracy; politics is always equivalent to
corruption and justice, with its procedural guarantees, a hindrance from
the past, slow and inefcient. The subliminal message hides the interest-
ed identi?cation of civil society with free markets, i.e. with the monopolies
of ?nancial power, and consequently progress requires the agility and
?exibility of deregulation, self-regulation, arbitration, mediation and any
other non-formalised mechanism.
In short, the discrediting of the state and its ongoing delegitimisation
calls for fewer rules, less law, less res publica. But as Epicurus warned,
“if they eliminate the laws, men need the claws of wolves, the teeth of lions.”
Only the Law provides rules, values, reasons, interests, and imperatives
capable of the transit from a society where the power of the strongest
governs – historically military force, today the ?nancial oligopoly – to an
orderly coexistence that is plural and transparent: the Rule of Law. Only
with legal security can there be a real free economy. And economic and
competitive intelligence must ?rst know these rules, and then encourage
their correct application and reform in accordance with the general inter-
est. That is the aspect of the economy as part of national security.
In this line, some proposals seem essential to achieve the objective of
a greater economic security. Firstly, to underline that the international
community already has useful and efective rules that, largely, can solve
many of the issues raised here. Its recognition, application and control of
compliance are essential to economic activity.
Secondly, promoting stricter laws on competition and enabling their
efective application, particularly on institutions of ?nance, energy and
new technologies of information and communication. This involves deal-
ing with disproportionate end bonuses, tax subsidies and public aid,
more transparency and an end to tax havens. But also tax reforms to
correct current gross inequalities, modifying legislation on bankruptcy
and ultimately, a new regulation that, in the words of Stiglitz, “softens
globalisation”
53
.
53
Stiglitz, Joseph E (2012), El precio de la desigualdad, Madrid, Taurus, p. 343.
José L. González Cussac
120
This crisis must be overcome by using more democracy (greater citizen
participation), and more Law (an updated and precise regulation). It is
essential to increase transparency, which is an essential way to the con-
trol of citizens over public representatives, who cannot continue holding
back public information and thus aspiring to exclusively retain the ability
of decision making on general matters, protected in the false assumption
that they are the only knowledgeable and therefore uniquely quali?ed
people. As Hobsbawm has categorically expressed it, “The States with a
stable and buoyant economy and a distribution of relatively equitable wealth
are less likely to sufer a social and political earthquake than those poorer,
where inequalities are the order of the day and whose economy is anything
but stable. Similarly, the possibility of peace would be afected by a drastic
increase in economic and social inequality, both in individual countries and
between all of them”
54
.
Historical experience shows us the consequence for the democratic Rule
of Law of having economic and social instability, manifested constantly by
periods of in?ation that are devastating to the middle classes. And we al-
ready know that without them a regime of freedom is not possible. The risk
of in?ation now lies in wait for many developed countries and consequent-
ly its control must constitute one of the priorities of our governments
55
.
Likewise, the legally developed States – which entail an important degree
of implementation of civil, social and individual rights (especially labour
rights) – favour sustainable growth and consequently attract economic
investment. This premise is a historical constant, and currently begins
to loom with the incipient end of the trend toward of-shoring and out-
sourcing of large companies. Indeed, many of them have started the re-
turn “home” as a reaction to the enormous problems of legal uncertainty,
corruption and political instability, insufcient technological development
and infrastructure of many of the countries that initially attracted their
residence due to their low costs.
With Berlin, we can reject monistic analysis and response: nor is there
a single crisis, but several intertwined ones, nor is the answer unique
– only ?nancially and economically – but also institutionally, with a de-
mand and pressing need to develop rules built on shared values. Indeed,
because as economists also remember, this ?nancial and economic crisis
is primarily a crisis of values, that is, a moral crisis and consequently a
crisis of rights, insecurity and lack of con?dence
56
.
54
Hobsbawm, Eric (2006), Guerra y paz en el siglo XXI, Barcelona, Crítica, p. 16.
55
Touraine, Alaine (2011), Después de la crisis, Madrid (Paidós).
56
Stiglitz, Joseph E (2010), Caída libre El libre mercado y el hundimiento de la economía
mundial, Madrid (Taurus), pp. 324 et seq. On this point integral education becomes a
fundamental value; this is humanistic, because without it there are no truly free citizens
(critics); and without them, democracy remains a hollow idea.
Legal intelligence: the strategic value of the law in…
121
I will conclude with an idea expressed with great clarity by Juillet, “Facing
the pressure exerted by all those who want to increase their global market
share, the only true answer consists in creating clear game rules that are
applicable in all countries. It is a rare event now because many have the
tendency to seek privileges or to slip away. Faced with the difculty of en-
forcing international agreements, it is necessary to convince people that the
absence of rules, the non-compliance of rules and violation of patents are
ruinous for companies and economies. The recognition and supervision of
the rules as well as the control of compliance with the rules applicable for all
are therefore at the heart of economic intelligence activities”
57
.
In conclusion, as I have tried to emphasise in this work, all human activity
is subject to rules, their knowledge, handling, application, and especially
their creation, are an essential strategic value (Auctoritas, non veritas, fac-
it legem). As Aristotle warned, intelligence consists not only in knowledge
but also the skill to apply knowledge in practice.
Rules, values, interests, imperatives, all this is Law. Without reliable laws
a truly free economy cannot exist, in other words, without legal security
there can be no economic security. And without a free and secure econo-
my for everyone, a peaceful and orderly coexistence is impossible (Salus
populi suprema lex). Therefore, only the Law is the future of democracy.
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Chapter IV
Competitive intelligence: a new
paradigm in the strategic direction of
organisations in a globalised world
Fernando Palop Marro
Abstract
The author starts from the challenges that organizations cope with in
the global world of the twenty-?rst century with a dynamic of changes in
their markets, technologies and socio-economic context. Those changes
often behave disruptive character of the prevailing by both its content
and its complexity and uncertainty derived in part from the speed with
which they occur. This dynamic requires a new paradigm to be taken into
consideration. First in terms of culture and learning processes of the or-
ganization in relation to the changes taking place around them but as well
in the way decisions are built and made. That is how the organization and
its sphere of in?uence detects, anticipates and ”reads” the meaning and
stakes of those changes. But also how it integrates and transforms the
results of that learning capability into actions, decisions.
This integration need is stressed in the decisions ?eld, afecting the man-
agement and strategic direction of the business. This new paradigm that
requires intelligence to compete is collected by the proposal formulated
as competitive intelligence and other denominations also known. Com-
petitive intelligence is not as such a ”new” proposal, it takes more than
half a century of practice in many companies and organizations as we un-
Fernando Palop Marro
128
derstand it today
1
, and has precedents from many centuries ago. But it is
still unknown and partially or completely unexploited by a large number
of them. So it can be said that not exploiting today the potential posed by
CI in organizations is a competitive disadvantage. The article reviews the
term, its foundations and the processes involved. The main bene?ts and
some application examples are put forward and the relationship between
competitive intelligence, CI, business security and the importance of the
in?uence concept are reviewed. Focused on the business world, this pa-
per also addresses other applications of the same concept, as in the case
of territorial intelligence. Finally some evolutionary trends in this ?eld
are provided.
Keywords
Competitive intelligence, strategic planning, decision process, organiza-
tional learning, knowledge management, organizational intelligence.
1
Masson, J.L. (2005)
Competitive intelligence: a new paradigm in the …
129
Executive summary
CI forms part of the responses developed by organisations (of all kinds
and sectors) to provide the management of organisations with the keys to
drive strategy and many of the tactical matters in a modern world with a
high grade of uncertainty and speed of change.
This grade of uncertainty and speed of change has made part of the tra-
ditional practices that deal with information gathering and analysis of
non-structured decision making obsolete.
CI does not eliminate uncertainty but it does reduce it to the extent that
the systematic nature of its practice makes identifying a greater percent-
age of relevant information possible. This percentage varies signi?cantly
depending on the context of the matter to be decided. On the other hand it
does not eliminate risk, but it does help to manage it.
Competitive intelligence creates a change in the paradigm of the tradi-
tional way of dealing with the development process and decision making
by directors. Traditionally, intelligence generation for decision making
has been almost exclusively assumed by decision makers. Within the
new paradigm, the organisation is not generally limited to providing the
decision maker with data and information. The organisation starts by in-
volving the decision maker in the CI process and collaborates with the
decision maker by generating intelligence (implications and signi?cance
of events, trends, alternatives, action proposals) to make the decision.
CI forms part of the characteristics of modern organisations considered
as learners. From CI the organisation actively participates through difer-
ent roles and purposes in the tasks of information observing, gathering,
organisation and analysis and ?nally in its communication. There is ex-
tensive involvement and participation by the organisation in the process,
not reduced to a few people from the management “staf”. Even from the
network concept, the involvement of people outside the organisation but
within its sphere of in?uence is managed.
CI is above all an inter-disciplinary process in the organisation’s traditional
vertical functions, of continued performance over time (through its warning
and anticipation aspects), focused on its support priorities and on the future.
CI as a process enables management within all of a company’s processes,
its results are measured through indicators and have regulatory referenc-
es regarding innovation and quality such as from AENOR (Spanish Stand-
ardisation and Certi?cation Association) UNE (Spanish Standard) 166.006.
CI takes many of its tools from other areas of knowledge (such as stra-
tegic planning, marketing, ?nancial analysis, knowledge management or
forecasting). But also, in addition to the process, it generates, especially
in the analysis stage, an important store of practical experience (in part
Fernando Palop Marro
130
originating from its application in the area of defence, security and geo-
politics) with contributions and proposals in the ?eld of cognitive biases
in the use of analogies, inductions, deductions, inferences etc.
CI represents a competitive advantage for those organisations that know
how to make use of the untapped potential in their organisations. CI,
according to what has been empirically compared through surveys, in-
creases a group’s degree of cohesion based around goals and strategic
priorities and their achievement.
Today, possibly one of CI’s most typical and unique characteristics is its
capacity for risk detection and anticipation. Unlike other functions in or-
ganisations that also collect data and information from the outside envi-
ronment, CI focuses on providing context to the facts, their signi?cance
and implications for organisations and their possible progress. These
facts will appear from CI only as evidence of support for the reasoning
that leads to the provided intelligence. In this sense Gilad, B. (2008) main-
tains that CI creates a speci?c perspective of the risks and external op-
portunities for the global performance of companies and therefore is part
of an organisation’s risk management activity.
Introduction
In recent decades the merging of a group of changes in organisations’
socio-economic and technological environment has represented major
challenges in order to adapt to these changes. Behind this need for adap-
tation is their capacity for learning about the changes and the integration
of this capacity into the decision making process in organisational and
strategic plans. For this adaptation to be efective it is dependent, as I will
explain, on the way in which said learning occurs and on the way deci-
sions are constructed and made.
This group of changes includes challenges created by the globalised world.
Accelerated technical change modi?es not only products and services but
also their consumption and appropriation habits. The obligatory interna-
tional presence that very many companies, not only large corporations,
have today is also represented in order to achieve maximum performance
in their business models. The reality of a world with less economic security,
where new aspects of competition appear to be considered as an in?uence,
cannot be ignored. All of this has contributed to the fact that in their man-
agement organisations face increased risk and high levels of uncertainty.
It is in this context where organisations are faced with today’s unavoid-
able need to manage the aspect of monitoring and learning about the
changes that occur in their surroundings, particularly those that go be-
yond an operational or divisional sphere. Not long ago this aspect was
considered a general obligation for any director’s position, not needing
Competitive intelligence: a new paradigm in the …
131
to be allocated to any job de?nition in particular, nor did it seem neces-
sary for some tasks or speci?c processes. Everybody knows about it,
but it is nobody’s responsibility. It was not measured and as a result not
managed, apart from exceptions such as in the case of marketing
2
, but
remained restricted to its sphere. However, history has shown numerous
cases of organisations, and in particular companies, that have passed the
?rst company generation when their directors have been able to connect
strategic re?ection with the capability transferred to their organisations
to keep them up to date with events that determine how they understand
organisations, and as a result act and make decisions. This has been
much more frequent in sectors dependent on science; as is the case, for
example, in bio-pharmaceuticals used to working with a long-term view.
This outlook penalises all those organisations that are not capable of de-
tecting the signals that generate these changes in time, or that having de-
tected them, do not take decisions as a result. This shortcoming ends up
becoming a weakness in these companies and organisations when com-
peting in a global market. This has been highlighted by Ansof, I. (1975)
by introducing the concept of “Strategic Management”. In that year he had
already put emphasis (at a time when companies were facing problems
in the environment) on the need to focus on their capacity to anticipate
threats and opportunities. Later, other leading writers, among them Mi-
chael Porter (1980), Gary Hamel and C.K. Prahalad (1994), emphasised
the importance of strategic positioning based on analysing information
from the local environment. The former, in addition to proposing tech-
niques for analysing the sector and competition, suggested generating
intelligence about competitors through an “intelligence system”. The
latter pair emphasised the importance of management teams in order
to compete to obtain a prospective vision of the sector. Later Clayton M.
Christensen et al. (2004) returned to obtaining certain types of signals of
change as the starting point of analysis to predict changes in the sector.
With regard to the bene?ts of anticipating competitors’ actions and un-
derstanding their strategies and other market forces or assessing the
consequences and implications of technological changes, today this does
not require great justi?cation. It is as clear as the negative consequences
of decision making based on incomplete or non-reliable information or
information not available in time.
But as far as decision making is concerned, we have a process of ob-
taining information (increasingly collective and linked to the learning
capacity) and another complementary analytical process and then the
subsequent decision. It is here where a competitive disadvantage is again
2
The idea linked to this analysis function or environment intelligence – “environmen-
tal scanning”, market intelligence, although limited to its field, shares approaches with
competitive intelligence.
Fernando Palop Marro
132
occurring between organisations that continue under the traditional par-
adigm (the director assumes the initiative and the leading role) against
the more participatory paradigm, for instance those based on models
such as learning organisations (Peter Senge, 1990). In this regard, he un-
derlines in Chapter 1 that, “there are surprising examples where the intel-
ligence of a team exceeds the intelligence of its members”.
It is in this context that we talk about competitive intelligence, also known
by other descriptions such as corporate or economic strategy and similar
to other concepts such as technological or strategic security or to that of
market intelligence. It does not seem to us that the name today is an impor-
tant matter but rather a consequence of the youth of this ?eld. That is why
we call this contribution competitive intelligence, hereinafter CI. Competitive
intelligence, although it has prior precedents, strictly speaking started in the
eighties in the business environment as a response to the context explained
at the beginning of this introduction. It refers to making use of the capacity
to understand the environment in the process of making non-structured or
strategic decisions, as well as some operational decisions.
CI and strategic direction
CI represents current methodology that is increasingly linked to the needs
of strategic management and corporate innovation. D. Bernhardt (1994)
noted how intelligence was the energy of strategy and even went on to
suggest that strategy without intelligence would make it necessary to re-
turn to speculation. Recently Roger Martin (2013) recalled how on more
than one occasion when asking company directors about the company’s
strategy they answered that they did not wish to or could not develop it to
match the high degree of change in their operating environment. Accord-
ing to them, particularly in high technology sectors (although it would also
be possible to ?nd other cases) there was not enough certainty to develop
strategy efciently. The danger for them, of course, is that whilst they are
using uncertainty as an excuse to postpone strategic decision making, the
competition can be doing something completely diferent such as antic-
ipating, thanks speci?cally to its strategy. Therefore, it is no coincidence
that directors complain after the event of having been surprised by some-
thing unexpected. Their story tends to be that when it happened it was too
late to do anything constructive in this regard. The failure was not their
fault at all, because for them it is the sector that is uncertain and this type
of thing only occurs “naturally” and is unpredictable.
As the lecturer in Administration at Toronto University aptly remembered,
each company has a strategy (Martin, R. 2013). Whether its execution is ex-
plicit or not, the decisions that are taken daily afect the company’s perfor-
mance on some part of the playing ?eld (for example, making a choice of
“where to compete”) and how to compete there (in other words, making a
Competitive intelligence: a new paradigm in the …
133
choice on “how to win”). Without making an efort through “making strategy”
and let us not forget that it requires feeding with intelligence, a company
runs the risk that its numerous daily options will not be connected to each
other, will be contradictory regarding their divisions and levels and will ?-
nally have a reduced impact compared to the goals that have been set.
Summarising the practice of strategy, it is supported by the existence of
a competitive intelligence process and in turn CI requires the existence of
some strategic priorities in order to be able to efectively contribute and
support the organisation’s performance.
CI ?eld of activity
CI activity focuses its attention outside the organisation but to do this it
has to start from solid inside knowledge. Fleisher (2001) pointed out how
with regard to CI’s outside role it focuses on the comparison of:
• The industry structure and its evolution: special emphasis on the
attractiveness of the sector;
• The macroeconomy seen in another way, as those social, techno-
logical, economic, ecological and political/legal (Steep
3
) aspects of
the environment associated with the company itself;
• The interested parties: those organisations that can afect or are af-
fected by the achievement of the organisation’s competitive goals, and
• Issues or problems: these are the gaps that exist between the or-
ganisation’s actions and the expectations of those (for example,
stakeholders such as clients, suppliers, etc.) that can afect its
competitive goals.
Bene?ts that ci provides to the organisation
Professional practice and literature on the subject lists the most common
bene?ts:
• It reduces risks and uncertainty. Gilad (2008) stated, “it proposes
a speci?c perspective for risks and external opportunities… and
therefore it is part of the organisation’s risk management activity”.
• Warnings about technological and commercial surprises and those
from the local environment. This bene?t originates from the ability
to manage anticipation. This will be dealt with later in the chapter
on CI Basics.
• It contributes to the companies’ non-structured decision making
process, both in strategic decisions and in many of the tactical ones.
• It identi?es “opportunities, threats, weaknesses and strengths”.
3
Also known as PESTEL.
Fernando Palop Marro
134
In the case of strategic planning we should emphasise its capacity for
characterising the business sector through the preparation of pro?les
about the sector itself, its players, special competitors or the technology
that determines it, thereby satisfying the speci?c needs of the decision
maker. Prescott (1989) pointed out the capacity to provide answers to
questions that demand the preparation of these pro?les, such as:
– What are the basic characteristics of my industry and the
competitors?
– What is the current position of my competitors?
– What could my competitors’ most likely movements be?
– What movements can our organisation make to achieve a compet-
itive advantage?
It transforms collected information into practical intelligence aimed at
action:
• The collaboration of all members in an organisation in the intelli-
gence process as “antennas” or “lookouts”.
• Its adaptation to the time dynamic, to deal with the evolution of
critical matters and thereby make organisational reform easier.
• The monitoring and anticipation of changes in market structure
and competitive activities such as: the emergence of new busi-
nesses, new alliances, capacity expansion, mergers and acquisi-
tions (Fleisher, C., 2001).
• The analysis of competitive models: processes, products,
organisations.
• Technology security and monitoring and its implications: R+D ac-
tivities, innovations based on technology, emerging technologies.
CI as a process
In general terms CI is the process through which organisations collect and
analyse information (evidence that can be translated into action) about
competitors and the competitive environment and that ideally can be ap-
plied to their decision making and planning processes to improve their
performance. It involves understanding the signi?cance and implications
of changes and innovations to the environment in time. CI connects in-
formative signals of changes, with no apparent relationship, spread over
diferent sources, events, perceptions and data, establishing guidelines
and trends relating to the market environment.
According to the UNE 166.006:2011 standard, “competitive intelligence
includes… analysis, interpretation and communication of strategically valua-
ble information about the business environment, about competitors and the
organisation itself that is sent to those responsible for decision making as
a support element to adjust direction and indicate possible paths of devel-
Competitive intelligence: a new paradigm in the …
135
opment that are useful for the organisation”. This standard de?nes CI in its
chapter 3.3 as: “Ethical and systematic process of collecting and analysing
information about the business environment, about competitors and about
the organisation itself and noti?cation of its signi?cance and implications
used for making decisions” (Aenor, 2011).
CI uses public access sources to ?nd and develop information about com-
petition, competitors and the market environment (Vella and McGonagle,
1987, quoted by Fleisher, 2001). CI is not corporate espionage; it is ethical,
legal and legitimate, while corporate espionage is clearly illegal, unnec-
essary and does not form part of the description of CI tasks. Information
from public sources does not necessarily involve published information.
There is a set of data and evidence which can be accessed legally without
it needing to be published. (Fleisher, C., 2001).
Today, most organisations carry out CI in some basic form whether they
are aware of it or not. Many directors practice CI in their daily activities
when it involves understanding how to best position their organisation’s
products or services in the market. Not only large corporations but also
small companies (especially in sectors such as capital goods or those
more dependent on science such as biotechnology or health sciences)
are often more sensitive to the gathering of information and to the use of
IC efectively. Perhaps because their size does not allow many levels and
everyone has “their feet more on the ground”. It is not unusual in these
cases for motivated businessmen to be the ones that lead this demand
in their organisation, as they are personally used to ?nding out as much
as possible about the market that surrounds them and their competitors.
Case 1: Example of a small casting company.
Such is the recent case of a casting company with thirty employees in a
South American country. For years it had performed comfortably in its local
market using a highly manual process carried out with professionalism but
with one weakness; a high percentage of its turnover depended on projects
for an outside company. The development experienced in recent years in the
country led that foreign company to decide to invest in its own casting plant
in the country, thereby terminating the long-standing relationship. Just at
that same time, the small company made an investment to extend and mod-
ernise its facilities and process. The small company, after taking part in a CI
transfer of skills process and conducting market analysis for the ?rst time,
carried out a strategic re?ection exercise to redirect its current position be-
fore the consequences of the changes forced it to do so.
Source: own preparation with the collaboration of technicians and staf of
the company Templamos.
CI, its concepts and practices are shown to be of great potential value for
diferent types of organisations, not only companies but public entities,
Fernando Palop Marro
136
local bodies, institutions, universities and research centres with a need to
make decisions based on evidence, looking for risk anticipation and re-
duction. This is the case with a hospital institution making decisions about
investment in order to expand its accident and emergency department.
Case 2: Example regarding the introduction of Surveillance Technology and
CI in a leading hospital.
In 2011 Pablo Tobón Uribe Hospital (HPTU), Medellin, Colombia decided on
an ambitious plan to expand its healthcare capacity, which entailed improv-
ing the services in the accident and emergency department to put it among
the leaders in its ?eld in South America. In the same year the HPTU man-
agement decided to take part in an initiative
4
that a local innovation agency,
Ruta-n, coordinated, to de?ne and install CI practices among companies in
the Antioquia region. Health institutions increasingly have to face strategic
investment decisions that are more dependent on technology. At the same
time these can determine its future performance. As a CI pilot exercise, the
HPTU management selected the decision concerning efciency in the acci-
dent and emergency department. As a result, a hospital team in collabo-
ration with the local university institution, ITM (Metropolitan Technology In-
stitute), previously trained in CI, followed the known CI methodology and in
twelve weeks prepared an international report on best practices, trends and
processes in the organisation of the hospital emergency department. It iden-
ti?ed two communication technologies applied to emergency units that up
until then had only been installed in the USA. The management endorsed the
report’s results and gave approval to this surveillance technology (ST) and CI
practices in the hospital. The quality control manager and the systems and
ICT manager were integrated into the ST and CI task force.
Source: own preparation with the collaboration of HPTU technicians and
medical personnel.
Adapting a work by Professor Craig Fleisher (2001), a way of understand-
ing a CI operation is to see it as a progression from raw materials or con-
sumables up to ?nished products. From this perspective CI starts with
scattered pieces of raw basic data. This raw material is organised by CI
practitioners and turned into information. The information is turned into in-
telligence when, after obtaining the information originating from it (mean-
ings, implications and consequences for the organisation), it is put into a
useful format for the key or unique intelligence needs of a decision maker
(known as Key Intelligence Factors or KIF); good CI is driven by needs. With-
out CI customer orientation, it does not make the slightest bit of sense. The
decision maker’s involvement in the CI process starts with the de?nition of
the need and culminates in the interaction with the results or communica-
4
This initiative had the writer of this article’s address from the Polytechnic University
of Valence and was financed within a programme known as ERICA with support funds
from Spain’s cooperation through the AECI and local institutions.
Competitive intelligence: a new paradigm in the …
137
tion to make the decision. Therefore, intelligence is the information that is
analysed, interpreted and communicated with the explained implications.
Competitive intelligence is the more speci?c intelligence product that sat-
is?es the unique needs of a decision maker to understand a competitive
aspect of the organisation’s internal and/or external environment.
CI as an organisational function or management approach
CI is the aforementioned process but to ful?l all of its potential it also
needs to be administered as a management approach or system that
makes use of the learning potential of the entire organisation and of its
area of in?uence as a support network and by obtaining warning signals
about those changes that to a great extent involve the organisation.
In this regard it is considered as an organisational function and therefore
we should also discuss a system’s formalisation and organisation.
In fact this is the approach of UNE 166.006 when mentioning the pur-
pose of surveillance technology and a competitive intelligence system
in Chapter 1: “formalisation and structuring in the organisation of the
listening process and environment observation to support decision
making at all levels in the organisation, evolving into the introduction of
permanent surveillance technology and a competitive intelligence sys-
tem. In this regard the system will contribute to establishing bases for
de?ning the competitive position that the organisation has to take, its
goals (in the case of this particular standard its purpose especially relates
to matters of R&D+i) and the appropriate organisational diagram for said
position and goals”.
CI can provide the foundations for the construction, assessment and
modi?cation of both market and technological strategies and tactics
and in other ?elds. As a function mainly aimed at management, CI is
cross-functional. That is why in practice, organisations coexist where the
CI approach is functionally developed based on marketing and/or plan-
ning and to a lesser degree on other functions, such as R&D. While these
other practices appear, there are less common ones where CI is used,
depending on the need in question, whether purchasing or a corporate
need, including marketing, engineering, human resources, ?nance and
planning and there is CI coordination for the entire process. Later in the
chapter its organisation will be discussed in more depth.
On the other hand, CI can consider two possible approaches to work,
which are often complementary; contributing intelligence for decision
making at a particular time, and continuous tracking regarding the time,
surveillance and monitoring of a particular subject of interest. This is in-
cluded in the UNE 166.006 standard Chapter 7.1 as:
• The search and research into what is unknown, and
Fernando Palop Marro
138
• The search and systematic monitoring of innovations in areas that
have already been previously de?ned.
Essential stages in the ci working process
The CI process or cycle that is shown in Figure 1 brings together a series of
the usual steps or stages in a CI exercise or project that with some minor
variations in terminology and in the number of steps meet the standard
model in this scope of the intelligence function (Aguilar, F.J. 1967, Porter,
M. 1980, Bernhardt, D. 1994, whilst in Equipo CNI we can ?nd an abridged
Spanish version). Madureira, L. (2013) claims how the OODA (Observe, Ori-
ent, Decide, Act) Loop model by the American John Boyd is more suitable,
by prioritising immediate answers. It is important to emphasise that al-
though the stages appear as consecutive within a cycle, in reality it is not
like this. This means that it is good for clients/decision makers, as they are
up to date and direct the research advances throughout. Neither does the
analysis stage begin once the previous stages have ?nished. At the end
there is a high degree of group work and interactions that enable delivery
times to be cut from that of a strictly sequential process of these stages.
Figure 1. Competitive Intelligence process or generic cycle
Source: own preparation from the traditional Competitive Intelligence Cycle/Process in
Palop Marro, F. and Martínez, J.F., 2012.
Competitive intelligence: a new paradigm in the …
139
Planning
The CI process or cycle usually starts with a decision maker who has
a speci?c intelligence need (key intelligence factor or need or KIF) and
people who collaborate to construct it. It is important to determine
what needs to be discovered, for whom and how and when it is going
to be used.
Writers such as Herring, J. (1999) speak about three types of need that
are most common. These in turn make up the basis of the approach for
structuring the work process around the ST/CI subjects as projects or
Key Intelligence Factors, KIF. Each one of these three groups of needs
requires a diferent type of result and this determines the sources to be
consulted, the analysis techniques to be applied and also the structure/
report that will contain the answer.
Strategic decisions and actions. Including the development of strategic
plans and strategies. For example, decisions appear that are connected
to investments in technology, entrance into a market or alliance with a
company.
Early warning subjects. Possible initiatives regarding competition, tech-
nical and technological advances that can surprise, socio-economic and
geopolitical changes and their implications, modi?cations, regulations
and standards that have to be complied with.
Descriptions of the players and of a certain market. These include
competitors, suppliers, clients, possible allies or the regulator of a
market.
When CI is developed with a “spontaneous” nature there are no prede-
?ned formats for reports to organise the intelligence that it generates.
But this does not occur when we are in a planned CI situation. As a re-
sult of seeking productivity in tasks and ?exibility in the delivery periods,
some types of reports or CI products are de?ned, such as competitor pro-
?les, warnings about risks/opportunities, reports on the status of state-
of-the-art technology, comparisons or “benchmarking” of products/ser-
vices, monitoring services or synthesis reports etc., the communication
of which will be discussed later.
Each one of these reports or products is diferentiated from each other by
considering variables such as:
• Purpose and expected value in relation to the need that arises and
type of decision.
• Main client and other recipients.
• Sources of information to be used.
• Models, analytical methods and software tools to be used, as
appropriate.
Fernando Palop Marro
140
• Forms of communication and type of template for the report.
• Cost in terms of hours of commitment and acquisition of
information.
Obtaining information
The arrival of the internet, web sites and social networks meant a new
paradigm in the way in which electronically published information is ac-
cessed. However, despite its indisputable value, the role of primary con-
tact sources on the ground with the main players involved in the subject
cannot be underestimated. This in the Anglo-Saxon world is known as
“humint” or intelligence from information and tacit knowledge that only
resides in people. The need to access these “experts” or players about
the matters of interest, mainly by telephone, e-mail or professional
meetings has been shown as essential on numerous occasions in order
to compare and complete substantial pieces of the “puzzle” that enables
completion of the intelligence. It is also irreplaceable for the managing
of the other experts that ?nally enables completion of the task. In this
regard it must not be forgotten that globalisation also gives these ex-
perts access from a global viewpoint. We should also take into account
that in the full “kingdom” of the internet and electronic sources an en-
tire series of markets coexist, for example energy markets in distant
countries, where the scarcity of data from conventional sources takes
preference and where veri?cation “in situ” of the interlocutors is needed
before negotiating
5
.
Case 3: Example of how companies watch over each other: Microsoft – Google
MICROSOFT spent months on a massive project to bring down Google
when the truth began to dawn on Bill Gates. It was December 2003. He
was browsing on the web site of the company Google and found a page
with descriptions of all the jobs available at the company. Why, he asked
himself, were the requirements for many of these positions identical to
the speci?cations for working at Microsoft? Google started as a search
engine on the web, however, here on the screen were jobs for engineers
with experience that had nothing to do with search engines, whereas all
were connected with Microsoft’s main business; people quali?ed in things
such as operational system, compiler optimisation and distributed archi-
tecture systems design. Gates asked whether Microsoft could be facing
much more than a war in search engines. In an e-mail that he sent to a
handful of executives that day, he efectively said, “we have to watch these
guys. It appears that they are building something to compete with us”.
Source: adapted from Fred Volgestein, 2005.
5
I owe this teaching to a technique of a gas industry company.
Competitive intelligence: a new paradigm in the …
141
Analysis
From the CI approach, data and information are the starting point not the
?nishing point. Therefore, data and information collected in the prelimi-
nary stage are not intelligence. So that “sense making” is brought to de-
cision making (Jaworski, 2002), meaning and value, that is, intelligence,
must be selected, validated and organised through its analysis and in-
terpretation (Kahaner, L. 1996). In other words, this refers to construct-
ing, from unconnected fragments made up of data, personal testimonies
and information, a puzzle or outlook that makes it possible to understand
what the analysed scenarios are and intuit possible ways forward. In
short, building CI is transforming information into elements for deciding
and acting.
In this regard, although much has been written on the role of intuition
in CI and on the nature of the “art” of interpreting the collected facts,
while not ignoring its contribution, it does not appear to us that it is
an appropriate starting point to approach the learning of analysis. In
accordance with what we have explained in the basics of CI, we be-
lieve that the construction of CI reasoning based on the interpretation
of the collected evidence and its significance for the context of the
company to be key. A CI construction based on evidence and analyti-
cal models makes it possible to involve the decision makers within a
transparent chain of the decision making process. At the same time,
intelligence gains in objectivity by reducing its dependence on the
person(s) who formulate(s) the conclusions and interpretations. Fi-
nally it supports learning of this key stage in the CI process. This said,
of course over time experience accelerates the analyst’s capacity to
sense consequences derived from facts, but the analyst must try to
justify them through evidence so as not to introduce excessive biases
in the results.
The results produced by the analysis, as Fleisher, C. (2001)
6
recalled,
must be able to induce action, have a prospective nature and be directed
towards the future, provide the perspective of the facts within the con-
text of the business, (Gilad, B. 2008), help the decision makers to devel-
op better competitive strategies, provide a better understanding of the
competitive environment than their competitors have and identify not
only the current and future competitors, their plans and strategies but
also the key risks and opportunities. The ?nal goals of the analysis are
to obtain better business results, not achieve intermediate results from
better decisions or analysis. Good analysis provides a response to the
well-known question in CI, “if this is true, then what?” – in other words
collected information tells me something new and original that I need to
6
Adapted from Craig Fleisher with changes.
Fernando Palop Marro
142
know about the market that can satisfy the matter or KIF proposed by
the decision maker.
Fleisher, C. (2001) also completed this description of analysis when he
pointed out how an efcient CI practitioner must know about the inter-
action between the collection and analysis stages, use creativity and al-
ternative thought
7
, use deductive and inductive reasoning, understand
basic analytical models, introduce interesting and attractive models to
induce the idea of discovery from the analysis rather than a more unex-
citing research approach, know when and why to use the diferent ana-
lytical tools, recognise the inevitable existence of gaps and blind spots
and know when to stop analysing in order to prevent paralysis due to
over-analysing.
The relationship between people immersed in analysis using the CI
process with the diferent analysis tools must be that of experts re-
garding the possibilities that each of them ofers within the “toolbox”
and their ability to apply the most appropriate tool in each case. Pro-
fessors Fleisher and Bensoussan (2002), made a commendable efort
to compile analytical tools used in the business environment, many of
which were ignored or underused, and they also gave guidelines for
their application.
Finally, analysts need diferent training to people with an informational
pro?le, more focused on obtaining and organising information from dif-
ferent cultures. Large organisations develop a diferent function within CI
and sometimes from a diferent place.
Communication, application of what has
been provided and evaluation
The communication stage presupposes an interactive process be-
tween the decision maker who is going to put the intelligence into
practice and those who contribute to it. What is provided does not
become intelligence that is directly applicable by the decision maker
unless the decision maker gets involved and interacts especially in
this team stage so that the team directs and personalises its results
just as the decision maker needs. This is why the reports mentioned
earlier in the planning stage give the specific decision maker differ-
ent types of communication such as personalised reports, personal
communications, scheduled presentations, special notes, archives,
computerised databases, along with memos, regular meetings, train-
ing seminars, electronic notice boards in the intranet or the removal
of tasks.
7
Writer’s note: in the sense of outside the box of conventional thinking.
Competitive intelligence: a new paradigm in the …
143
Generally, application of the results also includes certain sub-pro-
cesses that are no less important. Among these is control of the CI
process. In other words, the evaluation and communication of what is
provided, its effectiveness regarding the decisions taken and their re-
sult. In short, the capacity shown by the CI to contribute to generating
value. Also, from the point of view of quality, the experience acquired
and its development, resources used, etc., will be taken into account
in the feedback for improving the CI process – the driving force of
quality – as UNE 166.006:2011 proposes. Finally the results can also
influence the need to review or reconsider some aspect of the organ-
isation’s strategy.
When measuring and controlling the performance and value provided by
the resources spent on CI it is necessary to go beyond the quantitative in-
dicators of activity to the result. We must focus on measuring its capacity
for generating value. In this regard some questions of the following types,
frequently asked, can help to evaluate it. Who are the clients of the CI
process? What type of needs are they demanding? How do they value the
intelligence they receive? How are they applying the intelligence? What
are the costs of the resources spent on CI? To what extent has the work of
the CI team and this process contributed to turnover/pro?ts and savings
in costs for the organisation?
How CI is organised
Not only one organisational reference model can be mentioned but dif-
ferent scenarios that depend on the degree of maturity, on a person’s
experience in CI, the sector in which it occurs, etc. Writers that have
studied this aspect (from Rouach 1996 to Michaeli or Singh, 2006 among
others) essentially agree, although using diferent terms, in de?ning be-
tween three to ?ve situations. A ?rst, which is widely used, of reactive
CI, practiced spontaneously individually as a response to an urgent need
for collecting information and making decisions given the appearance of
certain changes. In many organisations these practices are formalised as
a work process in a team with a coordinator within any of the operational
divisions or any business unit but without developing synergies between
them. Finally, in some companies CI is organised as a cross-departmental
corporate process already consolidated with an assigned director or a CI
unit within the management personnel.
Although in many cases an evaluation process is con?rmed among the
diferent aforementioned situations from the spontaneous/reactive to
the planned and consolidated, each organisation ?nishes by ?nding the
model with which it is most comfortable. The most typical situations are
summarised below:
Fernando Palop Marro
144
From operational departments independently or jointly using the ?gure
of a coordinator or project manager.
• Michaeli, R. (2006) suggested evolution of their organisation as
from “islands” in the operational divisions or departments to being
organised as a “centre”.
• Fleisher (2001) highlighted the organisation starting from a com-
pany’s own speci?c programme.
• Cartwright, Boughton and Miller (1995), mentioned by Fleisher
(200) described 1) ad hoc, 2) continuous overall 3) continuous fo-
cused and/or 4) project-based CI. Ad hoc would be the most exten-
sive CI, done on demand and producing results that are by their
nature one-of and are focused on a particular competitor, event or
competitive product/service.
Regarding large corporations, Martín (2010) proposed a model for the
CI unit and operations manual where a study on the risks agenda was
provided.
From the nineties we see how CI has contributed to strategic decision
making integrated into formal dedicated units, whether independently
or more usually within marketing or planning. The activities of com-
petitive intelligence are focused on both tactical and strategic decision
making and include qualitative and quantitative analysis starting from
the evidence. Competitive intelligence receives moderate attention from
senior management and is often a useful factor for taking strategic
decisions.
Reference countries in the CI practice.
The situation in Spain. The range of training.
If we prepare an indicator for said purpose based on variables such as the
ofer of CI training with degrees and postgraduate studies in the academ-
ic ?eld, courses for companies, conferences and seminars and compa-
nies with formalised CI processes it is probable that among the countries
having a better score will be most countries in the OCDE (Organisation
for Economic Cooperation and Development). Among them some are tra-
ditionally mentioned as leaders: USA, Canada, France, Germany, United
Kingdom, Israel, Japan, South Korea, Finland, Sweden and Switzerland.
Many of the multinational companies from these countries are known for
involving their employees as antennas of observation in their business
environment.
With regard to Spain, it is con?rmed that CI public visibility still ap-
pears well below its use for business and its potential for generating
value in a globalised world. It is true that since the nineties, driven
Competitive intelligence: a new paradigm in the …
145
by internationalisation of many of its companies and the acceptance
of more complex risks, it has seen signi?cant promotion. However, its
awareness and practice is not comparable to the situation in neigh-
bouring countries. In any case, the role played in recent years in its dis-
semination by institutions such as AENOR with its UNE 166.006:2011
standard, ICEX (Spanish Institute for Foreign Trade), the National Intel-
ligence Centre (Centro Nacional de Inteligencia, CNI) or the Inter-Uni-
versity Masters between the Carlos III and Rey Juan Carlos Universities
in Madrid that the Autonomous University of Barcelona recently added,
should be considered.
CI promoted from institutions
Countries such as France, Germany, Israel, Japan, South Korea or Swe-
den maintain diferent policies and support instruments for their compa-
nies with institutional information networks. From there they have been
generating interactions and transfers to the commercial and economic
sphere.
We highlight the French approach of “intelligence economique” as France
is a neighbouring country and for the particular interpretation and in-
volvement of the institutions from that country in the development of CI in
the business environment as policy.
This idea was introduced in recent decades, driven by government ini-
tiatives and through working groups with extensive involvement in the
business world. It contains an appropriate interpretation for the inter-
ests of France and its economy regarding the consequences of globali-
sation. Therefore, it went from the priority consideration of strategic
surveillance to the appearance in 1994 of the Martre Report in which
the current concept of “intelligence economique” was already mentioned
and presented in relation to its important role in improving the country’s
competitiveness and its social cohesion
8
. It was in January 2003 when
there was a new step by motions from the French government’s Prime
Minister and what is known as the Carayon Report (2003) was prepared.
It was the Prime Minister Jean-Pierre Rafarin who asked his MP Ber-
nard Carayon “to make an inventory of how our country integrates the
functions of intelligence in its educational system and training into its
public performance and into the business world” and he pressured him
to make recommendations to improve this function. Said report consid-
ered the public policy of competitiveness, economic security and in?u-
ence, especially with international organisations and training. It is de-
8
Martre (1994), Intelligence économique et stratégie des entreprises, Commissariat Gé-
néral au Plan, 1994.
Fernando Palop Marro
146
rived from an original reading on globalisation that took into account
the daily life in markets, avoidance of their rules, games of power and
in?uence. Economic intelligence is considered in the report as a public
policy more aimed at the identi?cation of sectors and strategic technol-
ogies and at organising the convergence of interests between the public
and private spheres.
The report emphasised the trio formed by obtaining information (sur-
veillance of the environment...), protection and in?uence. Emphasis on
in?uence was presented as a characteristic of French researchers (both
in the form of pressure groups, of political in?uence to endorse market
conquests by companies, but also as an ability to impose international
standards, images, values and general ideas supporting their economic
intentions).
Therefore, today the concept of economic intelligence in a neighbouring
country is especially linked to:
• Surveillance and business intelligence (obtaining of important
information).
• Protection of the wealth of information assets (stopping secrets
from being revealed).
• Supporting decisions (analysis, decision mapping, scenarios and a
“war room”...)
• In?uence (spread information or forms of behaviour and interpre-
tation that support the strategy)
Therefore, the policy has involved diferent institutional and territorial
levels. So the French Chambers of Commerce have been very active for
years making this approach reach small and medium-sized companies.
Meanwhile in the territory around the concept of a group or “cluster”, dif-
ferent “technological poles” of specialisation throughout the country have
been prioritised with the idea of intelligence playing an important role.
This will be returned to later when discussing the concept of territorial
intelligence.
Harbulot and Baumard (1997) provided historic background to the French
concept of economic intelligence and, among other references, cited writ-
ers such as the aforementioned Harold Wilensky (1967), on his vision of
organisational intelligence. This writer proposed two main issues that
remain valid:
• Collective and cooperation strategies between institutions and
companies in the production of common knowledge for the de-
fence of a competitive advantage.
• The importance of knowledge on the economy and industry as a
strategic fact of development and change.
Competitive intelligence: a new paradigm in the …
147
Training ofer
It is necessary to distinguish between programmes from academic insti-
tutions for degree and postgraduate quali?cations and informal training
programmes.
Apart from exceptions in countries such as France, Canada, USA, Swe-
den and Finland, CI studies are still not present as such in degree pro-
grammes, although they are re?ected in closely related areas of knowl-
edge (information sciences and librarianship). In postgraduate studies
there is a better range of Master quali?cations in diferent countries; in
Spain particularly there is the aforementioned Inter-University course of
Intelligence Analyst and some short courses ofered by the UOC (Catalo-
nia Open University).
Informal training is full of courses with diferent contents and diferent
durations that involve the term CI. Recently the ESIC Business Marketing
School, Madrid, has become involved in this market with a specialised
seventy-hour course.
Speci?cally with a programme designed for company directors there are
programmes in various European Union countries from the Institute for
Competitive Intelligence (ICI) with headquarters in Germany to the North
American Academy of Competitive Intelligence LLC (ACI). The certi?cation
of the quali?cations that they issue is one of the key elements of these
programmes.
CI basics. The state of the art
I am not aware of an accepted model that integrates learning about the
business environment and the non-structured decision making process
into organisations. In this regard, I agree with Day and Schoemaker
(2006) when they, regarding the concept that they called the “peripheral
vision” of the organisation, particularly necessary when referring to intel-
ligence on emerging changes, considered that a universally assumed and
accepted model did not exist that sustained it. In this regard, one of the
challenges to be covered by competitive intelligence in its current context
is the analysis and forecasting of future opportunities that are still distant
from the activity itself.
That is why we write as a starting point in order to establish the CI
basics; the re?ections that for this purpose these writers carry out of
the “peripheral vision”. Among our many sources we have turned to
the decision-making ?elds (decision sciences), marketing, strategy, or-
ganisation theory and economy as well as to scienti?c ?elds applied as
scenario planning, competitive intelligence, market research, environ-
ment scanning and technological forecasting. This leads us to a ?rst
Fernando Palop Marro
148
conclusion; we are faced with a ?eld of an interdisciplinary nature and
still, as Fleisher and Blenkhorn (2003) stated, in the standardisation
process. These apply - starting with Ashley and Morrison (1995) - the
phases in the evolution time cycle of problems to the solution and reg-
ulation of some of the issues that are still under debate within CI, in-
cluding its name.
The non-existence of a reference model for CI or the persistent lack of
consensus with regard to certain issues has hindered its dissemination
in this still young ?eld as we understand it today, but not in its precedents
as we will explain below. On the contrary, as argued previously, the cur-
rent market challenges have helped to expand the concept and put it into
practice.
From a historical perspective, professors Juhari, A. and Stephens, D.
(2006), from the University of Loughborough in the United Kingdom, car-
ried out a valuable review on the background and development of CI. They
outlined the beginning of intelligence starting from military confronta-
tions, companies’ needs for information and government practices. This
process for con?guration of the CI ?eld meant a continuum that dated
back in time many centuries until reaching the current CI situation, where
it was positioned at the end of the 1970s.
This is how a multidisciplinary environment has been con?gured in
recent years. This includes the management of work processes, Com-
petitive Intelligence (CI) that requires a culture and skills in knowledge
management by the organisation and a process that integrates it for de-
cision making. In this regard it has obvious synergies with the concept
of organisational intelligence. This idea includes management of the or-
ganisation’s knowledge and learning. It has a ?nal purpose by directing
knowledge management towards its strategic adaptation to the environ-
ment and ful?lment of business goals, Halal, W.E. (1998). Its precursor
was Harold Wilensky (1967).
This process is necessarily cross-departmental in organisations as it in-
volves and needs contributions from people, from diferent departments
and operational departments in the organisation and the use of a set of
techniques inspired within strategic and prospective planning. Finally, the
model that the management of this efort requires is company strategic
management and innovation.
Palop Marro (2012) previously tried to show this interdisciplinary nature
but relating in particular to the ?eld of Surveillance and Intelligence in
technologies (see Figure 2). This had already been done by Masson, JL.
(2005), who, by con?rming how CI resulted from the integration of some
areas of knowledge, referred also to Information Technologies, Linguis-
tics and, within knowledge management, to Information and Documenta-
tion Management.
Competitive intelligence: a new paradigm in the …
149
FIGURE 2. Inter-disciplinary nature of CI
Source: adapted from Palop Marro (2012).
Having con?rmed its inter-disciplinary nature, we are next going to
outline to what extent CI represents a proposal for a change of the
paradigm on which the current strategic decision making process is
based. In particular the decision maker’s role in this process is inter-
esting, as is that of the people that make up the organisation and the
value of the evidence obtained as main support that is irreplaceable in
CI proposals for decisions. This role is explained below on three axes:
the information process aimed at decision making, learning mecha-
nisms for changes in the environment by organisations and the third is
the need to generate the anticipation that this learning demands. The
?rst two start from the Day and Schoemaker (2006) approach and we
add the third here.
It is con?rmed from a planning and decision making perspective how in-
dividuals are the receivers of the organisation and its internal procedures
are those that ultimately impose the matters that must receive attention.
There are major challenges on an individual, group and organisational
level to take responsibility for the appropriate issues at the appropriate
time (Stoner and Wankel 1989). To assess these matters, Day and Schoe-
maker (2006) proposed incorporating:
• At an individual level diferent criteria and choice biases.
• At a company level the organisational and strategic dynamic.
Fernando Palop Marro
150
Implications for organisations. Their use vs. Their protection
Three axes on which to locate the CI basics in organisations:
1. The information process focused on decision making.
In the past, Palop (2012) maintained how the slow rhythm of change
made it easier for a small group of directors with access to information
and the ability of prospective vision to successfully de?ne an organisa-
tion’s evolution. Today what we are seeing is that these same directors
must consider changing their traditional paradigm for decision making,
relying more on their organisation, in which it actively participates in the
timely integration of multiple sources of information and its analysis. In
a world where to compete means making decisions with a high degree
of uncertainty, the reasoning and construction of intelligence that these
decisions demand must be based on evidence. Senior management must
discover, if it has not already done so, that in this task its own organisa-
tion must play a leading role, including the networks of relationships that
it acquires.
Alan Newell and Herbert Simon proposed “a perspective of information
processing in the organisation’s decision making”. The heuristic nature
of human reasoning as understood by cognitive psychology continues to
fail to resolve interaction between emotion and cognition. When applied
to the problem of periphery vision of what surrounds an organisation,
Day and Schoemaker (2006) understood that the processing paradigm of
information indicates the presence of four key phases: perception, judge-
ment, action and feedback. At an organisational level the parallel stages
to this process can be described as: information acquisition, information
dissemination, shared interpretation, coordinated action and collective
learning. This interpretation of Day and Schoemaker seems important
to us as it shares the elements that in our opinion the new paradigm
requires.
Nor must we ignore how these writers remind us that “In all stages the
process is guided by a set of models or mental sketches that reside in
very deep levels of the organisation”. In other words it is not enough to
generate value with CI by implanting a process or investing in a cost-
ly software tool. A new type of leadership must be demanded that also
changes those aspects of the corporate culture linked to information
management and knowledge.
2. Learning about the changes in the environment by organisations
and their implications in the management of knowledge required
by CI.
There are many precedents and points of intersection with the point of
view of the information process for decision making.
Competitive intelligence: a new paradigm in the …
151
Peter Senge’s book The Fifth Discipline (1990) could be considered as a
turning point, by translating for a wider audience of directors the evalua-
tion of the importance of a focus on learning
9
. Senge combined his contri-
butions with other points of view, especially the importance of systematic
thought, to provide a comprehensive perspective of an organisation that
learns. The related work carried out by John Sterman
10
, Chris Argyris and
others helped to con?gure organisational learning as a diferent intellec-
tual perspective. The basic point of view is that in dynamic environments
learning is complex and therefore it is neither simple nor automatic. To
try to determine what happened and why, we ?nd – by following Day and
Schoemaker (2006) – the following: ambiguous “feedback”, late reactions,
multiple partial causality, interesting contributions, missing information,
processing efects, random noise and the illusion of controlling all at-
tempts to destroy the organisation.
When we add to this the probability and ambiguous nature of the signals,
lower in as much as it comes from the organisation’s business periphery,
the problem becomes a lot worse. Some writers have demonstrated that
people show a great aversion to ambiguity when faced with decisions
that involve unknown hazards. People prefer “the devil you know” to the
supposed known good. Consequently they never experience or learn well
in environments of great ambiguity. This tendency can be aggravated at
an organisational level where it is expected and desired that rationality
and the capacity for prediction dominates. However, new opportunities
usually lead to a high level of uncertainty and therefore demand a high
degree of tolerance to ambiguity. These thoughts by Day and Schoemaker
(2006) coming from an analysis of emerging technologies are perfectly
valid for many mature markets where the socio-political circumstances
give them high uncertainty. For example, decisions about nationalisation
that are being taken in some Latin American countries with populist gov-
ernments or the situation recently in some Arab countries emerging from
long periods of dictatorship.
For Day and Schoemaker (2006) the idea of cultures that are capable of
learning from complex environments might require some management
principles and values diferent to those that are necessary for maxim-
ising the organisation’s legal business. In this case a con?ict arises be-
9
In addition to P. Senge’s book the strategic importance of learning – above all about
the future – is underlined by Gary Hamel and C.K. Prahalad in their book Competing for
the Future (Boston, Harvard Business School Press, 1994). Chris Argyris in his book
Strategy, Change and Defensive Routines (Boston: Pitman Publishing, 1985) tackles the
organisational obstacles to learning and change. In the field of new technologies these
obstacles are a threat, as is shown by Clayton M. Christensen in The Innovators Dilemma
(Boston: Harvard Business School Press, 1997).
10
Morecroft, John and Sterman, John “Modelling for Learning Organizations”, Port-
land, 1994, Business Dynamics: Systems Thinking and Modelling for a Complex World (Mc-
Graw Hill, 2000).
Fernando Palop Marro
152
tween the culture of performance and that of learning and it is senior
management that is responsible for determining the correct balance be-
tween them.
3. The need to generate the anticipation that this learning requires.
Diferent studies frequently connect failures in business management
to the inability to: anticipate rapid changes in the markets, respond to
new competition and to its proliferation or to redirect a company’s new
technologies and strategic management towards the changing needs of
clients and a sector’s new standards (Fleisher 2001). Gilad expressed the
same idea that organisations frequently failed because they were not ca-
pable of reading typically weak and ambiguous signals that were ubiqui-
tous in their environments and markets.
By introducing the expression “Strategic Management”, Ansof (1975)
highlighted the need to focus on organisations’ capacity to anticipate
threats and opportunities in order to confront the turbulence in the envi-
ronment surrounding a company.
In fact, diferent ?eld studies con?rm this point of view. Successful organ-
isations are among those that detect the most important events through
“warning signals”. When uncertainty is high the directors report on a
greater frequency in the monitoring and surveillance of the environment
and a greater use of sources of personal information. The top directors in
high performance companies respond to strategic uncertainty by moni-
toring the environment more frequently and extensively than their equals
in low performance companies (Daft et al., 1988).
But in practice this challenge does not provide a simple solution (Ansof
et al., 1979, Porter, 1980). Even organisations that have implemented CI
systems often do not anticipate strategic surprises (Gilad, 1988; Blanco
and Lesca, 1998). In both cases (with and without CI systems) the majority
of them seemed to sufer from both an information overload and from a
lack of “strategic information” which for Blanco and Lesca 1998 led to a
questioning of their strategies of information collection.
However, in my opinion this situation is also due to a failing in the other
two aforementioned axes. Here we are to go a little deeper into the iden-
ti?cation and selection of the signals of change as a basis for anticipation
and into its management overcoming barriers and “blind spots”.
Ansof con?rmed the existence of a series of ?lters in the organisation,
shown in Table 1, which prevented the relevant signals getting to the de-
cision makers on time. Today these contributions continue to be very val-
uable. I personally had the chance to con?rm it. Such is the case of rapid
international growth in the last two decades of a new competitor in the
sector of lemonade drinks, the Peruvian family group AJE, by making the
most of opportunities for changes in the traditional business model. This
Competitive intelligence: a new paradigm in the …
153
growth occurred and people within one of the afected competitors told
me they were conscious of the appearance of the threat but did not have
the mechanisms available in their organisation to make senior manage-
ment aware of it and catalyse a change. This is an example that con?rms
how knowledge of events is not enough - the signals of change. Their
meaning and implications must be made available to senior management
so that it can set up the strategic direction before it is too late. Among
other challenges, this means overcoming these Ansof ?lters and com-
municating not the events but the intelligence about them.
Table 1. Barriers to early signals of change: the CI process helps to reduce them.
Filtro o barrera Causa de la existencia del ?ltro
Filtro de vigilancia
Error al centrar el foco de atención. No hay directrices
ni prioridades
Filtro de mentalidad
No se reconoce la importancia de la novedad porque
sale del modelo o esquema mental predeterminado. Se
reduce la información
Filtro del poder
En la toma de decisiones lleva a los actores menos
poderosos en la organización a contener la expresión de
sus percepciones
Source: Ansof, I. 1984.
The existence of a CI process helps to reduce these barriers as Ansof, I.
(1984) pointed out, to those early or “weak” signals of changes and to
communicate not only the evidence but its implications for the business,
in short, intelligence. In this regard, supporting with evidence and with a
transparent process for everybody improves the credibility of the team
that promotes the CI exercise while minimising the possible power ?l-
ter by integrating decision makers into the CI process itself. That is why
the CI working team must try to diferentiate at all times between what
are valuations or interpretations regarding their facts. Once the case has
arrived it must be explicitly documented in such a way that the decision
makers are always clear about the process or the chain of value of the
information transformation
11
. In other words the sources from where the
data and information starts, the gathered evidence, and the perceptions
and meanings gathered from them that are managed for their decision.
The underlying supposition of “Early Warning Signals” (EWS) is that dis-
continuities do not arise without prior warning. These warning signals
11
This idea is from the French engineer Paul Degoul, Director for many years of ARIST
(Annual Review of Information Science Technology) Alsace and ADIT (Design, Industria-
lisation and Technology Consultancy).
Fernando Palop Marro
154
can be described as “weak signals” as they have a value while they are
scarce, scattered and fragmented. The capacity for anticipation and mar-
gin for reaction still exists there. The goal of the “weak signals” (Ansof,
1975) concept is early detection of the signals that could give rise to stra-
tegic surprises and to an event that would have the potential to put the
organisation’s strategy in danger. The CI process must integrate an or-
ganised and systematic response to the detection of these signals.
A major problem for organisations is to resolve the choice of these “Early
Warning Signals” (EWS). To conclude, Blanco and Lesca (1998) con?rmed
that EWS could not be approached objectively, but was a construct that
represented the knowledge of individuals. Therefore, the choice must be
necessarily considered as a collective process in which interpretation
played an important role. This led them to formulate both practical impli-
cations and theories. Mendonça et al. (2007) came to the same conclusion
when he stated that the practical meaning of weak signal information is
that it can be transformed into meaningful knowledge for action. Howev-
er, they con?rmed that as the value of this information did not material-
ise automatically, the carrying out of this potential required a collective
cognitive framework through which the weak signals could be collected,
evaluated and from there action be taken. The theory of stakeholders was
proposed by Comai and Tena (2006) to understand ?gures in a speci?c
industry within a EWS system.
Therefore, the approach from a CI process on how to focus the response
to EWS is not obvious, as has now been pointed out. Its solution has been
shown not to rely solely on information technologies. These are an instru-
ment and not an end and can help the human team’s productivity but not
replace it. The combination of information technologies and the human
team is shown as the approach with greatest potential.
As a result of the existence of these aforementioned ?lters reported by
Ansof, certain blind spots of incorrect perception regarding the view of
the environment appear in certain managers. This idea of a “blind spot”
was raised by Porter (1980, pp. 59-60), who used the term to refer to
elements of knowledge about the environment that were not certain but
that still guided business strategy. Speci?cally this writer mentioned
that, “they are areas in which a competitor or not sees the importance
of events absolutely (such as for example a strategic movement) or per-
ceives them in an incorrect way or only perceives them slowly”.
Behind the analysis of blind spots lies an assumption about the biases in-
herent to decision making among an organisation’s senior management
(companies and institutions), which overcomes those of their employees
or outsiders. Their foundations can be found in the Ansof ?lters. In 1994
and later, Ben Gilad developed a three-stage analysis method for these
blind spots that has been incorporated into the CI analyst’s toolbox. From
Competitive intelligence: a new paradigm in the …
155
a ?rst examination of ?ve market forces and their driving factors an anal-
ysis is carried out on the directors’ assumptions and perceptions of a
certain company to identify in them these possible blind spots in a third
step. The deterioration of the capacity of the managers to see reality as it
is and the most objective analysis of analysts and the medium-level plan-
ners (with less ego involved) means that this third step in the analysis of
blind spots can be a tool to manage those potential blind spots.
In?uence and security inside companies.
Although the bene?ts for the business and for world globalisation de-
velopment have been con?rmed, the fact remains that it represents an
increase in risks which companies must face in con?ictive and/or distant
markets. It is obvious that the complexity/uncertainty increases in those
countries where an information value chain does not exist or is incomplete
and therefore the performance of conventional sources will be very much
reduced. On the other hand, and purely as an example, recent events such
as those experienced in 2012 by the Spanish company Repsol YPF in Ar-
gentina (complexity of political and economic “drivers”, subsequent entry
of a competitor Chevron, “a dark horse” into the scenario) or the limited
situation experienced at the beginning of 2013 with the occupation of the
BP gas plant, the Norwegian Statoil and Sonatrach in Tiguentourine, in
southern Algeria (again the triggering factors were socio-political) are
re?ected in that growing complexity and uncertainty of the existing po-
tential for CI and of the need to emphasise risk management.
But today security also has to be considered in the EU’s own market. In
this regard, as an example we include some of the advice about economic
security that the French Chambers of Commerce, Chardon, V. and Bauquis
(2012) propose to research companies and entities based on three goals:
1. Identi?cation and analysis of the threats when French companies
are the target;
2. Protection of research companies and institutions, by their size or
sector in which they operate. In fact any business can be subject to
“attacks” when it is a prominent innovator and operates in a com-
petitive sector; the same is applied to research institutes;
3. Dissemination of a security culture for tangible and intangible as-
sets in all companies, both in large groups such as SMEs and re-
search institutions.
The strong tendency of organisations towards dependence on knowledge
management, their re?ection on the growing value of management of
intangible intellectual assets, and global electronic commerce also un-
derlines threats of a diferent kind to these intellectual assets and their
need for protection from a global viewpoint. An example of it is shown
in the aforementioned French idea of “intelligence economique”. This in-
Fernando Palop Marro
156
cludes, as has been seen, two additional dimensions to the surveillance
or monitoring of the environment and to the generation of intelligence for
decision making, which are:
1. The capacity for in?uence, in other words, the technique for using
the information for the organisations to project their in?uence into
the markets;
2. Protection of information assets, in other words, the company’s
ability to preserve the information relating to its knowledge, expe-
rience, strategy and prevention of risks connected to negligence or
fraud in the handling of the company’s information and knowledge.
Here we will limit ourselves from this con?rmation to explain the nega-
tive consequences of a type of traditional crime for the security of compa-
nies and research institutions, as is case with industrial espionage. This
situation, which nowadays takes on new forms through cyber crimes,
requires the ability to respond with active protection policies that also
deal with the organisation’s intangible assets. One of those derived from
CI is that the organisation as a collective becomes more aware of what
is really important to preserve (tangible and intangible assets) from the
knowledge, where their most vulnerable points are and as a result how to
adequately protect them.
The illegal nature of industrial espionage and its
negative consequences on CI in companies
Throughout history attacks on organisations’ intangible and tangible
assets have occurred. The attempt to use shortcuts breaking the law to
steal a competitor’s unique know-how has a lot of precedents. In fact,
now we will be using examples on how this type of crime has an im-
portance today that cannot be dismissed. What attracts attention is that
within this ?eld this crime, which is called “industrial espionage”, leads
the media to eclipse the work of the great majority of the professionals,
associations and training entities that respect legislation and are used to
generate value for their organisations by analysing the information ob-
tained from public access sources. In addition, as Gilad (2008) empha-
sised, this negative connotation is the result of ignorance and confusion
in general interest media, of the meaning of the concept of intelligence
with something more suitable to a military environment, where obtaining
information is the end that justi?es the means. This is where a crime can
appear if extrapolated to the civil sphere, but that is information obtained
illicitly and therefore unacceptable on principle. These same methods can
ignore that the meaning and value for the company lies in the result of the
information analysis; that is the CI. In all events, this confusion represents
a clear impediment to greater knowledge of CI and its role in companies.
Here are some examples and economic data about these crimes.
Competitive intelligence: a new paradigm in the …
157
Case 4: the German company Enercon GmbH was spied on at the order of a
North American competitor.
The facts place this criminal act in March 1994. At that time its in-house
technology of turbines with direct drive (without gears) and variable speed
gave incomparable advantages in the maintenance of machines that gave it
a diferentiation strategy. Its product was sold at prices higher than its com-
petitors. During this period, 1993-1994, the German manufacturer negotiat-
ed with New World Power Corp. (NWP) for its E-40 machine’s export to the
USA. What the Germans were unaware of was that its North American com-
petitor, Kenetech, in violation of the law, obtained the intimate details of an
E-40 and armed with them, directed a defensive battle against the planned
exports declaring a breach of one of its patents before the federal body, the
US Int. Trade Commission. The litigation lasted years and kept Enercon out
of the US market.
Subsequent to these events Wobben and its American lawyers received –
possibly accidentally – the evidence from the other party. In addition to a
large number of photos that showed the complete interior of the E-40, there
was also an eight-page report on the espionage by Ruth Hefernan. The re-
port describes in detail the way in which she and her Dutch colleagues from
the US competitor Kenetech, Jans-Robert “Bob” and Ubbo de Witt from Old-
enburg, spied on the Enercon system. According to it “they left Groningen in
the early hours of Monday 21st March 1994 with Bob”. In Oldenburg they col-
lected Ubbo, a physicist and meteorologist who had worked as a “freelancer”
for Kenetech. He was in contact with a farmer who owned an Enercon-40 on
his land and it was in use. The rest of the events are summarised as the
nocturnal and criminal entry of those persons into this machine, the dis-
covery of the facts, their statement and the scandal that in its day merited
the condemnation of the European Parliament.
Source: adapted by the writer from the original by Schröm, Oliver in Die
Zeit (1999).
Case 5: Convicted for stealing Motorola secrets including an unproved accu-
sation of selling them to China.
Jin Hanjuan, a nationalised American citizen, was about to board a ?ight to
Beijing on 28th February 2007 when a random check stopped her short.
In accordance with the judicial ?le and the sworn declaration of the FBI
presented as a case of economic espionage against her, when the customs
ofcers at O’Hare airport in Chicago inspected the bags of the 40-year-old
software engineer they found over 1,000 con?dential documents that were
allegedly stolen from Motorola, the US electronics group, for which Ms Jin
had worked until two days before the ?ight.
The court documents said that the Chinese ofcials also discovered military
manuals, catalogues of a European military products company, documents
Fernando Palop Marro
158
that detailed Chinese military applications for electronic equipment, etc. that
had been drawn up by an unidenti?ed Chinese telecommunications compa-
ny and 30,000 USD in cash
12
. In the criminal case against Ms Jin, held in a
Chicago court, Motorola alleged the research and development costs of the
information in the accused’s possession was more than 600 million USD. The
company lost major global revenue when the contents were made public, it
alleged. For her part Ms Jin pleaded not guilty.
In another civil case brought by Motorola, Ms Jin was one of those accused
along with Huawei, the Chinese telecommunications equipment manufactur-
er, through an allegation that her and the others were “secretly involved” in
the development of products for the Chinese company at the time when she
was employed by Motorola. Huawei said that the case presented by Motorola
was “inadmissible” and denied to comment on the criminal case.
Source: extract translated from the Financial Times original, 1
st
February
2011.
The economic losses that these crimes represented were, as seen in
these two cases, signi?cant. The ?gures involved were very inconsist-
ent according to sources. A report to the US Congress in 2002 included
some estimates (Xerox White Paper, 2003). The writers of the report in
the Financial Times (2011) con?rmed a growing preoccupation with the
appearance of these cases. Some of the most well-known recent cases
involved Renault and its battery technology for electric cars or Google and
its source code subject by cyber attacks. But cases were also presented
in very diferent sectors, such as the accusation of espionage in 2009 by
Starwood Hotels and Resorts against Worldwide Hilton, (Reuters 2012).
Among other protection measures, given these crimes, the work of the
Financial Times in 2011 set out to reduce the possibility of leaks to a min-
imum, whether through methods prepared with the help of information
technologies, or sometimes by starting from ideas that were due more
to common sense. Another approach can be to abandon hope that all
leaks can be avoided and concentrate on a continual innovation process
regarding the most advanced technologies and products that are difcult
to reproduce by any unconnected person due to their complexity and the
use of original ideas.
In any case, this type of crime has led to some OECD countries to actively
transfer advice on prevention and protection to their companies against
12
Bloomberg subsequently added at the start of the judgement that her flight ticket
to China was one way only, that the Chinese companies could be Kai Sun News Tech-
nology Co., also known as SunKaisens, and the Chinese army and iDEN the technology
in question. On 29th August 2012 the judge, after examining the proven facts, condem-
ned the accused to 4 years in prison for stealing secrets, but exonerated her from the
crime of selling them to the Chinesehttp://www.huffingtonpost.com/2012/08/29/han-
juan-jin-sentenced-for_n_1840304.html
Competitive intelligence: a new paradigm in the …
159
espionage. This is the case in Canada, whose national research services
on security are published on the Internet
13
.
Implications for territories: territorial intelligence
The development of a territory depends on various factors and variables
and the information and knowledge generated in it play an important role.
It makes use of this knowledge and of this information, through coordi-
nation of the players that work and participate in the same region; this
has come to be called territorial intelligence (TI). Although TI encompasses
more aspects than information management, this is one of its corner-
stones (Ortoll, Eva, 2012).
This term arose in France in the nineties and is used to name the function
and the intelligence process carried out by public administrations on a lo-
cal, regional or national scale. The goal is, through the use of information,
to know about the territory and its resources, to create wealth and plan
development policies and sustainability, (Bertacchini 2004). For Ferrari,
T. (2007) TI consists of systematically approaching the development of a
territory through the work of its players in a network aimed at its sustain-
able development.
This TI concept cannot be understood without starting from concepts such
as strategic territorial planning, triple helix, territory capital, “clusters”, dis-
tricts or poles of economic specialisation due to competition, drive to inno-
vation and CI. The Carayon Report, 2003, dedicated a large part to EI (eco-
nomic intelligence) and the territory. The idea of “territorial intelligence”
basically serves to promote innovation in the territory. In practice it is ex-
plained by the collection and analysis of information about the environment
with a focus on competitive intelligence and confrontation of the viewpoint
of local players to generate the most consistent policies to be applied.
For Ferrari, T. (2007) territorial intelligence is the domain of the methods
and resources of economic intelligence at the service of the territories; its
use is carried out with the goal of:
• Identifying projects and helping to put them into operation, creat-
ing employment, wealth and business in line with the strategy.
• Anticipating changes, risks and future evolutions, with regard to
the prospective vision and safeguarding assets.
• Assessing the territory and its most attractive performance in
terms of in?uence.
• Encouraging the territory’s technological and economic develop-
ment through networks.
13
The addresses are: www.csis-scrs.gc.ca/nwsrm/wr/wr2-eng.asp and www.csis-
scrs.gc.ca/nwsrm/wr/wr3-eng.asp
Fernando Palop Marro
160
Development perspectives
The present and future CI is linked to the way in which it is capable of
serving strategic decisions and integrating the decision maker. In many
cases a lack of client focus has been demonstrated. This de?cit in the
attention that is paid to the client and its involvement in the CI process
limit intelligence generation and the process becomes a mere supply of
information and documentation and this leads to the marginalisation of
the organisation.
This is why conversion of information into intelligence has become one
of today’s central CI issues. Wright, S. (2013) has recently worked on it
by starting from a consideration of how to make use of an organisation’s
unique intangible assets: its explicit and implicit acquired and derived
knowledge, and from a concept such as the traditional intelligence-based
competitive advantage or “IBCA”. For Gilad (2008) this was done through
interpretation (or what many call analysis) of information. For me, the
correct de?nition of intelligence must therefore be that of a viewpoint
regarding the facts and in this regard must be clearly distinguished from
information. This is why two currents are mentioned, the main one, the
“reporting school”, with emphasis on the collection and organisation of
information and another that responds to its position, and the “analysis
school” focused on generating intelligence.
Madureira (2013) put the emphasis on the CI proximity
14
or generation
time. For him the CI competitive advantage does not come from access to
the data, nor only from the quality of the analyses, but from the balance
between speed and quality of the vision, which we call “?exible insight”.
This means being ?rst to detect an opportunity or a threat and transform
it into applicable perceptions and understanding that can lead to strategy
and be put into practice to gain position in the market.
Professor Prescott, J.E. (1999) after analysing the evolution of CI spoke
about a tendency towards it becoming a central ability for companies, its
generalised integration into the training programmes of business school,
with an emphasis on attributes such as qualitative and strategic abilities
and its communication using direct components to the decision maker
provided by CI, marketing or planning units. In the past decade, I have
worked on the standardisation of a body of standardised contents that
de?ne the curricular contents for teaching CI.
If this is a more academic vision, interesting proposals also arise for the
future of CI from business practice. For example, that made by the Amer-
ican Brenner, M. from the corporation Air Products and Chemicals, who
saw the efectiveness of the CI specialists as facilitators or “coachers” of
14
I owe this term to Marcelino Huerta, former manager of FAMOSA.
Competitive intelligence: a new paradigm in the …
161
group decision-making sessions. This approach is supported by Fahey, L.
(2009) when he showed how intelligence ultimately is not the result of in-
telligence professionals by themselves. It is co-created through interac-
tion between intelligence professionals and decision makers. That is why
he insisted: “the key result of intelligence is understanding “insight”. This
is all the game consists of: this “insight
15
” involves the decision makers.
Speci?cally in line with the creation of mechanisms that will involve par-
ticipation together with CI specialists and decision makers and their staf,
there appears a form of developing the technique of analysing scenarios
that are known as the “war room”. Speci?cally for its capacity to confront
uncertainty in a timely way it has great potential in business.
Interesting integration experiences for librarianship professionals are
arising from university libraries in the academic ?eld, which are added
temporarily to research groups to provide them with access to the anal-
ysis results.
This need to obtain results from the analysis together with an explosion
of scienti?c, technological and market knowledge increasingly obliges
the incorporation of software tools for mining technical scienti?c texts or
‘Tech Mining’ or of syntactic and semantic analysis in order to understand
the emerging guidelines and their relationships.
Finally, standardisation is opening a path in this ?eld through R&D+i.
Therefore, the UNE 166.006:2011 standard in its latest revision has been
opened up to CI. The studies in progress by the group of the European
Standardisation Committee, CEN 389: on Strategic Intelligence Manage-
ment point towards an international presence in the near future with a
regulatory reference for companies in this ?eld.
Dedicated to Antonio Rico Gil, economist and teacher, in memoriam
(1947-2013).
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Chapter V
The economic risks of cyberwar
Henning Wegener
Abstract
The increasing acceptance and introduction of digital technologies in mil-
itary planning and armament opens the perspective of a cyber warfare
that, given the global interdependence of net structures, would unavoida-
bly and deeply afect the economy and vital societal assets. Hostile mili-
tary use of these technologies could, for factual and legal reasons, not be
cleanly separated from cyber con?ict in general and raises serious ques-
tions of controllability and legitimacy, thus opening up highly disturbing
damage perspectives. There is the perennial dilemma that the exponen-
tial growth and ultra-rapid development of cyber technologies and new
sophisticated uses are in con?ict with the equally exponential growth and
sophistication of attack options. The amazing quantitative and qualitative
growth of digital systems and infrastructures in a second digital revolution
comes accompanied by an equal or even superior growth in attack op-
tions and thus in vulnerabilities. Yet, the bene?ts of the digital age accrue
only if there is trust in the functioning, availability, integrity and safety of
the underlying technologies; thus, cybersecurity has come to be a global
challenge. The article describes actual and possible future cyber devel-
opments and the evolving threat landscape in terms of new attack modes,
new perpetrators, and new dimensions of economic risk and loss.
The article argues that the deliberate military use of digital technologies
in a cyberwar mode should be delegitimized or that at least its ofensive
Henning Wegener
168
component be deemphasized, but that the best course for all stakehold-
ers, including economic actors, would be to optimize strategies for the
prevention and mitigation of cyber damage. The key concepts – for all
forms of cyber con?ict – are self-defense, resilience, security improve-
ments in the IT industry, standard setting including standards for cloud
safety, technical redundancies, restraint, national and international co-
operation, emergency responses, efective information exchange and
warning systems, increased eforts to harmonize cyber penal law and
sanctions, advances in international law enforcement, and building in-
ternational norms of behavior for the cyber age The article concludes
emphasizing the need for a universal culture of cybersecurity, and ofers
an outline of a concept of cyber stability and “cyber peace”.
Keywords
Cyberwar, cybersecurity, cyber con?ict, cyber attack, cyber infrastruc-
ture, critical national infrastructures, new digital technologies, cyber law,
threat landscape, resilience, culture of cybersecurity, cyber law, cyber
stability, cyber peace
The economic risks of cyberwar
169
Cyberwar and Cyber Con?ict: the Economic Dimension
An earlier volume of this series of Cuadernos de Estrategia, published
in December of 2010, concentrated its analysis of cyber threats on the
national security dimension
1
. The current essay will examine the conse-
quences of cyber insecurity and cyber con?ict for economic security and
economic intelligence. As the underlying threat factors are the same or
similar – and economic security is, after all, an essential ingredient of
national security – the analysis will build on the earlier publication, which
remains entirely timely and valid, although some more recent develop-
ments and ?gures have of course been incorporated.
Understood literally, our topic appears to focus on the economic damage
that may be in?icted by the hostile use of cyber technologies in a military
context, thus positing a direct relationship between economy and war.
Indeed, history has shown that war – traditionally conducted with kinetic
weapons – has always spelled enormous risks and damage to the eco-
nomic assets of a belligerent country: by its indirect efects on infrastruc-
ture, consumption patterns, economic processes and client relationships,
the general functioning of society, etc.; as unintended, collateral damage
where the efect on strictly military targets spills over into society at
large including essential infrastructures – or directly, as part of a deliber-
ate strategy to destroy the economic grid of an enemy country, especial-
ly with regard to its armament industry or transport infrastructure, the
“war economy”, or beyond, to break the morale of the adversary and to
undermine the will of its populations to ?ght and resist.
Modern war has increasingly engulfed societies as a whole. Its intend-
ed comprehensive destructive efect has certainly seen its climax in the
Second World War, a “total” war, where the practically unlimited explosive
power of weapon systems, including nuclear weapons, and the strategic
will of the parties entailed the wholesale destruction of enemy territory,
economic assets, cities and populations included, with new dimensions of
violence and human sufering.
When we enter the digital realm, other laws govern. Digital attacks in-
cluding those with a military purpose are primarily non-violent and rela-
tively low-cost – “bits instead of bombs”, exclusively by way of electronic
invasion of systems and net structures. That also holds for military as-
sets. ITCs, Information and Communication Technologies have revolution-
ized military afairs, including battle?eld information and communication
and weapons systems, but at the same time increased vulnerabilities to
such invasions. A cyber attack comes from an invisible enemy, is hard
1
Ciberseguridad, Retos y Amenazas a la Seguridad Nacional en el Ciberespacio, Minis-
terio de Defensa, Madrid
Henning Wegener
170
to track and trace, is asymmetric, difcult to assess in its amplitude and
?nal efect, uncertain in the overall damage caused to assets beyond the
accountable economic consequences. And while there will be less blood-
shed and physical destruction, the consequences could yet be disastrous
and touch profoundly on the economy.
Many de?nitions where authors venture to de?ne cyberwar, describe it as
politically motivated actions by a nation state to in?ict upon an adversary
damage of military relevance – damage to military computer networks,
command-and-control systems, air defense networks and “network-cen-
tric” weapons systems by digital means
2
. More than 100 countries have
reputedly established cyber commands and understand cyberspace
as the ?fth domain of warfare, just as critical to military operations as
land, sea, air, and space. More than 30 countries are known to have de-
veloped explicit cyberwar doctrines; more than a hundred possess the
technical prowess to develop ofensive military capabilities. There is a
general understanding that cyberwar is a real and portentous military
warfare option that has to be taken very seriously, although scenarios
and predictions as to its likelihood difer. One concern in this respect is
the autonomous growth of cyber commands and cyber war doctrines that
may follow traditional military thinking patterns as if aficted by autism,
oblivious of the interconnected cyber context. Thinking in terms of cy-
berwar may lead one into a terminological trap. We will return to this
worrying aspect.
However, a brief review and juxtaposition of the various available de?ni-
tions of cyberwar quickly reveals that they clarify little, and that cyberwar
remains an elusive concept at best. The naked minimum substratum is
that we are dealing with digital attacks on systems and cyber infrastruc-
tures. Almost any further de?nitional criteria are open to doubt or ambiv-
alence. Politically motivated attacks? If espionage, including espionage
in armament industries and national infrastructures, is a prominent ele-
ment in cyber war, as most of the de?ners claim, political and economic
motives are naturally intertwined, and economic gain or data theft may
well be the dominant motive
3
. Cyber terrorism (a concept to which this
2
Wikipedia, Cyberwar. See also Glenny, Misha, Das Ende der Nettigkeiten. Cyberkrieg
und Sicherheit im Internet, Internationale Politik, November/December 2012, p. 80
3
Recent reports about cyber exploitation from China do not only demonstrate the
huge and indeed alarming dimension of cyber espionage from that country, but also
the great variety of perpetrators: big spying units that steal technological blueprints,
negotiating strategies, corporate and government databases from the US in terabyte
quantity appear to be part official, part contracted, part independent, and as these stu-
dies claim, at least linked with, if not coordinated by, a Chinese army unit. This opaque
relationship shows a mix of actors and purposes that defies definition and renders the
cyberwar notion ambivalent. See David E. Sanger, David Barboja, Nicole Perlroth, Chine-
se Army Unit Is Seen as Tied to Hacking Against US, New York Times, February 19, 2013,
and the Mandiant Report cited therein and widely commented in other organs.
The economic risks of cyberwar
171
analysis will return) certainly has political motives, but does not pursue
state-to-state war aims. Action by States and governments? Yes, attacks
may be state-run, but the more likely and more efective scenario is that
crime consortia, digital mercenaries as it were, are employed to in?ict
digital havoc at least as auxiliaries – unholy alliances between rogue
States and organized crime as a provider of “crime as a service”. “False
?ag attacks” could occur when states or non-state actors undertake a
cyber attack in the disguise of another state; the resulting misperception
could entail consequences that defy imagination, as generally mispercep-
tion that follows from errors of attribution or wrong interpretation of an
innocuous intrusion as a preparation of major attack could be fatal. Am-
biguities abound. ¿Military targets? Indeed, should governments lead a
determined attack on an enemy country, cyber commands may be spear-
heading the campaign, military assets will be at the center of any attack,
and modern network-centric military systems are sure to be aimed at as
preferential targets. Yet, what about comprehensive military and indus-
trial espionage? Even a schematic outline of principal scenarios proves
that the spectrum of targets is much wider, and that military planners
already include by implication at least critical infrastructures and vital
non-military communication systems in their target list, as most of these
are dual purpose. All four of the scenarios most frequently mentioned in
military-political analysis – the Estonia “cyberwar” in 2007 with its mas-
sive attacks on government and important infrastructures by distributed
denial of service saturation, the combination of cyber attacks and kinetic
means in the Georgia con?ict in 2009, the persistent “low level” threat
of military espionage, or the hypothetical “all out” cyberwar on defense
assets, governments, the economy and infrastructures described in a
somewhat sensationalist, but in the last analysis realistic way by Richard
A. Clarke
4
– are multi-target, half military, half civilian attacks and show
that cyberwar in its pure de?nitional form is very difcult to ?nd; the heu-
ristic value of the cyberwar concept is thus very limited, and an integral
assessment of cyber con?ict and cyber threats is by consequence una-
voidable. It is exactly such an integral perspective that can demonstrate
the tremendous destruction potential of a far-reaching cyber attack. This
author is not given to dwelling on dramatic doomsday scenarios, but the
extant literature on possible “digital Pearl Harbour” events can neither be
disregarded nor trivialized
5
.
The key factor that renders any de?nitional efort to characterize cyber
war as a distinct category of hostile behavior so difcult lies in the digital
4
Clarke, Richard A. and Knake, Robert K., Cyberwar. The Next Threat to National Security
and What To Do About It, New York, 2010.
5
Citable literature with plausible assumptions and calculations is hard to find, but it
can be assumed that governments and security institutions dispose of substantiated
threat assessments shielded from the public eye.
Henning Wegener
172
technology itself: the means of attack between civilian and military are
identical, almost always dual-use, whatever the motives and targets. Any
attack on the now all-pervasive net structures afects (all) digital partici-
pants in an unforeseeable and often uncontrollable way. One may regret
the absence so far of a systematic investigation on the likely cascade ef-
fects of even a limited military cyber attack and its international reper-
cussions, which is to say, a lack of estimates as to the basic risk of the use
of cyber weapons
6
. Digital interdependence between various sectors of
the economy is likely to create situations where failure in one sector not
only creates damage in another, but various mutually reinforcing feed-
backs. It is thus clear that the cascade efect of any attack on systems
and net structures in a closely interconnected world may be enormous
– and, as the assets of the attacker may also be endangered this may in
the best case serve as an implicit deterrent
7
. Characteristically, all eforts
to de?ne cyber weapons have failed in the past, although some partial
identi?cation of dedicated attack malware has resulted.
The truth is thus that cyber attacks pose an even greater threat to society
at large and its social and economic fabric than indicated in any variant of
military doctrine, planning and forebodings. The growing dependence on
digital technology puts public and private facilities, electricity supply, tel-
ecommunications, banking and ?nance, transportation, manufacturing,
medical installations, education and government just as much at risk as
military assets (more on these critical infrastructures further down). We
must speak of an integral risk exposure of our countries and their econ-
omies. In this perspective, the diferences between cyberwar, cyber ter-
rorism and cybercrime become blurred, and it appears more adequate
to speak of cyber attacks and cyber con?ict when analyzing the broad
threat pattern now emerging and impinging so clearly on the economy.
In popular parlance, cyberwar has often been understood with this broad
connotation, as a re?ection of the unspeci?ed, but massive fear cyber
6
It is as yet an open question whether the often-cited Stuxnet virus, a very sophistica-
ted malware, specifically geared to attacking the Siemens-produced dedicated control
software (SCADA) of nuclear enrichment installations in Iran, breaks this cascade effect
and can be the precursor of smart surgical cyber attacks. In any event, the Stuxnet at-
tacks were not directed at a military installation, and did not emerge in the Internet, but
were applied via smuggled flash memory sticks within a plant, thus posing a problem
more of physical access control and insider misbehavior. See in this context, James P.
Farewell and Rafal Rohozinski, The New Reality of Cyber War, Survival, August-Septem-
ber 2012, p.107
7
The cascade effect may be less effective if data – for instance, military data – are
managed in Intranets, or if other forms of net segmentation have been installed. Yet, the
insulation is only relative, and network defense is always needed to combat the same
invisible enemy. The same logic holds with respect to presumed plans of certain coun-
tries to opt out of the worldwide Internet structure, creating national digital borders in
a “cybered Westphalian age”. Such a national net segmentation will never be complete
and finally ineffective.
The economic risks of cyberwar
173
con?ict evokes among citizens. These public intuitions demonstrate that
cybersecurity, or rather cyber insecurity, is among the great challenges
of our time.
It is these broad threat patterns that most directly impinge upon the econ-
omy by way of an integrated threat perspective, and on which this essay
will concentrate in keeping with the general theme of this book. A realistic
economic risk analysis requires a comprehensive, integrated analysis of
the entire spectrum of cyber risks, whether the primary purpose of a cy-
ber attack is to reach economic gain or not, and an integrated strategy to
combat cyber con?ict. The vital contribution digital technologies make to
our era and especially to economic security, depends on the functioning,
integrity and reliability of these technologies, and of the con?dence they
inspire. Cybersecurity must thus be a central theme of this essay, as it
was in the 2010 publication cited above.
We will, then, ?rst explore the extent to which digital technology has al-
ready permeated all economically relevant segments of society. In a pre-
dictive mood, we will then analyze, even if somewhat speculatively, the
likely growth and mutation of the digital world in years to come. The fol-
lowing chapter will focus on the vulnerabilities and exposure to risk this
ever more interconnected world will generate, and the security threats
thereto as they are shaping up. An attempt will then be made to measure
the resulting economic damage, and the tenuous relationship between
cyber attack and cyber defense, i.e. the state of the security industry.
In the second part of the essay, the accent will be on counterstrategies,
damage mitigation and prevention, exploring the full panoply of cyber de-
fense. An important emphasis will be placed on the legal aspect, as there
is as yet little provision made to efectively control the escalation of cyber
con?ict by norms, and as there is at best an incipient understanding of
how the existing norms of international law would apply
8
.
Cyber as the Agent of an Economic Paradigm Shift
Any realistic threat assessment requires an overview over the state-
of-the-art digital technology employed by key economic actors. Infor-
mation and Communication Technologies (ICT) increasingly become the
new dominant paradigm of all aspects of human endeavour, providing
the all-encompassing operative system of human societies. Cyber Tech-
nology has become a de?ning characteristic of our age. The well-nigh
total dependence on ICT confers vital importance upon the performance
robustness, security and reliability of digital systems and networks, con-
8
Further down more detailed reference will be made to the “Tallinn Manual on the
International Law Applicable to Cyber Warfare”, Cambridge University Press 2013, the
first comprehensive treatise on the subject
Henning Wegener
174
?dence in their functionality and integrity, and in the protection of privacy.
These increasingly become framework conditions for the functioning of
society. Information security thus needs to be ranked as an overarching
societal challenge of global proportions.
The progress and growth of ICT which we currently observe in the econo-
my and elsewhere, including in military afairs, is breathtaking and justi-
?es designation as a second digital revolution.
As mentioned by diferent sources and studies, rapid advancements
regarding the integration density and performance of very large-scale
digital circuits which form the base technology in the digital age will be
going on for at least another decade. Moore’s law of doubling comput-
er performance every 18 months continues to be valid. As these digital
components are getting smaller and cheaper, more and more of these
components like microprocessors, sensors and actuators are embedded
in technical or physical systems and interconnected via various kinds of
networks. According to a recent paper by Manfred Broy, currently about
98% of all microprocessors are embedded (and invisible), and are con-
nected via sensors (e.g. RFIDs) and actuators with the physical world and
with the internet. As Broy mentions, “… the physical world merges with
the virtual world of cyberspace leading to Cyber-Physical Systems and to
an Internet of Things, data, and services”
9
.
With more than 2,3 bn computers on-line, billions of microprocessors and
microcomputers thus employed in embedded systems, RFIDs and other
sensors, mobile devices, evolving network technologies and bandwidth,
ultra-miniaturization of digital circuits and the resulting ubiquity of new
miniaturized computing elements, the steady progress towards an “In-
ternet of Things” with miniature computers soon inserted in cloths or the
frames of eyeglasses, the possible resulting threat spectrum goes in-
?nitely beyond traditional computers and the current Internet. Basically,
all digital devices and networks are vulnerable, and increasing intercon-
nectivity of digital systems can easily result in “snowball”-like distribu-
tion of errors, faults and failures – or damage caused by cyber attacks.
And these are ongoing processes. We are already witnessing an explosive
growth of digital actors and an exponential growth curve of interconnec-
tivities, an all-pervasiveness that automatically spells a parallel increase
in vulnerabilities.
The phenomena of migration – migration of ?xed line telephone to mobile
systems and to VoIP, migration of computing processes, software man-
agement and data storage from individual and business computers to
huge server farms (grid computing in the “cloud”) with petabyte capac-
9
“IT” – Information Technology, Special Issue, 6/2012, p. 255, Manfred Broy, Editorial,
Cyber Physical Systems (Part 1), München 2012
The economic risks of cyberwar
175
ity (1PB = 10
15
bytes) and cloud computing services – and convergence
– resulting in an undistinguishable mesh of mobile and ?xed systems –
add up to a huge integrated global network structure with a universe of
connectivity.
Counting traditional computers, mobile devices, embedded systems –
omnipresent, but sophisticated microprocessors often miniaturized to
the size of a sugar cube – some analysts estimate that the total number
of interconnected systems, civilian and military, has already reached – or
will soon be reaching – the level of 50 bn. The exponential propensity of
their mutual connectivity potential – and thus also their vulnerability to
cyber attack if not speci?cally protected – is difcult to calculate, but in
any event a matter of evidence and concern.
The development of mobile devices is particularly noteworthy. Recent
statistics indicate that worldwide smartphones trading alone will have
reached more than 650 million units in 2012, bringing the worldwide
mobile subscriber base to nearly 8.5 bn by 2016, an annual growth rate
of more than 7%, with mobile penetration exceeding the point of 100%
soon. The annual business ?gure of the mobile handset business stands
at appr. US$250 bn
10
. This does not count in other mobile devices, nor the
innovative potential of all smart mobile systems: such as smartphones,
tablet computers etc. with mobile Internet connection. They are making
computing ubiquitous.
In OECD countries and in emerging markets, nearly all companies are
connected to the Internet, and an increasingly higher percentage of busi-
ness sector value-added can be attributed to Internet-related activities;
developing countries are catching up with increasing speed, often pre-
dominantly based on mobile techniques.
The production apparatus of our societies is already digitized to a large
extent. Internet-connected machines that operate comprehensive au-
tonomous machine-to-machine information exchange systems within
factories, often interconnected through wireless protocols, so-called cy-
ber-physical production systems, increasingly characterize today’s – and
tomorrow’s – production processes and are the basis of the fourth indus-
trial revolution, even though this development is as yet incipient. Net-con-
nected and imbedded IT systems like RFID responders become the driver
of innovation, replacing central production control and management by
self-organization and ?ne-tuned process adjustments.
“Smart factories” go hand-in-hand with smart grids for essential public
support functions. A rational energy economy has to move to smart grids,
a production and consumption control and steering process predicated
upon the functioning of millions of sensors. Smart systems are by no
10
Figures from Portio Research Report Smartphone Futures 2012-2016
Henning Wegener
176
means the property of OECD countries: New Delhi has recently introduced
smart grids for the energy management of the metropolis.
The second digital revolution manifests itself also in the unprecedented
quantitative growth of data trafc. The new dimension of information
storage, transfer and processing, and the availability of new ICT services
is speci?cally enabled by the tremendous growth of data centers, “Big
Data”, colloquially referred to as the “cloud”, which have become a prime
driver of economic growth. The various and fast-growing “cloud” servic-
es (Infrastructure as a Service, IaaS, Software as a Service, SaaS, etc.)
allow for the reduction of company hardware and software acquisition
and maintenance, and ofer ?exibility, savings, and universal availability
of company data from anywhere. The explosion of data production is in-
deed fomented by the cloud phenomenon. Cloud computing is the fastest
growing segment of IT operations, with data in the cloud expected to grow
sixfold over a ?ve year span, and to produce, for the EU alone, almost
€600 bn additional revenue, creating 2.5 mn new jobs in the process.
The Cyber World of Tomorrow
Before appreciating fully the threats and economic risks of cyber con?ict,
one must also appreciate, if in a summary manner, evolving cyber devel-
opments, although predicting is risky business by itself. Yet, the grand
lines can be drawn, as they develop from current trends, provided a re-
alistic accelerator is built in. It is safe to assume that miniaturization and
the all-pervasiveness of devices – the Internet of things, based on the
much more potent Internet Protocol IPv6 – will continue at an even fast-
er pace, that the ubiquity and pervasiveness of invisible computing will
grow, that data growth will accelerate and that new forms of computing
leading to diferent and novel structures of processing con?gurations in
digital nets, e.g. neural computing, will evolve. We will see the develop-
ment of minute computers with self-organizing potential (“organic com-
puting”), able to communicate autonomously with other digital devices,
new human mind-machine communications (to name just some of the
“next generation” computing trends
11
). These developments will gener-
ate a continuing explosive growth wave of digital devices, dwar?ng the
quantitative evolution we have seen so far. Computing power, especially
through grid and cloud computing, becomes virtually unlimited. The in-
corporation of smart processing modes in industry will accelerate, and
smart grids, today still in an experimental stage, will be a regular feature
of the economic environment.
11
A more complete list would look to the advancements of nanotechnology, material
science, new semiconductor-based sensor technology, the formation and management
of virtual systems, new architectural concepts etc.
The economic risks of cyberwar
177
Broadband availability and coverage, and bandwidth, will increase to a
point of providing entire societies, including in the developing world, with
efective and powerful on-line access, in many third world countries pre-
dominantly by mobile techniques
12
. We will see new very high speed ?ber
connections, and new high-speed wireless connections, two technologies
that will shape the near future of connectivity. Mobile devices will become
more sophisticated and versatile – serving as means of payment, replac-
ing traditional keys and even chip cards, able to receive high resolution
television anywhere.
Mobile technologies will be so efcient that they allow work at home with
full access to company data as a normal feature, thus changing the work
structure and enabling savings in infrastructure and travel. Bring your
own device (BYOD), a work form where the employee takes on his comput-
ing and data management tasks from anywhere, fully connected, already
in use in some companies today, will become a routine procedure. Noth-
ing will be as before.
Threat Development – the New Economic
Reality of Cyber Insecurity
The foregoing analysis has placed emphasis on the exponential current
and future growth of systems and actors, all interconnected, that make
up the cyber world. And it is evident that the multiplication of systems
and actors are the principal indicators of new opportunities to imperil
cyber security on a grand scale, military and in a civilian context. Growth
of objects, at this exponential rate, indicates growths of threats, equally
exponential. One must bear in mind that any digital object, if not protect-
ed, can be an object of cyber attack, and if it is part of a connectivity mesh,
this spells multiple infection potentials and profusion of damage.
The tremendous growth process simultaneously afecting cyber systems,
actors and net structures has generated the famous quantity to quality
jump. Rather than old-style crime merely going on-line, cyber attackers
are today taking advantage of the increasing dependence of our day-to-
day life on IT by developing creative strategies to exploit the vulnerabili-
ties of IT systems.
The resulting change is nothing less than dramatic. The various dimen-
sions of the threat surge have to be assessed in conjunction. The explo-
sive growth of systems and interconnectivity – here already described
– the growing intensity, sophistication and diversity of attack modes and
attack technology, and the radical change in the characteristics of cyber
con?ict perpetrators, all interact and multiply the damage potential. With
12
For current percentage figures see OECD Internet Economy Outlook 2012
Henning Wegener
178
the second digital revolution we enter a new world of perils which makes
analyses of the cyber threat of, say, ten years ago, appear idyllic.
All operations in cyber con?ict have in common that they intervene in the
functioning of digital processes, whether they afect data, their storage,
their handling, or their transmission, thus undermining the reliability and
authenticity, integrity and privacy of data and processes.
But the aim of an attack can difer. Some leave the normal functioning of
the systems and computing processes unafected: their purpose is to ob-
serve and possibly to copy (“steal”) data. The key applications are military
and industrial espionage, data and personality theft. If the attack remains
undiscovered for a length of time, it can be pursued, and even more data
can be retrieved as they emerge; espionage and data theft operations aim
at this long-term covert use. The usual term for these practices is persis-
tent threat, or in case of an organized crime perpetrator and systematic
use over time, Advanced Persistent Threat (APT).
Other attacks, using for instance “logic bombs”, aim at altering or de-
stroying the functions of the attacked system, falsifying its efect (e.g.
the operating instructions of a weapons system) or making it inoperative.
Still other attacks change the normal functions for abusive or illegal pur-
poses for a given time, for instance in bank or credit card fraud, or more
permanently by defacing the sites. The massive sending of spam, unsolic-
ited bulk e-mail, frequently with commercial content, to an indiscriminate
set of recipients, can also be termed an attack, as it is frequently used
to dispatch viruses and other malware as a technique to enact ?nancial
theft, identity theft, data and intellectual property theft, fraud or simply
deceptive marketing.
Evolving Attack Modes
The con?ict modes which we will review subsequently, together with
their development trends and evolving dimension, fall in one or several of
these attack scenarios. As this essay does not purport to deal with their
information-technological characteristics, the references to them will be
general.
Topical information and ?gures are amply collected and made available
by the globally operating cyber security companies Symantec, Norton,
McAfee, Microsoft, KasperskyLabs, PandaLabs and CISCO, among oth-
ers
13
. In addition, many national cyber security services like the German
BSI, the US Homeland Security Department, and the European agency
13
Symantec Internet Security Threat Report, Norton Cybercrime Report, McAfee Threat
Reports. These reports are issued periodically, and 2011 and, in part, 2012 data and
developments are already covered in their latest editions.
The economic risks of cyberwar
179
ENISA
14
collect and often publish data. While extremely revealing, such
compilations still have to be read with a grain of caution. Commercial IT
security companies, while certainly correct and conscientious with their
information, tend to highlight the perils of attack in the interest of their
business. And victims tend to underreport incidents – businesses too,
like banks, in order to protect business con?dence, individuals because
of shyness or lack of interlocutors, national security services, especially
when information networks relate to military secrets, weapons systems,
or an essential security dispositive that has been penetrated.
But it is exactly the exploitation of espionage possibilities that have been
displaying lately one of the highest growth factors. As they access the se-
cure systems of target states, organizations and industries encounter in-
creasingly lower barriers to entry, and the ubiquity of techniques used to
undertake such collection, many of which have been developed by crimi-
nal groups, is evident – some States make an increasingly aggressive use
of cyber espionage. There is detailed information on China’s cyber oper-
ations in the US, where the intruders concentrate on key corporate infra-
structures aiming at the theft of intellectual property
15
. For many years
China has been practicing nuclear espionage, collecting highly classi?ed
information on long, documented lists of nuclear warheads, while also
accessing networks of major defense and ?nancial institutions. The most
commonly used penetration technique is Trojan attacks, where a virus
is introduced and can over long periods be instructed to download data
without being perceived by the target system’s operator. While China’s
cyber exploitation operations have received special publicity because of
their extent and aggressiveness, all other great powers are also involved
in intense espionage battles. At the moment, viruses with espionage
functions enjoy a positive business cycle. Lately the spyware variants
Madi and Flame have become particularly prominent
16
. Their appearance
shows that even relatively simply constructed spyware can serve to ob-
tain very valuable and sensitive information on a large scale.
From state-run espionage networks with a high Trojan penetration, it is
only one step to the direct attack, degradation of weapons systems, and
sabotage, e.g. through sleeping logic bombs, although these need to be
14
ENISA’s Reports, as recently the ENISA Threat Landscape: Responding to the Evolving
Threat Environment, of January 2013, stand out because of their broad database, incor-
porating findings from most other reports, and because of the systematic and definitio-
nal analysis of the various types of threats and risks.
15
Wikipedia, Chinese Intelligence Operations in the US; IISS Strategy Survey 2012, Inte-
lligence Agencies and the Cyber World, p. 33. See also Nigel Inkster, Chinese Intelligence in
the Cyber Age, Survival, February-March 2013, p. 45. See also fn. 3 above.
16
The Duqu virus, often cited in the Flame context, also has excellent espionage and
data theft properties, but is substantially more complex, possibly related in structure
and origin to Stuxnet. Its primary target is also control software like SCADA. Duqu disa-
ppears from the affected systems after 36 days which complicates detection.
Henning Wegener
180
able to resist the vigilance and ongoing software upgrades of the soon-
to-be attacked party.
All reports from security companies agree in their latest editions that
malicious attacks continue to grow rapidly and, according to McAfee, have
presently reached an all-time high in database breaches. At the same
time there is growing sophistication of attacks and malware develop-
ment. Mobile malware, a new central focus of attack, has almost doubled
in a one-quarter period. With the number of vulnerabilities in the mobile
space rising – Symantec has detected a 93% rise in one year – and mal-
ware authors creating speci?c malware geared to mobile opportunities,
2011 was the ?rst year that mobile malware presented a tangible threat
to businesses and consumers, not least because workers tend to bring
their smartphones and tablets into the corporate environment faster
than many organizations are able to secure and manage them. “BYOD”
poses enormous new security challenges. It may lead to a further long-
term increase in data breaches. The new threats to mobile are designed
for activities including data collection, the sending of content, and user
tracking.
There are quantitative jumps in all categories of attack mode. Syman-
tec alone blocked more than 5.5 billion malicious attacks in 2011, an in-
crease of 81 percent over the previous year. In addition, the number of
unique malware variants increased to 403 million during that period.
Financial damage to banks and individual customers (credit card fraud,
phishing and carding, spearphishing, direct ?nancial extortion) continues
to rise fast. Last year cybercriminals set up an automated transfer sys-
tem (ATS) that was used to attack European ?nancial institutions, and set
out to target a major U.S. multinational ?nancial institution. “Mobile Mon-
ey Transfer”, MMT, a catchword for novel digital ?nancial systems, servic-
es that are bringing banking to millions of people in the Third World, will,
if not quickly and efectively regulated, display the “dark side of cyber
?nance” and will become a playing ?eld for cyber attack and crime
17
.
Given the still persisting quasi-monoculture of operating systems where
one producer dominates the market, the vulnerabilities inherent in its
products are particularly widespread and, if exploited, lead to substantial
damages. The main source for distributing computer viruses are there-
fore innocent users of personal computers and company computers, who
often are not aware of the risks inside the web.
Virus attacks have also been greatly facilitated by the huge presence of
“new social networks” that act as gratuitous distributors for infection.
17
Bronk, Christopher; Monk, Cody and Villasenor, John, The Dark Side of Cyber Finance,
Survival, April-May 2012, p. 129. A specific virus, Gauss, targets financial transactions;
there are others.
The economic risks of cyberwar
181
Moving beyond spam attacks, cyber criminals are turning to these social
networks. Their seemingly very innocent nature makes users incorrectly
assume they are not at risk, and attackers are using these sites to target
new victims. Due to social engineering techniques and the viral nature of
social networks, it is much easier there for threats to spread from one
person to the next. Yet spam, although now better controlled by anti-spam
?lters of the Internet Service Providers, and in addition in many countries
subject to anti-spam legislation, is still rampant; more than 86% of Inter-
net trafc – 62 bn messages globally per day – was spam in 2010, (with
a slightly lower percentage of 75%, 42 bn messages, in 2011)
18
, which by
inundating the accounts causes appreciable damage in lost production
time, apart from its potential to spread virus attacks.
There is another move away from indiscriminate spam: attackers indi-
vidualize their attack, focusing on those victims on whom they have pre-
viously accumulated actionable knowledge through data and personality
theft. One individualizing method is spearphishing. The term denotes a
targeted email attack on persons who are known to frequent speci?c on-
line businesses and may have relevant account information for banks,
speci?c businesses or distribution chains. It is so called because the
move to target is precise and narrow, like the tip of a spear. Although
credit card data may not be stolen, email addresses are compromised,
and these addresses can be sold on the black market. Furthermore, the
information gathered from spearphishing can also beget more sophis-
ticated phishing attacks on other customers acting upon the legitimate
looking message from a retailer or bank with whom they are already do-
ing business. Targeted attacks are increasingly directed at smaller com-
panies, because they may be less well defended or occupy an important
place in a given supply chain.
At the same time, malicious code is less and less programmed to directly
cause irreparable damage. Rather, attackers try to bring infected com-
puters under their control so that they can continue to misuse them by
way of Trojan infection and remote control.
One important and efective element in such schemes are targeted DDoS
(Distributed Denial of Service) attacks. In this attack method, the attacker
?oods the server with useless data packages, thus overloading the sys-
tem in order to provoke business interruptions in the victim’s systems
and net structures. In a business context, such attacks could be launched
by competitors, dissatis?ed personnel, or otherwise motivated groups of
people. Obstructing the smooth operation of web sites massively can re-
18
Figures from Symantec. Spam may grow less rapidly also because there is increa-
sed pressure on spammers; some huge specialized spam botnets having been taken
out over the last two years. By contrast, the content of criminal spam has become more
sophisticated.
Henning Wegener
182
sult in considerable economic consequences, especially for companies
practicing or relying on e-commerce. In military or political con?ict sce-
narios, DDoS attacks – a central feature of the cyber attack on Estonia
in 2007, where, however, economic damage was minor – can paralyze
defense installations and communications, neutralize or destroy weapon
systems, paralyze government services, provoke breakdowns in critical
infrastructures and economic sectors, and may thereby, in extreme cas-
es, lead to massive loss of life.
While the latest reports of the security companies clearly put their ?nger
on the new threats to mobile devices – and through them to the whole
interconnected universe – they do not yet quantify the new vulnerabilities
that spring from the explosive growth of the cloud centers. Yet, apart from
the mobile threat, the insecurity of massive migration of data to the cloud
has for some time been a hot topic in security discussions, in the words
of an ENISA report from 2009
19
, “The massive concentrations of resourc-
es and data present a more attractive target to attackers”, although the
agency believes that “cloud-based defences can be more robust, scalable
and cost-efective”.
Underpinning this list of new attack modes is the emergence of a wide ar-
ray of new highly sophisticated destructive software programs appearing
with an ever increasing rapidity and sophistication
20
and targeting pre-
cision. National boundaries are of course no longer relevant to this type
of threats, and it is impossible to con?ne the protection of information
technology and IT infrastructure to domestic policies. The authors and
vendors – and pro?teers – of computer viruses and other malware are
operating globally, and cyber defense has to adopt that same mode.
The New Enemy: Collective Actors of Cyber Con?ict
Internet criminality is more and more conducted in a professional and
commercial manner. Targeted attacks are increasingly carried out by
organised criminals. Financial interests are the decisive driving power.
Cyber con?ict is developing into a powerful branch of the international
organized crime scene. Crime consortia command armies of cyber ex-
perts and malware developers and systematically organize crime cam-
paigns for gain. Over years of operation they have built professional
teams for sophisticated malware development, bene?tting from massive
crime-generated resources. This also allows for a new magnitude of at-
19
Cloud computing: benefits, risks, and recommendations for information security, No-
vember 2009, www.enisa.europa.eu
20
One example is a new technology to segment malware into minute data packets
that enter a target system, unrecognized by firewalls and anti-virus systems, but reas-
semble automatically once inside the host system
The economic risks of cyberwar
183
tacks. Already in 2004, sixteen percent of hacking activities were aimed
at e-commerce companies. This represented a 400-percent-increase
compared to the previous year, but since then the individual hacker has
terminally faded into the dark, and organizations have taken over.
They systematically plant Trojans into large numbers of computers – in-
creasingly also into mobile devices, and thus have thousands and even
millions of devices at their command where they can activate malware
and use it for attacks, Botnets – the word is composed of robot and net –
are on the rise. These aggregates of zombie computers have several uses.
Their operators – the botherders – can proceed to money-making directly,
or collect espionage knowledge, commit data and identity theft. Botnets
provide an efective and increasingly used infrastructure to distribute
spying programs in a wide range of variants, and to do business in online
banking. Botnets are the ideal platform for DDoS attacks, as these need
a large number of activated email-emitters to reach the desired large-
scale saturation efect. Botnets can also be rented out to other criminal
perpetrators – or to governments, as digital mercenaries, creating an
opaque state-non-state actor mix. They are not the only merchandise
on the black market, accessible to criminals and governments alike; ag-
gressive attack software, email addresses and credit card numbers in
huge packages are available for almost token prices. There is no lack
of zombies either. Almost every 10th email is estimated to be infected
by relevant viruses, and, accordingly, the botherders can count on large
herds, functioning unbeknownst to their owners. Already in 2010 McAfee
had estimated that the number of zombie computers grow by at least 5
million systems per month, and that identi?ed malware variants increase
annually by a factor of 5. At the best time of the Con?cker virus which
was, and is, autonomously able to recruit new computers into the botnet,
the dimension of that net alone may have reached more than 10 mn de-
vices. Without the push of the new collective actors this growth would be
inconceivable.
One alarming aspect of the new criminal cyber scene is the aforemen-
tioned technical and ?nancial prowess to develop malware ahead of cy-
ber defense and in spite of the undoubted efciency of the international
cyber security industry. At the same time, the digital dependency of mod-
ern societies is growing; infrastructures are ever more net-dependent
(e.g. smart grids). Even the numerical aspect alone is worrying. McAfee’s
reports indicate that identi?ed malware variants increase annually by a
factor of 5. The timeless dilemma of attack vs. defense thus takes on a
new meaning, especially due to these new collective operators in cyber
space, and the defenders of a functioning, peaceful and crime-free cyber
space do not always have the upper hand
21
. The attack potential of these
21
“There is and always will be a permanent race in cyber space between attackers
and defenders. Unfortunately, at the moment attackers are one step ahead.” ENISA
Henning Wegener
184
organized evil forces also gives an idea of the possibilities of a true cyber
war if states and organized crime cooperate.
There are several analyses with theories about the countries or places of
residence of these crime groups, based in part on the URL of the attack
messages. But given the unlimited possibilities of station-hopping and
combining inputs from various sender countries, this essay refrains from
any such attribution.
With all these developments it has certainly become clear that the term
security has reached an entirely new meaning and dimension in cyber
space; national boundaries provide less protection today than ever be-
fore. Such terms as internal and external security are increasingly dif-
cult to de?ne or might indeed merge in most cases.
Cyberterrorism can also be subsumed under the new collective threats.
Under the dominant de?nition, cyber terrorism denotes the use of In-
ternet attacks by political-ideological groups, aiming at large-scale dis-
ruption of systems and networks, potentially creating destruction, alarm
and panic. If the purposes of these terrorists are not economic gain, they
would not be genuinely within the purview of this study. If they go eco-
nomic, for instance, to extort funds for the ?nancing of terrorist activi-
ties, they are not essentially diferent from other criminal operators, and
would only form part of the integral cyber con?ict and threat landscape
here described. That does by no means trivialize the dangers they pose,
especially with attacks on critical infrastructures, and they are rightfully
within the focus of governments in their anti-terrorism and general se-
curity campaigns
22
.
Measuring the cost of cyber con?ict: is quantifying possible?
Several international cybersecurity companies periodically undertake
to put a price tag on overall economic damage caused by cyber con?ict,
based on their own activities and insight.
The Norton Cybercrime Report 2012 calculates the immediate ?nancial
loss to come to US$110 bn for 24 countries (Symantec arrives at 114
bn), with 556 mn victims; but if the money equivalent of lost time trying
to respond to incidents and resolve cybercrime is added, the ?gure rises
to roughly 390 bn. Whatever the exact methodology in arriving at these
?gures, it is certain that – apart from the limited number of countries
Threat Landscape, January 2013, cited above.
22
See Candau Romero, Javier, Estrategias Nacionales de Ciberseguridad. Ciberterro-
rismo. In: Ciberseguridad, Retos y Amenazas a la Seguridad Nacional en el Ciberespa-
cio, Instituto Español de Estudios Estratégicos, Cuadernos de Estrategia nº 149, Madrid
2010.
The economic risks of cyberwar
185
covered – the cost of long-term damage and business disruption, direct
cash spent in incident response, and the damage to business reputation
have not been fully factored in, and, for all countries, if included, should
reach important additional proportions. And as pointed out before, any
damage statistics have to cope with the huge number of unreported and
unassessed attack cases
23
.
Preventive and cyber defense measures do not appear to be covered ei-
ther. Taking the US Government eforts at enhancing its cybersecurity
capabilities (protecting critical infrastructures, cybersecurity operations,
information sharing and analysis, etc.) as an example, the budget allot-
ment of the Department for Homeland Security for these purposes alone
amounts to US$1,2 bn for FY 2013
24
, surely less than the private sector,
all businesses told, has to invest in cybersecurity and cyber vigilance.
Such amounts of funds have to be scaled up for the entire international
community. The cybersecurity industry itself runs a multi-billion euro or
dollar business.
Estimating the budgets for safeguarding military installations, com-
munication systems and weapons will be even more difcult. But it
is evident that the availability and maintenance of one’s own military
communications and command structures as well as the capacity to
neutralize hostile military action – cyber defense – must enter, as they
do, into calculation and planning.Given the uncertainties of calculation,
it is thus not surprising that there are no handy overall ?gures. Yet, at
the recent First World Summit on Cybersecurity organized by the East-
West Institute in Dallas, Texas, in 2010, authoritative speakers have
estimated the total economic damage of cyberinsecurity at appr. US$ 1
tn (1000 billion) annually, and this indicative ?gure has been used since
without anybody seriously objecting. In the same order of magnitude,
an authoritative speaker from the US House of Representatives has
estimated the annual loss from cyber espionage – presumably from
Chinese intruders – to have reached $300 bn in 2012, no breakdown
of ?gures included
25
. At the World Economic Forum at Davos 2013 it
has been assumed that over the next decade there is a 10% chance of
a major digital breakdown – presumably of criminal origin – costing
23
The European Commission through its Vice President Neelie Kroes is currently con-
templating to establish a legal obligation for business to report cyber attacks. News
agencies, 26 November 2012. The EU Commission is preparing a Directive in this sense.
EU-wide, more than 40,000 enterprises would have to submit to the reporting obliga-
tion. The initiative has encountered resistance from industry and IT service providers.
ENISA has estimated that 25% of attacks in the EU and the US are not reported to law
enforcement authorities. For an initiative calling for voluntary industry reporting, see
fn. 55 below.
24
www.dhs.gov
25
Article in El País and US press, February 21, 2013
Henning Wegener
186
over a quarter of a tn dollars
26
. These ?gures, and at least their order
of magnitude, are enormous.
While the ?rst part analyzed current and evolving cyber threats and their
enormous economic cost, and emphasized that an integral risk situation
required also a comprehensive and integral response, this second part
will concentrate on combating cyber con?ict, developing cyber defense
strategies and devising strategies for the mitigation of consequences.
Limits on Cyberwarfare Proper
Although we have found the concept of cyberwar to be ambiguous and of
doubtful relevance to the present analysis of economic risks, a brief sum-
mary of the constraints international law places on hostile cyber action
appears in order, as they may limit the potential of damage.
International law and especially the law of armed con?ict antedate the
cyber age, but as cyber space is now increasingly recognized as a new
theater of war, it is generally assumed that the jus ad bellum and the jus
in bello, suitably adapted, also govern hostilities in cyberspace. There is
much academic literature on the analogies that can and must be drawn
from the UN Charter, the Hague, Geneva and ICRC Conventions and Ad-
ditional Protocols and other treaties on Humanitarian Law, UN General
Assembly resolutions announcing general principles for state conduct,
extant international case law and customary International Law. Govern-
ments have published manuals and cyber strategies that also de?ne con-
straints, but at the same time provide the underpinning for huge invest-
ments in cyber armament. Much of the debate centers on the de?nition
of “attack” and “armed attack”, but also cyber-suited de?nitions on the
principles of the laws of armed con?ict (necessity, distinction, propor-
tionality, non-discrimination, prohibition of attack on civilian objects and
certain persons, objects and activities, neutrality, etc.
27
The views expressed range from the acceptance of broad options of at-
tack, where targeting critical infrastructures is considered within the
realm of legality
28
, to more restrictive interpretations
29
.
26
Cited by Vice President Kroes at the Global Cyber Security Conference, Brussels, 30
January 2013
27
For a summary of the issues, see Westby, Jody R. A Call for Geo-Cyber Stability in ITU
(Hamadoun Touré and the Permanent Monitoring Panel on Information Security, World
Federation of Scientists), The Quest for Cyber Peace, ITU, Geneva, 2011, p. 66. In the same
publication, see Barletta, G.A., Barletta, W.A. and Tsygichk, V.N., Cyber Conflict, p. 53.
28
For a cautious assessment, stressing the complexity of “line-drawing” in the use-
of- force debate, see Waxman, Matthew C., Cyber Attacks and the Use of Force: Back to the
Future of Art. 2(4), The Yale Journal of International Law, Vol 36 (2011), p. 421.
29
In 1999 Amato, Anthony D,, International Law, Cybernetics and Cyberspeace, 76 Intern.
Law Studies, p. 59, predicted that “attacks in the Internet will soon be seen as clearly
The economic risks of cyberwar
187
There is no point in belaboring these various perspectives, as the prin-
cipal reference work is now quite clearly the recently published “Tallinn
Manual on the International Law Applicable to Cyber Warfare”
30
elaborat-
ed by “The International Group of Experts at the Invitation of The NATO
Cooperative Cyber Defence Centre of Excellence”. This comprehensive
treatise seeks to establish 95 “Rules” covering the jus ad bellum and jus
in bello for cyber con?ict exhaustively.
The Manual has obvious merit. The prestigious assembly of co-authors
proposes under the international regime de lege lata plausible de?ni-
tions and rules and puts an end to many previous controversies. Yet, the
members in dealing with the military-civilian relationship, and in try-
ing to distinguish between military and civilian assets, and dealing with
non-discrimination, etc. have to admit that cyber “weapons”, “by their na-
ture generate efects that are incapable of being controlled and therefore
can spread uncontrollably into civilian and other protected computers
and computer networks that create an uncontrollable chain of events”
(p.122), and that most possible targets, especially critical infrastructures
and cyber infrastructures, are dual-use, and that an attack on them cre-
ates more than the “collateral damage” to be assumed in kinetic con?ict.
Could a critical infrastructure of mixed military-civilian use also be tar-
geted if it supports targets that are protected by the Geneva Conventions?
The Manual seems to give preference to the military purposes. Rules such
as “The civilian population as such, as well as individual civilians, shall
not be the object of cyber attack” (Rule 32), thus they are likely to lose
their protective efect. Rules 14 and 55, specifying that cyber operations
in self-defense must be necessary and “proportionate” become blurred,
if, because of lack of controllability, the proportion cannot be measured
reliably. Other uncertainties concern the treatment of hidden non-state
actors, combatant status, de?nition of “war-sustaining” economic ob-
jects, neutrality, anticipatory self-defense – when can a cyber attack that
occurs with lightning speed be judged to be imminent? The authors are
more successful in de?ning “attack” and “armed attack”, employing the
“efects” rule in the latter (“Whether a cyber operation constitutes an
armed attack depends on its scale and efects”, Rule 13)
31
. Yet even here
illegal in international law, and customary international law may already have reached
that point”, but clearly developments since then have not gone that way.
30
See footnote 7 above.
31
The Manual also makes clear that not all transfrontier cyber attacks, even though
issuing from a state, constitute a violation of the law of armed conflict or international
law generally. Thus cyber espionage, in “peace” or armed conflict, does not fall within
the purview of international law (except in special cases, e.g. when disregarding the in-
violability of diplomatic archives and communications). One of the important elements
of cyber conflict, massive intrusion into digital systems for purposes of espionage, an
Advanced Persistent Threat, is thus to be judged under national cyber laws and sanc-
tions, such as the Budapest Convention defines.
Henning Wegener
188
the ambiguities are preoccupying. The “armed attack” rule is so broad
that it lowers the barrier to war; it is unwise and dangerous for interna-
tional stability to treat con?icts that imply no clear threats to human lives
or essential societal disruption as “armed attack” with the accompanying
consequences under international law
32
.
On the whole, the Manual, far from constraining the cyberwarfare option,
rather underlines the great new possibilities of cyber attacks and the un-
controlled damage it can in?ict. Very little harnessing is done. Instead, the
uncertainties and the risk to civilian cyber structures become more ap-
parent. That refers speci?cally to Critical National Infrastructures which
are not only predominantly privately owned, i.e. part of the national econ-
omies, but indirectly penetrate the whole social fabric so much that econ-
omies are ever more dependent on them. Cyber attacks on them not only
generate massive economic damage, but also seriously compromise the
security and safety of society, putting human life at peril.
More importantly, the Manual accepts the option of warfare in cyberspace
in an unre?ecting way and dodges the question of whether unbridled cy-
ber armament in view of future use is a wise course for civilized nations
to take. The Manual starts of course from the underlying assumption that
state-sponsored cyber hostilities respect the UN Charter, and are only
invoked in self-defense. Yet, the ?nal impression is that the wholesale
transfer of the traditional Law of Armed Con?ict and the thinking in mili-
tary terms does end up as a cloak of legitimacy for the cyberwars of the
future, neglecting the huge dynamics both of digital developments, and
the growing societal vulnerabilities and unpredictability of consequences.
A similar approach can also be detected in the military cyber manuals
many governments have prepared, to the extent that they are publicly
accessible.
Some countries are incorporating ofensive cyber capabilities into con-
ventional warfare strategy, foreseeing conventional military responses
even to information sabotage on the Internet, even independent of the
presence of an “armed attack” or human casualties. Others call for unlim-
ited use of cyber weapons (”exploit potential fully, maximum efect, joint
?ring process, retaliation, punishing blow“) indicating that planning also
follows military lines (”war-?ghting doctrine“) with the corresponding
analogies and thinking patterns
33
. Yet, concepts like deterrence, retalia-
tion, ”rules of engagement“ do not take account of the speci?city of cyber
attacks and, for instance, the problems of attribution and proportionality.
32
Barletta, Barletta, Tsygicho, op.cit. p.60
33
A brief list of the various “warfare” modalities has been offered by ITU Secretary
General Touré in The international Response to Cyberwar, in The Quest for Cyber peace,
op. cit, p. 86
The economic risks of cyberwar
189
Fortunately, these concepts do not stand uncontradicted. The destruction
potential and unpredictability of cyber attack options are increasingly
recognized, and have nuanced the purely military viewpoint or are juxta-
posed to it. In many military and political doctrine documents, cyberwar
prevention, prioritization of cyber defense, and cooperation of all stake-
holders are now moving to the foreground. One interesting example is
the US Department of Defense Strategy of Operating in Cyberwar of July
2011 which clearly opts for cyber defense, close cooperation between
Government agencies, Government and industry and international co-
operation. NATO’s summit documents, like the Declaration of Lisbon (20
November 2010), do not conceal defense needs, placing the emphasis,
however, on central cyber protection and the optimization of collective
cyber self-defense and internal alliance cooperation as well as interna-
tional cooperation (§ 40). It is also signi?cant that cyber attacks are not
subsumed under the attack concept of Art. 5 of the NATO Treaty, but rath-
er mentioned in the context of the consultation regime under Art. 4.
34
This indicates that the mastering of cyber attacks is in many quarters
healthily recognized as falling under a new security paradigm that places
prevention, ”resilience“, strengthening of threatened digital infrastruc-
tures and a defense ”network of partnerships“ up front.
As this article will substantiate further down, this movement to a defen-
sive mode should lead one to introduce the concept of cyber peace.
To opt for the positive side in the war-peace antinomy implies an impor-
tant change in perspective and scale of priorities, as it orients the mind
towards the bene?ts and positive potential of the Information Society and
provides a goal post to that efect, reinforcing the negative connotation
of cyberwar and related terms and calamities – delegitimizing it as it
were – and fomenting dynamic movement towards a global culture of
cyber security.
In attempting to reverse the above described belligerent perspectives,
one must be fully aware that digital infrastructures are now all-perva-
sive, and will unavoidably also be used for hostile, non-peaceful purpos-
es. The overriding objective, then, is to harness such uses and to provide
the strictest possible limits for any attack situation. As the very term
34
Another good example for this emerging instinct of prudence can be found in cu-
rrent reports on a draft US Presidential Directive embodying legal rules for the military
in defending or retaliating against a major cyber attack, fully respecting International
Law. The rules will reportedly endow the President with broad powers, including for a
preemptive strike, but, given the consequences and the attribution problems, also re-
flect an attitude of substantial restraint, ruling out “automatic” retaliation, and reserving
the prerogative of ordering strikes to the President as Commander-in-Chief. David E.
Sanger, Tom Shanker, Broad Powers Seen for Obama in Cyberstrikes, New York Times:
February 2, 2013. See also Jamie E Condliffe, Obama Has Signed a Secret Directive to
Stymie Cyber Attacks, Washington Post, Nov. 15, 2012
Henning Wegener
190
“cyberwar” is conducive to stimulating thinking in military categories, an
attempt must be made to combat this mental automatism and to substan-
tiate a plea for peaceful behaviour in cyber space.
Active and Passive Cyber Defense
If an “armed attack” is carried out by a state – or if such attack is pre-
sumed – the victim, the attacked state, has, under the UN Charter, the
right to proportionate self-defense. But if the attack in?icts damage on
private interests, e.g. an enterprise or a privately owned infrastructure
(energy, banking, aviation, etc. – for a more precise de?nition see fn. 42)?
Can the attacked then slap back? And can he do so also if there is un-
certainty as to attribution and the perpetrator is, or may be, a non-state
actor or simply an ordinary cyber criminal? Here national cyber law with
its penal sanctions and law enforcement tools comes into play. The de-
bate as to whether “active” defense is legal, even though it implies intru-
sion into systems and networks and in?icts damage, has been waged for
some time
35
.
Active defense tactics such as have been proposed could include hack-
ing back into systems to retrieve data, shutting down systems, sabotag-
ing data, infecting the attacker with malware, taking over the attacker’s
botnet, or hiring a botnet to attack the attacker. Feeding an attacker
data (so long as it is not malware) may not be illegal, but these other
active defense actions likely are. Just because actions are being taken
against a criminal attack does not make them legal in most jurisdic-
tions. Moreover, these actions can trigger lots of other laws (particu-
larly if botnets are involved), such as intellectual property, spam, fraud,
contract and tort laws. Plus, they can cause collateral damage to third
party systems
36
.
Some of the justi?cations that are being suggested for active defense
tactics include self defense, hot pursuit, and ownership of stolen data.
However, none of these justi?cations hold water; self-justice will not do,
and the right course to take instead is to make systems and nets more
resilient, and to improve (passive) cyber defenses and national and inter-
national law enforcement
37
.
35
See article of Jody R. Westby on Forbes bloghttp://www.forbes.com/sites/
jodywestby/2012/11/29/caution-active-response-to-cyber-attacks-has-high-risk/
36
Examples taken from Westby, fn. above
37
If attribution of origin of an economic attack is reasonably certain, some economic
counter measures, like discontinuation of relationships, refusal to deliver, withdrawal
of trade benefits, or – for a government – withholding of most favored nation status or
other punitive trade measures, may be legitimate. Responding to the current surge of
cyber attacks on US corporate assets and infrastructures, President Obama has recent-
ly spoken of such measures.
The economic risks of cyberwar
191
An Emerging Comprehensive Information
Security Management System
After the foregoing excursion into the territory of cyber warfare with its
ambiguities, de?cits and scary implications, the discussion shall now
once again focus on the overall threat panorama, with cyber con?ict orig-
inating from states, non-state actors – or a combination of both – ter-
rorist groups, organized crime consortia, and cyber criminals in general.
Commensurate with the near total penetration of our societies by cyber
technologies, one can now increasingly observe that international organ-
izations, governments, the economy in general, the IT industry and IT se-
curity industry, as well as civil society, the entire stakeholder community
as the accepted term goes, join forces to combat and mitigate threats in
cyberspace. In a paper of limited length, this movement, in part concert-
ed, in part autonomous, is impossible to cover. Thus, an attempt will only
be made to list and evaluate its major forms of expression. The overriding
key words are cyber defense, self-protection and resilience.
Resilience – the defensively oriented policy that maximizes the ability of
possible target systems to prevent, deter and withstand cyber attacks
and, if they occur, to minimize and mitigate their efects – is a multidi-
mensional concept and has technical, organizational, political and legal
components that need to be combined to be efective
38
. We will discuss
in turn the legal framework requirements, the requirements of self-de-
fense at enterprise and end-user level, the improvement of attack-resist-
ant technical design, the potential of standard-setting and best practic-
es, the bene?t of redundancies and societal assistance and cooperation,
international cooperation and law enforcement, the role of information
exchange, warning systems and emergency responses, and, of crucial
importance, the national and transfrontier protection of Critical Informa-
tion Infrastructures.
Creating a harmonized legal framework to
combat cyber crime and cyber con?ict
Cyberspace could not remain a lawless space, and, with the advent of ICT
legislators, has faced a double task: capturing the new technologies with-
in their national legal system, and providing a harmonized international
framework for penal prescriptions and sanctions and law enforcement, as
38
The European Commission, a trailblazer in constructing digital strategies for the
27 members of the European Union, thus unifying their digital policies and defense, is
using the “resilience” concept as an overriding finality, for instance by creating – throu-
gh ENISA – a “European Public Private Partnership for Resilience” (EP3R), and placing
its recent draft Cybersecurity Strategy of the EU in a major way under the plank “Achie-
ving cyber resilience”.
Henning Wegener
192
cyber attacks can take their origins in any part of the globe. Most industri-
alized countries have now cyber laws and cybercrime laws, many of them
very adequate, but signi?cant variances in de?ning what constitutes a cyber
ofense, in detecting and identifying cyber crime, and in the applicable pro-
cedural provisions have until recently signi?cantly hindered cybercriminal
investigation. The Council of Europe Convention of Cybercrime
39
(Budapest
Convention, signed in 2001 and entered into force in 2004) has brought a
major advance in the harmonization of global cybercrime laws, and I join
Professor González Cussac in his praise of this instrument; I also agree with
him that new digital developments and attack mode will make a revision
of the text necessary over time, however valuable it is at this moment
40
.
Yet, the Convention, as of this writing, has only been signed and rati?ed by
39 countries, with 10 rati?cations pending. Signi?cantly absent are Russia,
China, as so often Israel, and most third world countries, presumably reti-
cent to adopt a document of European origin. The ITU Toolkit for Cybercrime
Legislation has been developed as an alternative, with proposed legislative
language that is harmonized with the Convention and cybercrime laws in
industrialized nations. Broader use of these texts, or adopting compara-
ble autonomous language by countries not yet party to the Convention, will
hopefully soon advance the harmonization process further. This is time-crit-
ical. The Convention, of course, has to be translated into national legislation
by countries ratifying the international legal commitments..
Self-Protection
Cyber defense begins at home or at enterprise level. Among the obvious
obligations of the Chief Information Ofcer should be the introduction of
state-of-the art ?rewall, antivirus and incident information technology,
encryption of con?dential information, access control for premises and
digital equipment, including a rigorous and diferentiated password man-
agement (“need to know”) and other sophisticated authentication tech-
niques. If BYOD is permitted, rigorous controls should cover the brought-
in equipment. Vigilance is especially required as regards the SCADA
systems of critical infrastructure installations, as these are particularly
vulnerable to state, non-state or terrorist attacks with a military or other-
wise disruptive purpose. This should be obvious, but experience demon-
strates that theft of con?dential information, both in enterprises and
governmental agencies, is predominantly due to negligent insiders. More
than 9 out of 10 breaches would have been prevented if the organizations
had followed data protection and information security best practices
41
.
39
www.conventions.coe.int
40
Estrategias legales frente a las ciberamenazas, Cuadernos de Estrategia nº 149, op.
cit., p. 116
41
Figures from ENISA
The economic risks of cyberwar
193
One of three top causes of data breach is physical theft or loss of devices.
Also, a report from German industry shows that only a small percentage
of e-mails with highly sensitive information, like industrial design blue-
prints, are encrypted. There is a systematic lack of encryption on mobile
company devices. In many cases, no provision is made for redundancies
that could, in case of attack, conserve or rapidly re-establish functionality
of systems or connections.
Designing for Security
One important loophole for attackers almost from the inception has been
that hardware and software designers, focusing primarily on design ben-
e?ts arising from technical advances for performance, have given less
interest and efort to information security and privacy. Also, building in
security from the outset may entail additional cost reducing pro?t mar-
gins. Traditionally, there has been a gap between the production and the
security industries, helped by the lack of awareness of end-users of in-
formation security and privacy risks inherent in their equipment; for a
long time, there has been incongruence between factual and perceived
security. Many smaller enterprises may not have the resources or profes-
sion skills set to design the means of protection themselves. These gaps
are now increasingly ?lled by a more security-conscious industry, higher
end-user awareness, closer cooperation and even common ventures of
the various stakeholders (see, for instance the recent acquisition of the
important IT Security company McAfee by Intel).
Also it would be wrong not to give credit to major industry alliances
formed to promote the security performance of hardware, software and
net architecture, collective exercises that started mostly in the nineties
of the last century. Most prominent is the Trusted Computing Group with
more than 100 members, contributors or adopters from industry. Its
Trusted Platform Module (TPM) has been standardized by ISO/IEC
42
.
Yet, given the threat landscape, the obligation of the hardware and soft-
ware industry to “design for security” remains permanent, and there is
also a permanent responsibility for public and private institutions and for
countries to establish security procurement and certi?cation policies and
standards
43
. Collective eforts to securize SCADA system design would
42
www.trustedcomputinggroup.org. The TPM is used in the operating systems of
most major providers. Trusted Computing does, however, face severe criticism from
the free software community on the ground that it produces customer lock-in.
43
The ITU in its Global Security Agenda is committed to the “Development of strate-
gies for the creation of globally accepted minimum security criteria and accreditation
schemes for hardware and software applications and systems”. See also the chapter
Designing for Security in Information Security in the Context of the Digital Divide, Recom-
mendations submitted to the World Summit on the Information Society (November
Henning Wegener
194
appear particularly useful. All this is based on the insight that there is still
a lack of design and analysis methods, scienti?cally proven, to master the
enormous complexities of future interconnected digital systems, espe-
cially regarding safety, reliability, functioning and security. The IT security
industry deserves high marks for keeping abreast, at a very professional
level, of the challenges it increasingly has to confront; the security com-
panies run a rapidly expanding and highly demanding and competitive
multi-billion dollar business.
Standard-Setting and Best Practices
Government action and self-organization by industry have created a
universe of technical and operational standards to secure IT structures.
Many of these are voluntary, but a system of certi?cations provides in-
centives to adopt them with public visibility. Enterprises that do not vie
for excellence in this area, and consequently sufer attacks and data
breaches, not only lose money, but also reputation and clients. The most
important standards for the management of IT technology, of practical-
ly global applicability, have been elaborated by ISO/IEL
44
in the series
27.000 and 13.335, for the aforementioned Trusted Platform Module
in norms 11889-1 to 11889-4 on information technology (2009). In the
USA the norm-setting function is entrusted to the American National
Standards Institute ANSI. For years, the community of users, develop-
ers and vendors of Internet technology have joined in the Internet Engi-
neering Task Force (associated with the Internet Society) to develop and
promote standards for the Internet infrastructure, routing, transport
security. Then, on the special problems of distributed computing, there
is the Open Grid Forum for standard-setting in grid computing and grid
architecture.
The International Information Systems Security Certi?cation Consortium
(ISC), described as “the world’s largest IT security organization” (“securi-
ty transcends technology”), promotes the standardization idea by award-
ing certi?cates for excellence in secure IT operations (Certi?ed Informa-
tion Security Professional, CISSP); the areas eligible for certi?cates also
include software development, security architecture and design; 85,285
members from 143 countries currently hold the certi?cate. The issuers
of certi?cates beyond the traditional norm-setting agencies – institutes,
associations, individual enterprises, intergovernmental agencies – are
many, obviously re?ecting a need for recognition of excellence and con-
2005) by the Permanent Panel on Information Security of the World Federation of Scien-
tists, Doc. WSIS-05/TUNIS/CONTR/01 at www.itu.int
44
www.iso.org, www.iec.ch. The Spanish member organization of both is AENOR,
which is also setting standards of its own (in this context see UNE 71502) and provides
certification.
The economic risks of cyberwar
195
?dence-building. An indicative compilation on the Wikipedia web page of
CISSP lists 70 diferent certi?cations
45
.
Protection of Critical Infrastructures
CIIP, the protection of critical information infrastructures
46
, has for many
years been at the center of attention of information security policies and
strategies to enhance resilience, both on the part of Governments and
international bodies, and of the operators of these infrastructures them-
selves. Indeed, in a “cyberwar” context , it would be the centerpiece of
defensive strategies and of any efort to optimize system resilience. Giv-
en their vital importance for the functioning of society, the increasing vul-
nerability of infrastructures in an interconnected and Internet-dependent
environment, and the possible cascade efects of their failure, this prior-
ity is understandable. Critical infrastructures are ?rst in the line of ?re of
military attack, terrorists, and crime consortia – organized crime – in the
latter case as a basis for blackmail.
In the US, presidential directives since the time of President Clinton have
ordered the necessary protective measures. Securing critical infrastruc-
tures and information systems is an essential part of the brief of the
Department of Homeland Security, generously endowed in each annual
budget. CIIP policies ?gure prominently on the DHS home page www.dhs.
gov. Capping intense previous eforts, the US President on February 13,
2013 signed an Executive Order (EO) on Improving Critical Infrastructure Cy-
bersecurity and a Presidential Policy Directive (PPD) on Critical Infrastruc-
ture Security and Resilience, which provide instructive reading. Another
major actor is the European Commission, assisted by its net security
agency ENISA. Mindful of the still existing diferences in systems and lev-
els of protection in the 27 member countries, the EU has been working
on CIIP and the harmonization of protection standards for some time. In
2009, the Commission adopted an Action Plan and a Communication on
45
The Revista Seguridad en Informática y Comunicaciones, www.revistasic.com, an ex-
cellent publication, and certainly the best journal in Spain in the information security
field, helps the non-professional reader to keep track of these various distinctions as
they are earned by Spanish enterprises. The editor of this journal, SIC, also organizes
periodic cybersecurity conferences in Spain.
46
These infrastructures are generally understood to include, in the broadest sense,
electricity generation, transmission and distribution, gas production, transport and dis-
tribution, oil and oil products production, transport and distribution, telecommunication,
water supply (drinking water, waste water/sewage, stemming of surface water (e.g.
dikes and sluices), agriculture, food production and distribution, heating (e.g. natural
gas, fuel oil, public health (hospitals, ambulance transportation systems (fuel supply,
railway network, airports, harbors, inland shipping); financial services (banking, clea-
ring), security services (police, military). The energy component is often considered the
most vulnerable part.
Henning Wegener
196
CIIP
47
and has organized a EU Ministerial Conference on CIIP
48
. The Euro-
pean Public- Private Partnership for Resilience has already been referred
to. ENISA has been organizing several European Cybersecurity Exercis-
es with broad government and private sector participation, the latest in
2012
49
, aiming at strengthening the cyber incident management commu-
nity. On February 7, 2013, the Commission published, in a Joint Communi-
cation with the other major EU bodies, the Cyber Strategy of the European
Union which, in a broad sweep, intends to set common minimum require-
ments at the national level for each member of Network and Information
Systems (NIS), touching very much on resilience and infrastructure pro-
tection
50
. The European Parliament is also active; it held its latest meeting
on CIIP on February 6, 2013.
For more than a decade the International Telecommunication Union
(ITU) has been dealing with Critical Infrastructures Protection in a global
perspective, lately in reference to its Global Cybersecurity Agenda, al-
though no uniform regulatory framework has as yet emerged. Yet there
is a wealth of studies, publications and conference reports, easily to be
found at the ITU web page and that of its executive arm, the International
Multilateral Partnership Against Cyber Threats (IMPACT)
51
. The foregoing
survey is no more than indicative; supplementing it with an overview over
national initiatives would exceed the possibilities here. Yet many, if not
most, countries participating in the cyber world deal with CIIP in their
national organs, complementing international eforts. The German Fed-
eral Information Security Agency, for instance, runs a specialized Internet
Platform for CIIP and sponsors a series of publications
52
Resilience in Cloud Computing and Mobile Computing
The rapid advance of cloud computing in huge data centers, and the mas-
sive migration to mobile, as described in earlier sections of this article,
make it useful to analyze the resistance to attack of both these new ven-
ues of data management and cyber operations, and to point to novelties
in this respect.
Cloud computing is a new way of delivering computing resources, not a
new technology. The concentration of data and services delivery, scalable
to demand, ofers huge economic bene?ts and accordingly has attracted
47
COM/2009/149, endorsed by the European Council in Resolution 2009/C 321/01. See
also the Directive 2008/114/CE on the Protection of European Critical Infrastructures
48
www.tallinnciipeu.eu/?id=conference
49
For key findings, see www.enisa.europa.eu
50
JOIN (2013 1 final). The Strategy is accompanied by a draft directive on measures to
ensure a high common level of cyber protection
51
www.itu.int; www.itu.int/ITU-D/cyb/cybersecurity/impact.html
52
www.bsi.bund.de, for the CIIP platform see www.kritis.bund.dE
The economic risks of cyberwar
197
massive global investment. The worldwide forecast for cloud services in
2013 indicates a likely volume of $44.2 bn. As ENISA has tangibly ex-
pressed it, the cloud’s economies of scale and ?exibility are both a friend
and a foe from a security point of view. The massive concentrations of
resources and data present a more attractive target to attackers, but
cloud-based defenses can be more robust, scalable and cost-efective.
Attacks on data centers of this dimension ofer a military or terrorist at-
tack important new opportunities, including tampering with the energy
supply entailing massive loss of data (if energy supply redundancies are
overcome), physical destruction, or cyber intrusion into the data bases.
Clients’ fears are heightened as data masses are moving seemingly ar-
bitrarily and untraceably from rack to rack, as supervisory personnel be-
comes anonymous, and as con?dence in the integrity and privacy of the
data becomes harder to maintain. The risks in cloud computing are major,
and provide a major security challenge.
It is thus not surprising that cloud security has become a central theme
of the current cybersecurity debate. In the very competitive cloud market,
suppliers and security companies outdo one another in con?dence-build-
ing. They can indeed show that there is also a premium in cloud security
management. All kinds of security measures are cheaper when imple-
mented on a larger scale; the same amount of investment in security buys
better protection (cheaper physical perimeterisation and access control,
better scaling of resources, timeliness of response, more efective threat
management, etc.). Clients – governments among them – make their
economic choices in good measure on the resilience of security servic-
es ofered, reputation of con?dentiality, and transparency of the internal
center procedures. Lately, one important diferentiating factor for Euro-
pean enterprises has been that they judge the legal data protection in
Europe better than in the US, given the more intrusive data policy of the
Department for Homeland Security.
Cloud security currently appears to be everybody’s business. The refer-
ences of this article to current analytical work and recommendations on
the subject are therefore limited to ENISA’s recent studies, “Cloud Com-
puting: bene?ts, risks and recommendations for information security” –
mentioned before – and “Critical Cloud Computing: A CIIP perspective on
cloud computing” (14 February 2013), both at www.enisa.europa.eu.
Further up, ?gures have been cited on the breath-taking growth of the
number of mobile digital devices, mobile services and applications, and
the consequences of the migration to mobile technologies. It had also
been pointed out that the threat to mobile computing and communication
is growing out of proportion, making cyber attacks to mobile one of the
dominant features of the threat landscape. Although exceedingly vulner-
able to cyber attacks, mobile systems have long gone virtually unpro-
tected. Only at this juncture, new anti-attack software for most mobile
Henning Wegener
198
operative systems appears on the market. But the future may well lie
not in software downloads to individual devices, but in central vigilance
of mobile customers from the cloud, such as an alliance between Voda-
fone and BAE Systems that is presently being introduced into the market
via a 5 year strategic partnership
53
. The promise of this cloud vigilance
approach is that not only smartphones, but also tablets, and eventual-
ly smart RFIDs, the controlling systems in smart factories and other cy-
ber-physical systems could be efectively protected.
National and International Cooperation in Cybersecurity
Given the seamless and global nature of the digital net structures, broad
national and international cooperation of the entire stakeholder commu-
nity in combating and mitigating the consequences of cyber con?ict is
a matter of indubitable necessity – and this necessity is globally recog-
nized. The cooperation patterns that in part already exist, and need to
be enhanced, include efective information exchanges including incident
reporting, mutual assistance, also to activate redundancies, organized
incident responses, warning systems, contact points within and between
nations, improved cooperation on law enforcement – and the organiza-
tional prerequisites to make all these desiderata function.
These measures – and other, related ones – appear quite straightforward
and their usefulness within a strategy of preventing, defending against,
sanctioning and mitigating incidents of cyber con?ict is fairly self-evident.
It is thus not surprising that the categories and numbers of stakeholders
involved in them are huge and multifarious. We are dealing here with on-
going and expanding processes, very hard to capture in a brief analysis.
Sufce it to mention a few recent developments to indicate tendencies.
Entrusted by the World Summit on the Information Society with coordi-
nating cyber security responses, the ITU has worked out a Global Cyber-
security Agenda that promotes many of the cooperation tasks globally,
culminating in “a framework of a global multi-stakeholder strategy for
international cooperation, dialogue and cooperation”. The Agenda has dy-
namically pursued its goals, as can be gathered from the ITU web pages.
One important element of cooperation strategy is time-critical informa-
tion across borders. The key mechanisms is the “24/7” approach, the per-
manent availability of contact points for cyber incident management. The
?rst international plan originated with the G8 in 1998. The group created
a 24-hour network of law enforcement experts among its members, but
other governments joined. In the EU, the ?rst 24/7 program came with
the Council Framework Decision on attacks against information systems
53
BAE and Vodafone in cyber safety deal, Financial Times, and news services, 18 Fe-
bruary, 2013
The economic risks of cyberwar
199
of 2003. A more systematic approach is part of the (Budapest) Convention
on Cyber Crime, which, apart from harmonizing criminal substantive law
of cybercrime, has provided for domestic criminal procedural law powers
necessary to investigate and prosecute such ofenses, but has also set
up a fast and efective regime of international cooperation and mutual
assistance (art. 23 et.seq. of the Convention) for “tracking and tracing”
that includes rules on the expedited preservation of stored computer and
trafc data, etc. In art. 35 a permanent 24/7 network with appropriate
equipment and trained personnel is set up in order to ensure the avail-
ability of immediate assistance for purposes of investigation and prose-
cution, including the collection of evidence and the locating of suspects.
Many governments, even beyond existing treaty obligations, participate
in the 24/7 set-up.
An element of growing importance in the incident reporting, mutual
assistance, early warning, risk information etc. area are the Computer
Emergency Response Teams (CERT), also labelled Computer Security In-
cident Response Teams (CSIRT). Pioneered by Carnegie Mellon University
with funding from the US Department of Defense in 1988, the CERT is
now a network of global dimension. In many countries there is a central
government CERT, mostly charged with the coordination of other national
CERTs and speci?cally with securing government digital infrastructures.
CERTs are teams of IT experts that follow and process information on
computer incidents, analyze, advise, coordinate, lend assistance in com-
batting cyber attacks and in restitution, and often issue news bulletins
and warnings on new threats. Worldwide there are presently more than
250 organizations that use this name and deal with cybersecurity re-
sponses. In many countries industry and academic institutes have taken
the initiative to establish CERTs. In the US, the Department of Homeland
Security has established the US CERT. It coordinates CERT/CC, the in part
federally funded US CERT community led by Carnegie Mellon. In Germany,
a similar task is ful?lled by the BSI with its CERT-Bund, in Spain with the
Centro de Respuesta a Incidentes de Seguridad TIC by INTECO, an organ
of the Ministry of Industry and its executive ofce red.es. The ITU, as part
of its Global Cybersecurity Agenda, assists developing countries in creat-
ing national CERTs. In September 2012, the EU set up a CERT-EU, at ?rst
for the protection of its own entities, but also to liaise with national and
government CERTs in the EU area. At the same time, in its Digital Agen-
da for Europe of 2010 the EU called on members to establish their own
national CERTs, a development to be completed by 2012, thus paving the
way for an EU-wide network of efective incident responses.
In a related move, the EU has, in February of 2013, created a European
Cyber Crime Centre (EC3) at EUROPOL that is to focus speci?cally on or-
ganized groups aiming at large criminal pro?ts, and their hostile impact
on infrastructures with enhanced investigative powers.
Henning Wegener
200
In the future it is necessary that the CERT movement be universalized,
and that CERTs become more operative and interconnected, but they cer-
tainly form a major defensive weapon against cyber attack and to har-
ness cyber con?ict
54
.
At the time of this writing, one does not only observe a surge of cyber
attacks on governments and industry, mostly in the APT vein, but also
a growing awareness that all stakeholders must become more active
and forthcoming in information exchange and sharing of cyber defense
resources. One prominent example of such broad industry self-help en-
deavors is the collective cybersecurity alliance pioneered in Europe by
René Obermann, the CEO of Deutsche Telekom, who has called for more
voluntary incident reporting and transparency
55
A Culture of Cybersecurity: Norms of Behavior for the Cyber Age
So far, only some broad legal aspects have been dwelt upon: International
Law as it ambiguously de?nes the limits to cyber warfare and “armed
attack”, and the harmonization of criminal cyber law in its national and
crossfrontier dimension. Not mentioned, but valid in most countries, is, of
course, a civil law regime that governs torts and damages, as well as the
pertinent International Private Law.
But all that is far from ?lling the requirements of a functioning cy-
berspace regime able to combat and withstand cyber con?ict. Legally
speaking, the new area of cyberspace was initially a void, in need of
a comprehensive framework of norms not only for states, but for all
stakeholders. The task was to develop over time a set of norms for con-
vivial behavior – of a culture of cyberspace and cybersecurity, including
a comprehensive legal framework to manage and control the all-per-
vasive, in?nite potential of digital technologies. Consequently, there is
as yet little or no ability to efectively control by law the escalation of
cyber con?ict and to guarantee the peaceful use of cyberspace – and
as we have seen no unambiguous understanding of how the existing
norms of international law would apply. A dangerous, precarious state
of afairs indeed. The cybersecurity group within which I have been ac-
tive, the World Federation of Scientists, has early on ambitiously called
for a UN-led efort to create a universal and comprehensive Law of
54
CERTs since 1990 are coordinating and exchanging information in an informal in-
ternational organization FIRST; there is room for more effective coordination. Already in
2004 this author has recommend that the CERT approach should not only be universal,
but should, beyond individual information processing and assistance, develop a sys-
tematic lessons-learnt approach, see Henning Wegener, Learning Lessons from Cyber
Attacks: Broadening the CERT Framework, at www.unibw.de/infosecur
55
See, for instance, Obermann, René, Uniting for Cyberdefense, New York Times op.ed.
page, February 21, 2013
The economic risks of cyberwar
201
Cyberspace
56
. Yet, for many reasons a one-shot cyber treaty has not
proved to be a realistic option. Fortunately, collective thinking about the
necessary processes of cyber strategy has notably evolved. To make a
long story short, a new age of cyber diplomacy has begun around 2008
with a manifestly emerging international consensus to concentrate ef-
forts on an alternative to formal treaty-making: the elaboration of con-
?dence-building measures or codes of conduct as normative tools. We
may be witnessing a turning point in cybersecurity diplomacy.
The prevailing view now is that CBMs and codes of conduct open a win-
dow of opportunity to make real progress towards common de?nitions
and behavioral standards. CBMs have the potential to reduce threat, en-
hance transparency, make State behavior predictable, are ?exible, volun-
tary, and ofer a variable geometry in terms of participants – it is possible
to include non-State actors – and follow-up: contrary to coherent trea-
ty-making, participants are free to adopt partial solutions and enact them
without delay and independently or with other like-minded stake-hold-
ers. CBMs which States embrace do not require rati?cation; they invite
emulation, and are at most – and at best – politically binding. They are
thus uniquely suited to foment international consensus-building on an
evolutionary scale. A well negotiated package of CBMs with a critical
mass of participants may set in motion a process of further incremental
change and heightened sensitivity. Clari?cation of behavioral standards
may provide an incentive for going for more.
There are currently many parallel international activities that jointly con-
tribute to consensus-building. Sufce it to cite some. A UN Group of Ex-
perts has been instituted in 2011 with the concrete mandate to de?ne “co-
operative measures … including norms, rules of principles of responsible
behaviour of States and con?dence-building measures with regard to in-
formation space”
57
and will report out in 2013. Governments have provid-
ed numerous inputs to the Group at the request of the UN Secretary Gen-
eral
58
. Their views have strongly supported the idea of identifying CBMs.
In a short time, ?urries of other national statements to the same efect
have surfaced: from Australia, the UK, Germany, at least by implication
56
Toward a Universal Order of Cyber Space: Managing the Threat from Cybercrime to Cy-
berwar, Document WSIS-03/GENEVA/CONTR/6-E,, www.itu.int/dms_pub/itu-s/md/.../
S03-WSIS-C-0006!!PDF-E.pdf,, also at www.unibw.de/infosecur. See also Kamal, Ah-
mad, The Law of Cyber Space: An Invitation to the Table of Negotiations, UNITAR, Geneva
2005, www.in.int/kamal/the_law_of_cyber_space. At the United Nations, Russia has, as
of 1998, in a series of resolutions advocated a Cyber Treaty, proposing to some extent
conflictive and probable unimplementable contents, see Res. A/53/70 up to A/65/41.
These resolutions had, however, the undoubted merit of keeping the argument alive
that a major universal normative effort was required.
57
A/Res/66/24 of 13 December 2011
58
A/66/152 and A/66/152 Add.1
Henning Wegener
202
the US, among others
59
. An authoritative academic voice from India has
joined the concert
60
. China, Russia, Tajikistan and Uzbekistan, re?ecting
work within the Shanghai Cooperation Council, submitted to the UN Sec-
retary General, in September 2011, a draft international code of conduct
for information security
61
. Although the document, by virtue of its choice
of authors, did not seem to display a sufcient ?avor of political correct-
ness, the catalogue of commitments, ofered for voluntary subscription by
states, should not be disdained. In the meantime, member countries have
organized prestigious international conferences, where the CBM idea has
been ventilated, and more or less detailed catalogues of CBM contents
or contributions to it have ?gured in the conference summaries (London,
Berlin, Beijing, Vienna, Budapest). Apart from the ongoing UN exercise,
regional organizations are also getting into the act. The ASEAN Regional
Forum with its representative membership and participants, 27 nations
going much beyond Asia, has zoomed in fully on the CBM theme
62
. The
OSCE, mindful of its earlier experience with East-West CBMs, is intensive-
ly working on a draft code of conduct (see “A Comprehensive Approach
to Cyber Security”)
63
and APEC
64
, as well as the Shanghai Cooperation
Organization
65
are also working on regional arrangements. The Council of
Europe, famous for its contribution to a world penal law on cyber crime
through the Convention on Cybercrime, has adopted 10 Principles on In-
ternet Governance
66
. UNIDIR helps to provide the academic underpinning
59
See previous footnote and the positive utterances at the cyber session of the Sha-
ngri-La Dialogue, IISS news July 2012. For Germany, see also “Challenges in Cyber Se-
curity: Risks, Strategies and Conference Building, Conference Report, December 13 and
14, 2011, Berlin,http://www.auswaertiges-amt.de/DE/Aussenpolitik/Friedenspolitik/
Abruestung/Projekte/ Cybersicherheit.html. The German Federal Foreign Office, in ad-
dition, supports a 2012 UNIDIR project on International Cybersecurity and CBMs
60
Gupta, Arvind, CBMs in Cyber Space: What Should Be India’s Approach?, IDSA, Ins-
titute for Defence Studies and Analysis, June 27, 2012
61
A/66/359. See also the Agreement between the Governments of the Member States
of the Shanghai Cooperation Organization on Cooperation in the Field of International
Information Security, signed in Yekaterinburg on 15 June 2009
62
Secretary of State Clinton at the Pnom Penh ASEAN meeting on July 12, 2012,
“This Forum includes some of the world’s largest cyber actors. So this is an appro-
priate setting for a sustained, meaningful dialogue on cyberspace issues. In the years
ahead, we should work together in support of responsible norms and standards, and
pursue practical measures to build confidence and reduce risk”. The ARF is organizing
a Seminar on Confidence-Building Measures in Cyberspace in Seoul next September. In
May of this year ASEAN defense ministers called for an ASEAN “master plan of security
connectivity”.
63
www.osce.org
64
See the APEC TEL Strategic Action Plan 2010-2015, www.apec.org
65
No home page in English of the SCO could be detected. News is best gathered from
the web pages of the member countries.
66
www..coe.int
The economic risks of cyberwar
203
for these endeavors
67
. ONGs in the cyber area, as well as individual re-
searchers, ofer catalogues of rules of conduct of their own. These cat-
alogues can obviously not be reproduced or analyzed here but provide
efective tools for spurring the debate and facilitating CBM negotiations
68
.
It is to be hoped that the present dynamics in moving to negotiations on
such con?dence-building measures and codes of conduct be maintained,
and that agreement on an appropriate negotiating venue is reached soon.
In order to provide the reader with at least some ideas of content on the
current normative endeavors, a brief reference to a short list published
by the ITU Secretary General is included:
1. Every government should commit itself to giving its people access
to communications.
2. Every government will commit itself to protecting its people in
cyberspace.
3. Every country will commit itself not to harbor terrorists/criminals
in its own territories.
4. Every country should commit itself not to be the ?rst to launch a
cyber attack on other countries.
5. Every country must commit itself to collaborate with each other
within an international framework of co-operation to ensure that
there is peace
For the ITU this concise list constitutes the essence of cyber stability and
an important part of cyber peace. In the same direction goes the Erice
Declaration on Principles for Cyber Stability and Cyber Peace, (2009) ema-
nating from the World Federation of Scientists, whose list of tenets cul-
minates in the plea “to avoid the use of cyberspace for con?ict”. Cyberwar
can be avoided, and it should not be considered a legitimate instrument of
military con?ict. That would go a long way to alleviating the ambivalence
of cyber technology, and would sensibly reduce economic preoccupations
and economic risks. Cyber peace is the better choice
69
.
67
UNIDIR, www.unidir.org, organizes conferences and participates in others. Particu-
larly relevant the 2012 conference on The role of Confidence-Building Measures in Assu-
ring Cyber Stability.
68
For a tentative listing of principles to be embodied in a global code of conduct,
see Henning Wegener, La ‘ciberguerra’ se puede evitar, Política Exterior, Madrid, No. 146,
March/April 2012, p140; from the same author, Die Diplomatie des Cyber-Friedens, 2011
at www.unibw.de/infosecur, and also Regulating Cyber Behavior: Some Initial Reflections
on Codes of Conduct and Confidence-Building Measures, August 2012, The Science and
Culture Series, World Scientific, Singapore 2013 (in press).
69
See also Henning Wegener, A Concept of Cyber Peace in The Quest for Cyber Peace,
op. cit., 2011. In the same publication, the Erice Declaration is also reprinted.
205
Composition of the working group
Coordinator: Mr. Eduardo Olier Arenas
President of the Institute Choiseul Spain
Director of the Department of Geoeconomics at San
Pablo CEU University
Member Secretary: Ms. María José Caro Bejarano
Analyst at the Spanish Institute of Strategic Studies
Members: Mr. Antonio M. Díaz Fernández
Professor of Political Science and Administration
Faculty of Law, University of Cadiz
Mr. Christian Harbulot
Director of l’École de Guerre Économique in Paris.
Associate Director of Spin Partners
Mr. José L. González Cussac
Professor of Criminal Law, Faculty of Law,
University of Valencia
Mr. Fernando Palop Marro
Co-Founder of Triz XXI.
Associate Professor at the Politécnica University of
Valencia.
Mr. Henning Wegener
Former Ambassador of Germany in Spain.
President of the Permanent Observatory for Cyberse-
curity of the World Federation of Scientists
207
Strategic Dossier
01 La industria alimentaria civil como administradora de las FAS y
su capacidad de defensa estratégica
02 La ingeniería militar de España ante el reto de la investigación y
el desarrollo en la defensa nacional
03 La industria española de interés para la defensa ante la entrada
en vigor del Acta Única
04 Túnez: su realidad y su influencia en el entorno internacional
05 La Unión Europea Occidental (UEO) (1955-1988)
06 Estrategia regional en el Mediterráneo Occidental
07 Los transportes en la raya de Portugal
08 Estado actual y evaluación económica del triángulo España-Por-
tugal-Marruecos
09 Perestroika y nacionalismos periféricos en la Unión Soviética
10 El escenario espacial en la batalla del año 2000 (I)
11 La gestión de los programas de tecnologías avanzadas
12 El escenario espacial en la batalla del año 2000 (II)
13 Cobertura de la demanda tecnológica derivada de las necesida-
des de la defensa nacional
14 Ideas y tendencias en la economía internacional y española
Strategic Dossiers Collection Title
208
15 Identidad y solidaridad nacional
16 Implicaciones económicas del Acta Única 1992
17 Investigación de fenómenos belígenos: método analítico factorial
18 Las telecomunicaciones en Europa, en la década de los años 90
19 La profesión militar desde la perspectiva social y ética
20 El equilibrio de fuerzas en el espacio sur europeo y mediterráneo
21 Efectos económicos de la unificación alemana y sus implicacio-
nes estratégicas
22 La política española de armamento ante la nueva situación inter-
nacional
23 Estrategia finisecular española: México y Centroamérica
24 La Ley Reguladora del Régimen del Personal Militar Profesional
(cuatro cuestiones concretas)
25 Consecuencias de la reducción de los arsenales militares nego-
ciados en Viena, 1989. Amenaza no compartida
26 Estrategia en el área iberoamericana del Atlántico Sur
27 El Espacio Económico Europeo. Fin de la Guerra Fría
28 Sistemas ofensivos y defensivos del espacio (I)
29 Sugerencias a la Ley de Ordenación de las Telecomunicaciones
(LOT)
30 La configuración de Europa en el umbral del siglo XXI
31 Estudio de «inteligencia operacional»
32 Cambios y evolución de los hábitos alimenticios de la población
española
33 Repercusiones en la estrategia naval española de aceptarse las
propuestas del Este en la CSBM, dentro del proceso de la CSCE
34 La energía y el medio ambiente
35 Influencia de las economías de los países mediterráneos del
norte de África en sus respectivas políticas defensa
36 La evolución de la seguridad europea en la década de los 90
37 Análisis crítico de una bibliografía básica de sociología militar en Es-
paña. 1980-1990
38 Recensiones de diversos libros de autores españoles, editados
entre 1980-1990, relacionados con temas de las Fuerzas Armadas
39 Las fronteras del mundo hispánico
40 Los transportes y la barrera pirenaica
41 Estructura tecnológica e industrial de defensa, ante la evolución
estratégica del fin del siglo XX
Strategic Dossiers Collection Title
209
42 Las expectativas de la I+D de defensa en el nuevo marco estra-
tégico
43 Costes de un ejército profesional de reclutamiento voluntario.
Estudio sobre el Ejército profesional del Reino Unido y (III)
44 Sistemas ofensivos y defensivos del espacio (II)
45 Desequilibrios militares en el Mediterráneo Occidental
46 Seguimiento comparativo del presupuesto de gastos en la déca-
da 1982-1991 y su relación con el de Defensa
47 Factores de riesgo en el área mediterránea
48 Las Fuerzas Armadas en los procesos iberoamericanos de cam-
bio democrático (1980-1990)
49 Factores de la estructura de seguridad europea
50 Algunos aspectos del régimen jurídico-económico de las FAS
51 Los transportes combinados
52 Presente y futuro de la conciencia nacional
53 Las corrientes fundamentalistas en el Magreb y su influencia en
la política de defensa
54 Evolución y cambio del este europeo
55 Iberoamérica desde su propio sur. (La extensión del Acuerdo de
Libre Comercio a Sudamérica)
56 La función de las Fuerzas Armadas ante el panorama internacio-
nal de conflictos
57 Simulación en las Fuerzas Armadas españolas, presente y futuro
58 La sociedad y la defensa civil
59 Aportación de España en las cumbres iberoamericanas: Guadala-
jara 1991-Madrid 1992
60 Presente y futuro de la política de armamentos y la I+D en España
61 El Consejo de Seguridad y la crisis de los países del Este
62 La economía de la defensa ante las vicisitudes actuales de las eco-
nomías autonómicas
63 Los grandes maestros de la estrategia nuclear y espacial
64 Gasto militar y crecimiento económico. Aproximación al caso es-
pañol
65 El futuro de la Comunidad Iberoamericana después del V Cente-
nario
66 Los estudios estratégicos en España
67 Tecnologías de doble uso en la industria de la defensa
68 Aportación sociológica de la sociedad española a la defensa na-
cional
Strategic Dossiers Collection Title
210
69 Análisis factorial de las causas que originan conflictos bélicos
70 Las conversaciones internacionales Norte-Sur sobre los proble-
mas del Mediterráneo Occidental
71 Integración de la red ferroviaria de la península ibérica en el resto
de la red europea
72 El equilibrio aeronaval en el área mediterránea. Zonas de irra-
diación de poder
73 Evolución del conflicto de Bosnia (1992-1993)
74 El entorno internacional de la Comunidad Iberoamericana
75 Gasto militar e industrialización
76 Obtención de los medios de defensa ante el entorno cambiante
77 La Política Exterior y de Seguridad Común (PESC) de la Unión Eu-
ropea (UE)
78 La red de carreteras en la penísula ibérica, conexión con el resto de
Europa mediante un sistema integrado de transportes
79 El derecho de intervención en los conflictos
80 Dependencias y vulnerabilidades de la economía española: su
relación con la defensa nacional
81 La cooperación europea en las empresas de interés de la defensa
82 Los cascos azules en el conflicto de la ex-Yugoslavia
83 El sistema nacional de transportes en el escenario europeo al
inicio del siglo XXI
84 El embargo y el bloqueo como formas de actuación de la comuni-
dad internacional en los conflictos
85 La Política Exterior y de Seguridad Común (PESC) para Europa
en el marco del Tratado de no Proliferación de Armas Nucleares
(TNP)
86 Estrategia y futuro: la paz y seguridad en la Comunidad Ibe-
roamericana
87 Sistema de información para la gestión de los transportes
88 El mar en la defensa económica de España
89 Fuerzas Armadas y sociedad civil. Conflicto de valores
90 Participación española en las fuerzas multinacionales
91 Ceuta y Melilla en las relaciones de España y Marruecos
92 Balance de las primeras cumbres iberoamericanas
93 La cooperación hispano-franco-italiana en el marco de la PESC
94 Consideraciones sobre los estatutos de las Fuerzas Armadas
en actividades internacionales
Strategic Dossiers Collection Title
211
95 La unión económica y monetaria: sus implicaciones
96 Panorama estratégico 1997/98
97 Las nuevas Españas del 98
98 Profesionalización de las Fuerzas Armadas: los problemas sociales
99 Las ideas estratégicas para el inicio del tercer milenio
100 Panorama estratégico 1998/99
100 1998/99 Strategic Panorama
101 La seguridad europea y Rusia
102 La recuperación de la memoria histórica: el nuevo modelo de
democracia en Iberoamérica y España al cabo del siglo XX
103 La economía de los países del norte de África: potencialidades y
debilidades en el momento actual
104 La profesionalización de las Fuerzas Armadas
105 Claves del pensamiento para la construcción de Europa
106 Magreb: percepción española de la estabilidad en el Mediterrá-
neo, prospectiva hacia el 2010
106-B Maghreb: percepción espagnole de la stabilité en Méditerranée,
prospective en vue de L’année 2010
107 Panorama estratégico 1999/2000
107 1999/2000 Strategic Panorama
108 Hacia un nuevo orden de seguridad en Europa
109 Iberoamérica, análisis prospectivo de las políticas de defensa en
curso
110 El concepto estratégico de la OTAN: un punto de vista español
111 Ideas sobre prevención de conflitos
112 Panorama Estratégico 2000/2001
112-B Strategic Panorama 2000/2001
113 Diálogo mediterráneo. Percepción española
113-B Le dialogue Méditerranéen. Une perception espagnole
114 Aportaciones a la relación sociedad - Fuerzas Armadas en Ibe-
roamérica
115 La paz, un orden de seguridad, de libertad y de justicia
116 El marco jurídico de las misiones de las Fuerzas Armadas en
tiempo de paz
117 Panorama Estratégico 2001/2002
117-B 2001/2002 Strategic Panorama
118 Análisis, estrategia y prospectiva de la Comunidad Iberoamericana
Strategic Dossiers Collection Title
212
119 Seguridad y defensa en los medios de comunicación social
120 Nuevos riesgos para la sociedad del futuro
121 La industria europea de defensa: presente y futuro
122 La energía en el espacio euromediterráneo
122-B L’énergie sur la scène euroméditerranéenne
123 Presente y futuro de las relaciones cívico-militares en Hispa-
noamérica
124 Nihilismo y terrorismo
125 El Mediterráneo en el nuevo entorno estratégico
125-B The Mediterranean in the New Strategic Environment
126 Valores, principios y seguridad en la comunidad iberoamericana
de naciones
127 Estudios sobre inteligencia: fundamentos para la seguridad in-
ternacional
128 Comentarios de estrategia y política militar
129 La seguridad y la defensa de la Unión Europea: retos y oportu-
nidades
130 El papel de la inteligencia ante los retos de la seguridad y defen-
sa internacional
131 Crisis locales y seguridad internacional: El caso haitiano
132 Turquía a las puertas de Europa
133 Lucha contra el terrorismo y derecho internacional
134 Seguridad y defensa en Europa. Implicaciones estratégicas
135 La seguridad de la Unión Europea: nuevos factores de crisis
136 Iberoamérica: nuevas coordenadas, nuevas oportunidades,
grandes desafíos
137 Irán, potencia emergente en Oriente Medio. Implicaciones en la
estabilidad del Mediterráno
138 La reforma del sector de seguridad: el nexo entre la seguridad,
el desarrollo y el buen gobierno
139 Security Sector Reform: the Connection between Security, Deve-
lopment and Good Governance
140 Impacto de los riesgos emergentes en la seguridad marítima
141 La inteligencia, factor clave frente al terrorismo internacional
142 Del desencuentro entre culturas a la Alianza de Civilizaciones.
Nuevas aportaciones para la seguridad en el Mediterráneo
143 El auge de Asia: implicaciones estratégicas
Strategic Dossiers Collection Title
213
144 La cooperación multilateral en el Mediterráneo: un enfoque inte-
gral de la seguridad
145 La Política Europea de Seguridad y Defensa (PESD) tras la entra-
da en vigor del Tratado de Lisboa
145 B The European Security and Defense Policy (ESDP) after the entry
into Force of the Lisbon Treaty
146 Respuesta europea y africana a los problemas de seguridad en
África
146 B European and African Response to Security Problems in Africa
147 Los actores no estatales y la seguridad internacional: su papel en
la resolución de conflictos y crisis
148 Conflictos, opinión pública y medios de comunicación. Análisis de
una compleja interacción
149 Ciberseguridad. Retos y amenazas a la seguridad nacional en el
ciberespacio
150 Seguridad, modelo energético y cambio climático
151 Las potencias emergentes hoy: hacia un nuevo orden mundial
152 Actores armados no estables: retos a la seguridad
153 Proliferacion de ADM y de tecnología avanzada
154 La defensa del futuro: innovación, tecnología e industria
154 B The Defence of the Future: Innovation, Technology and Industry
155 La Cultura de Seguridad y Defensa. Un proyecto en marcha
156 El gran Cáucaso
157 El papel de la mujer y el género en los conflictos
157 B The role of woman and gender in conflicts
158 Los desafíos de la seguridad en Iberoamérica
159 Los potenciadores del riesgo
160 La respuesta del derecho internacional a los problemas actuales
de la seguridad global
161 Seguridad alimentaria y seguridad global
161 B Food security and global security
162 La inteligencia económica en un mundo globalizado
doc_962301178.pdf
In 1992, one of the authors of this report published a book entitled La máquina de Guerra económica.
Spanish
Institute for
Strategic
Studies
MINISTRY OF DEFENCE
Strategic Dossier 162 B
Economic intelligence
in a global world
SPANISH OFFICIAL PUBLICATIONS CATALOGUEhttp://publicacionesoficiales.boe.es/
Publishes:
MINISTERIO
DE DEFENSA
SECRETARÍA
GENERAL
TÉCNICA
© Author and plublisher, 2013
Publication date: february 2014http://publicaciones.defensa.gob.es/
NIPO: 083-13-250-1 (e-book edition)
ISBN: 978-84-9781-896-4 (e-book edition)
The ideas included in this work are the responsibility of the authors and do not necessarily re?ect the opinions of the
IEEE, which sponsors its publication.
5
ÍNDICE
Página
Introduction
Strategic intelligence and economic security ..................................................... 9
Introduction................................................................................................................. 9
Economic globalization and geo-economy ........................................................... 11
Strategic and economic intelligence ...................................................................... 15
Models of economic intelligence ............................................................................ 18
Strategic intelligence and economic security ...................................................... 22
In?uence as an essential element in economic intelligence............................. 25
Economic intelligence and cyber security ............................................................ 27
Goal of this strategic dossier .................................................................................. 29
Chapter I
The role of strategic intelligence in the modern world .................................... 33
Introduction................................................................................................................. 34
There are no longer any blue or red draughts on the new board .................... 39
The redesigned Kent trinity ..................................................................................... 45
Organisation: the Matrix has already been created .................................... 45
A truly strategic new product .......................................................................... 51
Strategic process: the new plan ...................................................................... 54
Conclusions................................................................................................................. 57
Chapter II
A study on economic warfare and associated problems ................................. 63
Introduction................................................................................................................. 64
Emergence of the founding principles of economic warfare ............................ 64
Violence and survival ........................................................................................ 65
Resources and territories ................................................................................ 65
The difcult dynamics linked to colonisation ............................................... 66
Página
Control of trade routes ...................................................................................... 67
The overlapping of war and the economy............................................................. 70
The in?uence of economic con?icts on the war’s direction....................... 70
Ideological ?ght and strong economic relationships between powers ... 71
Creation of structures dedicated to economic warfare .............................. 73
The geopolitical justi?cations of conquest ........................................................... 75
The conquest against commercial imperialism ........................................... 75
Conquest of living space ................................................................................... 77
Covering up economic warfare ............................................................................... 79
Dominance strategies ....................................................................................... 80
Recovery strategies ........................................................................................... 84
Change in the paradigm of economic warfare ..................................................... 86
Economic security policies ............................................................................... 86
The impact of economic strategies on increasing power .......................... 88
Limits of western ethnocentrism ........................................................................... 89
The contradictions between the United States and Europe ....................... 90
The bad efects of the liberal model ............................................................... 92
Conclusion ................................................................................................................... 93
Chapter III
Legal intelligence: the strategic value of the law in economic security ....... 97
Approach ..................................................................................................................... 99
The law as a collection of regulations ................................................................... 101
The law as an object of intelligence ....................................................................... 105
The law as an intelligence tool ............................................................................... 110
Conclusions................................................................................................................. 118
Chapter IV
Competitive intelligence: a new paradigm in the strategic direction of or-
ganisations in a globalised world .................................................................. 127
Executive summary ................................................................................................... 129
Introduction................................................................................................................. 130
CI and strategic direction ......................................................................................... 132
CI ?eld of activity ....................................................................................................... 133
Bene?ts that ci provides to the organisation ....................................................... 133
CI as a process ........................................................................................................... 134
CI as an organisational function or management approach ............................. 137
Essential stages in the ci working process .......................................................... 138
Planning ............................................................................................................... 139
Obtaining information ....................................................................................... 140
Analysis ................................................................................................................ 141
Communication, application of what has been provided and evaluation 142
How CI is organised ................................................................................................... 143
Reference countries in the CI practice. The situation in Spain. The range of
training. ................................................................................................................ 144
CI promoted from institutions .......................................................................... 145
Training ofer ...................................................................................................... 147
CI basics. The state of the art .................................................................................. 147
6
7
Página
Implications for organisations. Their use vs. Their protection ......................... 150
In?uence and security inside companies. ............................................................. 155
The illegal nature of industrial espionage and its negative consequen-
ces on CI in companies .............................................................................. 156
Implications for territories: territorial intelligence............................................. 159
Development perspectives ...................................................................................... 160
Chapter V
The economic risks of cyberwar ............................................................................ 167
Cyberwar and Cyber Con?ict: the Economic Dimension .................................... 169
Cyber as the Agent of an Economic Paradigm Shift ........................................... 173
The Cyber World of Tomorrow ................................................................................ 176
Threat Development – the New Economic Reality of Cyber Insecurity ........... 177
Evolving Attack Modes .............................................................................................. 178
The New Enemy: Collective Actors of Cyber Con?ict .......................................... 182
Measuring the cost of cyber con?ict: is quantifying possible? ......................... 184
Limits on Cyberwarfare Proper .............................................................................. 186
Active and Passive Cyber Defense ......................................................................... 190
An Emerging Comprehensive Information Security Management System .... 191
Creating a harmonized legal framework to combat cyber crime and cyber
con?ict .................................................................................................................. 191
Self-Protection ........................................................................................................... 192
Designing for Security .............................................................................................. 193
Standard-Setting and Best Practices .................................................................... 194
Protection of Critical Infrastructures ..................................................................... 195
Resilience in Cloud Computing and Mobile Computing ...................................... 196
National and International Cooperation in Cybersecurity.................................. 198
A Culture of Cybersecurity: Norms of Behavior for the Cyber Age .................. 200
Composition of the working group ........................................................................ 205
Strategic Dossier ....................................................................................................... 207
9
Introduction
Strategic intelligence and economic security
Eduardo Olier Arenas
Introduction
In 1992, one of the authors of this report published a book entitled “La
máquina de Guerra económica”
1
. In the ?rst pages the author warned about
the importance of economy in international relations, from the end of the
Second World War to the early stages of globalization, and its exchanges
that were changing the notion of con?ict itself. The author also warned
about the repercussions of the economic war which, unlike traditional
war, implies actions that are frequently invisible and decisive.
When the Cold War was over, Harbulot focused on the end of global polar-
ization and on the increasing American hegemony. After the collapse of
the Soviet Union, there was only one player left. A fact that worried Jean-
Jacques Servan-Schreiber
2
, who many years before, in 1968, categori-
cally stated: “We are neither witnessing a classical political imperialism
nor a wish to conquer, but a power that surpasses all limits because of
the diference of “pressure” between North America and the rest of the
world, including Europe”. In another passage of the book he said, “Acting,
how? Against whom?...General Motors is not Wehrmacht, the Bull case is
1
Harbulot, Christian. La machine de guerre économique. Etats-Unis, Japon, Europe.
Ed. Economica.
2
Servan-Schreiber, Jean-Jacques. El desafío americano (The American Challenge).
Plaza y Janés. 1968.
Eduardo Olier Arenas
10
not Munchen and the Concorde is not Sedan. We are witnessing the ?rst
great war without weapons or forti?cations”.
The French were not the only ones to be aware of this problem. The Jap-
anese also became aware of the importance of economy as a new niche
of dominance. Almost since the end of the Second World War, with their
armed forces destroyed and without any capability to rebuild them, they
started their way to industrial reconstruction to become one of the world
economic powers. Therefore, as time went by, in the early nineties, they
started their third industrial revolution with the powerful MITI conducting
ofensive and defensive economic operations. Along with Japan, other
nations also developed strategies to expand their economic, technolog-
ical or commercial power to other places. This expansion proved to be
defensive in some cases, especially in smaller countries such as Sweden.
Shortly before the publication of the above-mentioned book by Harb-
ulot, the Romanian US-based Edward Luttwak, an expert on geopolitics,
launched a new concept in The National Interest
3
magazine. The term
geo-economy emerged for the ?rst time. For Luttwak, “geo-economy is
maintaining old rivalry among nations using economic means instead of
military ones”. He expanded on it in his book The Endangered American
Dream
4
by saying “geo-economy measures progress considering the per-
formance of a product in the market instead of focusing on the advance
of a military force on the map”. And thus a connection emerged between
economy and geopolitics. Economic wars become an integral part of the
economic fact. Economics and politics joined in new war scenarios far
from traditional military con?icts.
As new scenarios, they become more and more complex. These new wars
become increasingly sophisticated. A fact rati?ed by another geo-econo-
my theorist, Pascal Lorot, in the early nineties.
Lorot, founder and editor of the French magazine Géoéconomie, de?ned
geo-economy in 1990 as “the analysis of economic strategies – espe-
cially commercial ones – designed by the States within the context of
those policies aimed at safeguarding national economies and some of
the elements inherent to them, mastering certain key technologies and/
or conquering certain sectors of world market regarding the production
or marketing of a sensitive product or set of products which provides its
holders (State or domestic company) with some power or international
projection and contributes to reinforcing their socioeconomic power”. A
power that would be exerted according to the “soft power” concept devel-
oped by Joseph S. Nye
5
.
3
Luttwak, Edward. ”From Geopolitics to Geoeconomics: Logic of Conflict, Grammar of
Commerce”. The National Interest, Summer 1990, pp.17-23.
4
Luttwak, Edward. The Endangered American Dream. Simon & Shuster, 1994.
5
Nye, Joseph. Soft Power. The Means to Success in World Politics, Public Affairs, 2004.
Strategic intelligence and economic security
11
The soft power strategy needed new techniques. One of them, old as the
war arts, was the use of intelligence services. In order to anticipate the
enemy, it was necessary to know its strategy and movements in advance.
Therefore, it was necessary to ?nd new methods in line with the new
times. Economic intelligence strongly emerged as the use of intelligence
services in the economic sector. The States needed to know what to do in
the new global world that was approaching.
Intelligence activities took a new turn with the emergence of the concept
“economic intelligence” as a set of coordinated actions for investigating,
processing and distributing information in order to make economic deci-
sions in the ?eld of economy. These actions focus both on the domestic
economy and on the business sector since the market globalization chal-
lenges companies. The defense of economic interests, on the one hand,
and the need to achieve economic advantages against competitors – at
state or business level – have been a decisive driving force for the devel-
opment of powerful economic intelligence tools at the service of national
interests and powerful transnational companies which nowadays control
the global economic scene.
The Institute of Strategic Studies’ report falls within this frame of refer-
ence since the defense of national interests must also include economic
aspects which are essential in the current world. A fact that Spain has ig-
nored for a long time and is now dealing with: the importance of economic
intelligence services beyond the protection of people or critical premises.
Economic globalization and geo-economy
We have brie?y mentioned geo-economy above. Let’s go back to this
concept.
While Edward Luttwak and Pascal Lorot did not expressly afrm it, they
insinuated that something had changed in the world scene to have econ-
omy as a determining element. Perhaps the authors, both experts in
geo-politics, were not able to notice the economic globalization move-
ments which were, in fact, the focal point of these changes because,
since the end of the Second World War, especially with the Bretton Woods
Agreements, a new world economic order was emerging. This new world
order was controlled by the US and this fact worried Servan-Schreiber.
The ongoing economic globalization is a movement, perhaps spontane-
ous, by which nations have become increasingly interdependent. In fact,
similar situations took place many years ago. For example, the Phoeni-
cians traded throughout the Mediterranean and the Romans expanded
their dominions by building impressive stone roads to move their troops
and extend their economy far away from their borders, from Egypt to
England. Egypt, for example, was the Empire’s granary for decades. Also
Eduardo Olier Arenas
12
Spain, the United Kingdom and Holland extended their dominions almost
throughout the entire world. But we should underline that, as far as econ-
omy is concerned, trade transactions and ?nancial movements were quite
limited. To such an extent that economic crises have been always limited
to certain areas and have not expanded all over the world. A fact that
still remains nowadays since globalization only makes sense within the
?nancial world. As far as trade is concerned, the world moves towards
globalization and basic commercial activities are carried out among bor-
dering countries or speci?c regions.
However, we should underline that globalization is not limited to the com-
mercial and ?nancial sectors but also includes cultural, social and polit-
ical aspects which give rise to a new order characterized by four main
features
6
:
• Important transfers of people from one country to another;
• Large capital ?ows across borders;
• Increasing international trade; and, especially
• Strong technological innovation.
Since 1945 we can identify six stages
7
towards globalization. The last one
has entered a new phase after the ?nancial crisis which started in the US
in 2008 and we do not know how it will evolve.
1945-1960. The great industrial machinery. After the Second World War,
the USSR, the United States and some European countries had power-
ful industries emerge during the con?ict: automobiles, railroads, avia-
tion, electronic industries, etc. In parallel, there was a real estate boom
coupled with a huge demographic growth: the so-called baby boom. GDP
doubled in all industrialized countries, as did purchasing power and con-
sumption of the middle class.
1960-1973. Geopolitical turmoil. It was a period of economic prosperity
and tensions caused by the Cold War. The period ended with the OPEC oil
embargo (Organization of Petroleum Exporting Countries). It was a dec-
ade of intense decolonization in a large part of Africa where more than
30 new countries emerged. It was a period of great changes that wit-
nessed the landing of the ?rst man on the moon, the revolutions in South
America, the assassination of Kennedy, the Vietnam War, and a series of
developments that ended in the French events in May 1968. The Pales-
tinian Liberation Organization (PLO) was also set up in this timeframe
and the Six Days War broke out in 1967 leading to the Israeli occupation
of the Palestinian territories of Gaza and the West Bank and of the Golan
Heights in Syria.
6
Olier, Eduardo. Geoeconomía: las claves de la economía global. Pearson-FT-Prentice
Hall. 2011.
7
Olier, Eduardo. Ibíd.
Strategic intelligence and economic security
13
1973-1982. Energy stan?ation. Economic stagnation plus heavy in?ation
is called stan?ation. The OPEC oil embargo provoked a 70% increase of
oil prices which caused high in?ation, economic stagnation and unem-
ployment. Post-war wealth came to an end. Many public companies were
privatized, especially in the USA. In this period, the Iranian revolution and
subsequently the Iran-Iraq war broke out.
1982-1989. Economic liberalism and market economy prevail. US President
Ronald Reagan formed his government in 1981. The supply-side econom-
ics started. It was an economic strategy aimed at encouraging the pro-
duction of goods and services based on the idea that supply generates
its own demand, according to Say’s Law, one of the economists from the
Classical School. This was followed by economic liberalization and tax
cuts. The US government’s revenues increased almost automatically due
to the rise in productivity and the boost of savings which led to a higher
rate of employment and sharp economic growth. Decreasing in?ation in-
creased consumption and reactivated bank credits. In England, Margaret
Thatcher, appointed prime minister in 1979, followed the same line of
action. A liberal wave spread all over the Western countries. Post-Sec-
ond World War Keynesian policy was no longer valid. The Berlin Wall col-
lapsed in 1989 and the two superpowers’ polarization came to an end. A
period, however, that witnessed one of the most serious ?nancial crises
of the century, the so-called debt crisis of many Latin American countries
that declared themselves unable to pay of their debts owed to interna-
tional bodies, especially the FMI (International Monetary Fund).
1989-2000. The interconnected society. On the night of 9-10 of November,
1989, the Berlin Wall fell down. It did not take too long until consequenc-
es were noticed; on 25 of December, 1991, Mikhail Gorbachov, known as
the Father of Perestroika, resigned. The Soviet Union and the “system of
blocs” collapsed as well. This phenomenon led to the opening of world
borders, the intensive use of information technologies and telecommu-
nications, the emergence of the Internet and the de?nite starting of eco-
nomic globalization. The world trade quickly ?ourished and there were
great technological achievements in every ?eld, particularly as a result
of the development of electronic microprocessors that revolutionized in-
dustry, particularly medicine. The world economy began to grow leading
to the globalization of the ?nancial markets. The world witnessed a soar-
ing economic growth which was halted by the so-called dot-com crisis,
technological companies that prompted a serious although controlled
capital crisis.
2000-2010. A globalized world amid a global ?nancial crisis. Japan, the
second largest economy in the world behind the United States, showed
signs of exhaustion in the early nineties, when the Japanese banks were
not able to withstand the loss of value of the real estate assets they had
several years before. Then, the subprime crisis emerged and the 2007
Eduardo Olier Arenas
14
global ?nancial crisis began to spill over from the United States into the
Western world in 2008. Economic wars became evident and the world
economic center of gravity shifted to the East. The Asian economy, which
accounted almost for 20% of global economy in 1970, exceeded 28% in
2007, the European community’s economy fell from 34% to 25% during
the same period, and the US economy remained at 33%. The 11-S bomb-
ings also changed power relations. The bipolar world preceding the fall of
the Berlin Wall led to a multi-polar world including regional actors such
as Brazil, China, India, Russia (BRIC countries), Turkey and Iran. Islamic
pressure as a very in?uential religious and cultural movement should not
be forgotten.
The post-crisis world will be diferent from the previous one; however it
is still too soon to forecast how it will evolve. In the economic ?eld, the
situation will be quite diferent. Geo-economy has become evident. The
current situation is marked by the convergence of political interests and
dominance of markets. Previous military actions led to more sophisti-
cated eforts; strategic capital investments, manufacture and technologi-
cal innovations of interest for the state, a leading position in the markets
instead of invading territories, custom duties, regulatory measures, de-
valuation of foreign currencies and other similar actions mark current
strategies.
In this new context, the previous elements have become obsolete and
the value of information no longer provides a competitive advantage. At
present, knowledge is necessary to anticipate the moves of countries
and businesses. Currently, intelligence is one of the keys, i.e. structured
knowledge for decision-making. Hence, economic intelligence is es-
sential for businesses and institutions in the geoeconomic context and
should allow us:
• To describe the competitive environment, i.e. to identify its factors
and elements. Competitors, products, regulatory requirements,
etc.; price structures and technologies included in this environ-
ment that may provide an alternative.
• To forecast the evolution of those competitive factors, including
disruptive technologies, new competitors, etc.
• To verify if the foundations of this strategy prove solid, if they have
been laid properly in accordance with the present environment
and the foreseeable one.
• Intelligence should respond to those aspects questioning the strat-
egy. In this context, proper assessment and monitoring technolo-
gies will be needed to collect the necessary information.
• To thoroughly identify threats and weaknesses, as well as strengths
and prospects according to the classic DAFO chart.
• To identify if the agreed strategy is no longer sustainable. This deci-
sion should be dynamic in order to be consistent with further actions.
Strategic intelligence and economic security
15
Strategic and economic intelligence
The term intelligence usually leads to mistakes, to confusion. And con-
fusion increases as adjectives are added. Each expert or group in this
?eld understands intelligence in a diferent way. We have identi?ed four
categories.
Apart from the intelligence services, which are well-known and identi-
?able bodies, there are other ?elds and concepts that interrelate with
each other. In the ?eld of intelligence, we have identi?ed ?ve categories
according to their technological nature (see Figure 1):
• Arti?cial Intelligence
• Knowledge Management
• Economic Intelligence
• Competitive Intelligence, and
• Strategic Intelligence
Figure 1.- Hierarchy of Intelligence Systems
The ?rst two categories are highly reliant on commonly used technol-
ogies. Arti?cial intelligence has been developing since the ?fties and is
mainly aimed at understanding how human beings think, learn and rea-
son in order to develop techniques and computer programs that try to
emulate human behavior. This was the origin of robotics, expert systems
and systems to help decision-making. All of these systems rely on tech-
nologies capable to learn.
Knowledge management systems, mainly related to expert systems,
were a breakthrough. These systems gave rise to a branch of engineer-
ing currently known as Knowledge Engineering that uses techniques fo-
Eduardo Olier Arenas
16
cused on several elements, including acquisition of knowledge, coding of
knowledge, assessment and tests of the coded system and implementa-
tion of the system. Coding is usually based on rules that, as they become
more complex due to multiple chains, they can turn into neuronal net-
works. This is another way of emulating how the human brain works and
the starting point for implementing other functions, including language
comprehension systems, computerized vision, etc. These techniques do
not represent what is understood as Economic, Competitive or Strategic
Intelligence but help to develop them.
There is a myriad of ways to de?ne Economic Intelligence, and its ap-
plications will be diferent depending on the country and on who in-
terprets it. In the United States and other Anglo-Saxon countries, the
term business intelligence refers to the activities related to knowledge
management, particularly the methods and models designed to ?nd
“hidden” information in databases for decision making. These include
marketing intelligence, which deals with the trade and marketing as-
pects of businesses within their competitive environment. The behav-
ior of current and potential clients is “standardized” that way in order
to increase sales or just to prevent those clients from looking to rival
companies.
The French de?ne
8
economic intelligence – intelligence économique – as
a series of coordinated actions aimed at investigating, processing and
disseminating useful information for the economic actors to be able to
exploit it. According to the authors, this de?nition includes two aspects.
On the one hand, scienti?c intelligence aimed not at “coming up with the
greatest possible invention” but at investigating accessible scienti?c
sources in order to ?nd new scienti?c ?elds which may provide further
economic advantages. On the other hand, competitive intelligence aimed
at tracking the activities of laboratories or plants of rival countries or
businesses in order to become aware of their breakthroughs and improve
one’s own competitiveness; for instance, pharmaceutical laboratories of
other countries.
Other non-Anglo-Saxon countries understand economic intelligence as
the state’s activities designed to defend its economic interests at interna-
tional level. Therefore, these activities are run by intelligence services, as
is the case in Spain.
Competitive intelligence, as the term suggests, is aimed at improving the
competitive position of countries or enterprises in the markets. However,
competitive intelligence has further developed within enterprises, where
it focuses on increasing their knowledge in order to improve their po-
sition. While knowledge provides an added value, intelligence provides
8
Martre, Henri. Intelligence Économique et Stratégie des Entreprises. La Documentation
Française. February 1994.
Strategic intelligence and economic security
17
power, as Helen Rothberg and Scott Erickson state
9
. In other words, com-
petitive intelligence looks for what is needed based on what is known.
Nevertheless, those authors do not consider other circumstances which,
in our opinion, should be included as essentials of competitive or even
strategic intelligence. The four essentials of the rhombus of intelligence
shown in Figure 2 should be established for efcient decision making:
determining assumptions (what we know that we know); latent knowl-
edge (what we don’t know that we know); information vacuum (what we
know that we don’t know), and the blind points (what we don’t know that
we don’t know). We can conclude that intelligence activities, regardless
of how they are labelled, must provide knowledge in every vertex of what
we de?ne as rhombus of intelligence. These aspects of intelligence are
interrelated. We must point out that if we link the vertical points, i.e. “the
things that we know”, we will be within the strategic environment of an
organization; if we link the horizontal points, i.e. “the things that we don’t
know”, we will be in the axis of intelligence. “Working” in both directions,
we would be able to provide intelligence with its strategic nature, which
is what makes the competitive diference.
Figure 2.- Intelligence Diamond
Strategic intelligence will therefore encompass the above-mentioned,
with the aim of providing information and knowledge in order to help de-
cision-making processes of a strategic nature. It should be born in mind
9
Rothberg, H. and Erickso, S. From Knowledge to Intelligence: Creating Competitive Ad-
vantage in the Next Economy. Butterworth-Heinemann/Elsevier. 2005.
Eduardo Olier Arenas
18
that some pieces of information may lead to non-desired rumours or con-
fusion, as shown in Figure 3
10
, instead of knowledge.
Models of economic intelligence
the concept of economic intelligence and strategic intelligence will be
used from now on without distinction, but assimilated to the French con-
cept, i.e. to the intelligence strategies for decision making in defence of the
State or companies’ economic interests. It is in this context that we can
make a foray into the situation of some of our neighbouring countries.
The situation in those countries could be assessed according to their
potential positioning – Figure 4, which shows the diferent intelligence
levels according to the objectives to be reached and their strategic level.
Strategic intelligence appears in those areas where this view is fostered.
Nevertheless, a summary description of the diferent systems will be
10
Olier, E. La inteligencia estratégica al servicio de la competitividad. Global Security
Magazine. Choiseul Institute, Spain. Summer of 2011.
Figure 3.- Information, Rumor and Knowledge
Strategic intelligence and economic security
19
made, taking into consideration the most developed countries: the U.S.,
Japan, Sweden, Germany, France and China.
Figure 4.- Strategy vs Economic Intelligence Goals
In its global economic expansion, the U.S. developed a strategy of domina-
tion based on four pillars: military, technology, economy and culture, with
the ?rst two and the last two somehow interconnected. Its ?nancial dom-
ination has been essentially based on currency. With the disappearance
of the pound as a currency of reference at the dawn of the Second World
War, the dollar decisively imposed itself on the markets. Firstly, because
of its reference with gold: the price of gold as against the dollar is $35
per ounce. Secondly, for US preponderance in Bretton Woods Agreements
and, especially, in the newly-born International Monetary Fund. With re-
gard to its cultural domination, the Hollywood ?lm industry, and even rock
music, have been strong soft power tools capitalized on by Americans.
All that encompassed by a perfect economy intelligence network linking
the Pentagon with other multiple actors: federal agencies that involved,
apart from traditional ones, the National Science Foundation or the Naval
Research Ofce; powerful think tanks and even prestigious universities
such as the MIT; security and intelligence companies such as Kroll or SRI
International; transnational companies and even legal ofces and lobbies.
All under the formula that “national security” equals “?nancial security”.
Eduardo Olier Arenas
20
The Japanese, for their part, as previously mentioned, developed their
economic intelligence strategy around the Ministry of International
Trade and Industry (MITI). It is a “glocalization” concept that implies the
need to protect its domestic market while fostering the expansion of
international trade. The Japanese market has been traditionally very
difcult for foreigners, and the large Japanese companies dominated
the electronic or car international markets. It was a system of econom-
ic intelligence developed in seven strategic lines perfectly coordinat-
ed from “top to bottom”, which involved companies and government
services:
• Global and local approach to markets.
• Commercial penetration tailored to the economic context and each
country’s way of life.
• Very selective information policy, also with the participation of
companies, on a daily reporting system basis.
• Long-term economic strategy.
• Integrated approach and coordination between large industrial
conglomerates.
• Selective release of information according to levels.
• Training programmes in companies for young professionals, on
a country-by-county-specialization basis, even mastering foreign
languages and understanding local cultural events.
Sweden is a small European country that, however, understood the
need to develop an economic protection system to boost the crea-
tion of large multinational corporations, while developing an inter-
national educational system based upon knowledge of at least three
languages per student; a means to compensate their geoeconomic
difficulties. In 2010, Sweden already had 30 companies in the Forbes
2000 ranking list: AstraZeneca in biotechnology, Telia Sonera in tel-
ecommunications, Ericsson in technology, Ikea in furniture and oth-
er household accessories, ABB in energy and capital goods, and so
on. This would not have been achieved if it had lacked a policy and
economic intelligence systems able to overcome many difficulties. A
“bottom to top” plan opposed to the Japanese one, since the State is
not the one to boost the system or the criteria to be applied, but com-
panies and their information systems, which aim at improving their
competitiveness.
The German system meets the characteristics of the German State: it
has a federal structure, and there is intertwined three-level coordina-
tion: administrations, financial institutions and industries, a scheme
that has given rise to natural alliances between industries and fi-
nancial institutions, where trade unions take part as active agents in
the march of economic progress. Agents that participate and do not
protest, since their power lies not in the former postulates of class
Strategic intelligence and economic security
21
struggles, but on becoming elected delegates in the definition of eco-
nomic policies. Thus, it is possible to establish government alliances
between parties competing from social democratic or Christian dem-
ocratic positions, and also alliances between very different trade un-
ions and businessmen, as well as with federal governments, where
consultancy firms and political or cultural foundations also partici-
pate. A plan that leads to:
• A permanent coordination among the diferent economic commu-
nities: banks, industrial groups, etc.
• Flexibility and a coordinated approach to diferent markets.
• A coordinated use of German immigrants abroad.
• A search for German common interests beyond disagreements,
which boosts intelligence activities.
In France, economic intelligence is a State issue. The well-known Carayon
Report, presented in 2004 by the deputy M Bernard Carayon before the Fi-
nance Commission of the National Assembly, under the title “Strategy of
National Economic Security”, is a clear sign of the importance that these
techniques and services have for French political forces. .
It was not the ?rst time that the French State took the implementation
of a national economic intelligence system very seriously. Nevertheless,
deputy Carayon’s report included some diferences. In its introduction, it
already mentioned a new situation:
“11-March attacks in Madrid – it said – have painfully reminded it to us: Eu-
rope is a privileged target for terrorists. If the bombs represent an essential
threat in our collective subconscious, the reach of the threats to our societies
is even greater. After twenty years, our country – without being fully aware –
has entered the age of information society. The production of national wealth
currently lies, apart from in the quality of the people, in the bulk of legal,
?nancial, commercial, scienti?c, technical, economic or industrial informa-
tion. The threats against our productive structure have also evolved. Now,
these are vaguer”.
He proceeded:
“The exacerbation of international competence transforms the strategic in-
formation of companies into a real “economic war”.
The French system, for many years now, is perfectly designed and tailored
to the new circumstances and needs. Apart from state agencies, leading
companies on strategic intelligence, and a whole network of Chambers
of Commerce that try to defend French interests inside and outside the
country, participate in this system. It is a “top to bottom” structure, sim-
pler than the Japanese one. It is an intelligence structure well interwoven
in a context of very powerful and well-developed soft power all around
French-speaking countries; a context of 58 Member States, along with
Eduardo Olier Arenas
22
another 20 observer states. A clear commercial power supported by the
hard power that comes from French military capabilities.
I will ?nish this review with a comment on China – a new and signi?cant
player. However, this country is always involved in international con?icts,
and the US and England have systematically charged it with illegal prac-
tice before the WTO.
Moreover, China has a powerful and sophisticated economic intelligence,
which integrates the following aspects:
• It is focused on the search of intangible properties: copyright, pat-
ent rights, etc.
• It includes networks of executives from Chinese multinational
companies who work with big corporations selling them technol-
ogy and services.
• It has a group of ofcials highly trained in cyber security (both
for defense and attack) which works in close cooperation with
universities.
• A decentralized system, with well-de?ned control commands and
a vague division among intelligence services, companies and mili-
tary defense structures.
• It has services to speci?cally protect strategic industries.
Strategic intelligence and economic security
Intelligence systems — particularly those of strategic intelligence — are
essential in today’s complex world. However, these systems and the or-
ganizations responsible for them usually focus on security. Thus, most of
them focus on defensive espionage or on protection of facilities or ser-
vices very valuable for the State, companies or other organizations. To
this aim, they follow the intelligence cycle and underscore analysis as
a means of specifying information and knowledge in order to make de-
cisions. The scheme in Figure 5 is applied, taking the available data as
a base to reach the knowledge that will make decisions easier, if made
according to the intelligence cycle (Figure 6).
Figure 5.- Data to Knowledge Process
Strategic intelligence and economic security
23
Figure 6.- Intelligence Cycle
However, a question which is obviated most of the time is that intelligence
results from a strategic process; a model of economic intelligence cannot
be implemented without strategy. If intelligence is the capability of under-
standing and interacting with the milieu in order to act to obtain competitive
advantages, it could not be tackled without a de?ned and ?exible strategy
to adapt to the variations in the milieu. This process should take into ac-
count, at least, the following aspects:
• To de?ne the strategy, including the approach and the task of the
organization.
• To have the capability for abstract reasoning and understanding of
the multiple interactions existing in complex environments, includ-
ing a capability of judgment and knowledge development.
• To have the capability to detect substitute products or disruptive
technology and to understand cultural or demographic changes.
• To develop the capability to be ahead of changes in regulatory or
economic conditions of market dealers in order to launch ofensive
or defensive actions.
Intelligence must be ?rstly strategic and then economic. Then, it will be
competitive or solely reduced to the analysis previous to knowledge ac-
quisition through the appropriate techniques and technologies. These
state level techniques will be diferent depending on the terminology:
SIGINT, signals intelligence — the process of tapping electronic commu-
nications transmitted through radars, radio, or weapon-control-systems;
Eduardo Olier Arenas
24
HUMINT, human intelligence that obtains information through persons;
MASINT, that is to say, the use of intelligence to make reports on the tar-
gets; GEOINT, images acquisition including those coming from satellites;
OSINT, intelligence from open sources, especially from mass media and
the Internet and IMINT, or image creation through electronic systems
such as radars or electronic optics-based systems, etc.
The strategic intelligence, then, will focus on the established strategic in-
terests and on de?ning the goals to be achieved. These goals, in a geoeco-
nomic context will be aimed at
11
:
• Making analyses of economic forecasts in complex competitive sit-
uations and understanding the political and geostrategic circum-
stances involved.
• Knowing the legal and regulatory aspects in detail and assessing
foreign policy interests and international relations that could con-
dition them.
• Developing strategic programs and monitoring the achievement of
goals.
• Making a detailed analysis on economic and commercial forecasts
in times of market changes or new political situations.
• Making assessments on threats and risks, and establishing time-
ly criteria and security systems, both real ones and those coming
from the Network.
Figure 7.- Strategic Intelligence Methodology
11
Olier, Eduardo. Geoeconomía: las claves de la economía global. Pearson-FT-Prentice
Hall. 2011.
Strategic intelligence and economic security
25
This scheme cannot be isolated from the analysis of the milieu, and
should make a STEEP analysis considering all the elements: political and
geostrategic factors, regional circumstances, strategic challenges, etc.,
as shown in ?gure 7.
12
Here is where intelligence activities connect to security — economic in this
case —. This would be the Swedish case. A small country, though leader in
strategic and competitive intelligence, since it does not consider econom-
ic intelligence as a military category but as a means to ensure peace and
economic prosperity. Therefore, Swedish multinational companies, banks
and the government (and diplomatic missions abroad) share information
and establish strategies to improve the country’s competitiveness. Also
universities, like Lund University, develop doctorate programs on these
issues. Moreover, other small and middle-sized companies develop dis-
ruptive technologies while sharing information as an economic security
and competitiveness strategy. This methodology shows the success of
combining intelligence and economic security.
In?uence as an essential element in economic intelligence
However, all the above-mentioned facts are not enough to develop an
efective program on economic or strategic intelligence. Currently, the
powerful countries and the most important companies stake their in-
?uence capabilities that go beyond what is commonly understood by
lobby. In this sense, in?uence included within the context of strategic
intelligence has three components that should not be implemented
separately.
Therefore, strategic intelligence, regardless of its goals, is based on de-
?ning a strategy and is achieved by implementing coordinated actions in
line with a program based on goal-achievement. If these goals are com-
plex, they should not be considered a series of short-term actions, since
strategy is not only that. Thus, the diference between lobby, corporative
diplomacy and strategic in?uence can be expressed this way:
• Lobby, characterized by punctual, very short-term actions and that
should never be used.
• Corporative diplomacy, characterized by actions carried out to de-
velop a concrete in?uence program and uses of lobbies and biased
information with the intention of misinforming.
• Strategic in?uence, characterized by a long term strategic pro-
gram and carried out through lobbying coordinated actions (if nec-
essary), social learning (actions in the socio-cultural ?eld), advoca-
cy (actions of public political in?uence), development of in?uence
12
Olier, Eduardo. Ibíd.
Eduardo Olier Arenas
26
networks, alliances, communication policies (and counter-commu-
nication or counterintelligence), and the large-scale use of social
networks (under a de?ned strategy).
Thus, in?uence should be understood as the combination of perfor-
mances — either direct or indirect, open or closed — regarding persons,
groups, organizations and/or States with the aim of obtaining more credit
or in?uence, and channeling decisions towards the desired direction
13
.
In?uence is, therefore, a power strategy that takes advantage of diverse
tools, with communication strategy being of paramount importance,
since communication helps to pass on messages based on arguments,
far away from merely “transmitting news”. In?uence is, above all, a ques-
tion of content: in order to be able to in?uence there must be a message,
especially a coherent message.
And here is where diferent techniques and procedures come into play.
In?uence is part of the intelligence strategy. It is not an out-of-the-meth-
od activity. So, tools like economic diplomacy will have to be used. That is
to say, a series of activities aimed at achieving favorable positions in the
international economic ?eld, including complex investment structures,
markets, institutions, protection and economic security, and the whole
global economic framework. This framework cannot be improvised; on
the contrary, it requires structured and constant activity and medium to
long term actions.
Likewise, social learning techniques are essential; they are aimed at
achieving a socio-cultural in?uence and developing a soft power program
that can be implemented in the ?eld of Universities, NGOs and social
networks. Social learning has not been designed only for states. Large
companies like Microsoft, Google, Twitter, etc., use it profusely, especially
in market-oriented techniques; this has resulted in the new concept of
social marketing and in the appearance of network communicators: the
community managers.
We are talking about a strategy of power. That is, a capability to “domi-
nate” others through the capability to exert in?uence on their conducts
and feelings. This has resulted, in the economic intelligence ?eld, in a
“soft” way of imposing a strategy aimed at achieving some commercial
or economic control goals. And it has also resulted in a way of defending
oneself earlier from the “attacks” of other competitors. All in all, this is a
sophisticated implementation of the soft power, and considering the case,
of the smart power or the hard power, according to Joseph Nye
14
, who con-
nects leadership with power under the three following meanings.
13
Revel, Claude. France, a country under influence? Vuiver. 2012.
14
http://www.hks.harvard.edu/netgov/files/talks/docs/11_06_06_seminar_Nye_HP_
SP_Leadership.pdf.
Strategic intelligence and economic security
27
• Leadership based on soft power, which transmits values on three
levels:
• Political view: attractive for the followers and efective concerning
ideals and capabilities.
• Communication: persuasive, both for close and distant people,
through symbols and messages.
• Emotional: from the personal point of view: self-con?dence and
self-control and with regard to others by managing relations with
charisma.
• Leadership based on hard power, which is directed toward a trans-
actional leadership with:
• Organization capability: managing rewards, information systems
and external and internal in?uence circles, both bureaucratic and
institutional.
• Political skills: intimidation, pacts, purchase and competence.
• Leadership based on smart power, which will be a combina-
tion of the two above-mentioned. Deeply based on emotional
intelligence to understand the development of the environment
(which will require wide political capability) and make the most
of the situation by anticipating the likely trends and, at the
same time, adapting the style to the context and the needs of
the followers.
Economic intelligence and cyber security
The current economic world cannot be understood without Internet tech-
nologies and developments. It is the environment where a real and true
economic – or better said, ?nancial – globalization occurs. It is where
movements of capitals or ?nancial operations are made in real time,
moving foreign currencies and all kinds of ?nancial operations from one
place to another on the planet.
However, the Net is not just the virtual environment of economic afairs.
It is also the virtual environment of the criminal afairs. Where attacks
can be launched against critical infrastructures or where patents can be
stolen or just where one can steal from unprotected or scarcely protected
bank accounts.
As a reference, we can mention that one study carried out in 2011
about the situation in the United Kingdom
15
showed that the economic
losses caused by the cybercrime reached as much as £27 billion the
15
The Cost of Cybercrime. A Detica Report in partnership with the Office of Cyber Security
and Information Assurance in the Cabinet Office. February 2011.http://www.detica.com/
uploads/press_releases/THE_COST_OF_CYBER_CRIME_SUMMARY_FINAL_14_Fe-
bruary_2011.pdf
Eduardo Olier Arenas
28
previous year. The cases ranged from industrial espionage to patent
stealing, commercial bids stealing in international tenders, opera-
tions to acquire or sell companies, industrial design stealing, market-
ing campaigns, and a long list of information valuable in the business
world. According to this study, the computer services companies were
the most attacked, with losses reaching up to £2.5 billion, followed
by financial services, with £2.3 billion and electronic companies, with
£1.7 billion.
Actually, the exact economic cost of losses caused by the espionage from
the Net is unknown. A former study prepared for the US Congress in
2003
16
raised the ?gure to US$226 billion all over the world; and add-
ed that losses due to attacks from the Net of highly valued companies
could reach 5% of their value in the days following the intrusion. All this
deployment materializes in diferent practices, all of them punishable,
such as:
• Cyber-attacks on sensitive information of countries. This was the
case of the “virus” Stuxnet that prevented the Iranian nuclear plant
from coming into service.
• Information stealing by employees. The case of soldier Bradley
Manning and the leakage of data to the page Wikileaks.
• Attacks on browsers as a means to access users’ systems.
• File and database stealing, including bank phishing, carding or
skimming systems and other similar techniques.
• Security in the cloud. All the systems placed in the Cloud Comput-
ing services add to the concern on the security of the “traditional”
cyber space.
• Risks for smart telephones and tablets.
• Attacks on corporate networks.
More recently, in January 2012, the prestigious magazine Wired
17
pub-
lished an amazing piece of news concerning the dimension of what
they called cyber-crime. The piece of news referred to a lecture given in
July 2011 in the American Enterprise Institute, Washington, by General
Keith Alexander, director of the National Security Agency and Interna-
tional Security and the U.S. Cyber Command, in charge of protecting the
country from cyber-attacks. The General warned about cyber-attacks
that caused “the greatest transfer of wealth in history”, and mentioned
?gures of statistics of computer safety companies as Symantec Corp.
that insisted that stealing copyright in US companies caused an eco-
nomic loss of US$250 billion yearly. He estimated that, at a global lev-
16
Cashell, B., Jackson, W. D., Jickling, M. and Webel, B. The economic impact of cyber-at-
tacks. CRS Report for Congress. Government and Finance Division, April 2004. http://
www.cisco.com/warp/public/779/govtaffairs/images/CRS_Cyber_Attacks.pdf.
17
http://www.wired.com/threatlevel/2012/08/cybercrime-trillion/all/.
Strategic intelligence and economic security
29
el, such a cost could reach a trillion dollars, nearly the amount of the
Spanish GDP; urging the US Congress to develop an active strategy
with enough means to ensure a cyber-defense program in the United
States. Another report by the digital security ?rm McAfee Inc.
18
was
also mentioned. This report shows the dangers of criminal activities in
the Net for the economy.
Once again, China was mentioned as one of the most feared origins of
these cyber-attacks; talking even about a digital Pearl Harbor that could
paralyze the entire country. And the Bloomberg agency was told that a
group of Chinese hackers, known as Byzantine Candor, had allegedly sto-
len classi?ed information from about twenty organizations, including the
renowned company Halliburton Inc.
This situation recently prompted the Spanish Ministry of Defense to es-
tablish, on the Minister’s initiative, the Mando Conjunto de Ciberdefensa
de las Fuerzas Armadas (MCCD), the Armed Forces’ Joint Command for
Cyber Defense. Other less developed countries, such as Colombia, have
long been sensitive to these threats that are a reality today. Thus, it was
there where the Minister of Defense was entrusted with the leadership of
all the activities related to the defense of cyber space, creating under its
command the colCERT (Equipo de Respuesta a Emergencias Informáticas
de Colombia) in 2009
19
.
This whole scenario afects the economic interests of any country or even
company and has to be taken into account whenever a consistent strategy
of economic intelligence is to be developed.
Goal of this strategic dossier
For the ?rst time, the Instituto Español de Estudios Estratégicos tackles the
problem of economic intelligence. Besides, the title of this Dossier leaves
little room for doubt about its purpose: The economic intelligence in a glo-
balized world. The globalization and the geoeconomic problems demand
special attention to be drawn on this issue. Furthermore, this issue is also
related to the needs of the national defense of any State. Economic intel-
ligence is not only an issue of intelligence or diplomatic services posted
abroad, it is an issue that, as we mentioned at the beginning of this article,
is linked to any country’s geoeconomic strategy and, therefore, establish-
es a new scenario of con?icts where the economy is set as the scenario
of confrontation.
18
Unsecured economies: Protecting vital information.http://www.mcafee.com/us/re-
sources/reports/rp-unsecured-economies-report.pdf.
19
http://www.mindefensa.gov.co/irj/go/km/docs/Mindefensa/Documentos/descar-
gas/estudios%20sectoriales/Notas%20de%20Investigacion/Ciberseguridad%20y%20
ciberdefensa.pdf.
Eduardo Olier Arenas
30
However, although the issue of economic intelligence is wide, in this ?rst
Dossier, all problems are presented; the reader can ?nd highly quali?ed
authors on the subject we are dealing with.
Therefore, this Dossier starts with a general overview of the problem,
focusing on the most complex element, which is strategic intelligence.
Professor Díaz Fernández presents the historical evolution of strategic
intelligence, moving deeper into the current situation, particularly in
the new context aroused after the 11S attacks on the Twin Towers in
New York.
Professor Harbulot, already mentioned in these pages, director of l’École
de Guerre Économique, and acknowledged international expert on eco-
nomic intelligence, widely certi?ed economic con?icts, their causes and
their context. In a chapter entitled Estudio de la guerra económica y las
problemáticas relacionadas (Study of the economic war and related prob-
lems) he masterly clari?es this relation. Not only does he refer to the
economic space, but he also frames it within the ideological ?eld – a key
geoeconomic aspect – since cultural and ideological factors are essential
pieces in the movements of command and in?uence. It is a deep and very
detailed study of all the context of economic war that gives authorized
justi?cation for the Armed Forces to take seriously this new dimension of
non-armed but determining con?icts that occur in globalization.
Under this situation of economic intelligence, we will now deal with three
essential aspects. The ?rst one, mainly forgotten on many occasions, re-
fers to the role that the Law has to play in these new scenarios. It is es-
sential that, as in armed con?icts, economic war has its rules. Professor
González Cussac stresses the “value” of the Law within the context of
economic intelligence. This implies – according to his words – develop-
ing self-protection and cooperation rules, apart from a regulation capable of
ofering a greater capability to compete on equal terms with the other coun-
tries. In accordance with what González Cussac de?nes as a fourth-gen-
eration war. An interesting and new concept to be taken into account.
With this outlook, more focused on the legal aspect, the problems of com-
petitive intelligence are dealt with. La Inteligencia para Competir, nuevo
paradigma en la dirección estratégica de las organizaciones en un mundo
globalizado (The Intelligence to Compete, a new model of strategic manage-
ment of the organizations in a globalized world) is the title of Professor Fer-
nando Palop’s chapter. Once Professor Palop reviews the state of the art,
its meaning and what is made in other environments, he also tackles the
issue of in?uence, above-mentioned in this introduction as an essential
tool in the practice of economic intelligence. This in?uence is connected
to security, given that, as Professor Palop states, exerting in?uence is not
only an activity of ofensive nature, but essentially a defensive attitude on
many occasions.
Strategic intelligence and economic security
31
This Dossier ends with the contribution of Ambassador Henning Wegener.
His knowledge of the problems occurred in the fourth space puts cyber
security and the new concept of cyber peace into context.
We believe that the reader has this issue at sight, although being a ?rst
step in the way to better understand the context of economic intelligence
achieves the goals set: providing a global perspective on such an impor-
tant problem like this one in the current world.
33
Chapter I
The role of strategic intelligence in the modern world
Antonio M. Díaz Fernández
University of Cádiz
Abstract
The aim of this chapter is to explore what is meant by strategic intelli-
gence in the early twenty-?rst century. Created during the Cold War, de-
cision-makers’ intelligence needs were faced by intelligence structures
focused on avoiding strategic surprises. Generating real knowledge of
the global scenario and even trying to modify it is a task that is now re-
quired by the intelligence agencies. Monitoring the environment without
falling into the fallacy that technology can work by itself without the as-
sistance of the policy maker, who must tell them where and what to look
at, would be a fundamental error in the construction of a new model of
intelligence. This new model will have economic intelligence as one of its
key elements and will represent the struggle between nations and global
corporations at the beginning of this century.
Key words
Intelligence, strategy, planning, strategic surprise.
Antonio M. Díaz Fernández
34
Introduction
I hope that the reader who begins reading this section of the Strategy
Dossier comes previously equipped with their own de?nition of strategic
intelligence. If intelligence is based on prior warnings I honestly believe
this should be the ?rst of them. As Heidenrich states
1
, although we all use
the term ‘strategic intelligence’ extensively we would be no better of if
we had to give a more or less re?ned de?nition of it. Probably, after a brief
thought, we would say that it has something to do with decision making
and strategy, in order to go on to de?ne it by its opposite, that is, it is not
the intelligence that is aimed at solving today’s problems, it is not tactical
intelligence, but it is that which goes further, that which is focused on
giving support to a country’s national strategy.
I also hope the reader will permit me not to enter into the usual accu-
mulative relationship of de?nitions of the word intelligence that other
authors in the past have already done so well
2
, because the challenge
of this chapter is two-fold: on the one hand, to de?ne what strategic in-
telligence is in order to subsequently re?ect on what its future will be,
and on the other hand, in this regard, what place economic intelligence
should occupy. Therefore, as a starting point, we can basically assume
that information is equivalent to data and that intelligence is a prepared
product that enables decision making with the least possible uncertainty.
This re?ection on strategic intelligence begins from here.
However, I do believe it necessary to begin with some prior re?ection on
what strategy, planning and management are. States are complex organ-
isations that manage innumerable resources with a purpose and a use,
the most basic of them all being to guarantee security and a food supply
for its citizens. But even to guarantee these basic functions a strategy is
needed, given that resources are limited and there will be other organisa-
tions (States or not) in continuous competition for them.
Paraphrasing the disappearing Cheshire cat in its dialogue with Alice, if we
do not know where our organisation is going it makes no diference which
path (strategy) we take. That is why I understand that strategy has to re?ect
the thoughts and actions of an organisation regarding its environment. That
said, an organisation or a country can plan its future without necessarily
having to commit to a formal plan; even though plans are made they do not
have to be activated and turned into the path to be followed.
1
Heidenrich, John G., The State of Strategic Intelligence. The Intelligence Com-
munity’s Neglect of Strategic Intelligence, 2007https://www.cia.gov/library/cen-
ter-for-the-study-of-intelligence/csi-publications/csi-studies/studies/vol51no2/
the-state-of-strategic-intelligence.html
2
Richelson, Jeffrey, A century of spies. Oxford, Oxford University Press, 1997; Lowen-
thal, Mark Intelligence: From secrets to policy, Washington DC: CQ Press, 2006.
The role of strategic intelligence in the modern world
35
But after a strategy is accepted its management – which is what a State
does – would not have to be any more than putting the organisation at the
service of the strategy; therefore the management itself does not consti-
tute a strategy. Lesourne
3
maintained that “a strategic decision is either
one that creates an irreversible situation for the entire organisation or
one that anticipates an environmental change apt to provoke such an ir-
reversible situation”, although I do not believe that this assimilation is
immediate, as the Theory of Organisations covers, it is certain that the
variety of options available after choosing is successively limited. Hence
the idea that “strategic management” is almost a pleonasm and that “pro-
spective strategy”, if not an oxymoron, is at least a contradictory although
compatible term, since some prospects are strategic and others not. I am
not speaking about strategic decisions, but about decisions taken consid-
ering that we have “strategic” intelligence, because without intelligence,
strategy is merely an abstract game with blue and red teams on a board
without de?ned limits.
We are so eager to label a concept or phenomenon with a new name –
as if ?nding it a name would make all the qualities for understanding it
stick – that we do not pay the necessary attention to its de?nition, inter-
action and functioning. That is why I consider the use of the term “strate-
gic” inappropriate as an adjective to classify any concept, idea, process,
relationship or product that is relatively important. Although this is al-
most impossible to get around, what we can do is prevent its immediate
association with irreversible decisions that an organisation adopts. Be-
hind this suspicion there lies a certain mistrust motivated by the difcul-
ty that I have qualifying the word “intelligence” with complements that
are already typical, which are inherent to it; because if it is not proactive,
what is it if not intelligence? The problem with “strategic”, as Heidenrich
states
4
, is that it is difcult to abandon decades of routine during the Cold
War of abusing the use of the strategic concept and, what to say about its
direct assimilation in the “long term”.
The always helpful ofcial documents do not throw any light on what
strategic intelligence is. From the few ofcial de?nitions that we can ?nd,
that of the Pentagon tells us that it is “the intelligence that is needed for
the formulation of strategy, policy, plans and military operations at a na-
tional level and on the battle?eld”
5
. However, this de?nition stands alone
in the American government outlook since not even the two basic docu-
ments for North American consumers of intelligence include a de?nition
3
Lesourne, Jacques, “Plaidoyer pour une recherche en prospective”, Futuribles, No.
137, November 1989.
4
Heidenrich, opus cit.
5
Entry “Tactical Intelligence”. Joint Publication 1-02 (JP 1-02), Department of Defense
Dictionary of Military and Associated Terms, Washington, Department of Defense, 12 April
2001, p. 526.http://www.dtic.mil/doctrine/new_pubs/jp2_01.pdf
Antonio M. Díaz Fernández
36
of this concept
6
. In addition it has an essence very near to that which we
might have found during the Cold War, an era with very diferent ?gures
and needs to those at the beginning of the 21st century.
Nor does a text that, a priori, should re?ect it, ONCIX: Foreign Spies Steal-
ing US Economic Secrets in Cyberspace: Report to Congress on Foreign Eco-
nomic Collection and Industrial Espionage (2009-2011) of October 2011,
?nd space to de?ne it
7
. Even an academic such as Jan Goldman
8
, who
dedicated one of his works to specifying the terminology used in the study
of intelligence, does not provide clarity in his dictionary Words of Intelli-
gence. The word strategic intelligence says to us that it is intelligence that
is needed for the formulation of political and national plans at a national
and international level and that its components would include aspects
such as biographical, economic, sociological, transport, telecommunica-
tions, geographical, political and scienti?c and technical intelligence data
but does not provide added value that may be relevant for the debate that
I am trying to establish.
A representative case of the changes in the last decade, at the time,
appears in Spain’s very famous Defence White Paper of 2000
9
that
brought us into the group of countries that were developing these types
of thoughts. In our baptism into publicised defence planning we can see
how reference is made 217 times to the words “strategic” and “strategy”.
From here I would conclude that we will ?nd an intense and extensive
reference to intelligence as an essential tool to deal with its development;
however the word “intelligence” does not appear in the entire text and we
have to be content with the 66 times where the term “information” ap-
pears. Without doubt, use of the word “intelligence” was not usual more
than a decade ago, still very marked by the Cold War halo of secrecy,
but its non-existence and therefore how our policy makers thought that
“strategy” should be carried out is still remarkable.
Perhaps the White House National Intelligence Strategy of 2010
10
pro-
vides us with a clue, in which the only reference, indirectly, suggests to
us that: “strategic intelligence [...] informs executive decisions since this
is support for the decisions on internal, national and local security, tribal
governments, our troops and essential national missions. We are work-
6
Neither U.S. National Intelligence: An Overview, 2011.http://www.dni.gov/files/docu-
ments/IC_Consumers_Guide_2011.pdf nor the older CIA: A Consumer´s Guide to Intelli-
gence, 1999 include it.
7
ht t p: //www. dni . gov/f i l es/document s/Newsroom/Report s%20and%20
Pubs/20111103_report_fecie.pdf
8
Goldman, Jan, Words of Intelligence: A Dictionary, The Scarecrow Press, Oxford, 2006.
9
White Paper on Defencehttp://www.defensa.gob.es/politica/seguridad-defensa/
marcolegal/
10
National Intelligence Strategy. White House 2010, pp. 15http://www.whitehouse.
gov/sites/default/files/rss_viewer/national_security_strategy.pdf
The role of strategic intelligence in the modern world
37
ing to improve integration into the intelligence community at a time of
strengthening the capacities of our intelligence community members. We
are strengthening our collaboration with foreign intelligence services and
maintaining strong links with our nearest allies”. But above all because it
includes an important element when it maintains that “the security and
prosperity of our country depends on the quality of the intelligence we
gather and the analysis we conduct, our ability to evaluate and share this
information over time and our ability to counteract threats”.
It includes two aspects such as security and prosperity. Regarding the
?rst, we can assume a certain impact of a preventive nature attributed
decades ago to intelligence, that is, to avoid the strategic surprise that
Posner
11
analysed so well, but the second has always carried less weight,
signi?cantly less. However, we can ?nd ofcial documents from the sev-
enties in which it is assumed that “our foreign policy can bene?t if a more
careful and analytical examination is conducted on the reality of other
States”
12
. And it is speci?cally in economic intelligence where develop-
ment makes more sense, although not in a peaceful way as we will see
later. This document to which I refer, declassi?ed in 1976, about econom-
ic intelligence states that a systematic and periodic review of high-level
consumer needs is necessary, which shows that at a strategic and eco-
nomic intelligence level we are speaking about high-level “civil” consum-
ers, in other words the government.
I anticipate that for me the key to the present and future of strategic intel-
ligence is in the debate that Kent and Kendall maintained at the end of the
forties in the last century. Kendall
13
maintained that strategic intelligence
consisted of “helping politically responsible leaders to reach their foreign
policy goals, by identifying the elements susceptible to North American
in?uence”. At the same time, Sherman Kent was accused by Willmoore
Kendall of having a “compulsive preoccupation with prediction and with
the elimination of surprise from foreign afairs”. What emerged from this
and other accusations were difering visions of this new political element
as intelligence was then.
In essence, Kendall saw intelligence as support for political decision
makers to help them afect the progression of events so they could un-
derstand the operational factors on which the United States could have
a certain impact. And this is what we speak about at the beginning of
11
Posner, Richard A., Preventing Surprise Attacks: Intelligence in the Wake of 9/11, Row-
man & Littlefield, New York, 2005.
12
Letter from E. Richardson to W. Simon. “Re: Intelligence support for economic po-
licymaking” (5 pp. in Frank Zarb Personal Papers. 12/20/76. DECLASSIFIED MATERIAL)http://www.whitehouse.gov/sites/default/files/rss_viewer/national_security_strategy.
13
Kendall, Willmoore, “The function of intelligence”, World Politics, vol. 1, No. 4, July
1949, pp. 542-552.
Antonio M. Díaz Fernández
38
the 21st century if we want to speak about something that is strategic
intelligence, not preventing strategic surprises but understanding the en-
vironment to plan ahead for it and to some degree, con?gure it so that our
foreign policy – and its economic dimension – can be developed and can
generate prosperity for our country.
The other great theorist of the era, Washington Platt
14
, focused on a mil-
itary intelligence model, at a strategic level and not of a tactical nature,
and therefore it does not help us in our current discussion, despite hav-
ing been his most important contribution. In 1980, Harry Ransom
15
asked
whether it was speci?cally “strategic” intelligence that guided the United
States foreign policy, a question which only recently could begin to get a
positive response.
There was a ray of light on the role of strategic intelligence in the 1993
National Performance Review
16
coordinated by vice-president Al Gore,
where the then director of the CIA, John Deutch, con?rmed that “the Unit-
ed States eforts in intelligence must provide decision makers with the
necessary information on which to base their decisions with regard to
defence abroad, economic policy and protection of the United States’ na-
tional interests against foreign attacks”. This agreed with Swenson and
Lemozy
17
in that “strategic” attached to “intelligence” breaks down the
most comprehensive concept – broad and widespread – of “intelligence
for foreign policy”, but I cannot agree with them that strategic intelligence
excludes or supersedes the contribution of the diplomatic body in this
process, although its role and structure evidently would have to be mod-
i?ed as the report by the ambassador Melitón Cardona, to which I will
refer later, stated.
If we assume that strategic intelligence helps to provide context, devel-
ops national interests and delimits our problems and goals, the fact is
that the current rapid cycles of political events mean that the political
consumer requires an intelligence product that is not typical of strate-
gic intelligence, that is, long-range, meaningful products, but rather early
warnings against potential strategic surprises. In other words the recur-
ring cycles mean that there is no space for strategic thought and that
analysts and consumers are focused on the quanti?cation of a product
with little space for re?ection. Therefore, in my opinion, a much more
14
Platt, Washington, Strategic intelligence production: Basic principles, New York. Prae-
ger, 1957.
15
Ransom, Harry Howe, “Being Intelligent about Secret Intelligence Agencies”, The
American Political Science Review Vol. 74, No. 1 (Mar., 1980), pp. 141-148
16
National Performance Review, 1993,http://www.fas.org/irp/offdocs/npr_sep93/in-
dex.html
17
Swenson, Russell G. and Lemozy, Susana C. “Democratización de la función de in-
teligencia. El nexo de la cultura nacional y la inteligencia estratégica”, National Defense
Intelligence College, Washington DC., 2009.
The role of strategic intelligence in the modern world
39
intense presence should be demanded from strategic intelligence at the
beginning of policies, at agenda setting and the prioritisation of goals, in
other words at the design phase and not limiting it to implementation,
because that way we will be using it mainly as an early warning against
strategic surprises.
This complaint is covered in the report issued by the Commission on
Arms of Mass Destruction in Iraq in 2005 that indicated that “managers
and analysts of the intelligence community have, on repeated occasions,
expressed their frustration at their inability to spend time on research
and thought in the long term. This problem is intensi?ed with the cur-
rent incentives system for analysts where they are often rewarded for the
number of reports they produce more than for the substantial knowledge
or depth of their output
18
. A more recent episode we have is with the so-
called “Arab spring”, where the confusion it created in foreign ministries is
only understandable due to the absence of quality strategic intelligence,
of reliable knowledge about its roots and determining factors, not about
tomorrow, not even about the day after tomorrow but about the essence
of a phenomenon that will assist us in understanding its appearance and
progress.
As a result, when we speak about the state and therefore the future
of strategic intelligence we should not concentrate on the econom-
ic or military nature: strategic intelligence remains above these di-
mensions because it is more than a type of intelligence from signals,
open resources or technique; I understand it is as evolution of this.
Perhaps it will be better to proceed to understand how it has evolved
and what its elements are in order to understand its possible future.
And to understand what we are referring to and to try to conceptu-
alise strategic intelligence and suggest a future for it, bear in mind
the Kent Trinity: intelligence as an organisation, product and process,
but firstly it is important to comment, however superficially, on the
scenario in which strategic intelligence and its economic dimension
should occur.
There are no longer any blue or red draughts on the new board
There are no doubts about what the current threats are, nor that they are
diferent from a decade ago and from what they will probably be in the
future, even though they may be reduced. And what is certain is that the
markets – in that vague name – are the threats now. In modern democra-
18
Commission on the Intelligence Capabilities of the United States Regarding Wea-
pons of Mass Destruction, Report to the President (Washington, DC: Government Prin-
ting Office, 2005), Chapter Eight: Analysis, p. 175.http://www.gpo.gov/fdsys/pkg/GPO-
WMD/pdf/GPO-WMD.pdf
Antonio M. Díaz Fernández
40
cies, as Barry Buzan
19
saw, military con?icts lack logic so the polyarchies
do not suggest military confrontation between themselves. However, it is
entirely rational to put pressure on your business partners, suppliers of
raw materials, bet against your public debt and ensure that your compa-
nies are at a bargain price on the stock exchange and can be bought by
foreign capital; which without doubt Clausewitz would certainly consider
a kind of “war using other means”.
The European Security Strategy (ESS)
20
adopted by the European Council
in December 2003 took responsibility for the European project in relation
to global security, the axis of a security strategy for Europe. It pointed out
that “the security context that gave rise to the end of the Cold War is char-
acterised by ever greater opening of borders that permanently link inter-
nal and external security aspects”. The ESS supports preventive agree-
ment, an efcient multilateral strategy and the extension of the rule of
international law. This strategy – that is more a policy paper – deals with
how to make the European Union more capable, supporting an “ascend-
ing” approach, in other words, the focus is on how to increase the security
of people considered individually in diferent parts of the world. The re-
port develops both a set of principles on which European security policy
should be based, and the skills needed to make a credible contribution to
global security, on which its own security depends, but little attention is
paid to the instruments to make this contribution efective.
The European Union brings the concept of Human Security to the table –
as it is called in the ESS – and which is still another security concept; a
narrative that re?ects the goals and means of foreign policy and of highly
diversi?ed security and that is focused on diferent ?gures and aimed
at varied audiences that, ultimately, would be too vague and difcult a
concept. However, those who from the middle of the nineties defended
Human Security maintain that unilateralism is not possible and they un-
derstand the need to develop new instruments as well as persistence
with internal and foreign dimensions. If the European Union wishes to
continue with this using this security concept, intense thought will be es-
sential about how to use intelligence, not only strategic intelligence any
more, but others in full development such as police-criminal.
However, ultimately, at a European level we do not have an operational
concept such as that of Homeland Security which the Americans are
consolidating; that is why, from Europe, they have continued to use
others such as internal security, public security or domestic security.
Going deeper into this concept should not lead us to close the con-
19
Buzan, Barry, Security: A new framework for analysis. Boulder, London, Lynne Rien-
ner Publishers 1998.
20
A Secure Europe in a Better World. European Security Strategy, 12 December 2003.http://www.consilium.europa.eu/uedocs/cmsUpload/78367.pdf
The role of strategic intelligence in the modern world
41
cept without fully understanding it. Therefore, some extensively speak
about “protection space”. This is how the European Union is perceived,
its security perspective and the scenario from which to protect the Eu-
ropean citizens.
Therefore, we would be advocating comprehensive security, de?nable
as a system of defensive and proactive action that goes well beyond the
classic dimension of national security, highlighting the need to in?uence
– to guarantee said security – the energy, sanitary, food, environment, in-
frastructure, technological, military and internal security systems, which
must be created in coordination using public management instruments
in the political-institutional, technical, diplomatic and intelligence ?elds
for the development of preventive strategies as well as the executive re-
sponses of varied scope with the ultimate goal of guaranteeing the meet-
ing of people’s basic needs and consumers’ security, defending human
rights and protecting the exercise of democratic rights.
Therefore, we have not only a national focus, but a global one. The major-
ity of threats that the powers confront are global in origin and in results.
That is why global cooperation has clearly been regionalised. The 2004
report A Human Security Doctrine for Europe
21
maintains that European
citizens’ security cannot be separated from human security in any part of
the world and that the European Union therefore has a key interest in the
development of capabilities that contribute to human security worldwide.
They maintain that Europeans cannot be safe whilst millions of people
live in unbearable danger. Where people live with anarchy, poverty, ex-
clusive ideologies and daily violence there is fertile ground for criminal
networks and terrorism and drugs and arms are exported or transported
to the European Union from these regions in con?ict.
Therefore, it is not difcult to conclude that we are dealing with more ex-
tensive security requirements than intelligence had to report on scarcely
two decades ago. Using the diferent White Papers and reports on se-
curity scenarios, various States, the same as the European Union, have
been re?ecting on their future. In a kind of self-analysis these documents
enable us to see how threats are seen from the Union and the member
States. For example, in March 2008 the United Kingdom made public its
new National Security Strategy
22
, which comprehensively included a re-
vised version of previous reports and initiatives. This new initiative will be
considered original and welcome in the British approach to international
21
A Human Security Doctrine for Europe: The Barcelona Report of the Study Group on
Europe’s Security Capabilities, 15 September 2004,
http://www2.lse.ac.uk/internationalDevelopment/research/CSHS/human-
Security/barcelonaReport.pdf
22
A Strong Britain in an Age of Uncertainty: The National Security Strategy, 2008.
http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@
dg/@en/documents/digitalasset/dg_191639.pdf
Antonio M. Díaz Fernández
42
security but doubtful whether it will efectively overcome the traditional
visions of certain aspects of international security and its consequences
for the internal security of the country.
This National Security Strategy of the United Kingdom with the suggestive
general heading of: Security in an Interdependent World establishes that
the threat from the Cold War has been replaced by a series of diferent
but interconnected risks and threats, at that time, international terror-
ism, weapons of mass destruction, con?icts in fallen States, pandemics
and international organised crime. These would be interconnected by a
series of underlying factors, including climate change, ?ghting for ener-
gy sources, poverty and weak governance in some States, demographic
changes and globalisation, which does not diferentiate it from other na-
tional reports.
The vast majority of powers have developed their strategic security
scenarios to run for an average of 20-25 years. A review of them indi-
cates that they are all based on comprehensive security but they ?nd
it difcult to move away from the design and the mechanisms of a tra-
ditional military threat, although they are beginning to do so. The Na-
tional Defence Directive 2012 was drawn up clumsily, as analysed by
Arteaga
23
, who continues re?ecting on the evolution that has occurred
in recent years when the limited planning focused on defence eforts,
understood as purely military. This has changed since the purely mil-
itary threat has been eliminated and a plethora of others have now
appeared.
The 2011 Spanish Security Strategy is joined to this vision of speci?c
risks but also of general goals when it indicates that “we also have stra-
tegic interests that are related to the achievement of a peaceful and safe
environment: consolidation and good operation of the European Union,
establishment of a stable and just order, of peace, security and respect
for human rights, preservation of freedom of exchange and communica-
tions and constructive relationships with our neighbours”
24
.
This Spanish Strategy speaks about risk stimulators (globalisation mal-
functions, demographic imbalances, poverty and inequality, climate
change, technological hazards and radical non-democratic ideas) that co-
incide with others such as “La Seguridad Interior: España 2020” (“Internal
23
Arteaga, Félix, “La Directiva de Defensa Nacional 1/2012: tiempos de cambio para
cambiar a tiempo”, ARI 58/2012, Real Instituto Elcano.http://www.realinstitutoelca-
no.org/wps/portal/rielcano/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_es/
zonas_es/ari58-2012
24
Estrategia Española de Seguridad: Una responsabilidad de todos, Gobierno de España
(Spanish Security Strategy. A responsibility for all, Spanish Government), p. 16http://www.
lamoncloa.gob.es/nr/rdonlyres/d0d9a8eb-17d0-45a5-adff-46a8af4c2931/0/estrate-
giaespanoladeseguridad.pdf
The role of strategic intelligence in the modern world
43
Security: Spain 2020”), published some time before
25
. At the same time, it
develops the threats that Spain must confront, such as: armed con?icts,
terrorism, organised crime, economic and ?nancial insecurity, vulnerabil-
ity in energy, increase in weapons of mass destruction, cyber threats, un-
controlled migratory ?ows, emergencies and catastrophes and infrastruc-
ture, supplies and critical services. But these “national” goals match the
international ones such as that of the Re?exion Group for the Future of the
European Union, chaired by Felipe González in 2010 and therefore we are
not faced with a myriad of new threats but, in any case, with an increase or
decrease of them on state security agendas, if they exist as such.
Beyond the relevant cases of the great powers that place an extra empha-
sis on the global interests that they have, a necessary review of the White
Papers and national security doctrines since 2001 show us agreement on
four great threats: i) terrorism ii) organised crime iii) an increase in weap-
ons of mass destruction and iv) energy-climate problems. It is true that,
to a large extent, all of them try to avoid an approach based exclusively on
defence-military terms and almost entirely connected to direct threats to
the State. As López Espinosa
26
indicates, a new National Security concept
is emerging in this direction, as a better concept that would move the
centre of attention to others such as national defence or internal security.
A new policy has not been created, nor have others been broadened in a
sectorial nature – as a main feature – all the existing ones are adapted to
the directions of the new strategy in a process of adjusting instruments,
capabilities and State resources, including the economic element.
But within this clear change in national, international scenarios and,
closer to home, Europe, the content of the most recent European Union
documents does not appear to assign a new role to intelligence. There-
fore, in the Stockholm Programme
27
, we see how the European Council
calls upon the Council and the Commission to de?ne a strategy based on
“re?ection of a proactive and intelligence-led approach”; without a doubt
this is positive but it is essentially the same approach. The 2010 Draft
Internal Security Strategy for the European Union
28
indicated that “our
25
Jaime Jiménez, Óscar and Díaz Fernández, Antonio M., La Seguridad Interior: España
2020, Fundación Alternativas, Madrid, 2009,http://www.falternativas.org/la-fundacion/
documentos/libros-e-informes/la-seguridad-integral-espana-2020
26
López Espinosa, María de los Ángeles, “Inteligencia y terrorismo internacional. Un
panorama de cambios”, La inteligencia, factor clave frente al terrorismo internacional,
Cuadernos de Estrategia No. 141, Instituto Español de Estudios Estratégicos, Ministerio
de Defensa 2009, pp. 197-239.
27
The Stockholm Programme: An open and secure Europe serving and pro-
tecting citizens, 2010.http://eur-lex.europa.eu/LexUriServ/LexUriServ.
do?uri=OJ:C:2010:115:0001:0038:en
DF28
Draft Internal Security Strategy for the European Union: “Towards a European Securi-
ty Model”, 8 March 2010,http://register.consilium.europa.eu/pdf/en/10/st07/st07120.
en10.pdf
Antonio M. Díaz Fernández
44
strategy must therefore emphasise prevention and anticipation, which is
based on a proactive and intelligence-led approach as well as procuring
the evidence required for prosecution. It is only possible to bring success-
ful legal action if all necessary information is available”.
To this re?ection, which extends the security scenario at a global level,
we can add that of the National Intelligence Council, which has updated its
previous precautions by producing those with a time limit of 2030
29
. The
three diferences compared to the previous report would be the strong
appearance of three key variables: i) the globalised economy, ii) demog-
raphy and iii) new players (China and India). The report also suggests four
possible scenarios that would be more important for a world power than
for other countries, at that time:
– Scenario I entails a world in which the new powers replace the
West as world leaders (food shortages, post-petroleum era, geo-
politics of energy, water and food and climate change)
– Scenario II “surprise” or impact of the lack of attention to world-
wide climate change (con?icts over power, reduction in instability,
nuclear weapons, new con?icts over resources, terrorism, Afghan-
istan, Pakistan and Iraq, etc.)
– Scenario III, intense rise in emerging powers (BRICS) entering into
a dispute over vital resources as a source of con?ict (preparation
for changes, multi-polarity without multilateralism, world net-
works, etc.)
– Scenario IV, expansion of policies that will no longer be domestic,
and therefore the establishment of the environment on the inter-
national agenda overshadows governments.
And the most appropriate thing would be to ?nish this scenario into which
strategic intelligence should be moved with the 2008 French report. This
document has few conceptual novelties and is, in my opinion, the best in
the “strategic” planning of documents of its kind. The Défense et Sécurité
Nationale: Le Livre Blanc
30
states that: “development of knowledge and
the capacity for anticipation is our ?rst line of defence. [...] The battles
of the 21st century will take place within the ?eld of information, knowl-
edge, people and societies. [...] Politicians must have access to all data
that will serve as a basis for their decisions and to evaluate situations
with full sovereignty. [It must be assumed that] public powers are doing
everything possible on risks analysis for the future and trying to prevent
them by preparing the means to confront them.” Therefore, it is closer to
the role that I understand must be assigned to strategic intelligence at the
beginning of the century.
29
Global Trends 2030: Alternative Worldshttp://www.dni.gov/index.php/about/
organization/national-intelligence-council-global-trends
30
Défense et Sécurité nationale: Le livre blanc 2008, p. 66.http://www.ladocumenta-
tionfrancaise.fr/var/storage/rapports-publics/084000341/0000.pdf
The role of strategic intelligence in the modern world
45
The redesigned Kent trinity
Organisation: the Matrix has already been created
Intelligence organisations have had to sufer in the evolution process
from the ?rst intelligence system the world relied on: the Cold War model
that was also very similar on both sides of the Berlin Wall. From then
on and until today all intelligence models have been based on synthesis,
with diferent roles and commitments from the armed forces, the police
and the intelligence services although, obviously, with the latter having a
central role as the more specialised structure. More speci?cally, the main
characteristics that, in my opinion
31
, de?ned the intelligence model that
arose during the Cold War – and its speci?c understanding of “strategy” –
were: i) the practice of misinformation, ii) the mass use of technology for
controlling citizens, iii) the precedence of efciency over citizens’ rights
and freedoms, iv) the presence of the intelligence services in all walks of
life and v) the carrying out of covert actions.
This was clearly not a structural model for the challenges that would
come at the end of the Cold War. The fall of the Wall meant an objective
modi?cation in intelligence requirements and the volatility of the Eastern
Bloc produced two diferent dynamics. One of them wanted to understand
that it was time to collect the “dividends of peace” and to use the funds
invested in security and intelligence to other commitments even support-
ing the abolition of the army. The other united those who saw the need
to change existing systems to meet the new reality full of threats that
of necessity had to replace those that expired. Various commissions and
working groups were set up, mainly in the United States, to discuss and
deal with the emerging situation. Other countries did not think about the
subject beyond some minimal contributions from some thought centres
and the voluntary signing of limited cooperation agreements between
the intelligence services of diferent countries to control the increase in
weapons of mass destruction and the nuclear suitcases that might come
out of the old Soviet Union.
During the decade between 1989 and 1999 the intelligence services
were overloaded with a multitude of new and emerging commitments:
the veri?cation of arms reduction treaties, investigation into genocides,
protection of communication networks, money laundering, organised
crime, terrorism, etc. This responsibility that was so disproportionate to
the intelligence services’ goals was not planned but occurred gradually
through a need, given the lack of alternative structures to which to assign
them. Structurally the necessary thought had not taken place so that the
31
For a more extensive analysis see, Díaz Fernández, Antonio M., “La adaptación de
los servicios de inteligencia al terrorismo internacional”, ARI 52/2006, Real Instituto
Elcano, 2006.
Antonio M. Díaz Fernández
46
services could undertake these missions with the necessary guarantees,
leading to an incredible saturation of time commitments that wasted the
chance to adjust to the developing scenario. This meant a delay of ten
years for the services to adapt to the anti-terrorist ?ght. This decade was
the key time for adapting intelligence to meet the requirements of the
21st century. But after this delay there was no longer the chance to think
about whether it was more appropriate to undertake an evolutionary or
revolutionary intelligence process; now the reaction time was too mini-
mal to consider revolutions whose transition cost could only be accept-
able when there is a truly peaceful scenario ahead and, unlike now, there
were no individuals ready to sacri?ce themselves at any time in the very
heart of our cities.
This lack of an updated intelligence model led to 9/11 2001, tragically
representing the end of the brief and super?cial period of stability that
came with the fall of the Wall. The new intelligence model that should
have replaced that of the Cold War to contend with the threats relating to
the era was still not ready, nor had the window of opportunity opened so
that any of those designed by congressmen and the agencies could be im-
plemented. To a large extent its absence was because it had been worked
on in such an unhurried way that the State ended up being incapable of
anticipating the new type of threat.
But all this meant – and means – a regret that the urgency of the mo-
ment does not allow us to spend time on. What is certain and obvious
is that given the absence of a ?nished model the States had to turn to
a refuge model which they were aware of from the Cold War and apply
an incrementalist element to it in the hope that this would be useful for
adapting it to the new situation. Both the greater number of resources
and the technological skills that have appeared since this model was fully
in force during the previous decades would have to be that incrementalist
element that some considered sufcient for updating this model. In short,
this signi?ed that all the model’s characteristics in the Cold War appeared
again but with greater intensity. This model was scarcely useful for the
needs of politicians during those years and would hardly, and only then by
pure chance, be able to help in the growing anti-terrorist ?ght.
This emergency model applied after the attacks against the United States
are characterised, in my opinion, by the following elements: i) the practice
of misinformation, ii) the mass use of technology for controlling citizens,
iii) the precedence of efciency over citizens’ rights and freedoms, iv) the
presence of intelligence services in all walks of life, and v) the carrying
out of covert actions. Structural reforms aimed at improving the “con-
necting the dots” that the report of 9/11 marked as one of the intelligence
community’s errors; that is, the State had the data but internal wars and
lack of coordination prevented their appropriate treatment and resulted
in the failures that led to the September attacks. But again, the underlying
The role of strategic intelligence in the modern world
47
idea is to improve the intelligence that prevents surprises; a physical or
virtual Pearl Harbour, as this will be what we will see within a few years.
It is true that some opinions, including those of the 9/11 report, proposed
the importance of a better understanding of the world at the beginning
of the century to be able to organise intelligence in the most appropriate
way. It is also true that in the period immediately after the 9/11 attacks
some reforms occurred in some countries such as Austria, Holland, Spain,
Latin American States and the Eastern Bloc. However, their dynamics and
motivations were diferent to those generated by those attacks and re-
late to typical national contingencies. In some cases, such as Holland,
going back to decisions taken years before that had led to dismantling
foreign intelligence, in Spain a system generated during the transition to
democracy had to be adapted and regulated within the range of the law
without a prior model and by mutual agreement of bureaucracies. The
Latin American countries sought to coordinate their domestic and foreign
security agencies under a system that usually has the name “National
Intelligence System”, a structure already established in Portugal in 1986,
but with similar and limited results.
Eastern Europe modernised its intelligence structures and gave them
professional status after the culmination of its democratisation process-
es and they also reproduced this “National Intelligence System”. However,
Eastern Europe has a peculiarity since they keep police powers, the same
as in Colombia until 2012 and as the Dominican Republic considered es-
tablishing. In addition, some States used the fact that they had to make
their own reforms to introduce some original elements into their systems,
such as making their units ?exible and reducing the vertical nature of the
service’s structure so as to deal with more changeable environments.
It is this lack of adaptation that explains the failures of 9/11 and subse-
quently led to the attacks in Bali, Madrid and London, highlighting the lack
of an alternative model and the overriding need to redevelop intelligence
systems. The prevention strategies therefore turned into the basis for
security in the 21st century, in the ?eld prepared for the intelligence ser-
vices and, without any doubt, into the basis for future security systems.
Therefore, it is a fact that the intelligence services must snap out of their
inertia and turn into structures more adapted to the changeable needs
the 21st century brings, and be, shall we say, more strategic?
Reorganising the intelligence community so that it can adapt more quick-
ly not only requires changes in organisational systems. In the United
States, since 1947, when the intelligence system was established, nine-
teen commissions, committees and panels have tried to modify the role
of the centralised authority of the director of the intelligence community
and even proposed the creation of a director of intelligence. As early as
1985, the Turner proposal suggested the creation of a director for the in-
Antonio M. Díaz Fernández
48
telligence community and what has happened since then has been more
or less feeble support for this option. In fact, the reforms proposed by
Boren-McCurdy in 1992 did not manage to get approval due to rejection
by the Department of Defence; this is something that the members of the
subsequent Aspin-Brown commission learned from. They avoided pro-
posing it with too much bluntness and so softened this aspect by propos-
ing the creation of two deputy directors to directly assist the director of
the intelligence community with his tasks. Finally, the 9/11 Commission
recommended the creation of a new authority, coordinating all the agen-
cies and creating the position of National Intelligence Director. In short,
many of the debates that are taking place today are another wave of pro-
posals that have taken more than thirty years to occur.
Even when managing to introduce major advances in the construction of
the intelligence community, the problem is that both the 9/11 Commission
and the opinions and studies conducted in diferent countries have based
the adoption of measures on preventing another attack similar to 9/11
but not to adapting structures to a new type of threat, organised crime for
example. Without doubt this focusing of intelligence on counter-terrorism
has taken attention and eforts away from other no less serious and long-
term threats such as organised crime. It has to be understood that the
incentive of intelligence reforms is the ?ght against terror, but it cannot
be their only goal
32
.
A potential loss of budget and in?uence by opening up intelligence work
to other agencies from a broader intelligence community largely explains
the Department of Defence’s opposition to any change. What is very re-
markable is that the great failures in military intelligence during the ?rst
Gulf War led American politicians and military to wish to transfer re-
sources of “strategic” intelligence to the tactical, which is applied to com-
bat; that is, not to redirect but to have more tactical intelligence. It has to
be understood that during these years the Pentagon had put the majority
of its total budget into intelligence, something that it did not want to give
up and that would subsequently condition the de?nition of counter-ter-
rorism as a military problem, for example. The Department of Defence’s
in?uence on the modi?cations that could have been undertaken to the
intelligence system should not be underestimated.
The main study about the necessary evolution of the intelligence commu-
nity occurred under the auspices of the Aspin-Brown commission (1994-
96). This was a very ambitious task of great interest that covered all those
dimensions that had to be modi?ed or adapted into the intelligence sys-
tems. However, the lack of political leadership and, once again, strong
opposition from the Department of Defence prevented their application.
32
Díaz Fernández, Antonio M., Revenga, Miguel and Jaime, Óscar, Cooperación Europea
en Inteligencia: Nuevas preguntas, nuevas respuestas, Aranzadi, Pamplona, 2009.
The role of strategic intelligence in the modern world
49
However, Holshek
33
makes a personal interpretation of the North Ameri-
can intelligence community evolution when he states that:
“The national security system the United States had ?nally adopted
was more anticipatory, collaborative, agile, and innovative. It was more
capable of combining all elements of national strength and power, inte-
grating intelligence, making timely and informed decisions, and taking
decisive action. It went beyond whole-of-government to whole-of-na-
tion. American leaders had learned to think globally and act locally
– strategically rather than operationally. They prioritized investments
in strengths and opportunities over threats while lowering costs and
risks. They placed economic development and diplomacy out in front
of defence. Echoing changes in the business community, agencies be-
came leaner and ?atter, less redundant, more adaptive, teamed and
networked. Resources were driven ?rst by strategic goals, jettisoning
the wasteful mindset of a surplus mentality. Shaped for collaboration
among departments and between the public and private sectors, the
system was more inclusive, engaging much more of America’s still
considerable soft power.”
Organisations must look towards the outside to be more competitive
34
and this logic means that the system has to be a part of our activity out-
side of our organisation but one we must know about and try to imitate.
As Baumard
35
states, business intelligence is more structured in Western
countries whilst, for example, in Japan it is more structured at the level
of organisational culture.
We cannot conceive today of organisations – or intelligence communities
– without their technological dimension, a burden that Mintzberg
36
has al-
ready warned would continue to increase. Technology is, however, a term
mistakenly used since what we understand by technology is no more
than a part of it, in our case the internet and data processing software in
its many varied dimensions. Human beings have always been technolog-
ical and this is what has enabled them to solve the problems with which
they are confronted; technology is both the ?re and the wheel and the in-
tercontinental ballistic missile. And we must bear in mind that technology
has always been an essential element in intelligence. Therefore, during
33
Holshek, Christopher, America’s first Quarter Millennium: Envisioning a Transformed
National Security System in 2026, Project on National Security Reform (PNSR), 2011,http://0183896.netsolhost.com/site/wp-content/uploads/2011/12/pnsr_americas_
first_quarter_millennium.pdf
34
Arroyo Varela, Silvia, Inteligencia competitiva: una herramienta en la estrategia em-
presarial, Madrid, Ediciones Pirámide, 2005, p. 106.
35
Baumard, Philippe, “From noticing to ‘sense-making’: The use of intelligence in stra-
tegizing”, The International Journal of Intelligence and Counterintelligence, vol. 7, No. 1,
1994, pp. 29-73.
36
Mintzberg, Henry, La estructuración de las organizaciones, Ariel, Madrid, 1979.
Antonio M. Díaz Fernández
50
the world wars knowing what ships were crossing the Strait and their
possible cargo was a key security element. In the same way, the Sherman
Kent analysis was a success, impressing the military commanders to de-
sign spectacular scenarios as a result of the texts available in the Library
of Congress that were sought and processed, as Davis
37
states.
Some writers
38
maintain that strategy has been very focused on the me-
chanical process and a model more focused on people should be devel-
oped. Although this is true, technology has increased the possibilities to
prevent being surprised “strategically” while meaning an increase in the
threat potential to us and our interests. To advance towards strategic in-
telligence also means understanding scenarios and being clear about how
to carry out the processing and fusion of available data from the available
multiple and enormous information sources. The necessary data fusion
that it generates would refer, therefore, to the means not the purpose and
has to include an entire series of techniques such as networks of sensors
for data management, data collection with the machine-person interac-
tion, organisational optimisation or the analysis of a large volume of data.
This data fusion at a high level is to a large degree intuitive for human be-
ings but is a formidable challenge for computer systems. I will not go into
aspects such as the Bayesian analysis, metadata or the use of ontologies,
as it is not an area where added value can be contributed, nor would this
be the right place for it. I’m focusing attention on the fact that strategic
intelligence requires knowing what we are looking for to be able to ?nd
operation standards, if not, the emerging science of analytical reason-
ing that makes interactive interfaces
39
easier for analysts and decision
makers will make them fall into a Minority Report style illusion. Willing
to use resources and modify legislation relating to rights and freedoms,
political decision makers would delegate authority to the powerful auto-
mated computer systems that track online and that would know how to
deactivate threats before they materialise.
Combining automated analysis techniques with interactive viewing spe-
ci?cally designed to give support to analysts and political decision mak-
ers means an interaction should be achieved between the political deci-
sion maker’s goals with real data for efective understanding, reasoning
37
Davis, Jack, “The Kent-Kendall Debate of 1949”, Studies in Intelligence, 1991, 35, No. 2.
38
Martín Barbero, Isaac “Inteligencia economica. Tan lejos, tan cerca”, Inteligencia y Se-
guridad: Revista de análisis y prospectiva, No. 2, 2007, pp. 107-120; Service, Robert W. “The
Development of Strategic Intelligence: A Managerial Perspective”, International Journal
of Management, vol. 23, No. 1, 2006, p. 61; Solberg Søilen, Klaus, “Management Imple-
mentation of Business Intelligence Systems”, Inteligencia y Seguridad: Revista de análisis
y prospectiva, No. 9, 2010, pp. 41-65; Porter, Michael and Victor E. Millar (1985) “How
information gives you competitive advantage”, Harvard Business Review, July, pp. 1-13.
39
Cook, K., Earnshaw, R. and Stasko, J., “Discovering the Unexpected”, IEEE computer
Graphics and Applications, September/October, 2007, pp. 15-19.
The role of strategic intelligence in the modern world
51
and decision making on the basis of enormous and complex databases
40
.
This view is not so clear, for example, in the ?ght against terrorism, which
seems dominated by an obsession for massive data collection and their
exploitation through integrated platforms, some under development by
large IT companies. The debate again goes back to the old one of a more
basic nature such as the discussion between what emphasis needs to be
put on the HUMINT (Human Intelligence) vs. SIGINT (Signals Intelligence)
vs. OSINT (Open Source Intelligence) cocktail, but here is not the place to
discuss this and its in?uence on strategic intelligence if we do not want
to fall into commonplace themes which Rosales
41
studied some time ago.
A truly strategic new product
Economic intelligence existed in the past
42
and therefore under no cir-
cumstances is it a new concept. Beginning with Marco Polo, interest in
broadening markets and obtaining commercial, industrial or economic
information is well documented. For some time, as Rousseau published
in 1925
43
, economic intelligence was included as a complement to mili-
tary intelligence, which made it possible to know the enemy’s capabilities
but was not a tool for the discovery of the potentials of others outside the
sphere of war. However, this approach is no longer predominant.
According to the CIA, 40% of the information obtained from analyses con-
ducted in the middle of the nineties was already about economic matters.
The end of the Cold War meant that a lot of economic and commercial data
was available and today no less than 95% of it comes from open sourc-
es. In theory the North American intelligence agencies are not involved
in espionage for the bene?t of their national industries. However, they
are more and more involved in situations that entail identifying situations
abroad where North American companies are in a disadvantageous situ-
ation due to unscrupulous actions such as bribery by foreign competitors.
Few doubt that intelligence services have usually focused on threats of
a military and political nature or more recently on terrorist activity. That
the intelligence services can supply a product of an economic nature, be-
yond its use to discover the enemy’s capability in war, is also undeniable.
40
Keim, D. Kohlhammer, J., Ellis, G and Mansmann, F (eds.) 2011, Mastering the infor-
mation age: Solving problems with visual analytics, Konstanza, www.vismaster.eur/book/
41
Rosales, Ignacio, “La inteligencia en los procesos de toma de decisiones en la Se-
guridad y Defensa”, El papel de la inteligencia ante los retos de la seguridad y la defensa
internacional, Cuadernos de Estrategia No. 130, Instituto Español de Estudios de la De-
fensa, Ministerio de Defensa, 2005, pp. 35-59.
42
Díaz Fernández, Antonio M., Los servicios de inteligencia españoles, Alianza Editorial,
Madrid, 2005.
43
Rousseau, “Economic intelligence”, Journal Royal United Service Institution, vol. 70,
1925, pp. 701-709.
Antonio M. Díaz Fernández
52
In fact, they have been doing it for years, as Zelikov and Levet
44
explain.
In my opinion, with all logic and sincerity, what Brander asks is whether
the State must be involved in these tasks and, to support his questions,
he puts forward three arguments in favour
45
. Firstly, failures in the mar-
ket mean that the State must intervene, secondly, intelligence is public
property that can only be borrowed by it, and thirdly, it has a role to play
in protection the same as other State institutions.
Sherman Kent de?ned strategic intelligence as “the type of knowledge
that a State must possess in order to guarantee that its interests do not
sufer nor its initiatives fail due to the fact that its political decision mak-
ers or soldiers plan and act in ignorance”
46
. This de?nition is equally ap-
plicable to the business world but speci?cally there is one of the most
essential diferences in my opinion. Companies not only prevent their
competitors stealing market share from them but they study thoroughly,
and improve and try to attain it, about which Rodenberg
47
has written.
The potential for intelligence agencies that have adapted their instru-
ments and resources to this new task is impressive. As Fraumann
48
states,
this is because current economic espionage conducted by foreign powers
goes beyond classic industrial espionage. Because “we cannot politically
spy on an ally” some cases could be innocently justi?ed, but what about
economically? Both elements are subject to the action of intelligence but
in the case of economic espionage, assuming that we spy on the economy
of others, this means dividing this intelligence into two large dimensions,
public-private and ofensive-defensive, which I will discuss below.
On the one hand, globalisation has changed the concept of “ours” and
“theirs”, nationally and internationally. Markets are no longer strictly
local, national or international but globalised, yet the governments and
their instruments continue to be national. Therefore, the distinction be-
tween public and private that now is in itself more complex joins some
States that have lost part of their regulatory and police power both at a
State level and beyond their frontiers. It is in this environment where eco-
nomic intelligence would operate, as an instrument for the strategy and
44
Zelikov, Philip (1997) “American Economic Intelligence: Past Practice and Future
Principles”, Intelligence and National Security, vol. 12, No. 1, pp. 164-177; LEVET, Jean-
Louis (2001) “L’intelligence économique: Mode de pensée, mode d’action”, paperback
edition.
45
Brander, James A. “The Economics of Economic Intelligence”. Commentary, Cana-
dian Secret Intelligence Service. Reprinted in Evan Potter, ed. Economic Intelligence and
National Security, Carleton University Press, Ottawa, 1998, pp. 197-217.
46
Kent, opus cit.
47
J.H.A.M. Rodenberg, Competitive Intelligence and Senior Management, Eburon Publi-
shers, Delft, 2008.
48
Fraumann, Edwin (1997) “Economic espionage: Security missions redefined”, Public
Administration Review, 5 (4), pp. 303-308.
The role of strategic intelligence in the modern world
53
management of companies and the State in a global world, although of
course the latter accepts that it must have a pre-eminent role in it.
The second line of discussion is, therefore, not if the State can but if it
must involve itself in direct economic espionage or exclusively develop
its capacities for defence purposes
49
. But nor should we spend too much
time on thought, since really the topic is the connection and balance be-
tween the two. If espionage exists it is due to need and reciprocity and
therefore if we are developing a capacity for protection against threats
it is because we assume what other States are actively doing so. And
this is not only an assumption. The annual reports about the control and
management of parliamentary control committees and intelligence ser-
vices, respectively, unhesitatingly point to China and Russia as very active
agents in economic espionage, including industrial espionage. Maybe that
is why it is interesting that the two countries with the greatest interest in
economic espionage make no reference to the importance of economic
intelligence in their defence White Papers or in similar texts.
Therefore, in my opinion, although there is undeniable theoretical justi-
?cation for the State to thoroughly research and establish itself in this
area, the question is whether it should adopt an ofensive-defensive role.
Although we could speculate that if intelligence services worldwide were
so successful at stealing commercial secrets, then research and devel-
opment would drop rapidly since the private players would not be able to
recoup their investments. On the other hand we would be speaking about
information as public property – as Seiglie
50
mentions – in the sense that
a product that because of its nature can only be provided by the State, and
if this fails the private world cannot generate it since it is not produced
by the private sector. But information is not property in the pure sense,
although it is very close, as seen by the existence of private intelligence
companies and their incredible expansion in the last ?ve years.
Claude Revel
51
supports an ofensive option for economic intelligence.
This French expert says that economic security consists of prevention
and avoidance of any situation that can interrupt the existence of both
companies and the State. Without doubt it is a strange way of understand-
ing “ofensive”. Economic counter-espionage is well known but not that
of an ofensive nature. The Canadian strategy, which is explained it its
Securing an Open Society: Canada’s National Security Policy of 2004
52
, con-
49
Brander, opus cit. 1998:205
50
Seiglie, Carlos; Coissard, Steven and Échinard, Yann, “Economic Intelligence and
National Security”, War, Peace and Security. Contributions to Conflict Management, Peace
Economics and Development, vol. 6, 2008, pp. 235-248.
51
Revel, Claude, “Economic Intelligence: An Operational Concept for a Globalised
World”, ARI, Real Instituto Elcano, No. 134/2010.
52
Securing an Open Society: Canada’s National Security Policy, April 2004,http://publi-
cations.gc.ca/collections/Collection/CP22-77-2004E.pdf
Antonio M. Díaz Fernández
54
nects intelligence with foreign espionage, that is, as a threat from other
powers from which they should protect themselves.
Without doubt one of the most astute re?ections on how to maintain bal-
ance was made by Mark Lowenthal – although extendible to all the par-
ticipants – before the American Congress
53
and which Claude Revel
54
dis-
cusses in his last report Développer une in?uence normative internationale
stratégique pour la France. In it Revel supports “the need for a national
economic intelligence structure that will be a nerve centre for warnings,
promotion and support and for monitoring strategies on information, se-
curity and in?uence that must be inextricably linked”. The French writer
continues by indicating that “there should be inter-ministerial coopera-
tion, inevitably maintained at a State level, with access to all useful data
from any of the State services and private players. The structure must
centralise the data, direct strategy, tactics and action in international en-
vironments and monitor evaluation”. He states that all this must be car-
ried out in full coordination with all the State centres so that it can antici-
pate and make decisions on complex matters.
Returning to the debate between Kent and Kendall, here we would ?nd an
essential diference: either we want an organisation that wishes to an-
ticipate threats – essentially attacks – or wishes to regulate the environ-
ment, something that is perfectly acceptable in (strategic) management.
And the Carayon report shows, in my opinion, the evolution decided upon
from this debate. On page 37 it states that a true economic security policy
must impose on the State anticipation of threats and the active process-
ing of attacks that its companies sufer. It is time to go from a static and
reactive position (defence) to one of an active nature (economic security)
including all the State’s services and in the ?rst instance the intelligence
and security services.
Strategic process: the new plan
Russel Ackof con?rmed that the plan was “to conceive the desired future
as well as the necessary means to achieve it”
55
. Shared strategic analy-
ses make it possible to produce a synthesis of collective agreement, con-
trary to that which Henry Mintzberg
56
proposed. The most difcult thing
53
Hearing before the Select Committee on Intelligence of the United States Senate, One
Hundred Third Congress, First Session on Economic Intelligence, Thursday, 5 August,
1993http://www.intelligence.senate.gov/pdfs103rd/103650.pdf
54
Revel, Claude, Développer une influence normative internationale stratégique
pour la France, 2013,http://proxy-pubminefi.diffusion.finances.gouv.fr/pub/docu-
ment/18/14133.pdf
55
Ackoff, Russel L. (1973) Méthodes de planification dans l’entreprise, Paris, Les Edi-
tions d’Organisation.
56
Mintzberg, 1979, opus cit.
The role of strategic intelligence in the modern world
55
would not be making a good choice but being sure that the right questions
had been asked. This problem has been well considered and collectively
shared by those whom this problem concerns; we can say that it is an
almost resolved problem. Therefore, we can say that we plan to resolve
problems, in our case, the State in its diferent dimensions, including eco-
nomic ones.
But time is and will be a key variable. Neither the analysts can use all
they want in order to obtain deep knowledge, nor do political decision
makers have enough to understand complex afairs for which they are
responsible daily. The planning process starts from the clear allocation
of commitments, and therefore leadership – in our case political – is es-
sential for planning. Decision makers want information that helps them
to prevent unpleasant surprises and, therefore, political decision makers,
although they do not request strategic intelligence, need it. But the certain
fact is that our future is planned by people who want to feel comfortable
with their decisions but do not support receiving strategic intelligence
that predicts difcult events that do not ?t in with their politics, that is,
they want to prevent strategic surprises but rarely develop “strategic”
actions that go beyond the term during which they will be in ofce.
The ?ow of information from top to bottom is usually the traditional for-
mula used by the State which coordinates, stimulates and ?nances these
structures. However, the past shows us that the bottom to top approach
comes from successful experiences that boost feedback in which the
participation of the State is pragmatic and in response to initiatives that
emerge from the ?eld
57
. These preliminary elements, in my opinion, indi-
cate that the role senior civil servants, who give permanence to a coun-
try’s politics, have to play is key, although this is not the time to discuss it.
Maybe that is why an important document that passed unnoticed such
as the report from the Commission for the Reform of the Foreign Service
of the Spanish Cabinet Ofce, led by the ambassador Melitón Cardona in
2005
58
, should be recovered. It is interesting because of its comprehen-
sive approach, because of the date and because of the fact that Spain
rarely produces this type of document. It was already established in it
that the Foreign Service, on the one hand, had problems of an organisa-
tional nature that were re?ected in problems with planning, coordination
and the delimitation of capabilities and problems in the consular area.
Among the planning problems was the limited capacity for planning and
57
Marco, Christian and Moinet, Nicolas “L´intelligence économique”, Paris, Dunod,
2006, p. 120
58
Comisión para la Reforma Integral del Servicio Exterior. Ministerio de la Presidencia
(Commission for the Integral Reform of the Foreign Service. Cabinet Office), 2005, chaired
by ambassador Melitón Cardona,http://www.maec.es/SiteCollectionDocuments/Docu-
mentos/informe_CRISEX.pdf
Antonio M. Díaz Fernández
56
strategic preparation for action abroad. The report mentioned that “this
problem, which Spanish foreign policy has been sufering for decades,
means that that our country’s activity is moving within a new interna-
tional context with a short-sighted approach. Also, the design for the net-
work of Spanish missions abroad is inadequate. This problem is due to
the limited planning for Spanish foreign policy and a lack of ?exibility for
opening and closing diplomatic missions, a result of the existing complex
administrative procedures”.
The report also adds:
“There is a failure to de?ne the goals of Diplomatic Missions. The li-
mited planning together with our foreign policy means that Spanish
Diplomatic Missions do not have goals that make it possible to direct
and control their activity. This means that they work in a reactive way
and it is difcult to evaluate their actions objectively. The lack of Sec-
tion Heads in certain areas means a lack of prompt monitoring of these
topics, given that the Director of the Diplomatic Missions who is res-
ponsible for these issues must also be occupied with many other mat-
ters. The non-existence of certain Section Heads also means a need for
continuous travelling by civil servants from ministries with the skills in
these matters and as a result, a high cost in secondment”.
But ambassador Cardona also spoke about coordination problems.
Speci?cally:
“about the lack of sufcient inter-ministerial coordination, due in part
to the inefectiveness of the collegiate bodies responsible for such pur-
poses, such as the Foreign Policy Council which is the area where the
government’s general policy should be compatible with the priorities
of all ministries with foreign activity. Also, there is a lack of systematic
information ?ows which cause a large part of the coordination pro-
blems both in the Central Services and in the Diplomatic Missions. The
information is not transmitted from top to bottom nor horizontally be-
cause no guidelines have been set so that the information circulates
in all directions. There is a lack of coordination between the Mission’s
diferent departments, both due to poor circulation of information and
the erratic regularity of the coordination meetings. There is a lack of
suitable coordination of other national players with foreign activity”.
In France the Carayon
59
report, successor to the Martre
60
report, prepared
a decade before, marked a starting point in the development of strategic
intelligence that will be needed in the 21st century. Carayon explained
59
Intelligence économique, compétitivité et cohésion sociale, July 2003.http://www.
ladocumentationfrancaise.fr/var/storage/rapports-publics/034000484/0000.pdf
60
Intelligence Economique et Stratégie des Entreprises, February 1994.http://www.
ladocumentationfrancaise.fr/var/storage/rapports-publics/074000410/0000.pdf
The role of strategic intelligence in the modern world
57
that competitiveness needed economic intelligence policies and that
these have to be coordinated in order to be efcient. However, although
neither of the two reports establishes a unique de?nition of economic
intelligence, the ?rst does indicate that it should be based on four pillars:
i) encouraging this practice at company level, ii) optimising information
transfer between the public and private sectors iii) constructing databas-
es based on users’ needs and iv) mobilising the world of training and
education. A series of challenges that are slowly being developed in most
countries, including those where there is a clear wish to develop this type
of intelligence.
In Spain economic intelligence is included in the Spanish Security Strat-
egy (Estrategia Española de Seguridad). But, previously, the 11/2002 Act
of 6th May, regulating the National Intelligence Centre (Centro Nacional
de Inteligencia, CNI) included a key verb for developing the potentiality
of strategic intelligence and clearly, of economic intelligence. Its article
4 indicates that “to ful?l its goals the National Intelligence Centre will
carry out the following duties: a) Obtain, evaluate and interpret data and
disseminate the necessary intelligence to protect and promote Spain’s
political, economic, industrial, commercial and strategic interests and be
able to act within or outside national territory.” The verb ‘to promote’ is
key since it implies that the CNI can move from being an instrument fo-
cused on preventing threats to an instrument for development, including
economic intelligence, without doubt an evolution in the development of
our “strategic intelligence”.
Conclusions
The excessive use of the description “strategic” is widely accepted and
not only in the world of intelligence but also in that of marketing, per-
sonnel management and business decisions, among many others. The
end of the Cold War, in the ?eld of intelligence, generated the need to
redirect the function of some structures created speci?cally to ?ght in
eastern areas after the Second World War. And this is crystal clear. The
forced evolution of intelligence agencies is a reason for them to be con-
ceived and developed to basically ?ght against strategic surprise, no
matter how much the word “strategic” ?lls reports and declarations and
even leads to speaking about “strategic” nuclear arms, where we can
?nd little that is strategic. Overnight, a world that was almost surgically
divisible in half has been shown as plural, multi-faceted, complex and
strange. This scenario is where true strategic intelligence has its place;
intelligence that helps understanding, in its etymological sense, to ena-
ble political decision makers to understand what the challenges are in
the medium and long term, accepting the inevitable existence of strate-
gic surprises that, by de?nition, will always exist because uncertainty is
inseparable from life on Earth.
Antonio M. Díaz Fernández
58
To understand the world means evolving the Kent Trinity in its three di-
mensions. Organisations must be more adaptable, have analysts who are
allowed extensive and extended thought over time, away from the man-
agement of goals that destroys this type of human capital based on know-
how gained during years of experience and study. The product must also
change. Beyond continuous updates, greater awareness by political deci-
sion makers and what their needs are is required, which means greater
planning and monitoring by inter-ministerial coordination organisations,
something almost unknown, at least, in the Spanish approach. Finally,
processes must be modi?ed, mainly through a new relationship that has
to be established between intelligence consumers and producers, but
above all by making use of technology’s potential and escaping from con-
tinuous monitoring of the environment that will give us a lot of data, pro-
vided we know what we are looking for, and that is something that does
not exist without a true strategic approach to intelligence.
The State often plays a pioneering role because it includes activities that
are expensive or complex but that it usually abandons when the private
sector comes into play. In the case of economic intelligence this approach
is slightly more disputable since economic intelligence was important
centuries before the Cold War produced the ?rst intelligence services. We
could say that the State – once the Machiavellian Prince – is returning to
one of its original goals: economic information. The role that it will adopt,
either ofensive or counter-espionage to prevent other powers or compa-
nies draining its economic secrets, will be a debate that each state must
have with its own businessmen in deep discussions, since we cannot
speak directly about national companies as globalisation broke the “us-
them” reasoning that worked for many years. However, the duty to help
companies to protect themselves against economic espionage leaves us
with few doubts.
Therefore, without including the privatisation of intelligence, a very no-
ticeable rhetoric from the late nineties, there is a need not to duplicate re-
sources and to let organisations such as universities, centres of thought,
centres of analysis, computer centres and open sources take responsibil-
ity for part of the discourse about the new threats. We are not forgetting
that although intelligence needs are now very short-term, the intelligence
services’ true role is long-term strategic support and they should concen-
trate the majority of their eforts there; to forget this aspect in the interest
of daily efectiveness could lead to subsequent strategic surprises within
a decade.
Although it is true that we cannot associate the future of strategic intelli-
gence with that of economic intelligence, nor can we identify the current
delay in some facets as being due to oversizing the intelligence appara-
tus to focus it on terrorism, in the same way that we are not looking at
organised crime as the great threat that the parliamentary committee on
The role of strategic intelligence in the modern world
59
control of intelligence services 2001-2002 warned. But, ultimately and in
conclusion, the key factors for the success of economic intelligence pol-
icies, both for the State and for companies, will have to be their skill in i)
anticipating and not just comparing old scenarios ii) adapting structures
and laws to increasingly rapid processes and iii) establishing cooperation
networks mainly between the public and private sectors, especially be-
tween States that share the same general interests.
A visit to the oracle at Delphi in the centre of Greece is an illustration
about how to understand intelligence. The fortune tellers only gave their
predictions once a month and their preoccupation with the everyday was
diluted since their vision was about life, about essential elements, and to
do this they needed to dedicate time to thought. Various cities had their
own sites in Delphi, where they also kept their treasures and oferings,
a kind of meeting point for all those with an interest in knowing the fu-
ture and who attended to hear the predictions. And ?nally, the predic-
tions were not sure plans, they indicated how events or a person’s life
could progress and based on that, the integration between that “strate-
gic thought” and a correct reading of the everyday, the traveller to Del-
phi could have a map to follow for perhaps whole years of his life. This
means that it had a “reality” that could be known in advance. And for
years this was the belief of politicians; that with more resources they
would have the intelligence that would reduce uncertainty almost to
zero, and of intelligence communities which put their emphasis on re-
sources as an argument for achieving better analyses without acknowl-
edging that what they did not want was to issue reports through which,
inevitably, the next strategic surprise would be leaked. It is also true that
in Delphi there were hidden passages and smoke that rose out of the
subsoil that enabled magical appearances and disappearances but, the
rhetoric of the occult will always have its small element of mystery be-
yond the strategic element.
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63
Chapter II
A study on economic warfare and associated problems
Christian Harbulot
Abstract
The history of mankind is dominated by the power relationship of an
economic nature, identi?able at the diferent stages of progression: the
struggle for survival, colonization and slavery, territorial conquest and
trade, economic competition, the geoeconomic and competitive ?ghting.
But there is no recognized written culture on economic warfare in the
academic world. This gap can be explained by the lack of legitimacy of
the concept due to the desire to conceal the purpose of economic ?ghting.
The most visible expressions and irrefutable economic warfare as the
most contentious phases of colonization or the two opium wars have not
led to the beginnings of a reading grid. This article aims to ?ll this gap
in thinking about a reality that everyday becomes more demonstrative.
Unlike other countries such as the United States, South Korea and China,
Europe is powerless to address this problem.
Keywords
Economic war, survival, colonization, conquest, read gate/obliged read-
ings, concealment, strategy, increase in power.
Christian Harbulot
64
Introduction
Economic warfare is becoming an undeniable reality in international re-
lations, although it was considered for a long time as something exotic
by the university community. The intellectuals that criticise the strong
relationships between powers
1
have been obliged to give in, bearing in
mind the clear development of international relationships. In addition to
geopolitical events (such as the gas used by Russia as a weapon to rein-
force their status as a power or the questioning of the ?nancial suprem-
acy of the dollar by Iran) there have also been geoeconomic events such
as the diplomatic tensions between China and Japan over resources
or the protectionist policy defended by the United States against China
regarding the solar power industry. This diversity in situations empha-
sises the importance of a deeper reading of the con?icts linked to eco-
nomic warfare.
The beginning of the 21st century was marked by a questioning of the
positive vision of the development inherited from industrial revolutions
and from the relative peace from the globalisation of exchanges, as the
majority of liberal economists have stated. Similarly, the Pax Americana
that became ofcial due to the disappearance of the USSR, the begin-
ning of the end of history myth
2
, leaves room for risks of multi-polarised
con?icts due to the progressive limitation of resources, growing tensions
over the issue of energy, the structural crises of the Western world caused
by de-industrialisation and the desire for commercial conquest by new
players. In fact we are starting a long period of diferent tensions whose
monitoring cannot be limited to a mere comforting discussion about the
search for growth.
To analyse economic warfare
3
entails going from the implicit to the ex-
plicit, a difcult exercise taking into account the warring factions’ almost
universal desire to conceal the nature of their non-military con?icts. The
works carried out in the last sixteen years under my direction at the School
of Economic Warfare of Paris have enabled us to lay the foundations for
some compulsory reading to decipher the strategies for increasing power
through the economy and the strong relationships they generate.
Emergence of the founding principles of economic warfare
The history of humanity has been de?ned since our origins by two key
stages: the priority given to survival and the opposition between seden-
1
Badie, Bertrand, L’impuissance de la puissance, Paris, Fayard, 2004.
2
Fukuyama, Francis, La fin de l’histoire et le dernier homme, Paris, Flammarion, 1992.
3
Harbulot, Christian, Comment travailler sur l’absence d’histoire, report of 7th No-
vember 2012, www.lesinfluences.fr.
A study on economic warfare and associated problems
65
tism and nomadism. The theme of survival had been a predominant situa-
tion for the greater part of the world population until the beginning of the
industrial revolutions. It gave rise to the use of often systematic violence.
Violence and survival
Survival is one of the structural stages of the nature of economic con?icts
without having to refer to economic warfare, given the mainly individu-
al level of con?ict that was therefore limited collectively. Opposition be-
tween sedentary and nomadic towns has entailed regular con?icts such
as the origin of old Russia
4
shows.
“The Russian steppe is the extension of the Asian steppes and founded in
the Hungarian steppe. This continent of steppes – from the yellow sea to
Lake Balaton – is populated by nomads that, since pre-history, have trav-
elled vast distances searching for pastures. Coming from the depths of
Asia the nomads arrive at the steppe in waves. They expel the inhabitants
who, in turn, occupy the pastures of weaker villages.”
This warlike dance between the “barbarians” of the east and the town
populations in the west arose from the river and land trade between the
Baltic Sea and the Black Sea that lasted several centuries and played
a decisive role in the construction of Russian geopolitical space. Simi-
larly, the history of ancient China is marked by repeated invasions of
Turkish-Mongolian nomad villages. The ?rst version of economic warfare
came from this dialectic nexus between the accumulation of wealth of
the sedentary village and the rapid incursion of the nomad into foreign
territory to carry out pillaging.
Resources and territories
The issue of resources is at the centre of the problem of developing civi-
lisations. In the 15th century BC the Pharaohs of the new empire
5
needed
three natural resources: wood for constructing monuments and ships,
along with copper and tin, whose alloy in the form of bronze was used in
those days to make tools and weapons. The maritime (the Mediterranean,
the Channel and the Baltic) and land (the silk and tin routes) trade routes
became sources of recurring con?ict.
The progress of humanity between the Ancient and Modern Eras widened
the spatial ?eld in the process of economic con?ict. Thus piracy became
4
Heller, Michel, Histoire de la Russie et de son empire, Paris, Champs, collection his-
toire, 1999, p. 55.
5
Grandet, Pierre, Les pharaons du Nouvel Empire: une pensée stratégique (1550-1069
av JC) Paris, éditions du Rocher, 2008.
Christian Harbulot
66
a real power lever. Attracted by the gains of the triangular trade
6
, the
English pirates were warriors, precursors of future British Royal Navy. At
sea and on land, the warring factions integrated the economic dimension
to their military and diplomatic strategy.
At the end of the Middle Ages some monarchs turned to the economic
weapon
7
to support military action. In his prolonged ?ght against Charles
the Bold, Louis XI mobilised his ?eet to disrupt supplies of grain and her-
rings from Flanders, belonging to the House of Burgundy. The king of
France also pressured bankers to dissuade them from ?nancing the cost
of his rival’s war and promote the creation of trade fairs in Lyon to reduce
the income from the trade fairs in Geneva, which was an exchange point
for the trade routes between Germany, Italy and Burgundy.
The security of territory and of its urban and rural wealth was perceived in
the 17th century as a strategic priority for certain states in the process of
constitution. The seven United Northern Provinces
8
against Spain produced
the ?rst survival model made up of a network of bastions, reinforced by the
use of streams and rivers as a natural defence. The France of Vauban made
its own by creating forti?cations along the new frontiers that emerged af-
ter the conquest of territories in the north of the kingdom. This defensive
barrier led to the “Pré carré”
9
concept that has a modern signi?cance by
including the external area of in?uence (diplomatic, military and economic).
Security of territory was also defended indirectly through economic con-
cessions given to an ally State, taking advantage of its military suprem-
acy. In 1373 Portugal signed a treaty with England
10
to bene?t from its
protection. Through this diplomatic act Portugal sought to escape volun-
tary annexing to Castile. This alliance rati?ed under equal conditions was
gradually transformed into an English protectorate, as the English gave
their military support in exchange for ?nancial and commercial domi-
nance over Portugal that lasted several centuries.
The difcult dynamics linked to colonisation
The constitution of empires is inseparable from the processes of coloni-
sation that marks the history of humanity. Military con?icts that originate
6
Triangular trade flows from the early stages of colonisation of America. It covered
the slave trade between Africa and the U.S. as well as trade between the colonies and
the European continent.
7
Favier, Jean, Louis XI, Paris, Fayard, 2001, p. 754.
8
Cornette, Joël, Le roi de guerre, essai sur la souveraineté de la France du Grand Siècle,
Paris, Petite Bibliothèque Payot, 2010, p. 42.
9
Bitterling, David, L’invention du pré carré. Construction de l’espace français sous l’An-
cien Régime, Paris, Albin Michel 2009.
10
Lacoye Mateus, Alice, Harbulot, Christian, La complexité des rapports de force écono-
miques, Paris, Revue Française de Géoéconomie, April 2008.
A study on economic warfare and associated problems
67
from them are strongly related to economic challenges. Colonisation is the
basis of empire creation that serves, in particular, to ensure dominance
over underground riches and resources as well as over trade routes. The
capture and exploitation of human beings was one of the clearest man-
ifestations of the strong relationships generated by the desire for prof-
it. As Jane Burbank and Frederik Cooper
11
, lecturers at the University of
New York, con?rm: “In Great Britain, France and certain regions of the
Portuguese and Spanish empires slavery was pro?table to the empire
and the empire made slavery possible”. Economic warfare was present in
all phases of colonial development, regardless of whether it referred to
the dynamic of expansion of the Roman Empire or the construction stag-
es of the European maritime empires starting from the 16th century. The
most paradoxical element, from my point of view, about the formation of
this principle is that it is not acknowledged as one of the recurring ele-
ments in con?icts linked to the globalisation of exchanges.
The colonisation of North America shows in a very educational way the
superposition of con?icting rationalities created by economic challeng-
es. The Thirteen Colonies, established along the Atlantic coast between
French Canada and Spanish Florida, were ?rmly settled from 1733. The
settlers had begun to plant cotton in the 17th century. This planting pol-
icy developed on a mass scale at the end of the 18th century, producing
what would later be called “the triangular trade”. The British ships car-
ried manufactured products and spirits to West Africa to exchange them
for slaves who were ofoaded in the West Indies and in the south of the
Thirteen Colonies. The ships later returned to Great Britain with a cargo
of cotton, rum, sugar and tobacco, a result of the slaves’ work.
The American settlers considered themselves as harmed by their relation-
ship with England due to tax pressures and the trading restrictions with the
rest of the world imposed by the Crown. Great Britain had the advantage in
all cases since a substantial proportion of the merchandise imported from
the New World was re-exported to continental Europe by the island’s trad-
ing companies. The pro?ts obtained from these transatlantic trade trans-
actions contributed to the development of the British Empire’s Asian trade.
The accumulated wealth intensi?ed desires that gradually turned into
tensions, into strong relationships and into armed con?icts between Eng-
land and its colonies, between them and the native Indians and between
the two rival kingdoms of the time, England and France.
Control of trade routes
England built its power through the sea and trade. Initially the England
of the 16th century was a poor country without any real military capac-
11
Burbank, Jane and Cooper, Frederik, Empires, De la Chine ancienne à nos jours, Paris,
Payot 2011, p. 246.
Christian Harbulot
68
ity for expansion abroad. Its power was much less than the kingdoms
of Spain and Portugal, which at that time dominated the seas thanks
to their navigation techniques, to their pioneering marine cartography
and to their naval strength. Unlike the Spanish and Portuguese, the
English were not missionaries or settlers. When the English decided
to use the sea as a medium for expansion they had to ?nd immediate
pro?ts. Their situation of weakness compared to their opponents’ war
?eets led them to turn to piracy. English pirates and buccaneers stole
precious metals being transported by the Spanish and Portuguese
from South America. During the reign of Elizabeth I the British trade
networks extended towards Turkey and Russia. If the demand for sug-
ar attracted the English merchants to the Caribbean, the demand for
spices, tea and cloth led them towards Asia. The incorporation of the
kingdom of Scotland into the kingdom of England, which gave rise to
the birth of Great Britain in 1707, led to the creation of a major sector
of the era’s free trade and also to the appearance of the world’s ?rst
mass consumer model for imported products, such as tea, cofee, to-
bacco and sugar.
During the 17th century the English made use of the enormous commer-
cial potential of their overseas acquisitions. The creation of the British
East India Company (BEIC) opened the way for colonisation in India. Com-
mercial aggression by the English company from the East Indies led it to
progressively adopt a political-military position on the Indian subconti-
nent. It had to recruit local troops to be able to carry out armed operations
against regional sovereign states that protested against its supremacy.
The increase in the colonial military framework was also the result of
rivalry between the diferent European empires.
The development of exchanges between the continents thanks to trian-
gular trade encouraged the English to take control of the main sea routes
beyond Western Europe, not only towards the East Indies but also to-
wards the Baltic, North America, the Mediterranean and West Africa. The
origin of the economic challenges of the Anglo-Dutch wars between 1684
and 1784 was:
• Control of the main trade routes.
• Con?scation of trade trafc with the British colonies.
• Questioning of the dominant position acquired by the Dutch East
India Company (Vereennigde Oost-Indische, VOC
12
)
The Dutch had established the basis of a trade empire from one private
dynamic. The VOC was a trading company that emerged from the matri-
monial alliances of family and provincial groups. In two centuries it built
12
Burbank, Jane and Cooper, Frederik, Empires, De la Chine ancienne à nos jours, Paris,
Payot, 2011, p. 219.
A study on economic warfare and associated problems
69
a true commercial empire
13
that made it the most in?uential company
among the European companies founded in the 17th century to exploit
Asian wealth. But the private nature of VOC did not enable it to confront
the warlike versatility of the Spanish and Portuguese empires that were
seeking to gain control of the spice trade from the Indonesian archipel-
ago. It had to incorporate the mechanisms of armed conquest inspired
by the Portuguese model into its commercial development. In 1699 the
VOC was the major private economic force in the world and had military
strength in line with forty warships and ten thousand soldiers. Great Brit-
ain entered into the con?ict with it to break its strategy of a monopoly on
the trade between America and Asia.
Great Britain’s protection of the trade routes and with it its economic
prosperity de?ned British foreign policy and brought with it military oper-
ations during the empire’s duration. Numerous examples of armed ?ghts
illustrate these events:
• From the time when Great Britain felt its interests were threatened
in India by the Russians’ expansion to the south and east, protec-
tion of India against them via land and sea became the main axis
of Victorian foreign policy. Hence the military con?ict with Tsarist
Russia in central Asia that was still a “weak point”, far from Euro-
pean colonial expansions. The two Anglo-Afghan wars, the ?rst be-
tween 1839-1842 and the second between 1878-1880, show this
strategy.
• The opium wars
14
(1839-1842 and 1856-1860) between the United
Kingdom and the Quing Empire had an economic purpose. Great
Britain wanted to force the Chinese Empire to open up to interna-
tional trade. One of the goals of the British Empire was to obtain
the cession of the territory of the city of Hong Kong from China, in
order to store opium and trade with it in China. This is a clear ex-
ample of a military act in service of an economic goal.
• Prime Minister Disraeli’s decision to acquire part of the Suez Canal
titles in 1875 was intended to stop France from taking control of a
key trade route.
• The occupation of Egypt ensured the British Empire’s maintenance
and control of the strategic platform of Cairo.
13
The VOC was a real State within a State. It ensured the main regulatory functions
(police, defence, justice) in its business offices of the East Indies. It decided on war or
peace with the native princes, therefore having autonomous diplomacy.
14
In the mid-19th century westerners sold several tens of thousands of boxes of
opium a year in China. The British demanded payment in silver ingots to recover part of
the funds they paid the Chinese in the tea trade. This opium traffic enabled the British
Empire to reverse the imbalance of the exchanges with this country in its favour. The
opium war raised an unfair relationship that generated greater and greater corruption
between Chinese civil servants and caused problems among the population.
Christian Harbulot
70
• The war declared by the British Empire against the Boers was jus-
ti?ed by control of the strategic point that the city of Cape Town
represented. The British prepared this base at the tip of Africa with
the aim of setting up an emergency maritime route in the case of
Suez closing. Consequently part of the territory governed by the
Boers was revealed as one of the greatest gold reserves in the
world.
The British example showed how predominance of a power in the control
of trade routes becomes a decisive weapon in geo-strategic con?icts.
The overlapping of war and the economy
The revolutionary and Napoleonic wars, spread out between 1792 and
1815, emphasised the in?uence of the economy on the development
of strong relationships between the countries involved in this series of
con?icts under alliances. In this regard, the economic repercussions of
blockades were a great in?uence on the strategic changes in France and
Russia.
The in?uence of economic con?icts on the war’s direction
The Prime Minister William Pitt, whose family fortune came from An-
glo-Indian trade, was ?xed on a line of action to preserve Great Britain’s
dominant position in the trading world through control of the seas. His
strategy was to support the Royal Navy that represented the only major
force, compared to the military capacity of revolutionary and subsequent-
ly Napoleonic France. Whilst the Prussian alliance with Great Britain
fought the French and their allies in Europe, the Royal Navy undermined
the economic potential of the common enemy by preventing France from
trading by sea. The key point of the policy followed by Pitt was to establish
an indisputable maritime advantage. He obtained parliamentary support
in London to increase the British ?ghting ?eet up to 105 ships. This naval
arms race gave England a decisive advantage since the French ?eet only
had 70 ships.
For the ?rst time in history an economic war became global with the
appearance of two blocking systems used by the warring factions:
England’s Maritime blockade against France’s continental blockade
15
to cut British exports to Europe. Previously the blocking actions only
had any efect on port cities. The origin of the two blockades was the
reciprocal desire of the French and English to use economic reprisal
15
The blockade was effective in countries allied to France and in countries occupied
by its troops (Italy, Spain, the Netherlands, Lower Germany and Denmark).
A study on economic warfare and associated problems
71
measures strategically to achieve a favourable outcome to the con?ict.
This is what happened but not exactly as Napoleon had expected, since
the removal of Russia from the “continental system” sought by France
triggered the Russian campaign, which was so disastrous for the Na-
poleonic Empire.
This overlapping of war and economy gave rise to the birth of the ?rst
mechanisms in economic warfare that extended into peace time. At the
end of the 18th century France was very weakened industrially by the
war efort made during the revolutionary wars against Europe of the
monarchies. Napoleon con?ded to Jean-Antoine Chaptal
16
, a scientist,
about a mission to ?nd a way to revitalise French industry and protect it
from British trade threats. This desire for revival in production required
a recovery in terms of innovation. Napoleon wanted to know above all
the strong and weak points of the British economy and con?ded this mis-
sion to a Society for the Stimulus of National Industry (Société d’Encour-
agement pour l’Industrie Nationale, SEIN) that organised a mechanism for
observing discoveries on the other side of the channel. With a handicap
of between ?fteen and twenty years in technical knowledge, the French
manufacturers had to imperiously cover that disadvantage through all
media, including the use of illegal practices of smuggling in machines
either bought or stolen on British soil.
In the context of the ban on the importing of English products that be-
gan in 1793, Napoleon consolidated this economic defence system by the
militarisation of Customs
17
. His minister Chaptal considered this admin-
istration as “a guarantor of French industrial independence”. Customs
represented 20% of the administration’s total staf in 1815 (excluding the
army). This trade exclusion policy regarding Great Britain was extended
in the Restoration period under the management of Saint Cricq, the Direc-
tor General of Customs, who was kept in this position until 1824, the year
in which he became Minister of Commerce under Charles X.
Ideological ?ght and strong economic
relationships between powers
Despite the enormous economic cost of the wars against France, Great
Britain stayed in a position of strength. The industrial revolution, which
began many years prior to that on the continent, put its manufactured
products in a very advantageous competitive position. Its colonies guar-
anteed a large supply of raw materials and its naval supremacy enabled
it to block the main maritime trade routes. Consequently, London was
16
At that time Chaptal held the roles of Minister of the Interior and of Industry.
17
Todd, David, L’identité économique de la France, Libre échange et protectionnisme,
(1814-1851), Paris, Grasset, 2008, p. 64.
Christian Harbulot
72
interested in promoting the disappearance of customs barriers in order
to sell its products in other countries, especially in Europe.
To break the protectionist barriers maintained by France, the British gov-
ernment granted a greater strategic dimension to the techniques emerg-
ing from economic warfare in times of peace. The press and publishing
18
performed a decisive role in that strong relationship. London sent the po-
litical economist John Bowring
19
to Paris as head of the British commis-
sion responsible for negotiations on free trade. The reasons that led the
university student David Todd
20
to present John Bowring as an in?uential
agent at the service of the Crown were his working methods whose main
goals were, ?rstly, to create pressure groups in France supporting British
arguments and secondly, to use the local press so that his ideas would
reach the circles of economic and political power. His management was
summarised as follows:
“In 1834, through a series of letters sent to Lord Auckland, president of
the Board of Trade, Bowring explains in detail the strategy he is devel-
oping in France on his travels. In each city he visits he tries to gather
and form a group of supporters of free trade. Then he continues intense
correspondence with these supporters to direct them towards a common
goal: overthrowing the monopolies. The groups are responsible for the
liberal ideas in the local press and formulating solemn declarations sup-
porting a free market. Thus, they managed to favourably in?uence pub-
lic opinion: the opinion, the illustrated opinion – is the best instrument for
achieving our goal – without it we will not have the least progress; with it we
will achieve everything”.
John Bowring started to attack Saint Cricq’s ideas, considering that he was
an enemy of England
21
. He focused his activity on the exporting regions
(silks in Lyon, wine in Bordeaux). The goal of his numerous interventions
in the French circles of power was to encourage them to denounce the
prohibitive French system. He sought support in regions snatched from
the English in the 100 Years’ War, such as Aquitaine, where many wine
producers opposed the customs duties
22
. Another form of approach used
by Bowring was the dialogue he established with French liberals such
as Benjamin Constant and Jean Baptiste Say with whom he maintained
contact as a politician. Bowring knew how to take advantage of the inter-
nal contradictions of the French political world, supporting organisations
18
In 1834, in Paris, 6,500 copies of liberal economy treaties and manuals were printed.
19
He was also involved in Switzerland, Italy and Germany.
20
Ibid. p. 183.
21
Ibid. p. 199.
22
French wine growers were very powerful at that time, representing a tenth of the
population actively involved in either main or secondary grape producing activities, that
is, two million people.
A study on economic warfare and associated problems
73
of anti-government republican press that ranged from the centre left to
the extreme right. He knew how to collect the results of his labour on the
ground and encouraged his supporters to draw up collective petitions,
demanding the abolition of the protectionist barriers imposed by France.
Creation of structures dedicated to economic warfare
The First World War
23
established bases of economic weapons as a way
to achieve a de?ned goal. From 1914, aware that the con?ict would be
long, the involved powers conceived a strategy for economic warfare, as
the French note
24
below sent to the military attaché of the United States
in Paris certi?es:
“After the battle of the Marne, faced with the new movement from the war
the high command understood that it would be long and it would not be
enough to ?ght the enemy on the ?eld of battle but it also had to be fought
on their own terrain; preventing enemy armies having material available,
morally and physically undermining the entire population, cutting of the
necessary raw material supply for their industry, collapsing the economy,
blocking their ?nances, even afecting the food supply. These are the ba-
sic ideas on which economic warfare is based”.
In 1915 the French War Ministry organised a system dedicated to eco-
nomic information. A Control Section was created, managed by Jean
Tannery
25
, a senior public ofcial at the Court of State Auditors (Cour des
comptes). This section organised the collection of information required to
put into practice the activities of economic warfare:
• Identi?cation of the axes for German supplies and study of the ar-
rangements that would have to be made to hinder this supply.
• Monitoring of the organisation and development of the German
war industry.
• Preparation of plans for destroying industrial centres.
• Preparation of lists of companies connected to the enemy.
• Application of restrictions and quotas.
• Control of economic ?ows in order to prevent German foreign eco-
nomic relationships.
Great Britain organised itself diferently using an independent body, the
War Trade Department Intelligence, which in turn reported to the Foreign
Ofce. In 1916 the Italians created the Ufcio di raccolta e controllo di noti-
23
Soutou, Georges-Henri, L’or et le sang, les buts de guerre économiques de la Première
guerre mondiale, Paris, Fayard, 1989, p. 566.
24
Revue Historique des Armées, Paris, No. 4, 2001.
25
Bourlet, Michaël, Guerres mondiales et conflits contemporains, Jean Tannery (1878-
1939) à l’origine de la guerre économique, Paris, PUF, 2004.
Christian Harbulot
74
zie economiche, linked to its War Ministry. These structures were coordi-
nated by an Inter-Allied Bureau with its headquarters in Paris.
Throughout the war the activities of economic warfare were already fo-
cusing on international goals such as rationing the countries of Northern
Europe, in order to force them to stop exports to Germany or with military
operations carried out thanks to developments in aviation, such as bomb-
ing selected stations in Lorraine that, while occupied, provided three
quarters of the iron ores needed in the German iron and steel industry.
In 1918 the French, British and Americans agreed on the criteria for the
goals that had to be achieved. For Paris, the economic weapon was not
only a weapon of war to force Germany to sign for peace but also the pos-
sibility of preserving the advantages won in the event of victory. France
wanted to reach an understanding between the allies on how to keep Ger-
many in a weakened economic situation by jointly controlling raw mate-
rials. For Washington the economic weapon took the role of a strategic
and political in?uence that would force Germany to sign an acceptable
peace treaty and put an end to its economic expansion
26
. Raising the prin-
ciples of economic liberalism, the United States sought to ?nd itself a
place within the world market whilst London followed Washington’s line
although maintaining its own interests (protection of main industries,
special relationships with the Dominions on the question of control of raw
materials).
Economic warfare structures disappeared at the end of the war. At the
beginning of the Second World War, in September 1939, Neville Chamber-
lain, the British Prime Minister, created a Ministry of Economic Warfare
with similar powers to the structures developed during the First World
War. In July 1940 Winston Churchill gave this Ministry a very ofensive
role by allocating it a new service, the Special Operations Executive, which
was responsible for sabotage operations on the continent and for prompt-
ing rebellion and resistance in territories occupied by the German ar-
mies. The notoriety of this new organisation meant that speci?c aspects
of economic warfare shifted onto a second level. This Ministry ceased its
activity after the defeat of Nazi Germany.
If the overlapping of the economy and war was obvious, for some decades
the problem of economic warfare in the second part of the 20th century
again became invisible for the following reasons:
– The cold war forced the Western Bloc countries to squash or dis-
guise their economic disagreements, prioritising the image of an
ideological unit facing the Communist Bloc.
– The United States, the new world superpower, made the British
strategy of applying pressure to end the protectionist barriers on
26
Hauser, Henri, Les méthodes allemandes d’expansion économique, Paris, A. Colin, 1919.
A study on economic warfare and associated problems
75
continental Europe its own. The texts on free trade and free com-
petition became obligatory reading in the economic reality of the
Western political world. Strong economic relationships between
powers were silenced or were considered within the university
community, in particular by the majority of liberal economists, as
unrepresentative anomalies of the competitive relationship be-
tween companies.
The geopolitical justi?cations of conquest
The search for obligatory reading on economic warfare involves simulta-
neously analysing the progress of the conquest mechanisms (territorial
and commercial) and the States’ methods of power development.
Commercial conquests began to replace territorial conquests during the
19th century. Unlike territorial conquest often carried out turning to tradi-
tional war, commercial conquest tends to increase the State’s supremacy
by expanding its circles of power over foreign markets.
Historically some powers did not hesitate, almost publicly, to discuss
their expansion, which was necessary for their survival. This was par-
ticularly the case with Japan and Germany, which on several occasions
spoke about their living space in terms of territorial conquest or commer-
cial conquest.
The conquest against commercial imperialism
From 1853
27
, Japan was under the control of Western countries. In the be-
ginning the Japanese bowed to initial Western pressure, signing a treaty
on 31st March 1854 in Kanagawa that con?rmed the opening of Shimoda
and Hakodate ports to commercial ships under the American ?ag. In the
following years England and the main European powers obtained equal
privileges. In 1867 when the young emperor Mutsuhito (whose reign
would be called Meiji Tenno) came to the throne he modi?ed the terms of
the strong relationship. Listening to reformists the young king wanted to
avoid falling back under the domination of the West (as was the case with
China during the same period under the “unequal treaties
28
”).
27
This was the year during which an American fleet made up of four warships sent by
Commodore Perry appeared in the Bay of Tokyo. He was carrying a “friendly” letter from
the President of the United States for the shôgun of the Tokugawa family. After a second
layover in 1854 Commodore Perry demanded the shôgun to open Japanese ports up to
American merchant ships and whalers.
28
The result of the Chinese military defeats against Western troops, the unfair treaties
signed in the 20th century between China and Western powers as well as Russia tried
to force China to open up its domestic market.
Christian Harbulot
76
The strategy applied by Japan took a very signi?cant slogan: rich country,
strong army. The Naimusho, founded in 1873, was the ministry responsi-
ble for industrial development planning. It built state factories inspired by
European manufacturer models and discreetly fought to prevent foreign
capital taking over the strategic economic points of the emerging Japa-
nese market (port infrastructure, naval shipyards, armaments industry).
The modernisation of Japan was carried out within a policy framework of
all types of knowledge acquisition acquired abroad, following the exam-
ple of countries more experienced in the ?eld.
At the beginning of the 20th century, Japanese expansion (the annexation
of Korea, acceptance of a responsibility over China) caused antagonism
with the United States, who wanted to leave a door open in China. Be-
noit Meschin
29
summarised the report on the strengths between the two
countries after the Washington
30
Naval Conference in 1921 like this:
“Linked by the Washington agreements, excluded by the United States
with its new immigration law, complicated in its economic development
by the increasingly severe restrictions imposed by the American cus-
toms service on the importing of Japanese products into the United
States; what could Japan do so as not to be con?ned to their islands
and solve the dramatic problems originating from the ever faster rise
in its population?”
After initially seeking to break isolation by turning to a kind of colonisa-
tion of Korea, Japan considered that it would be essential to build up an
area of shared prosperity at a regional level
31
that would regroup all the
countries occupied by the Japanese Imperial Army during the empire’s
expansion phases. The occupation of Manchuria in 1931 is included in
this perspective.
The founding of the State of Manchukuo, a year later, is an example of
the reproduction of militarised conquest systems invented by the Portu-
guese and imitated by the Dutch and English at the beginning of colonial
processes in Modern History. The Japanese copied the model of the old
India Company but were also inspired by the development produced by
the American railway companies that built an industrial empire by con-
necting the East to the Paci?c coast. At the end of the thirties Manchukuo
was under the Manchu railway company administration
32
that governed
29
Meschin, Benoit, Histoire de l’armée allemande, volume 1, Paris, Robert Laffont, col-
lection Bouquins, p. 847.
30
The United States rejected marine equality with Japan and made it disarm part of
its war fleet.
31
The shared prosperity area project of eastern Great Asia was proposed by General
Hachir? Arita, Minister of Foreign Affairs from 1936 to 1940.
32
Over 75% of the company’s income came from exporting soybean to Japan and
Europe. In 1927 half of the world’s soybean came from Manchuria.
A study on economic warfare and associated problems
77
this territory in a relatively autonomous way with regard to Tokyo. It di-
rected the occupying Japanese troops, managed its own police force, ran
a local administration of over 200,000 employees and had its own issuing
bank as well as merchant ?eet. The State of Manchukuo was used as an
experimental laboratory for a new supremacy concept of power by using
the economy.
Conquest of living space
German history is marked by the search for new territories to be con-
quered, whether peacefully or by using force. From the beginning of time
Roman writings gave accounts of particularly difcult living conditions
in German villages. Covered in forests and not very suitable for agricul-
ture, the territories in Northern Europe did not enable its population’s
subsistence. To survive, German villages had to conquer more prosper-
ous territories for subsistence. This conquest strategy was carried out
on the land and by sea. At the end of the Middle Ages German colonies
had started to be established in the east of Bavaria. Bankers, such as
the Fugger family from Augsberg had ?nanced the exploitation of Czech
mines and forests. This commercial exchange enabled them to peaceful-
ly conquer the old markets of the Slav princes with this being the begin-
ning of the development of the territories of Bohemia and Moravia. This
colonisation was not always peaceful. The Polish rejected it and opposed
the Teutonic Knights.
The foundation of the Hanseatic League
33
opened the path for maritime
conquest. The expansion of the Baltic ports gave Germany as well as the
cities in Northern Europe the resources to become established peacefully
on the Polish coasts between the 16th and 17th centuries. Military cam-
paigns carried out by the Prussian family Hohenzollern completed the
creation of a sphere of in?uence to the east of Germany.
This constant search for living space outside borders permanently
shaped a sharp sense of distribution of strengths in the spirit of the
elite Germans. The debate about the strategic opportunity of territo-
rial conquest or commercial conquest dominated political life in the
Second Reich. Bismarck’s preparation of Germany enabled the coun-
try to take on an influential global role. Germany’s increase in power
at the end of the 19th century was not limited to the movement by
the German economy into the industrial era. The mobilisation of Ger-
man economic figures is inseparable from the geostrategic positions
of the Second Reich that were strongly determined by the attitude of
the British and French colonial empires. The strategic German heart
33
Association of German merchants and later of North German cities and Northern
Europe that dominated Baltic trade between the 12th and 17th centuries.
Christian Harbulot
78
(Konzern
34
, banks, insurance companies) shaped in that era wanted to
dominate other European powers.
This dimension to the debate did not escape German adversaries such
as Georges Clémenceau who, from 1915, estimated that the danger from
Germany was worse in peacetime than in war, due to the way in which
Germany had discovered how to develop a competitive economy capable
of competing on a worldwide level with the British Empire economy.
The First World War caused disputes to arise about how to manage hy-
pothetical military victory in geoeconomical terms, once peace had been
achieved. The result of this re?ection on Germany appeared in 1915 with
a work that can be considered today as the draft of an economic warfare
manual. It was translated into French under the provocative title of “The
German Business War Plan
35
”. From the beginning of the book the conno-
tation is obvious: “all business is a war, the world is a battle?eld”. It was
later called by the Americans the Bernhardi
36
of Business; Herzog de?ned
the economic action resources to be put into operation against the Reich’s
enemies. There were two types:
– The factors that may in?uence or control exports in commercial
war.
– The factors that would enable Germany to overcome the passive
resistance in defeated countries.
In the event of victory against the allies Germany knew that it had to face
“world hate”. Then it would have to face all kinds of reprisals in the de-
feated countries (supply or raw materials stopped, boycott on its exports,
censure of its scientists at international meetings or the poaching of their
cutting-edge technology). To justify its fears Herzog quoted an English
technical magazine that, at the beginning of hostilities, insisted on the
need to launch an economic war against Germany based on science. The
British still held resentment from Victorian times due to the stealing of
their techniques by the Europeans and Americans. The secret nature of
inventions and therefore control of science was for them the basis of all
economic warfare. To keep the economic wealth of his country Herzog
suggested state control be applied “to the industries that foreign coun-
tries have not yet stripped of their capacities”. Despite defending this
measure he did not question the market economy. Private initiative had
to be protected without prejudicing the nation’s economic interests. The
pro?t motive encouraged businessmen to relocate their companies to
countries which appropriated manufacturing secrets and so became po-
tential competition.
34
Association of companies that were developed through horizontal and vertical
concentration.
35
S. Herzog, Le plan de guerre commerciale de l’Allemagne, Editions Payot, Paris, 1919.
36
German General (1849-1930), theorist of Pan-Germanism.
A study on economic warfare and associated problems
79
As soon as the work of Herzog became known, the Americans had it
translated and they spread it extensively. Herbert Hoover, the American
Supplies Minister and future President of the United States, stated in
the preface of the book’s American version that the threat of economic
con?ict had been clearly understood in this book at the beginning of the
century: “not satis?ed with military supremacy, Germany was intrigued
by commercial supremacy, with an insulting snub towards the rights of
others and use of bad faith that has characterised its entire policy since
Frederick the Great”.
Covering up economic warfare
From ancient times until the time of industrial revolutions, economic su-
premacy was a constant in the nature of strong relationships between in-
dividuals, groups and States. Professor Edward Mead Earl of the Institute
for Advanced Study has recalculated the dialectic relationship between
the political and economic dimension of power
37
:
“If it were possible to separate economic and political power this would
only occur in the most primitive societies. In modern times (with the
emergence of the National State, expansion of European civilisation
throughout the entire world, the industrial revolution and constant
progress in military technology), it has been necessary to face the is-
sue of the interdependence between commercial, ?nancial and indus-
trial strength on the one hand and political and military strength on
the other. This correlation is one of the trickiest problems in the art of
government. It afects a nation’s security and, to a great degree, de-
termines the quality of life, freedom, property and happiness that an
individual can have”.
The same is true with the realist theory of international relations: despite
having ignored the economic aspect in the search for power, the “animus
dominandi” is described as a constituent element of all human associa-
tions and social relationships and therefore of national and international
political life. Hans Morgenthau
38
emphasised that international policy is
a ?ght for power. But power is not only military. However, unlike military
war, economic warfare did not become a subject for debate in political
and academic circles.
How to explain such an omission of strong relationships in compulso-
ry reading with regard to the con?ictive relationships between peoples?
From the early Middle Ages the nature of the historical phenomenon that
is economic warfare has been denied on the pretext that the political jus-
37
Mead Earl, Edward, Les Maitres de la Stratégie, volume 1, Paris, Flammarion, 1986.
38
Morgenthau, Hans, Politics Among Nations. The struggle for Power and Peace, New
York, Mac Graw-Hill, 1948, p. 29.
Christian Harbulot
80
ti?cations of economic warfare are perceived as actions of illegitimate
aggression. The debate on war, barely started by Saint Augustine and
Saint Tomas Aquinas, established the bases for the reasoning that iden-
ti?ed economic warfare with “a negative vision of war triggered by greed
and the desire to get rich at the cost of others
39
”. The idea of injustice
was quickly associated with wars of conquest. During the discovery of the
New World the conquerors had to justify the use of arms against towns
that opposed the conquest of their territories. The text De jure belli from
the Salamanca School (16th-17th centuries) classi?ed the indigenous re-
bels as disloyal enemies for adopting an impossible attitude against their
conquerors. In this way, through the seizure of property and the capture
of indigenous rebels (the spoils of war), punishment was justi?ed in the
eyes of the Christian world.
The results of this ideological debate, strongly instilled in the history of
political ideas, encouraged state ?gures in economic con?icts to hide their
strategy by using diferent pretexts such as the spreading of religious
thought, the modernisation of third world countries and, the most recent
way, the development of democracy. This policy, almost systematic in its
concealment of the true goals of conquest, distorted the interpretation of
the strong relationships linked to a people’s survival process or caused
by the search, maintenance and increase of a country’s power. Maybe a
relationship could be found in the fact that, today, there is no doctrine
on economic warfare within international military organisations such as
NATO (North Atlantic Treaty Organisation). Within the global focus de?ned
by the new doctrine (NATO) 2010
40
, the use of economic weapons never
appears as an ofensive option but as a factor for understanding the en-
vironment. This type of omission can be explained by the diferences in
domestic economic challenges within the community of member states
41
.
The disguising of economic warfare is applied both to domination strat-
egies put into operation by colonial empires and recovery strategies by
countries that wanted to avoid colonisation or that later sought power.
Dominance strategies
The religious question contributed to hiding the true purpose of con?icts
that involved considerable economic bene?ts. A papal bull of 1452 gave
39
“Où en est la notion de guerre juste?”, François Rigaux, Emeritus professor of inter-
national law at the Louvain Catholic University, published in the work Colère, Courage,
Création politique, volume 1, Paris, L’Harmattan, 2011, pp. 163-177.
40
OTAN “Concept et doctrine “, official site.http://.www.nato.int/nato_static/assets/
pdf/pdf_publications/20120203_strategic-concept-2010-fr.pdf.
41
Mazzucchi, Nicolas, “Alliance militaire et guerre économique”, Revue de la Défense
Nationale, No. 752, Paris, 2012, pp. 1-3.
A study on economic warfare and associated problems
81
carte blanche to the Portuguese to attack, conquer and subdue the Sara-
cens, pagans and other in?dels. A second papal bull of 1454 recognised
the Portuguese acts of conquest in Africa by contemplating the possi-
bilities of converting the local populations to Christianity and ratifying
the Portuguese commercial monopoly in a territorial area on the Guinea
coast as well as all the territories presumably located on the silk route.
In 1494 the Treaty of Tordesillas
42
was negotiated under the authori-
ty of the Catholic Church with the Spanish-born pope Alexander VI. He
was looking for a resolution of con?icts caused due to the discoveries of
Christopher Columbus and established the distribution of the lands of the
New World between Spain and Portugal, which were the two emerging
colonial powers. The Portuguese also obtained papal recognition of their
conquests of African territories and claimed the right to inspect any ship
in African waters. This treaty was not recognised by any other European
kingdom. Above all, it explained the reality of the strong relationships
between the two dominant maritime powers in that era.
After having been hidden under the pretext of evangelisation of peoples
that were considered primitive, the disguising of economic warfare was
the consequence of a new phase of development of power at the dawn of
the industrial revolutions. If military war had evolved thanks to technical
inventions, the notion of power had been the subject of an authentic met-
amorphosis under the impact of the creation of economic empires. The
birth of liberalism championed a new way of increasing power through
commercial conquest that in turn became an alternative to traditional
territorial conquest. The Victorian empire integrated the dynamic of eco-
nomic warfare, legitimising its reason for being and hiding its purpose
through a debate on the opening up of markets supported by the theory
of free trade. The imperialist dynamic of the British Empire represented
a decisive decrease in the logic of territorial conquest, necessarily politi-
cised, towards a system of commercial conquest, in other words, of con-
trol by markets. Therefore, free trade was transformed into the standard
for the Empire
43
:
“In short, the ?rst economic strategies for increasing power appea-
red through the creation of an economy-world under British in?uence.
Great Britain, by multiplying economic relationships – based on the
leitmotif of Adam Smith “laissez faire, laissez passer” (‘let men do, let
goods through’) – with state units operating both inside and outside its
42
Almost all the Americas belonged to Spain, except Brazil. The Portuguese secured
control of various coastal territories in Africa, the Middle East (Eritrea, Somalia), sou-
th-east Asia (Goa, Colombo, Malacca, Timor), except the Philippines that were claimed
by Spain along with the Canary Islands (Atlantic).
43
Blanot, Harold; Boyer, Adrien;, Kûhl, David and Spiess, Margo, La guerre économique
comme explication structurante de la construction d’un pays, EGE, Paris, éditions de la
Bourdonnaye, 2013.
Christian Harbulot
82
economy-world, created a free trade zone in which liberalism spread
and the market was institutionalised, even managing to venerate itself
as a means of paci?cation in international relationships and the deve-
lopment of participating nations. Consequently the British Empire ob-
tained great bene?ts from this system which was its great power cen-
tre, enabling it to in?uence the circulation of capital, merchandise and
manpower. Aware of its supremacy, the centre of the economy-world
(London) could therefore de?ne or even impose commercial policy in
accordance with its interests. In this way, between 1840 and 1860 the
volume of trade between England and the rest of the world trebled:
English industrialists exported their goods to the rest of the world in
English ships with the support of English insurers and banks. In addi-
tion, the trade balance was approximately 10% in favour of England
between the years 1870 and 1914. This growth enabled England to be
at the head of those countries on the road to industrialisation, to be
the leading maritime power and above all to control almost 25% of the
world in 1901. The theoretical application of this change in the way of
conquering was in the displacement of imperialist rationale – military
and vertical – to that of economic supremacy, with the latter being the
capability of one policy to exercise efective sovereignty over foreign
political societies without absolutely controlling them
44
. The transfor-
mation of power lead Benjamin Constant to con?rm that, “war is no
more than a savage impulse whilst trade is civilised calculation”. The
colonial empires meant the distribution of land in diferent spheres of
in?uence.
Commercial conquest could result in commercial war by turning into a re-
source for coercion when the countries coveted by the British merchants
were opposed to voluntarily allowing the penetration of its domestic mar-
kets. To impose their products on the Middle East and East Asia markets,
the British established the practice of “gunboat diplomacy” that reached
its peak during the blockade of the Port of Alexander by the Royal Navy
in 1840-1841 and, later, in the two opium wars that, successively, pitted
China against Great Britain and China against a coalition of Western coun-
tries. It was at that point when the Western world commanded the drug
trade through military means on a theoretically independent country.
William Jardine, who managed the opium company Jardine & Matheson
in Hong Kong, legitimised this action by making himself the protector of
“the freedom of the independent company without restrictions
45”
. It is
advisable to remember that the pretext given when using force by the
British was the embargo and destruction by the Chinese authorities of
44
Battistella, Dario, “La notion d’empire en théorie des relations internationales “,
Questions Internationales, No. 26, July-August 2007, pp. 27-32, p. 30.
45
Brizay, Bernard. Le sac du palais d’Eté. Seconde guerre de l’opium, Paris, éditions du
Rocher, 2011.
A study on economic warfare and associated problems
83
20,282 boxes of opium unloaded at Canton in 1839. The Chinese emper-
or Daoguang decided to suspend trade with the English and condemn to
death any foreign merchant engaged in the opium trade. The British con-
sidered the Chinese reprisals as a crime of “commercial treason
46
”and
began hostilities that resulted in adopting unequal treaties that “were
unfair and whose conclusion left, in the Chinese conscience, the germ
of a desire for vengeance that would only increase through successive
generations and would take its strength from the resentment that stirred
the memory of humiliation
47
”.
The opium wars gave such visibility to economic aggressiveness that it
took countries like Japan
48
to mould national identity with a power policy
based on economic expansion symbolised in the slogan “a rich country,
a strong army”.
The coming to power of the emperor Mutsuhito in 1868 was the beginning
of a series of reforms whose goal was to catch up with the West. Japan
took over a century to prepare the basics of an economy in the service
of power. At the end of the eighties, the Central Intelligence Agency pub-
lished the report Japan 2000
49
drawn up by a working group made up of
?gures from the civil and military worlds. This document was one of the
few written contemporary examples of a governmental text on the strong
economic relationships between two powers. The most explanatory part
of the text condemned “Japanese propaganda” of disguising protection-
ist measures that the country applied to other market economies and
its lack of respect for economic liberalism. Some passages in the report
stigmatised the Japanese power strategy in these terms: “The members
of the Chrysanthemum Club (who joined the elite Japanese political and
industrial resources) considered that the Western system was doomed
to disappear and they acted, as much as possible, in a way that brought
forward its end.” The Japanese recovery strategy pursued since the Meiji
era enabled it to reach second place in the world economies in little more
than a century of efort. At the end of the eighties, voices of complaint
were heard regarding Japanese expansion and the use of economic war-
fare techniques in political and economic media by the United States and
Europe.
Commercial aggressiveness in the ancient empire of the Rising Sun with
regard to the West stopped with the adoption of diferent measures by the
46
Brizay, ibid. p 35.
47
Leger, François, Les influences occidentales dans la révolution de l’Orient. Inde, Malai-
sie, Chine. 1850-1950, Paris, Plon, 1955.
48
Souyri, Pierre-François, La nouvelle histoire du Japon, Paris, éditions Perrin, 2010.
49
The report Japan 2000, rapidly withdrawn from circulation due to protests from the
Japanese authorities, announced the tension in negotiations between the United States
and Japan over the opening up of its domestic market and access to shareholdings in
its largest companies.
Christian Harbulot
84
North American authorities (repeated attacks to break Japanese protec-
tionism, the destabilisation of its banking system by the refusal to grant
a currency snake during the Asian ?nancial crisis, a blockade of its tech-
no-globalism strategy
50
, limitation of the Japanese games of in?uence in
the North American political administrative system). The fall of the Ber-
lin Wall deprived Japan of its implicit blackmail of the United States. If
the United States did not grant Tokyo enough room to manoeuvre for the
construction of its economic potential, the North American governmental
authorities no longer had anything to fear from the instability of this ally/
ancient adversary within the sphere of Soviet in?uence. Despite this, the
brutal blockade of Japanese economic potential did not stop its strategic
opportunities for recovery.
Recovery strategies
Recovery strategies were organised around elementary goals strongly
dependent on geographic and cultural context. In the case of Japan, as
a priority its insularity forced it to equip itself with an infrastructure for
maritime purposes (shipyards, ports) and secondly, to establish bases
for an industrialised economy. Several countries such as South Korea,
India, Brazil and China later followed its example without having to copy
its model. South Korea followed the Japanese style by favouring naval
construction and the formation of large private industrial conglomerates,
chaebols, the Korean equivalent to Japanese keiretsu or the ancient zai-
batsu dissolved by the American occupying authorities after the Japanese
defeat in 1945.
India followed other models to position itself as a dominant player in the
worldwide IT industry. The authorities in New Delhi pursued educational
reform between 1993 and 2004 to create a reserve of human resources
needed for the development in the ?eld of information technology. For
a while the federal government decided to remove from the secondary
education programme literary subjects to increase the number of hours
spent on mathematics. The goal was to support guidance of the maxi-
mum number of students towards technical and IT engineering profes-
sions. Gradually from 2004, literary subjects were reintroduced by the
authorities considering that the goal had been reached. This policy was
also based on transforming the city of Bangalore into the high tech capi-
tal. The reasons for its selection were its climate conditions, with it being
one of the few places in India where the monsoon’s range is weak. In this
50
Drawn up in 1987 by the Japanese Ministry of Industry and Commerce (MITI), te-
chno-globalism sought to prevent parasitism of research due to competitive practices
and thereby fulfil the separation between North and South, creating a common asset
of humanity. This occurred after the American tightening up in the field of patents and
scientific exchanges with Japan.
A study on economic warfare and associated problems
85
way a framework adapted to the return of Indian engineers was created
and the life of Western expatriates made easier.
Brazil developed recovery strategies by supporting the energy sector
(non-conventional petroleum thanks to its ofshore deposits and its Am-
azon reserves, water for its hydroelectric dams, renewable energies).
The Brazilian State
51
made the company Petrobras the vanguard for its
strategy of geoeconomic in?uence. Brazil sought to acquire regional
superiority in the energy sector, mainly by adopting numerous bilat-
eral agreements signed with neighbouring countries that gave them a
predominant in?uence in energy provision on the Latin American con-
tinent. Regarding soft power
52
, Brazil was also improving its image as
an emerging power in terms of sustainable development as well as
claiming to be one of the cleanest countries in the world thanks to its
electrical production.
China has built its recovery strategy by supporting opening up (crea-
tion of special economic zones and strong policies for attracting foreign
investment), unlike Japan, which sought to gain knowledge by closing
access to its domestic market. The meeting point between the two coun-
tries consisted of the priority given during their phases of mutual devel-
opment to the conquest of foreign markets. In both cases this form of
commercial aggressiveness resulted in hostile reactions by the United
States and high pro?le debates about the problem of economic warfare
53
in the Western world. China was accused of pursuing a strategy of in?l-
trating the standardisation organisations for the purpose of imposing its
own standards
54
. It has active members on 82% of the technical commit-
tees in the International Organisation for Standardisation (ISO) whose
headquarters is in Geneva. This participation is higher than France
(80%), Japan (79%) and the United States (75%). Suspicion towards Chi-
na generated diferent types of reactions difcult not to compare with
forms of economic con?ict. As an example, let us use the protectionist
measures of the Obama Administration regarding photovoltaic technolo-
gies and the refusal to allow shareholdings in Western industrial groups,
such as the refusal to the request by the Chinese company Minmetal to
own part of the Australian company Oz Metal by the Australian govern-
ment in Canberra.
51
Mazzucchi, Nicolas, L’énergie, source de la nouvelle puissance brésilienne, Nouvelle
Revue Géopolitique, No. 3, Paris, 2012.
52
Indirect action that seeks to place a power in a strong relationship that is to its ad-
vantage with regard to the topic of international interest under debate. The soft power
strategies also delimit the influence strategies intended so that certain countries agree
with the same positions of a power in accordance with its own interests.
53
Dossier 2013, l’année de la guerre économique, l’Expansion, No. 780, December 2012,
Paris.
54
Ibid. p. 44.
Christian Harbulot
86
Change in the paradigm of economic warfare
The control methods and economic domination devised by colonial em-
pires sufered a mutation under the efect of geopolitical, military and
commercial supremacy that the United States assumed at the beginnings
of the Second World War. Contrary to the coercive methods applied by
the colonial empires in their territorial occupations, the United States es-
tablished a new model for expressing economic power on the basis of
the following principle: a superpower that seeks to dominate an allied
country on economic or cultural issues must seek the best position at the
top of a hierarchy of values, regulations and arbitrations of the market
economy. This manoeuvre for monopoly from the summit entails a new
method of understanding economic con?icts. The United States imposed
this practice of silent economic warfare in peacetime on the industrial-
ised countries of the Western Bloc. But a geopolitical factor and another
of a geoeconomic nature modi?ed this period of stability from economic
con?icts:
• Opening of new spaces in the market emerging as a result of the
disappearance of the Eastern Bloc.
• Commercial aggressiveness generated by the recovery strategies
of emerging economies.
The tightening of worldwide competition caused by the joining of these
two factors meant that the United States took economic con?icts into
consideration in an almost ofcial way.
Economic security policies
The growth of Asia and the construction of a European economic space
afected the geoeconomic predominance of the United States from the
end of the Second World War. This rede?nition of strong relationships
re-launched the problem of economic warfare from a new paradigm:
the ally/adversary relationship replaced direct or indirect con?ict be-
tween two enemies. Economic warfare practiced since ancient times had
demonstrated direct con?ict: the power that gained territories was di-
rectly opposed to the country that tried to resist this conquest. The centu-
ries of colonisation were its clearest example.
The globalisation of exchanges modi?ed the unsettled economic
framework both in industrialised countries and in emerging econo-
mies. Competition went hand in hand with co-opetition (cooperation +
competition). Strategic interests of the powers were diversi?ed and be-
came more complex. Military or geopolitical interest could clash with
an economic interest or vice versa. In other words, a country could ally
with another from a military viewpoint and clash with it on economic
matters. In this way a new type of ally/adversary strong relationship
A study on economic warfare and associated problems
87
emerged. In practice, it resulted in a reduction in the strong economic
relations that had been shown in the past. But this formal reduction did
not erase the intensity of rivalry between the powers, in particular in
geographical areas where new markets were organised and in areas
rich in resources.
The leading economic world power felt legitimised during the nineties
to make an economic security policy already started in the seventies,
ofcial with the establishment of section 301
55
of the Trade Act of 1974
and the super
56
and special 301
57
of the Omnibus Trade and Competi-
tiveness Act of 1988. The American authorities used the pretext of ?ght-
ing against unfair competition sufered by North American companies
in some parts of the world. If the expression “economic warfare” was
not mentioned in ofcial texts the comments of some ofcial represent-
atives of the North American executive power underlined a hardening of
their positions in their analyses of commercial exchanges. Carla Hills
58
,
trade representative from 1980 until 1993, expressed it in her own way
using the inverse expression of the carrot and the stick, “we will open
foreign markets with a stick if necessary but with a handshake when-
ever possible.”
Despite protests from numerous countries, this unilateral regulation was
not abolished. The United States used it from then on as a means of pres-
surising the body for solving diferences in the WTO. The representative
of the State Department
59
was equally explicit when commenting on the
report on the gas pipeline between Thailand and Burma, “The Total Com-
pany has practically replaced Conoco and has obtained a contract that
would have been more bene?cial for Conoco. We want to punish those
companies that have this attitude in the future”.
The Torricelli (1992), Helms-Burton (1996) and D’Amato (2001) Acts com-
pleted these measures of commercial reprisal stopping hostile countries
having access to the United States in order to prevent their companies
being able to gain markets in those regions, thereby making them compe-
tition to North American companies. With the exception of Cuba, subject to
a North American embargo since 1962, countries afected by these acts
such as Iraq, Libya, Iran and Nigeria had major oil resources.
55
Section 301 enables the United States to oppose commercial barriers that penalise
North American exports.
56
The Super 301 fights against the set of unfair practices registered by the Office of
the United States Trade Representative.
57
The Special 301 was conceived to protect North American companies against viola-
tion of their intellectual property by foreign competition.
58
Jacob, Yvon and Guillon, Serge, En finir avec la mondialisation déloyale, Paris, La
Documentation française, January 2012.
59
Revel, Claude, Pedron Liou, Isabelle, La diplomatie exportatrice des Etats-Unis, Ob-
servatoire du Marché International de la Construction, Paris, 1997.
Christian Harbulot
88
The Clinton Administration completed this legislative regulation by cre-
ating the National Economic Council
60
in 1993, which worked closely with
the National Security Council. The North American Secretary of State,
Warren Christopher, emphasised the importance of the matter, “North
American economic security must be the ?rst priority in foreign policy”.
Various countries followed the North American example with difering
results. Firstly France created a Committee for Competition and Econom-
ic Security in 1995, chaired by the Prime Minister, Edouard Balladur. The
life of this committee was short-lived. However, the adopted economic
security measures were made permanent under the direction of the Min-
istry of the Interior. From the ?rst presidency of Vladimir Putin the Krem-
lin reinforced the role of certain state organisations in the protection of
economic wealth and made the governors of the states in the Russian
Federation aware of this new mission. China had also followed this path
in the previous decade.
The impact of economic strategies on increasing power
Can the mutation in strong economic relations of the ally/adversary con-
frontational kind be called into question by the economic strategies for in-
creasing power of new ?gures in the Western world in the global market?
Economic weakening of the Western world may emphasise, if con?rmed
in the medium/long term, tensions between the new conquering powers
and industrialised countries that have dominated the global economy in
the last century. Various factors might make the problems of con?ict and
domination reappear:
• Acquisition of energy and mining resources.
• Territorial challenges linked to geographical location.
• Problems of economic dependence.
• New forms of cultural colonisation by the information society.
• Possibilities of investment in alliances.
Currently there is an imbalance between the dynamics of power of the
new ?gures and the way in which the Western world has become accus-
tomed to managing its economic power without real rivals. The priority
of new players is the conquest of foreign markets to ?nance their policy
of increasing power whilst the countries of the Western world have sep-
arated the problem of power (mainly military and diplomatic) from the
rationalities of economic warfare, silenced from the second half of the
19th century. The policy of deregulation that began in the Western world
emphasises this paradox. National leaders are being broken up in Europe
whilst the new players build their competitiveness focusing on the pow-
60
Initially it was going to be called the National Economic Security Council but this
name seemed too aggressive to European countries.
A study on economic warfare and associated problems
89
er of consortiums ?nanced by banks, directly or indirectly controlled by
the country’s political power. This type of operation is incompatible with
the competitive system of the Western world. A competitive imbalance
originates from this that weakens the industrialised countries that have
separated the question of increasing power from the problem of eco-
nomic competition. Such an imbalance is reinforced by the importance
of ?nances in the operation of the Western market economy. Financial
markets in?uence the de?nition of strategic challenges to the extent that
politicians prefer the short term as the criteria to de?ne their timing in
the construction and preservation of power.
Chinese leaders who have managed to adapt a communist dictatorship to
the rules of the market economy have some more ambitious goals than
the simple desire for pro?t. Aware of the hostile reactions that the growth
of China might generate, ofcials of the Chinese People’s Liberation Army
have invented the term of-limits warfare
61
. The balance of the failure of
the USSR in its weapons race against the Western world encouraged
them to put a preference on methods of con?ict that went outside the
strictly military framework and that, in part, are a result of economic war-
fare. The concept of unrestricted warfare applied to the geoeconomic ?eld
is a way of diverting the rhetoric prepared by the Anglo-Saxon business
?eld. It opens the path to another form of perceiving economic con?icts.
During a Franco-American seminar in April 2012 in the United States,
representatives of the Pentagon reminded their French counterparts of
the sensitive report on computer hacking by China. Taking into account
the range of the phenomenon they were asked whether it would be ap-
propriate to classify this type of aggression as an act of war instead of
an act of industrial espionage. This change of vocabulary reopened the
debate on the issue of denial or validation of economic warfare. The Unit-
ed States managed to guide the debate in the direction of the denial of
economic con?icts between powers (see the economists’ dominant dis-
cussion). This paci?cation speech on the exchanges in the global village
of globalisation is justi?ed by the bene?ts obtained from its status as a
superpower since 1945.
Limits of western ethnocentrism
The West has dominated the world thanks to the colonial empires and
later to the North American superpower. The questioning of colonisation
(the clearest example of economic warfare of all time) opened a geopo-
litical
62
split that remained hidden by the victory of the Western Bloc over
the Eastern Bloc as a result of the collapse of the USSR. The promotion
61
Liang, Qiao and Xiangsui, Wang, La Guerre hors limites, Paris, Payot et Rivages, 2003.
62
The loss of colonies had political repercussions in some countries. In Belgium the lin-
guistic conflict between the Flemish and Walloons became a national problem from 1962.
Christian Harbulot
90
of emerging economies opened a geopolitical split shown by the process
of deindustrialisation and the weakening of some Western market econ-
omies. These two splits emphasised the limits of Western ethnocentrism
that caused strong relationships to be analysed, starting from the princi-
ple that the strong could only be from the Western side.
The contradictions between the United States and Europe
In this game of cards the Western world is weakened by numerous con-
tradictions. The ?rst recalls the tale of the “sprinkler sprinkled”. Great
Britain and later the United States used liberalism to legitimise the dis-
mantling of protectionist systems of countries-clients in order to support
the sale of their goods and their domination on international ?nancial
mechanisms. Today it is difcult to reverse this policy because it would
mean delivering a fatal blow to the validity of the discussion. The sec-
ond contradiction is American. Important private interests on the other
side of the Atlantic, both industrial and ?nancial, try in the short term to
make use of opportunities that the globalisation of exchanges ofers. The
?exibility of liberal discussion enables them to legitimise relocations and
the efects of deindustrialisation. The debates in the United States Con-
gress show the often unfair ?ght between the power groups supporting
the opening up of markets and the forces that prioritise the safeguarding
of the interests of the resident population in America. The third contra-
diction is the inability of the European Union to be con?rmed as a power
that is aware of the importance of the challenges in economic warfare.
Since the post-war era, negotiations on the compensation for bene?ciar-
ies of the Marshall Plan opened strong debates in France on some of the
American economic conditions such as the tax on American soybean used
as animal feed or Hollywood cinema distribution in its cinema market.
When he returned to power in 1958, General de Gaulle de?ned the criteria
for a national independence policy that opposed American interests:
• The creation of Elf Aquitaine, an oil consortium, to reduce France’s
dependence on the seven Anglo-Saxon oil companies.
• The setting of quotas to limit the establishment of multinational
American companies.
• The end of the argument about the predominant role of the dollar
as the global reference currency.
The Gaullist vision of national independence did not resist the liberal al-
legation with regard to the opening up of markets. The liberal doctrine
eliminated any possibility of structural discussion about the nature of
economic con?icts despite there being commercial diferences between
the United States and Europe that occasionally disrupted the GATT and
World Trade Organisation negotiations. The European market construc-
A study on economic warfare and associated problems
91
tion served as a pretext even for marginalising intellectual thought on the
role of the economy in the construction of power.
In 1976, Giscard d’Estaing and Raymond Barre dismantled the instru-
ments designed to provide French industry with the capability to respond
in terms of economic power. This was how the Plan’s Permanent Com-
mission on Electronics was abolished. This commission was the meeting
point for the general managers of the sector’s large companies, repre-
sentatives of professional organisations, SMEs and Ministries. The top-
ics submitted for debate referred to French strategy in strategic sectors
such as IT, telecommunications, aeronautics and electronics. This com-
mission originated from the raising of awareness in the sixties about the
essential need to provide France with a sufciently powerful electronics
industry in order to free it from North American domination. The Plan’s
Commissioner had even created an IT system called Mars that was a da-
tabase created from information ?ows generated by 250 companies, 30
administrative services and 23 trade unions. Information ?owed in both
directions since the industries could access it under certain conditions
and thereby improve their contribution to innovation et leur approche du
marché mondial. On the state side, the Mars system enabled the meas-
urement of the efectiveness of the credit injected into the electronic sec-
tor. Extending it to all French industry was considered. On that occasion
Le Monde newspaper emphasised that French multinationals had nev-
er accepted playing the role of a power strategy focused on France and
preferred to cooperate with American companies. In this way a fracture
line arose between those who were in support of a globalised market
and the defenders of an economic territory. This contradiction, despite
being fundamental, was not taken into account when the Prime Minister,
Dominique de Villepin, reopened the debate on economic patriotism at the
beginning of 2000.
Far from being an arti?cial or obsolete debate, the topic of economic pat-
riotism was fed by the negative efects of the emerging economies’ re-
covery possibilities. Their appeal, represented by cheap labour, did not
serve as an explanation for everything. Certain emerging countries have
been transformed into combat economies to now be on the same level as
Western economies. They have done nothing more than reproduce the
techniques started centuries ago in the Western world. You only have to
reread history. After the revolutionary wars France did everything pos-
sible to try to make up for its technical shortcomings compared to the
United Kingdom, turning to the trafcking of machinery imported clan-
destinely from Great Britain and to industrial espionage on British man-
ufacturers. The ofensive strategies of the emerging economies have
completed this panoply of ofensive techniques using an engineering of
information gathering, greatly ampli?ed thanks to the internet, the theft
of patents, the practice of dumping, to the industrialisation of imitations,
without forgetting the illicit trafcking of metals such as copper due to
Christian Harbulot
92
global demand. These unfair actions contribute to the degradation of the
economic supremacy in the Western world and it is becoming a topic of
concern in the United States. In Europe it is relegated to the category of
exceptions that prove the rule, in other words there is a blind belief in the
supremacy of the liberal model.
The bad efects of the liberal model
The United States did not hesitate to provide itself with a coercive sys-
tem for the penalisation of acts of pillage or economic isolation by hostile
countries. Brussels sometimes imitates Washington’s behaviour but it
does not usually put theory into practice. In 1984 the European Union was
provided with an instrument of commercial reprisal
63
inspired by sec-
tion 301 of the American Trade Act. Equipped with this weapon against
the illicit practices of third party states in sectors not regulated in the
GATT agreements, the European Union only exceptionally
64
resorted to
this type of pressure that can be compared to a kind of economic warfare
in peacetime.
The impossibility of a uni?ed idea about the geoeconomic priorities of
the country emerging in a country like France is not a result of a cultural
blockade. The European Union is limited to agreeing the preventive regu-
lations that the member states can take against risks of economic pillage
and unfair competition. Protection of the perimeter of national defence
and public order is the only room for sovereign manoeuvre recognised
by the Brussels Commission. In 2006 the European executive decided on
some infraction procedures that penalised attitudes contrary to the rules
of the internal market by copying the decree against the French takeo-
ver, which required the request for prior authorisation from the French
authorities by foreign investors that wished to take control or have a mi-
nority share of 33.33% in companies in 11 sectors of activity considered
strategic.
Unlike Great Britain, the Netherlands or Germany, which integrated the
disguising of economic warfare in their modus operandi, France sought
validation of its room for manoeuvre through ofcial texts recognised at a
European level. During the ?rst year of his term
65
, Alain Juillet, the Senior
Executive for Economic Intelligence, took months to convince his repre-
sentatives on the European Commission to accept the industrial energy
63
This type of tool made it possible to fight against countries that practiced unfair
competition, imposing penalty measures on exchanges with European Union countries:
quantitative restrictions on export, and an increase in customs duties.
64
Used on six occasions within a ten-year period.
65
His mission regarding commissioning of Economic Intelligence in the National De-
fence Secretary-General (Secrétariat Général de la Défense Nationale, SGDN) will last
from 2003 to 2009.
A study on economic warfare and associated problems
93
sectors that France had wanted to protect better. To justify its refusal, the
European Union claimed the exemplary application of liberalism stand-
ards as a pacifying element in the exchanges. This attitude was far from
unanimous on the Eurasian continent. In December 2008 the Russian
government established a list of 295 companies considered as strategic,
without omitting those in the energy sector
66
. Vladimir Putin added 1500
companies that were essential for the national economy and quali?ed
to receive state assistance, tax amnesties and customs privileges. The
warning from the Russian Head of State to his European counterparts
about the risk of a cut in the gas supply demonstrated the strategic fra-
gility in Europe when providing energy during this period. On this speci?c
topic the liberal doctrine that focused European thought on the deregu-
lation of a market open to competition did not seem suitable for the situ-
ation. However, this defect did not force the search for a uni?ed position
between the European members
67
.
Conclusion
Globalisation has long been rightly regarded as the carrier of positive fac-
tors such as rising living standards of the populations of industrialised
countries, the process of negotiating trade disputes, progressive regula-
tion of trade and the strengthening of protection thanks to the recognition
of international patents. But this “mixed” world product of globalisation
has not paci?ed the economy. The geoeconomic balance in the world play-
ing ?eld is much more deeply multipolar now that the market is global.
The growing rivalry between the Western world and the new actors weak-
ens the dynamics of appeasement driven by a dominant Western world.
The question could be asked of whether Europe has learnt its lesson from
world wars that made it lose its supremacy or whether it has managed to
correctly measure the importance of the threats that hang over its geopo-
litical and geoeconomic future. Devoid of analysis on economic con?icts
and incapable of drawing conclusions on its strategic development over
centuries, today Europe is still lagging behind the United States. Despite
appearances it is more divided than ever by a co-existence that it does not
want to name. Northern Europe is led by Germany, which plays a double
game in discreetly supporting the rebirth of its power whilst projecting
an image of a deeply paci?st country due to its previous military errors.
Southern Europe is trying to overcome its infrastructure crisis. The Eu-
rope made up of former socialist countries is trying to ?nd a path that is
still heavily in?uenced by the strategies of America, Germany and Russia.
To escape this cul-de-sac without a strategic exit it is important to con-
sider new obligatory reading on economic warfare. It seems logical to
66
The gas group Gazprom and the oil companies Lukoil and Rosneft.
67
Germany had signed a bilateral agreement with Russia in 2000.
Christian Harbulot
94
consider a new political economy based on proper coordination between
the construction of power in a state, command in the conquest of mar-
kets and the development of territories. These three strategic dimensions
are not naturally compatible. Political power must be provided with the
resources to de?ne a programme of the challenges and priorities in the
short, medium and long term. Today the European Union is incapable of
doing so. However, this is an absolute priority.
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Chapter III
Legal intelligence: the strategic value
of the law in economic security
José L. González Cussac
Abstract
In the present context of globalization, where new technologies have tak-
en on prime importance, the idea of legal intelligence is developed. In ad-
dition, in this area there has been a development in the idea of geopolitics
towards the idea of geoeconomics, with the rise of the notion of ”econom-
ic warfare” or ”fourth generation warfare”. The basic premise is that all
human activity is subject to regulations that in?uence the economy and
intelligence. On this basis, the paper examines the law as a matter of in-
telligence and the law as a tool of intelligence. The conclusion is that the
law is strategically valuable. The one who is capable of creating and im-
posing rules commands a decisive advantage, and the competitors who
do not know the meaning of those rules are not in a position to compete
on equal terms.
Key words
Legal intelligence, regulatory Trojan horse, economic security, legal se-
curity, national security, economic and competitive intelligence, rules and
law.
Legal intelligence: the strategic value of the law in…
99
Approach
Politics, Law and Economics show diferent patterns of marriage through-
out history. They are actually ways of exercising power. Power is domina-
tion, within a scenario of confrontation or competition, and in the frame-
work of the rules of the game. In the past century we witnessed a model
of colonial domination, and later another post-colonial domination during
the Cold War. Currently we are witnessing a new geopolitical scenario
in which domination is exercised by other mechanisms. Globalisation is
the key, and in the words of Juillet brings together two types of economy
that are far from coincidental: the market and the state. However, the
end of the “East-West” confrontation has led the confrontation towards
economic competition, which has placed the “market economy” in the
geoeconomics of the Great Powers. This universal competition in which
both traditional and emerging powers participate, reaching over two hun-
dred countries, requires new rules, both national, regional and interna-
tional, to referee the game between multiple interests and to determine
the distribution between dominant and subordinate countries. And in this
great game of power, interests and rules, and new technologies play a
fundamental role
1
.
In this context, various authors (following Clausewitz) now speak of the
economy as a continuation of the war, so that we would be dealing with
a “covert economic war” (Harbulot)
2
. Therefore, we would have gone
from geopolitics to geoeconomics
3
. Countries gamble their sovereignty
and the citizens their welfare. On this new board, non-state factors and
actors with exclusive economic motivations (?nancial markets) are also
involved, but there are also actions of in?uence and destabilisation led
by government actors. And closely linked with this starting point is the
idea that the “new war” is playing out, mainly, on the World Wide Web
(cyber war)
4
, and largely, within what we usually call economic espionage
(Clarke and Knake)
5
.
The economy and its resulting economic and competitive intelligence
are today more than just an essential component of national security
1
Juillet, Alain (2006), “Principios de aplicación de la inteligencia económica”, Intelli-
gence and security: Journal of Analysis and Prospective, No. 1, December, 2006, p. 123.
2
Harbulot, Christian (1992), La machine de guerre économique: États-Unis d’Amérique,
Japon, Europe, Paris, Economica. Also Carayon, Bernard (2006), Patriotisme économique:
De la guerre à la paix économique, Monaco, Editions du Rocher.
3
An excellent development and explanation at Olier Arenas, Eduardo (2011), Geoeco-
nomía, Pearson Prentice Hall.
4
Olcott, Anthony (2009), “Revisiting the Legacy: Sherman Kent, Willmoore Kendall,
and George Pettee - Strategic Intelligence in the Digital Age”, Studies in Intelligence Vol.
53, No. 2 (Extracts, June 2009), pp. 21-32.
5
Extensively in Clarke, Richard A. and Knake, Robert K (2011), Guerra en la red: los
nuevos campos de batalla, Barcelona, Ariel.
José L. González Cussac
100
as we used to know it (Potter)
6
. And as Juillet might warn, globalisation
and lack of regulation have essentially de?ned the geopolitical arena, in
addition to traditional state actors, companies and other subjects of civil
society
7
.
Perhaps by sharing this analysis, although from diferent angles, authors
such as Joseph Stiglitz, Paul Krugman and Alain Touraine, among others,
believe that the initial ?nancial crisis of 2008 has become not only a glob-
al economic crisis, but a real political and social crisis. In a way, we are
witnessing a true and complete global paradigm change: geoeconomics
has entered the scene. And with it the development of various models
of “economic security” (Buzan, Waever, Wilde)
8
. National security can no
longer be reduced to its classical content, or economic security, without
a human dimension. Thus, economic security as a component of national
security is not only measured by traditional economic criteria of wealth
(also the availability of goods and services, stability, levels of protection,
etc.) and transfers the centre of gravity from the idea of security of States
to the security of people.
However, the deregulation of trade and investment, that is, certain efects
of globalisation, involves a progressive loss of the ability of nation states
to regulate these activities and in turn to deliver goods and services to its
citizens. Therefore, States, including all their domestic legislative frame-
works, have lost decision-making capacity but continue to support the
security demands of their citizens.
The current global economic crisis must be added to this aforementioned
panorama of profound change, which has revealed (when not caused), a
serious instability and insecurity throughout the international system,
and not just in economic terms. The availability of strategic resources
and raw materials, capital ?ows, the burden of the welfare state and
institutional operations are to some degree determining factors in re-
gions and countries, which are now at the crossroads. And like any great
economic crisis this causes a deep expansion with efects (with varying
degrees of impact) in all areas and actions, and therefore carries an ad-
ditional risk of utmost importance for political stability. We know that the
evolution of these factors accentuates social diferences and therefore
represents an ideal scenario for social unrest, the rise of populist move-
ments and the rise of radicalism. All of which, combined and agitated,
6
Potter, Evan H (1998), editor, Economic Intelligence and national security, Carleton Uni-
versity Press. Cfr. Arnett, Dennis, Menon, Anil and Wilcox, James B. (2000), “Using Com-
petitive Intelligence: Antecedents and Consequences”, Competitive Intelligence Review,
Vol. 11, Issue 3, pp. 16-27.
7
Venegas González, Álvaro (2008), “Inteligencia económica: un componente estratégi-
co por desarrollar”, in AA Intelligence, Year 1, No. 2, Chile, pp. 10-19.
8
Buzan, Barry, Weaver, Ole and De Wilde, Jaap (1998), Security. A new framework for
Analysis, London, Lynne Rienner Publishers, pp. 95 et seq.
Legal intelligence: the strategic value of the law in…
101
constitutes the greatest of dangers to the democratic systems and the
Rule of Law
9
.
The above demands a need to change, update and revise regulatory mod-
els, in order to strengthen their own institutional system of democratic
Rule of Law, which is the only system capable of ofering minimal legal
security to guarantee civilised coexistence.
This task involves the development of standards and interpretive practic-
es of self-protection and cooperation, as well as legislation likely to pro-
vide a greater capacity to compete on equal terms with other countries in
its sphere. The law is viewed from this perspective as a ?rst-rate strategic
weapon to deal with a “fourth generation” war, where asymmetric actors
alone or in alliance with other states, can coordinate attacks on countries,
companies or ?nancial systems with serious damage to national security,
in which the economic rights of citizens are an essential component.
In this scenario, economic intelligence, as part of the global economic
policy and a basic component of national security, should organise its
strategy in a regulatory system that allows it to achieve its objectives.
These speci?c objectives are focused on the following basic aspects:
a) to ensure strategic surveillance in order to facilitate public and private
decision making; b) to sustain the competitiveness of companies and the
ability to transfer technology from research centres, and c) to ensure
the economic security of companies and research centres.
Consequently, an economic intelligence system must today be based on
an adequate regulatory policy, both nationally and internationally
10
. That
is why we can speak about the need to develop a legal intelligence with
value and a strategic projection.
The law as a collection of regulations
Wittgenstein staged an authentic revolution in philosophical thinking of
the twentieth century, particularly towards a “conceptual clari?cation”.
This thinking has led to a decisive turn in philosophy, social science and
the Law
11
. Therefore, for the purposes of this work, I wish to underline
that I take as a starting point one of its central ideas: that all activity
9
González Cussac, José Luis and Larriba Hinojar, Beatriz (2011), Inteligencia Econó-
mica y Competitiva: Estrategias legales en las nuevas agendas de Seguridad Nacional, Va-
lencia, Tirant, pp. 13-14.
10
Pooley, James and Halligan, R. Mark (2000), “Intelligence and the Law”, in Miller,
Jerry (ed.) Millennium Intelligence: Understanding and Conducting Competitive Intelligence
in the Digital Age, CyberAge Books, Medford, NJ, pp. 171-187.
11
A masterful development and application of criminal Law from the thinking of Witt-
genstein can be seen in Vives Antón, Tomás Salvador (2010), Fundamentos del sistema
penal, 2nd Edition, Valencia, Tirant lo Blanch.
José L. González Cussac
102
is subject to rules – beginning with language itself – or better yet, that
activities only have meaning and signi?cance from their understanding
through rules. The law, economics, economic security and economic in-
telligence are no exception: without rules it is not even possible to speak
of them
12
.
The law is a positive collection of regulations, i.e. imposed by the author-
ity that has the power to do so. Therefore, the Law also regulates the
economy and intelligence: all human activities are regulated, subjected
to the “Rule of Law”, this is the essence of democracy.
Therefore, the constant tendency in the last decades of the policies of
deregulation, self-regulation and “codes of good governance” in certain
economic areas, have from the start represented a thorny issue, to say
the least.
A second central aspect lies in the emergence of a new global legal or-
der, with spatial and temporal conditions diferent to the traditional ones,
framed within the globalisation process. The central categories of law
such as sovereignty, nation-state, and the constitution are facing new
challenges and restructurings (Jáuregui)
13
. In particular, this highlights
the need to structure time, taking into account not only the present but
also the future, a major challenge for the Law that will involve the draft-
ing of a new “social contract”. And secondly, the transition from one
scenario of nation states to another of supranational scenarios, which
in turn demands a conceptual change from the idea of ”government” to
“governance” that is broader and less formalised. This emphasises the
impossibility, in an era of globalisation, of states not subject to external
restrictions. To this must be added a lack of international order, an un-
bearable asymmetry in international relations and therefore a constant
delegitimisation process of all existing institutions. In short, we are faced
with the need to transform legal institutions to adapt them to new social,
cultural, political and economic parameters.
Therefore, in this new context, economic intelligence also cannot be bur-
dened with the macroeconomic analysis of regions, sectors and coun-
tries, or directed solely to the scrutiny of organised crime in its many
facets, or only ofer protection of industry and technology in a dual use,
12
On the ambiguities and difficulties of language, and in particular applied to the legal
environment of industrial secrecy, espionage and competitive intelligence, can be seen
the magnificent exhibition of Horowitz, Richard (2011), Competitive Intelligence, Law and
Ethics: The Economic Espionage Act Revisited Again (and Hopefully for the Last Time), SCIP,
Vol. 14, No. 3, July/September 2011, pp. 45-46.
13
Jáuregui, Gurutz (2011), “La emergencia de un nuevo orden jurídico-institucional:
el Estado y la Constitución de la era de la globalización”, in Innerarity, Daniel, and Sola-
na, Javier, editors, La humanidad amenazada: gobernar los riesgos globales, Barcelona,
Paidós, pp. 237 et seq.
Legal intelligence: the strategic value of the law in…
103
or even just trying to stabilise the ?nancial system
14
. When speaking of
economic intelligence we normally stress the risks associated with the
pro?tability of an investment, but often ignore both the examination of
the political risks associated with the investment itself (although these
are increasingly taken into account), such as the risks associated with its
legal insecurity. Both risks being, as evidenced by recent world events,
much more important than ?nancial ones.
Consequently, to transfer this approach to the Law intelligence can also
not stop at providing legal tools in all these areas, or by adding the need
to develop counterintelligence work. It should also encourage, for exam-
ple, rules that stop or reduce external actions aimed at altering the nor-
mal functioning of markets and of course it has to enable the deployment
of actions of in?uence within and outside of national borders.
In this sense, the proven experience of the legislation on the defence indus-
try and the regulation of technologies of “dual use”, that speci?es a strong
link between seemingly diferent matters, such as military and commer-
cial, are an excellent example of the path to follow. But they are just good
guidelines or necessary indicators of a sophisticated regulatory policy.
In any event, the Law is the only instrument that provides an essential val-
ue in the coexistence and human relationships of all kinds: legal security.
The measurement of this essential concept, with its complex interweav-
ing of rights and guarantees, of times, delays, procedures, of a legal in-
dependent power, of the quality of legislation, stable applicable practices
and, ultimately, order and guaranteed formalised institutional functioning,
decisively in?uences the actions of the various economic, political and so-
cial interests. Legal insecurity has a high economic cost. And this cost is
also related to the degree of corruption in a state and its association with
transnational criminal organisations and groups
15
. And of course we must
not forget the cost of social exclusion, with its levels of con?ict and conse-
quent risk of instability
16
. This is a tremendous political risk.
Thus, the Law, as a collection of regulations of mandatory compliance, is
crucial in any human activity, especially in the following ?elds speci?c to
this problem.
14
Bégin, Lucie, Deschamps, Jacqueline and Madinier, Héléne (2007), Une approche
interdisciplinaire de l´intelligence économique. Cahier de Reserche No. HES-SO/HEG-
GE/C--07/4/1-CH, Haute École de Gestion de Genève, 2007.
15
All indicators show a significant increase in prosperity in Latin American countries
and the consolidation of an emerging middle class. However, this progress is hampered
by social inequality and civil insecurity. Serrano Monteavaro, Miguel Ángel, La nueva
clase media Americana. Hacia una mayor seguridad económica y social, Information do-
cument, IEEE 02/2013, December 2012.
16
Essential explanation by Stiglitz, Joseph E. (2012), El precio de la desigualdad, Ma-
drid, Taurus.
José L. González Cussac
104
Firstly, the collection of regulations applicable to the intelligence cycle,
in particular, to intelligence and economic and competitive counterintel-
ligence
17
, and especially to covert actions and in?uence
18
. What is par-
ticularly important here is the serious problem of industrial, commercial
and technological espionage
19
, and all the new problems associated with
cyberspace and its regulation
20
.
Secondly, the Law must ofer sufcient and efective protection to com-
panies and research centres, preserving their security and competitive-
ness. This involves coordinated regulation from various government bod-
ies with competency in areas as diverse as foreign afairs, international
relations and cooperation, security and justice, tax, industry, tourism, ag-
riculture, ?sheries, public works and infrastructure, education, culture,
science, research, technology, entertainment, and the environment. But
besides a protective regulation of all these ?elds, states must also imple-
ment another policy capable of increasing the transfer capacity of public
and private research centres to companies and also ofering regulated
encouragement to companies.
Ultimately, economic policy must be translated into efective laws that
support sustainable economic development, which is not incumbent sole-
ly on institutions and companies but also on individuals. And intelligence
should also be applied to this task, and to do this we need to have difer-
ent organisational models
21
. This is about the understanding of regula-
17
Bradford, William (2007), The three faces of competitive intelligence: defection, collu-
sion and regulation, University of Florida, Warrintong College of Business, 19th February.
18
Extensively in González Cussac, José Luis and Larriba Hinojar, Beatriz (2011), cit.,
pp. 89 et seq.
19
As stated by Horowitz, Richard (2011), Competitive Intelligence, Law and Ethics: The Eco-
nomic Espionage Act Revisited Again (and Hopefully for the Last Time), SCIP, Vol. 14, No. 3,
July/September 2011, p. 43, one of the biggest problems in this area is that although theo-
retically there is a difference between espionage and the lawful obtaining of information,
in legal practice it is very difficult to draw the difference between legal and illegal methods.
20
Larriba Hinojar, Beatriz (2013), “Ciberespionaje Económico: Una amenaza real para
la Seguridad Nacional”, in Nuevas amenazas a la seguridad nacional. Terrorismo, crimi-
nalidad organizada y tecnologías de la información y la comunicación, (Directors José L.
González Cussac and María Luisa Cuerda Arnau; Coordinator Antonio Fernández Her-
nández), Valencia (Tirant) 2013, where the author emphasises that economic cyber
espionage is one of the most serious threats to national security in the twenty-first
century. Also see González Cussac, José Luis, “Estrategias legales frente a las cibera-
menzas”, in Ciberseguridad. Retos y amenazas a la seguridad nacional en el ciberespacio;
Instituto Español de Estudios Estratégicos, Ministerio de Defensa, Strategic Dossier No.
149 (Madrid 2010), pp. 85-127; and also see: “Tecnocrimen”, in Nuevas amenazas a la
seguridad nacional. Terrorismo, criminalidad organizada y tecnologías de la información
y la comunicación, (Directors José L. González Cussac and María Luisa Cuerda Arnau;
Coordinator Antonio Fernández Hernández), Valencia (Tirant) 2013.
21
Ugarte, José Manuel (2005), La relación entre inteligencia y política, y sus consecuen-
cias en las estructuras y normas de los Sistemas de Inteligencia, Brasilia.
Legal intelligence: the strategic value of the law in…
105
tions that govern any human activity. This involves not only quantitative or
descriptive analytical work regarding laws, but essentially a qualitative
understanding or interpretation of their signi?cance and their efects and
consequences.
The law as an object of intelligence
In the previous section we assumed that all activity, as if it were a game,
including economic and correlative intelligence activities, is subject to
rules: for better or worse, de?ned or vague, sufcient or insufcient.
Even the absence of rules expresses the application of a rule: that of the
strongest. But at the end of the day there are always rules. Therefore, it
is obvious that the player who produces, creates and enforces rules has
more advantages. And in any case, the player who does not know the
rules of the game properly is a daredevil and a more than likely a loser.
Both aspects, creation and knowledge of the rules, must be present and
will be dealt with separately.
Whatever is the objective to be reached, the players or competitors must
try to impose their rules. In legal theory the efect is distinguished be-
tween the material sources and the formal sources of creating regula-
tions. The ?rst, the materials, refers to the diferent social powers with
the ability to drive, to in?uence or to condition legislation. The second,
the formal sources, allocate the diferent procedures formalised regard-
ing the creation and manifestation of the Law. Both state and non-state
actors operate on this plane. And the playing ?eld is basically limited to
two spatial environments: the territory where a state has sovereignty (do-
mestic legislation) and beyond its borders, in the international scenario.
In principle, within its territory the state is sovereign to produce the Law
that it deems appropriate and necessary, reconciling diferent con?icts
of interest. On this plane the state has potestas and autoritas to decide,
at least theoretically, the relevant law according to its national interests
and according to its material and formal procedures of legislative output.
From the outside, their international commitments are only bound and
conditioned when transferred and included in internal regulations (trea-
ties, conventions, agreements, associations, etc.). Naturally the degree of
real sovereignty will depend on multiple internal and external factors,
which does not exclude the need to monitor and control them sufciently
in order to avoid external regulation causing dependency and subservi-
ence to outside interests.
In the international circuit the state and non-state actors also play an es-
sential role in the material and formal production of legal rules. Hence the
need for the presence of any state in all international institutions of deci-
sion or deliberation. Equally essential is to have a regulation that makes
José L. González Cussac
106
it possible to exercise in?uence on foreign actions, within internation-
al law. Therefore, states should encourage proactive action legislatively
over any organisation or actor capable of generating an impact on eco-
nomic activity, either through communication, public relations, in?uence
or lobbying. For many authors, the global economy is determined by the
power of no more than 120 large multinational corporations. Combining
this material power with that deployed by states is what today constitutes
the major challenge in this ?eld.
The second aspect to be developed lies in the need to utilise legal intelli-
gence resources to know the best possible laws and legal practices of a
country or of international regulations, for without knowledge of the rules
it is impossible to compete on equal terms, let alone at an advantage.
Knowledge of legislation, case law and other practices and customs is
essential to ensure an investment in a foreign country. It is not enough to
know or master employment, commercial, criminal or tax laws. A funda-
mental task of economic intelligence, developed by both public and pri-
vate services, is to detect highly unstable environments that are depend-
ent on the total discretion of their governments, or those managed by
pressure groups or even corrupt groups. This is not just to provide merely
descriptive information, but genuine legal intelligence, that is, qualitative.
This also implies the knowledge of the parties involved.
Legal intelligence in general we could de?ne as the type of intelligence
that deals with the collection, processing and protection of strategic in-
formation that is useful for all legal economic acts. It is a process that
includes among its key objectives giving strategic and legal meaning to
environmental information. This means that the value added to the in-
formation comes precisely from the capture of its meaning, interpreted
from a strategic perspective. The “search, treatment and transformation
of information of regulatory use in legal knowledge” and their purposes
include:
– Protecting individuals and companies from litigation, or at least,
to deal with it in the best possible conditions. This demands a pre-
cise knowledge of applicable rules and practices, and in any event
requires deploying preventive or defensive strategies through the
anticipation of the search and consolidation of evidence.
– Guaranteeing the recognition and legal protection of social or cor-
porate rights and intangible assets of companies and citizens. The
protection of sensitive information of a company is achieved, ?rst-
ly, through profound and accurate knowledge of the regulations
and practices on intellectual and industrial property. Secondly,
recognition and proper legal protection of a company is obtained
through “lobbying” awareness of all actors involved (legislative,
administrative, economic, media, etc.) to the needs of a company.
Legal intelligence: the strategic value of the law in…
107
These types of actions of in?uence cannot be confused with undue
in?uence or corruption, as it is limited to expressing the opinion of
the company about the type of laws and the applications that they
favour
22
.
– Defence of the company image, reactive communication, and cam-
paigns exposing the agreement to practices that are always legal
and ethical. Here the key lies in internal action protocols designed
to prevent or mitigate destabilising actions through various mech-
anisms of use of the Law. The need to provide specialised means
with internal protocols of reactive legal strategies that are imme-
diate, compared with media campaigns orchestrated by a com-
petitor, by initiating legal processes that, although risky, make it
possible to denigrate or diminish the value of a company (“infor-
mational risks”), for example, before a market exit or entrance. Or a
search in legal proceedings to obtain sensitive information about a
company or individual. Remember that also in the legal sphere the
advantage is always with he who attacks, who demands or claims.
Hence the need to reduce the possibilities of surprise
23
.
– Legal surveillance ofered by competent and reliable advisors to
safeguard tangible and intangible equity, contractual con?dential-
ity rules, a patents policy, that is, deciding whether to patent or to
operate the invention before but with an adequate protective sys-
tem, tackle fraudulent practices like “bait patents” or the ?ooding
of patents on the market to confuse them compared to the genu-
inely useful, etc
24.
– Before negotiation processes with other companies, and possible
takeover attempts by larger competing companies, they should
organise agreements between shareholders that reinforce these
22
In the last few months we have seen a strong debate on various legal initiatives
by countries such as the United Kingdom, Spain, France, Germany and Italy, in order to
reduce “tax competition” between several European countries. Indeed, for several mul-
tinationals, such as Amazon, Microsoft, Apple, Facebook, Inditex, Samsung, Starbucks
etc., imitating the giant Google, took advantage of the opportunities provided by the
different domestic tax laws, to avoid or reduce the payment of taxes. Therefore, the pro-
fits are attributed to subsidiaries, which act as intermediaries, declared in states with a
low tax rate, such as Ireland, Luxembourg, Netherlands and even Bermuda. To prevent
this leakage of revenue, these countries are trying to standardise their domestic laws
with the intention of fixing the obligation of contributing to the place of business and
generation of profits, and not in the place of corporate residence.
23
A recent good example is the surprise legal attack suffered by the Argentinean
frigate “Freedom” in Ghana, triggered by a foreclosure lawsuit filed in a New York court
by NML Capital investment fund, which persuaded the Tribunal of the Law of the Sea,
based in Hamburg (Germany) to instruct the courts of the African country to confiscate
the Argentinean Navy Training Ship, due to a debt of $300 million, unpaid since 2002.
24
Cfr. Larriba Hinojar, Beatriz (2006), La tutela penal del diseño industrial, Valencia,
Tirant lo Blanch.
José L. González Cussac
108
foreign entries of new partners, that on occasions seek the control
and destruction of the brand, or at least the corporate domain.
Therefore, the fundamental mission of the Law is “to ensure economic
security” by identifying the risks of interference in national companies
and research centres. In this sense it must develop procedures which
ofer sufcient protection and deterrence. Legislation must tackle com-
petition in an open global economy, which faces advantages in terms of
growth but must also confront established powerful actors and emerging
ones.
It is essential, therefore, to develop a concept of economic security linked
to the broader category of security and in particular national security,
detecting threats and thus promoting regulation that is both preventive
and penalises noncompliance. This would include economic security in
a strict sense (commercial deregulation, tarifs, protectionism, in?ation,
?nancial instability, market volatility, lack of transparency in investment),
commercial security (international crime, terrorism, espionage, cyber-at-
tacks, corruption), food security (food reserves, agricultural and ?sheries
subsidies, genetically modi?ed foods, bio fuels), energy security (reserves
and continuity of supplies, rising prices), environmental security (global
warming, nature reserves, prevention of natural disaster emergencies),
consumer safety and health (infectious diseases, genetically modi?ed
foods, biotechnology), social security (employment, coverage and assis-
tance, pensions).
In fact, the economic security category would include a broader one to-
gether with other more established ones such as the aforementioned
national security, collective security, common security, human security,
cooperative security and sustainable security
25
.
Legal intelligence must cover both the domestic market as well as over-
seas, and it must encourage a regulation that allows ?uid coordination
between central, regional and local administrations with diferent types
of companies. Here lies the convenience of the creation or improvement
of public companies in strategic sectors, as well as the promotion of sta-
ble cooperation forums between the public and private sectors.
New information technologies also make work in this ?eld easy, quick
and in real time by enabling knowledge about the Law and applicable
practices that is both quick and accurate. Its combination with the use of
highly-trained human sources allows the bringing together of unlimited
technical capabilities that provide detailed analyses for decision making,
and at the same time also enable the deployment of multiple actions of
25
Ballesteros Martín, Miguel Ángel and Joyanes Aguilar, Luis (2011), “Los efectos de la
globalización en el ámbito de la seguridad y defensa”, in Inteligencia y Seguridad: Revista
de Análisis y prospectiva, No. 10, pp. 14 et seq.
Legal intelligence: the strategic value of the law in…
109
in?uence through social networks, media, specialist publications and pro-
fessional forums, and, of course, also access to decision-making circuits.
Legal Intelligence must enable knowledge about contracts, opportunities,
projects, needs, and even pro?les of the competition, accompanying na-
tional ofers domestically and abroad. This work involves the study and
promotion of regulations that promote research and enhancement of
public research, whose priority is to bene?t domestic companies by ofer-
ing legal advantages to technological inventions to open or established
markets and promote exports. Similarly, they must organise contractual
models to ensure a return on the investment.
Patents, brand notoriety, contractual basis (conditions, applicable law and
jurisdiction) are indispensable elements. Today the key issue in economy
lies, more than the productive process such as simple manufacturing, in
design and in added value. Hence the importance of investment in tech-
nology, innovation and in the regulation and instruments for their protec-
tion (anti-espionage)
26
and operating in secure conditions.
The preference is for strategic contracts: attracting “direct investments”
to encourage investment overseas and especially exports in priority sec-
tors. The creation, knowledge and legal handling of these areas are at
present absolutely decisive.
And in this context of international competition it must be assumed that
domestic laws are not identical, as is obvious between the Europeans,
the Americans and the Asians; therefore the legal treatment of compa-
nies is very diferent from one place to another
27
. Nor is the degree of
compliance with international treaties reciprocal, as we can see with the
anti-corruption convention of the OECD, signed by all European coun-
tries and that reduces competitiveness against other states that have not
signed and therefore cannot apply it to their companies.
Consequently, the national security strategy must contain the national
and international regulatory policies that support its growth and stability,
as well as the mechanisms of external in?uences
28
.
26
A significant example can be seen in National Counterintelligence Center (USA, 1997),
The Economic Espionage Act of 1996: A Brief Guide. Cfr. Szott Moohr, Geraldine (2009),
“The problematic role of criminal law in regulating use of information: The case of the
Economic Espionage Act”, Public Law and Legal Theory Series, 2009-A-5, University of
Houston Law Center.
27
Illustrating these differences is the current acrimonious debate within the Euro-
pean Union on the implementation of a tax on financial transactions. Cfr. Montoya Cerio,
Fernando, Sambeat Vicién, Andrés and Fabra Rodríguez, Óscar, La tasa Tobin europea.
Un impuesto sobre las transacciones financieras, Opinion document, Instituto Español de
Estudios Estratégicos (IEEE), 06/2013, 16 January.
28
In the matter of international business alliances, the development of The Trans Pa-
cific Partnership (TPP) undoubtedly represents a global change of the first order, to
José L. González Cussac
110
The law as an intelligence tool
At present, economic intelligence includes any information that could
have an in?uence on the results of company activity and from there can
transcend the common welfare (national security). And knowledge about
laws and legal practices is a substantial part of these data with a poten-
tial impact on the social order, as it is part of the competitive environment
in an economic sector. Regulation is one of the key elements of decision
making.
The use of the Law as an intelligence tool is shown openly within the
framework of covert actions and actions of in?uence.
The North American model of the OSI (Ofce of Strategic In?uence)
29,
that
since 2001 has begun the creation of regulatory lobbying, represents one
of the best examples in this respect.
As a paradigmatic example, we can study the regulations on companies
about “information gathering”, particularly Google. These corporations
hoard multiple ways of obtaining information and data from consumers
and economic actors from anywhere in the world. Once acquired this also
raises its hypothetical communication, within a strategy of U.S. economic
intelligence, to competitor companies of this nationality - even just one set
of miscellaneous data in order to build pro?les of Internet users. Knowl-
edge is power
30
. But not only in the sense of acquiring mass information
now bring together the United States of America, Canada, Mexico, Peru, Chile, Australia,
New Zealand, Malaysia and Singapore, and the likely inclusion this year of Japan and
South Korea.
29
It should be noted that the existence of the OSI as such is so far unknown. Apparent-
ly it was a section created by the Department of Defence of the United States in October
2001 to support the war against terror through “psychological operations” in target
countries, including the United States. Although initially its closure was announced in
2002 by the then Secretary of Defence Donald Rumsfeld - once its existence became
public knowledge - various sources claim that the OSI continues operating - under ano-
ther secret name - and that it only removed its name, passing the majority of its “public”
powers to the Information Operation Task Force. But obviously, being secret activities
nobody really knows if they are now still being carried out and if so what the competent
body is. The OSI was originally authorised to employ what is called military deception of
public opinion, presenting information, images or false declarations in order to deceive
enemy armies or agencies and civilian populations through disinformation.
30
Solove, Daniel, J (2006), A Brief History of Information Privacy Law, George Washin-
gton University Law School, Public Law Research Paper, No. 215. Ibid. (2006), “A Taxo-
nomy of Privacy” in University of Pennsylvania Law Review, Vol. 154, No. 3, January, pp.
484-486; p. 478. Without doubt the obtaining of information has a strategic value, but
likewise constitutes an interference with the fundamental right to privacy of citizens;
therefore these activities should be carried out in strict compliance with the Law, even
in situations concerning national economic security. González Cussac, José Luis and
Larriba Hinojar, Beatriz (2011), Inteligencia Económica y Competitiva: Estrategias legales
en las nuevas agendas de Seguridad Nacional, Valencia, Tirant lo Blanch, pp. 89 et seq.
Legal intelligence: the strategic value of the law in…
111
from around the globe, also from the standpoint of bene?ting through
legislative coverage. A similar capability of the creation and enforcement
of the rules applicable to these large information companies expresses
an intelligent power
31
. Here we could launch an eloquent discussion on
the territorial and extraterritorial application of the domestic law of the
United States of America and on its nebula and diferent regulations re-
garding cloud computing
32
.
We are actually talking about what NYE baptised as “soft power”
33
. In this
case the export of legal systems, the ability to apply domestic law outside
its borders (extraterritoriality), the power to create protectionist rules in
a domestic market, a dominant position in international organisations,
or the in?uence on the process of the creating of laws of other states
34
.
These regulatory capabilities allow real advantages and in many cases
absolute ones, and have been ingeniously called real “regulatory Trojan
horse”. Some clear examples are the following:
• Promotion from the United States of America of IFRS (Internation-
al Financial Reporting Standards). Some analysts understand that
these rules are applied with great ?exibility in the U.S., while in Eu-
rope they are more rigorously regulated in terms of accounting
35
.
• However, we cannot lose sight of the ?nal objective: the contin-
ued convergence between U.S. GAAP and International Accounting
31
Geradin, Damien and Sidak, J. Gregory (2008), European and American Approaches
to Antitrust Remedies and the Institutional Design of Regulation in Telecommunications,
Howrey LLP and Criterion Economics, L.L.C., Working Paper Series, Liége, April 07.
32
González Cussac, José Luis (2012), “La verificación de los ordenamientos internos
en los países de localización como garantía de la seguridad y la confidencialidad de la
información”, in Derecho y Cloud Computing (Ricard Martínez Martínez editor), Madrid
(Civitas), pp. 289-307.
33
Nye, Joshep S. Jr (2011), The Future of Power, New York Public Affairs (ed.).
34
The ability to influence other states legally bears a close link with those conventio-
nally called “cultural norms”, and hence the relevance of the term “geoculture”. Cfr. Me-
jía Velásquez, Hernán (1998), “La geopolítica de la geoeconomía”, Revista Pensamiento
Humanista, No. 4, Medellin.
35
Since the promulgation of the stable platform of International Financial Reporting
Standards (IFRS) in 2005, subsequently revised and modified, a large number of com-
panies and countries around the world have adopted these standards (formerly called
IAS) as a basis for their financial reports. This collection of accounting standards of a
global nature, approved by the Council of International Accounting Standards, is inten-
ded to require comparable, transparent information and of a high quality in the financial
statements and other types of financial information, in order to help participants in the
capital markets around the world and other users to make economic decisions. Today,
one of the main challenges faced in this area is the development of a commitment for
convergence established between IFRS and generally accepted accounting principles
in the United States of America (U.S. GAAP). See, in detail, Peñalva Acedo, Fernando
(2007), “NIFF versus US GAAP: resumen de las principales diferencias”, in Revista de
Contabilidad y Dirección, Vol. 4, Year 2007, pp. 55-69.
José L. González Cussac
112
Standards. Certainly today it is carrying out a convergence project
to further align the rules included in the International Financial
Reporting Standards (IFRS) and Generally Accepted Accounting
Principles (US GAAP).
• The SOX, abbreviation of Sarbanes Oxley Act
36,
is an American law
passed in 2002 in response to ?nancial scandals such as ENRON,
undermining the con?dence of investors and the American State
itself on the data contained in the ?nancial accounting reports of
companies. The name of the law is derived from the surnames of
its two main sponsors, Representative Michael G. Oxley and Sena-
tor Paul S. Sarbanes.
• The main objective of this Act is to promote greater transparen-
cy and accountability in relation to the data of the reports issued
by both public companies in the United States and its worldwide
subsidiaries, such as the foreign companies that are listed on any
stock exchange in the United States. Speci?cally, and amongst oth-
er things, it establishes a new supervisory board, supervised by
the Security Exchange Commission (SEC) and includes new report-
ing requirements and more severe punishments regarding corpo-
rate fraud.
• In reality it is an American regulatory addition (Sarbanes Oxley
Act) of the IFRS that allows the PCAOB (Public Company Account-
ing Oversight Board) to extend research on companies in terms of
?nancial and strategic data beyond its borders
37
.
• The Patriot Act, which requires ?nancial institutions such as the
PCAOB, to transmit ?nancial reports to the intelligence services
(CIA, NSA etc.) without the permission of the companies and with-
out their knowledge
38
. After which, the CFIUS (Committee of For-
eign Investment in United States) evaluates the sensitivity of the
company to American interests according to its elastic National
Security Act
39
.
s Zunzarren sharply summarised, “if CFIUS believes that the data held by
oogle are sensitive to American interests by the Sarbanes Oxley Act and
Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745, 30 July, 2002.
For a more detailed analysis of this rule, see: Romano Roberta (2004), “The Sarba-
es-Oxley Act and the Making of Quack Corporate Governance”, in NYU, Law and Econ
esearch Paper 04-032; Yale Law & Econ Research Paper 297; Yale ICF Working Paper
4-37; ECGI - Finance Working Paper 52/2004.
Phillips, Heather, A (2005), “Libraries and National Security Law: An Examination of
e USA Patriot Act”, Progressive Librarian, Vol. 25, Summer.
A supplement to this legislation, in the sense of attributing federal jurisdiction to the
nited States of America to investigate and prosecute any business, is found in the Eco-
omic Espionage Act in this sense, extensively and critically in HOROWITZ, Richard (2011),
ompetitive Intelligence, Law and Ethics: The Economic Espionage Act Revisited Again (and
opefully for the Last Time), SCIP, Vol. 14, No. 3, July/September 2011, p. 41 et seq.
A
G
36
37
n
R
0
38
th
39
U
n
C
H
Legal intelligence: the strategic value of the law in…
113
by the Patriot Act, they can obtain them without the agreement of Google
and without the knowledge of the company under investigation even if not
American. And let us not forget that the company Concileo is one of the gi-
ants in terms of moderation of Web content, which some dubbed as censor-
ship; and is American. There are those who can cut to the chase regarding
the contents of the Web; but under what criteria?”
40
.
Juillet has already highlighted the importance of the Law and its use, say-
ing, “Americans, inspired by the world of business, have chosen to modify
the environment leading to a new con?guration system, turning to techno-
logical innovation. The aim is to change the game, to dictate new rules, af-
ter taking the lead in a competition that is currently lopsided. Technological
power linked to the de?nition of the battle?eld means the adversary can only
choose the type of defeat and speed of realisation”
41
. This is the model that
leading countries, particularly in the West, are trying to emulate.
Indeed, as the aforementioned author continues to underline, the basis
of sovereignty of a state is not just the standard of living, gross domestic
product or export capacity. Nor even its nuclear capacity. The global sce-
nario has changed and there are a small group of strategic technologies
that ensure real independence of nations. But the scienti?c expertise re-
quired to work in these ?elds and the volume of investment required will
prevent many countries remaining in the technological race. Therefore,
the launching of communal programmes at European level is essential,
since, “for more than ?fteen years, Americans have had a clear and perfect-
ly identi?ed strategy. They invest relentlessly in information technology as
well as in the development of knowledge and learning, elements that are
at the heart of power and modern independence. Encouraged by its state,
American industrialists have no hesitation in establishing partnerships and
in buying companies, throughout the entire world, when they want to acquire
a technology, complete their experience or neutralise a competitor”
42
.
On the international level there are countless examples
43
, sufcient for
our purposes here to cite the ongoing con?ict in Nigeria, where the ap-
40
Zunzarren, Hugo, inhttp://idinteligencia.wordpress.com/archivos-2/
posts-precedentes/inteligencia-juridica-en-los-eeuu/
41
Juillet, Alain (2006), “Principios de aplicación de la inteligencia económica”. Inteli-
gencia y seguridad: Revista de análisis y prospectiva, No. 1, December, pp. 123-132.
42
Juillet, Alain (2012), this text is a summary of his speech to the Coloquio Indepen-
dencia de Europa y Soberanía Tecnológica, held in April in Paris and titled “Cambian
las bases de la soberanía mundial. Se desplazan de factores económicos y de seguridad
a algunas tecnologías clave que Europa no ha cultivado”. Reproduced with permission
from the author. French translation: Eduardo Martínez.http://www.tendencias21.net/
Cambian-las-bases-de-la-soberania-mundial_a337.html.
43
González Cussac, José Luis and Larriba Hinojar, Beatriz (2011), Inteligencia Eco-
nómica y Competitiva: Estrategias legales en las nuevas agendas de Seguridad Nacional,
Valencia, Tirant, pp. 72 et seq.
José L. González Cussac
114
proval of a law is being debated that would enable the imposition of heavy
?nes on oil companies for damages caused in the Niger Delta in its crude
oil extraction activities. But naturally, the powerful lobbies of these multi-
nationals, supposedly supported by the institutions and services of their
home countries, are trying to in?uence to stall the proposal, delay it, or at
least limit its application.
The recent French military intervention in Mali is also analysed not only
as a determined curb to terrorism, but also with a geoeconomic purpose:
to protect their investments in neighbouring Nigeria (it produces 8% of
worldwide uranium), where its multinational AREVA, with 80% of public
ownership, extracting uranium that imports to France and which repre-
sents around 40% of its consumption. Energy security has undoubtedly
also been in?uential in China not opposing this intervention, which also
protects its giant companies CNIUC and CNPC with interests in uranium
and oil.
The importance of rules in the global economy has a remarkable expo-
nent today in the regulation of so-called “sovereign wealth funds”. Their
strategic importance is clear from the fact that they are treated as public
funds, i.e. handled by governments, but invested in the private sector. But
just one of the major criticisms of these ?nancial instruments is their
lack of transparency, besides some signs of protectionism, the cession of
strategic control to particular sectors (banking and technology) and their
possible use by some states as an instrument of political and economic
pressure on other countries.
All this controversy gave rise to the creation in April 2008 of the Inter-
national Working Group of Sovereign Investment Funds (IWGSIF), which
culminated in October 2008 in Chile, with the approval of a code of profes-
sional ethics. This agreement was called “Generally Accepted Principles
and Practices” (GAPP) or “Santiago Principles”. Yet despite its decisive
importance in the twenty-?rst century global economy, they remain a
model of self-regulation and not authentic binding legal rules. Therefore,
although their purpose is said to be purely economic and ?nancial, it is not
expressly excluded that their use is subject to “other considerations”
44
.
Here is a large calibre geoeconomics weapon to consider as central to any
analysis of legal and economic intelligence.
This panoramic view should also underline the so-called “Basel Accords”
and the World Trade Organisation (WTO).
In 1974, the Basel Committee, composed of central bank governors of the
G-10 countries, approved the ?rst “Basel Accord”; a collection of recom-
mendations aimed primarily at establishing the minimum capital a bank
44
Coronas Valle, Daniel and López Jiménez, José Mª (2013), Crisis y Fondos Soberanos:
¿El abrazo del oso?, Opinion document, IEEE 14/2013, 5 February 2013.
Legal intelligence: the strategic value of the law in…
115
should have taking into consideration the risks it faces. It was a simple
recommendation, so that the signatory states were not obliged to incor-
porate it into their laws, or they could do so with modi?cations. Over a
hundred countries signed it. However, two major drawbacks were detect-
ed: their insensitivity to the variations of risk and the lack of assessment
on credit quality.
To overcome these criticisms the “Basel II Accord” was adopted in 2004,
creating the subgroup responsible to drive its international implementa-
tion (Accord Implementation Group, AIG). Today it applies throughout the
European Union (mandatorily imposed by directives), in Japan, Australia
and in more than 95 diferent countries by the members of the Commit-
tee. This shows the extent of its unquestionable progress towards a uni-
?ed international practice, and its possible technical de?ciencies, once
again called attention to its legal nature, which allows a diferent degree
of compliance worldwide. This in spite of its implications in the genesis of
the current ?nancial crisis and its extraordinary value in a strategic mar-
ket such as the ?nancial one. Once again we are faced with a shortage of
obligatory regulations and a notable lack of transparency.
The World Trade Organisation, although not forming part of the UN, or of
the “Bretton Woods” organisations (the IMF, World Bank), includes more
than 158 countries and 26 in an observer capacity. Its objective is the
multilateral regulation of international trade, and currently administers
about 60 agreements. The original provisions, called “GATT 1947”, were
expanded from the celebrated “Uruguay Round”, known as “GATT 1994”,
i.e. “General Agreement on Tarifs and Trade”. It is known that the initial
impetus was the result of an agreement between the most developed
countries, especially the United States of America and the European
Community, with the aim of deregulating international trade, reducing
customs tarifs, subsidies and other instruments of “trade distortion”.
However, it was objected that they only covered sectors that suited
their interests, but exempted those that needed to maintain protection-
ist measures (textiles and agriculture). From the “Uruguay Round” this
situation began to change. However, the ?exibility measures were in-
sufcient in the opinion of the least developed countries, and also, as
compensation, they would introduce new sectors such as Trade Services
and particularly relating to intellectual property, as required by North
America
45
.
The WTO requires adherence to all its agreements, without exception.
This way trading rules apply to all, exactly the same, irrespective of the
level of human, technological and social development. This contrast rais-
es the essential critique, demanding special and diferential treatment
45
In this respect, see Arcos Martín, Rubén (2010), La lógica de la excepción cultural,
Madrid (Cátedra).
José L. González Cussac
116
commensurate with the degree of development of each country. The so-
called “Doha Round” of 2001 (“Doha Development Agenda”) pursued this
objective, which was still very distant and abandoned with the outbreak
of the great crisis of 2008. Consequently at present, the most developed
countries afected by the crisis maintain agreements that clearly favour
them in international trade and do not seem very willing to make con-
cessions to either the emerging countries or the underdeveloped. Once
again we can see the value of law, the advantage of who has the capacity
to create the rules and therefore its strategic value
46
.
In the Spanish case, among others recently, we could cite the dispute
over REPSOL-YPF in Argentina, which is highly signi?cant regarding
what we are discussing. Also very controversial was the reform of 27th
September 2011 of art. 135 of the Constitution. For some this consti-
tutes a manifestation of a loss of economic sovereignty, in?uenced by
the interests of international creditors and something that guaranteed
the maximum regulatory level. For others, however, it was a need to cor-
rect the public budget de?cit (structurally of 5% of GDP and that soared
after the current crisis), with the introduction of a limit on spending and
borrowing or a principle of budgetary stability
47
. Indeed, the determina-
tion to impose strict rules on budget de?cits should also be extended to
the imbalances in trade balances, to reform tax laws towards a ?exible
and adaptable understanding to periods of expansion or recession of the
economy
48
.
The strategic importance of a strong alliance between technological inno-
vation and regulatory accompaniment is nowadays expressed as a para-
digm in the energy industry
49
. According to the report of 12th November
2012 of the EIA (Energy Information Administration), the United States
of America will in 2017 be the largest oil producer and in 2030 the larg-
est exporter. This is thanks to what has been allowed legally (in spite
of obstacles and environmental risk warnings); the development of an
innovative technology of horizontal drilling and of “hydraulic fracturing”,
which allows the extraction of crude oil and gas through water pressure
(fracking). This change is already having decisive geopolitical efects and
multiple consequences on other countries as diverse as Saudi Arabia
46
Reynaud, Julien P. M. and Vauday, Julien, (2008), IMF Lending and Geopolitics, (14
November 2008). ECB Working paper No. 965, International Monetary Fund.
47
Worth considering is the theory that advocates a classification between countries
which accumulate wealth (favourable trade balance, technology and savings) and coun-
tries that accumulate debt.
48
For a more complete view about the geopolitics of oil today, see MAUGERI, Leonardo
(2012), Oil: The Next Revolution Discussion paper 2012-10, Belfer Center for Science
and International Affairs, Harvard Kennedy School, June 2012.
49
Youngs, Richard (2007), Europe’s External Energy Policy: Between Geopolitics and
the Market, (20 November 2007), Centre for European Policy Studies Working Docu-
ments No. 278.
Legal intelligence: the strategic value of the law in…
117
(and other Asian Gulf countries), Russia, China, Venezuela, Ecuador and
Bolivia
50
.
These “regulatory Trojan horses” express the allegorical construction
of Bentham’s panoptic, masterly description of the form of power under
which we live, and especially in the digital age. Moreover, new technolo-
gies may even dispense with the central monitoring tower and any other
material tool, as with these infrastructures they exercise complete con-
trol. The large ?nancial, energy, internet service and telephone compa-
nies are more than just good examples. Their alliance or collaboration
with the governments increases their powers and extends the watched
and the watched over. However, the Internet presents a problem for vig-
ilantes, since to watch leaves traces of their observation and in turn can
be watched. But to make this two-way possibility real, regulations must
be implemented. In the international environment, treaties that limit and
regulate global monitoring. At the domestic level, freedom of information
laws and especially regarding transparency, where citizens can control
the vigilantes.
In short, it is essential to have national and international law that enables
a powerful organisation that will deter external hostile actions. This will
update the doctrine of deterrence, as it becomes clear that the negative
consequences for those who try will outweigh any bene?t. We need spe-
cial and exceptional rules for times of profound change in social relations,
or if you prefer, in times of “economic war”. The rules should contribute to
diminishing or abolishing the vulnerabilities and to generating common
wellbeing. It could be stated as the necessity of a new economic Law for
a new global context.
To achieve basic results to improve institutions, providing them with
real capacity to implement a protective and penalising law to attacks on
economic, scienti?c, technological, historical, artistic, cultural and envi-
ronmental wealth, of a special guardianship against data espionage sen-
sitive to intrusions. To organise public mechanisms of control over the
capital of strategic companies, and surveillance on investors, especially
over those unwanted ones.
This complex regulation should extend especially to SMEs, permitting
the development of networks that will allow them to defend their rights
throughout the world, contributing to the reduction of oligopolies, to the
impositions of large multinational companies and, in short, enabling the
old liberal aspiration of free competition. Along with this it is necessary
to provide incentive rules to encourage implementation abroad and
domestic consolidation, and to implement formalised advisory mecha-
50
Nye, Joseph S. Jr (2010), “American and Chinese Power after the Financial Crisis”,
The Washington Quarterly, 33:4, Center for Strategic and International Studies, October
2010, pp. 143-153.
José L. González Cussac
118
nisms to eliminate bureaucratic obstacles, lack of data or misinforma-
tion actions.
Conclusions
The ?rst conclusion is to support the value of the Law, both as the pow-
er to create rules and its knowledge and application to economic intelli-
gence. The interplay between the three levels outlined above is therefore
essential. Thus, if today the dependence between national security and
economic prosperity is obvious, it is also obvious that both are proxies for
the current rules.
The second is to point out the hitherto insufcient attention which, regard-
ing economic security as an integral part of national security, has been
paid to the phenomenon of organised crime, its close links with corrup-
tion and its tremendous institutional impact. Very recently this attitude has
been corrected, as shown, for example, by the attention paid to diferent
strategies of national and regional security, or the European Parliament in
its report of 2011 on international organised crime in the European Union.
The third and essential point refers to the underlying causes of the cur-
rent international crisis. In this panorama the predominance of policies
of “non-Law” is rightly highlighted, using euphemisms such as deregula-
tion, self-regulation, or state anti-interventionism. Obviously these poli-
cies are part of an ideology behind which are hiding notorious economic
interests, and in no way express any kind of “natural law of markets”.
Supported by large ?nancial energy and new communication and infor-
mation technology oligopolies, they make it possible to impose their par-
ticular interests above general interests, whether in collusion with some
states or even against the wishes of other weaker ones
51
. The result is the
burden of the constant impoverishment of these countries and of their
citizens. But they also cause an erosion of institutions and a continual
loss of legitimacy. Better for them, because the weaker public institutions
are, the more power they accumulate.
This state of afairs, together with direct damage to the quality of life of
millions of people, feeds the discourse of radical and extremist ideolo-
gies. And it also resurrects the historically failed discourse of economic
protectionism. Hence proposals arise for de-globalisation. In particular,
some are in favour of a return to protectionist state regulations
52
.
51
Of great interest is knowledge of the operation of the global financial market, espe-
cially the so-called “Credit Default Swap”. Cfr. Álvarez Rubial, Gregorio Pablo: “El Credit
Default Swap como agente transformador del paradigma financiero internacional”, Opinion
document, IEEE, 04/2013, 9 January.
52
Todd, Emmanuel (2010), Después de la democracia, Madrid, Akal; MONTEBOURG, Ar-
naud (2011), ¡Votad la desglobalización!, Barcelona, Paidós.
Legal intelligence: the strategic value of the law in…
119
Certainly capitalism exercises its economic control by allowing govern-
ments, through the Law, to satisfy speci?c social demands. However,
with the fall of the counterweight represented by the communist states,
this balance was broken. The neoliberal ideology of modern capitalism
has been built on a dual argument: state intervention reduces individual
freedom and restrains the initiative of civil society. From this assumption
there was unleashed a constant and systematic process of reductionism
of the public sphere towards the “minimal state”. The explicit message
was simple: all state intervention is synonymous with domination, of re-
striction of freedom. Therefore, any product of the state is negative: thus,
legal regulation, with its formalities and requirements of control and pub-
licity is presented as useless bureaucracy; politics is always equivalent to
corruption and justice, with its procedural guarantees, a hindrance from
the past, slow and inefcient. The subliminal message hides the interest-
ed identi?cation of civil society with free markets, i.e. with the monopolies
of ?nancial power, and consequently progress requires the agility and
?exibility of deregulation, self-regulation, arbitration, mediation and any
other non-formalised mechanism.
In short, the discrediting of the state and its ongoing delegitimisation
calls for fewer rules, less law, less res publica. But as Epicurus warned,
“if they eliminate the laws, men need the claws of wolves, the teeth of lions.”
Only the Law provides rules, values, reasons, interests, and imperatives
capable of the transit from a society where the power of the strongest
governs – historically military force, today the ?nancial oligopoly – to an
orderly coexistence that is plural and transparent: the Rule of Law. Only
with legal security can there be a real free economy. And economic and
competitive intelligence must ?rst know these rules, and then encourage
their correct application and reform in accordance with the general inter-
est. That is the aspect of the economy as part of national security.
In this line, some proposals seem essential to achieve the objective of
a greater economic security. Firstly, to underline that the international
community already has useful and efective rules that, largely, can solve
many of the issues raised here. Its recognition, application and control of
compliance are essential to economic activity.
Secondly, promoting stricter laws on competition and enabling their
efective application, particularly on institutions of ?nance, energy and
new technologies of information and communication. This involves deal-
ing with disproportionate end bonuses, tax subsidies and public aid,
more transparency and an end to tax havens. But also tax reforms to
correct current gross inequalities, modifying legislation on bankruptcy
and ultimately, a new regulation that, in the words of Stiglitz, “softens
globalisation”
53
.
53
Stiglitz, Joseph E (2012), El precio de la desigualdad, Madrid, Taurus, p. 343.
José L. González Cussac
120
This crisis must be overcome by using more democracy (greater citizen
participation), and more Law (an updated and precise regulation). It is
essential to increase transparency, which is an essential way to the con-
trol of citizens over public representatives, who cannot continue holding
back public information and thus aspiring to exclusively retain the ability
of decision making on general matters, protected in the false assumption
that they are the only knowledgeable and therefore uniquely quali?ed
people. As Hobsbawm has categorically expressed it, “The States with a
stable and buoyant economy and a distribution of relatively equitable wealth
are less likely to sufer a social and political earthquake than those poorer,
where inequalities are the order of the day and whose economy is anything
but stable. Similarly, the possibility of peace would be afected by a drastic
increase in economic and social inequality, both in individual countries and
between all of them”
54
.
Historical experience shows us the consequence for the democratic Rule
of Law of having economic and social instability, manifested constantly by
periods of in?ation that are devastating to the middle classes. And we al-
ready know that without them a regime of freedom is not possible. The risk
of in?ation now lies in wait for many developed countries and consequent-
ly its control must constitute one of the priorities of our governments
55
.
Likewise, the legally developed States – which entail an important degree
of implementation of civil, social and individual rights (especially labour
rights) – favour sustainable growth and consequently attract economic
investment. This premise is a historical constant, and currently begins
to loom with the incipient end of the trend toward of-shoring and out-
sourcing of large companies. Indeed, many of them have started the re-
turn “home” as a reaction to the enormous problems of legal uncertainty,
corruption and political instability, insufcient technological development
and infrastructure of many of the countries that initially attracted their
residence due to their low costs.
With Berlin, we can reject monistic analysis and response: nor is there
a single crisis, but several intertwined ones, nor is the answer unique
– only ?nancially and economically – but also institutionally, with a de-
mand and pressing need to develop rules built on shared values. Indeed,
because as economists also remember, this ?nancial and economic crisis
is primarily a crisis of values, that is, a moral crisis and consequently a
crisis of rights, insecurity and lack of con?dence
56
.
54
Hobsbawm, Eric (2006), Guerra y paz en el siglo XXI, Barcelona, Crítica, p. 16.
55
Touraine, Alaine (2011), Después de la crisis, Madrid (Paidós).
56
Stiglitz, Joseph E (2010), Caída libre El libre mercado y el hundimiento de la economía
mundial, Madrid (Taurus), pp. 324 et seq. On this point integral education becomes a
fundamental value; this is humanistic, because without it there are no truly free citizens
(critics); and without them, democracy remains a hollow idea.
Legal intelligence: the strategic value of the law in…
121
I will conclude with an idea expressed with great clarity by Juillet, “Facing
the pressure exerted by all those who want to increase their global market
share, the only true answer consists in creating clear game rules that are
applicable in all countries. It is a rare event now because many have the
tendency to seek privileges or to slip away. Faced with the difculty of en-
forcing international agreements, it is necessary to convince people that the
absence of rules, the non-compliance of rules and violation of patents are
ruinous for companies and economies. The recognition and supervision of
the rules as well as the control of compliance with the rules applicable for all
are therefore at the heart of economic intelligence activities”
57
.
In conclusion, as I have tried to emphasise in this work, all human activity
is subject to rules, their knowledge, handling, application, and especially
their creation, are an essential strategic value (Auctoritas, non veritas, fac-
it legem). As Aristotle warned, intelligence consists not only in knowledge
but also the skill to apply knowledge in practice.
Rules, values, interests, imperatives, all this is Law. Without reliable laws
a truly free economy cannot exist, in other words, without legal security
there can be no economic security. And without a free and secure econo-
my for everyone, a peaceful and orderly coexistence is impossible (Salus
populi suprema lex). Therefore, only the Law is the future of democracy.
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Chapter IV
Competitive intelligence: a new
paradigm in the strategic direction of
organisations in a globalised world
Fernando Palop Marro
Abstract
The author starts from the challenges that organizations cope with in
the global world of the twenty-?rst century with a dynamic of changes in
their markets, technologies and socio-economic context. Those changes
often behave disruptive character of the prevailing by both its content
and its complexity and uncertainty derived in part from the speed with
which they occur. This dynamic requires a new paradigm to be taken into
consideration. First in terms of culture and learning processes of the or-
ganization in relation to the changes taking place around them but as well
in the way decisions are built and made. That is how the organization and
its sphere of in?uence detects, anticipates and ”reads” the meaning and
stakes of those changes. But also how it integrates and transforms the
results of that learning capability into actions, decisions.
This integration need is stressed in the decisions ?eld, afecting the man-
agement and strategic direction of the business. This new paradigm that
requires intelligence to compete is collected by the proposal formulated
as competitive intelligence and other denominations also known. Com-
petitive intelligence is not as such a ”new” proposal, it takes more than
half a century of practice in many companies and organizations as we un-
Fernando Palop Marro
128
derstand it today
1
, and has precedents from many centuries ago. But it is
still unknown and partially or completely unexploited by a large number
of them. So it can be said that not exploiting today the potential posed by
CI in organizations is a competitive disadvantage. The article reviews the
term, its foundations and the processes involved. The main bene?ts and
some application examples are put forward and the relationship between
competitive intelligence, CI, business security and the importance of the
in?uence concept are reviewed. Focused on the business world, this pa-
per also addresses other applications of the same concept, as in the case
of territorial intelligence. Finally some evolutionary trends in this ?eld
are provided.
Keywords
Competitive intelligence, strategic planning, decision process, organiza-
tional learning, knowledge management, organizational intelligence.
1
Masson, J.L. (2005)
Competitive intelligence: a new paradigm in the …
129
Executive summary
CI forms part of the responses developed by organisations (of all kinds
and sectors) to provide the management of organisations with the keys to
drive strategy and many of the tactical matters in a modern world with a
high grade of uncertainty and speed of change.
This grade of uncertainty and speed of change has made part of the tra-
ditional practices that deal with information gathering and analysis of
non-structured decision making obsolete.
CI does not eliminate uncertainty but it does reduce it to the extent that
the systematic nature of its practice makes identifying a greater percent-
age of relevant information possible. This percentage varies signi?cantly
depending on the context of the matter to be decided. On the other hand it
does not eliminate risk, but it does help to manage it.
Competitive intelligence creates a change in the paradigm of the tradi-
tional way of dealing with the development process and decision making
by directors. Traditionally, intelligence generation for decision making
has been almost exclusively assumed by decision makers. Within the
new paradigm, the organisation is not generally limited to providing the
decision maker with data and information. The organisation starts by in-
volving the decision maker in the CI process and collaborates with the
decision maker by generating intelligence (implications and signi?cance
of events, trends, alternatives, action proposals) to make the decision.
CI forms part of the characteristics of modern organisations considered
as learners. From CI the organisation actively participates through difer-
ent roles and purposes in the tasks of information observing, gathering,
organisation and analysis and ?nally in its communication. There is ex-
tensive involvement and participation by the organisation in the process,
not reduced to a few people from the management “staf”. Even from the
network concept, the involvement of people outside the organisation but
within its sphere of in?uence is managed.
CI is above all an inter-disciplinary process in the organisation’s traditional
vertical functions, of continued performance over time (through its warning
and anticipation aspects), focused on its support priorities and on the future.
CI as a process enables management within all of a company’s processes,
its results are measured through indicators and have regulatory referenc-
es regarding innovation and quality such as from AENOR (Spanish Stand-
ardisation and Certi?cation Association) UNE (Spanish Standard) 166.006.
CI takes many of its tools from other areas of knowledge (such as stra-
tegic planning, marketing, ?nancial analysis, knowledge management or
forecasting). But also, in addition to the process, it generates, especially
in the analysis stage, an important store of practical experience (in part
Fernando Palop Marro
130
originating from its application in the area of defence, security and geo-
politics) with contributions and proposals in the ?eld of cognitive biases
in the use of analogies, inductions, deductions, inferences etc.
CI represents a competitive advantage for those organisations that know
how to make use of the untapped potential in their organisations. CI,
according to what has been empirically compared through surveys, in-
creases a group’s degree of cohesion based around goals and strategic
priorities and their achievement.
Today, possibly one of CI’s most typical and unique characteristics is its
capacity for risk detection and anticipation. Unlike other functions in or-
ganisations that also collect data and information from the outside envi-
ronment, CI focuses on providing context to the facts, their signi?cance
and implications for organisations and their possible progress. These
facts will appear from CI only as evidence of support for the reasoning
that leads to the provided intelligence. In this sense Gilad, B. (2008) main-
tains that CI creates a speci?c perspective of the risks and external op-
portunities for the global performance of companies and therefore is part
of an organisation’s risk management activity.
Introduction
In recent decades the merging of a group of changes in organisations’
socio-economic and technological environment has represented major
challenges in order to adapt to these changes. Behind this need for adap-
tation is their capacity for learning about the changes and the integration
of this capacity into the decision making process in organisational and
strategic plans. For this adaptation to be efective it is dependent, as I will
explain, on the way in which said learning occurs and on the way deci-
sions are constructed and made.
This group of changes includes challenges created by the globalised world.
Accelerated technical change modi?es not only products and services but
also their consumption and appropriation habits. The obligatory interna-
tional presence that very many companies, not only large corporations,
have today is also represented in order to achieve maximum performance
in their business models. The reality of a world with less economic security,
where new aspects of competition appear to be considered as an in?uence,
cannot be ignored. All of this has contributed to the fact that in their man-
agement organisations face increased risk and high levels of uncertainty.
It is in this context where organisations are faced with today’s unavoid-
able need to manage the aspect of monitoring and learning about the
changes that occur in their surroundings, particularly those that go be-
yond an operational or divisional sphere. Not long ago this aspect was
considered a general obligation for any director’s position, not needing
Competitive intelligence: a new paradigm in the …
131
to be allocated to any job de?nition in particular, nor did it seem neces-
sary for some tasks or speci?c processes. Everybody knows about it,
but it is nobody’s responsibility. It was not measured and as a result not
managed, apart from exceptions such as in the case of marketing
2
, but
remained restricted to its sphere. However, history has shown numerous
cases of organisations, and in particular companies, that have passed the
?rst company generation when their directors have been able to connect
strategic re?ection with the capability transferred to their organisations
to keep them up to date with events that determine how they understand
organisations, and as a result act and make decisions. This has been
much more frequent in sectors dependent on science; as is the case, for
example, in bio-pharmaceuticals used to working with a long-term view.
This outlook penalises all those organisations that are not capable of de-
tecting the signals that generate these changes in time, or that having de-
tected them, do not take decisions as a result. This shortcoming ends up
becoming a weakness in these companies and organisations when com-
peting in a global market. This has been highlighted by Ansof, I. (1975)
by introducing the concept of “Strategic Management”. In that year he had
already put emphasis (at a time when companies were facing problems
in the environment) on the need to focus on their capacity to anticipate
threats and opportunities. Later, other leading writers, among them Mi-
chael Porter (1980), Gary Hamel and C.K. Prahalad (1994), emphasised
the importance of strategic positioning based on analysing information
from the local environment. The former, in addition to proposing tech-
niques for analysing the sector and competition, suggested generating
intelligence about competitors through an “intelligence system”. The
latter pair emphasised the importance of management teams in order
to compete to obtain a prospective vision of the sector. Later Clayton M.
Christensen et al. (2004) returned to obtaining certain types of signals of
change as the starting point of analysis to predict changes in the sector.
With regard to the bene?ts of anticipating competitors’ actions and un-
derstanding their strategies and other market forces or assessing the
consequences and implications of technological changes, today this does
not require great justi?cation. It is as clear as the negative consequences
of decision making based on incomplete or non-reliable information or
information not available in time.
But as far as decision making is concerned, we have a process of ob-
taining information (increasingly collective and linked to the learning
capacity) and another complementary analytical process and then the
subsequent decision. It is here where a competitive disadvantage is again
2
The idea linked to this analysis function or environment intelligence – “environmen-
tal scanning”, market intelligence, although limited to its field, shares approaches with
competitive intelligence.
Fernando Palop Marro
132
occurring between organisations that continue under the traditional par-
adigm (the director assumes the initiative and the leading role) against
the more participatory paradigm, for instance those based on models
such as learning organisations (Peter Senge, 1990). In this regard, he un-
derlines in Chapter 1 that, “there are surprising examples where the intel-
ligence of a team exceeds the intelligence of its members”.
It is in this context that we talk about competitive intelligence, also known
by other descriptions such as corporate or economic strategy and similar
to other concepts such as technological or strategic security or to that of
market intelligence. It does not seem to us that the name today is an impor-
tant matter but rather a consequence of the youth of this ?eld. That is why
we call this contribution competitive intelligence, hereinafter CI. Competitive
intelligence, although it has prior precedents, strictly speaking started in the
eighties in the business environment as a response to the context explained
at the beginning of this introduction. It refers to making use of the capacity
to understand the environment in the process of making non-structured or
strategic decisions, as well as some operational decisions.
CI and strategic direction
CI represents current methodology that is increasingly linked to the needs
of strategic management and corporate innovation. D. Bernhardt (1994)
noted how intelligence was the energy of strategy and even went on to
suggest that strategy without intelligence would make it necessary to re-
turn to speculation. Recently Roger Martin (2013) recalled how on more
than one occasion when asking company directors about the company’s
strategy they answered that they did not wish to or could not develop it to
match the high degree of change in their operating environment. Accord-
ing to them, particularly in high technology sectors (although it would also
be possible to ?nd other cases) there was not enough certainty to develop
strategy efciently. The danger for them, of course, is that whilst they are
using uncertainty as an excuse to postpone strategic decision making, the
competition can be doing something completely diferent such as antic-
ipating, thanks speci?cally to its strategy. Therefore, it is no coincidence
that directors complain after the event of having been surprised by some-
thing unexpected. Their story tends to be that when it happened it was too
late to do anything constructive in this regard. The failure was not their
fault at all, because for them it is the sector that is uncertain and this type
of thing only occurs “naturally” and is unpredictable.
As the lecturer in Administration at Toronto University aptly remembered,
each company has a strategy (Martin, R. 2013). Whether its execution is ex-
plicit or not, the decisions that are taken daily afect the company’s perfor-
mance on some part of the playing ?eld (for example, making a choice of
“where to compete”) and how to compete there (in other words, making a
Competitive intelligence: a new paradigm in the …
133
choice on “how to win”). Without making an efort through “making strategy”
and let us not forget that it requires feeding with intelligence, a company
runs the risk that its numerous daily options will not be connected to each
other, will be contradictory regarding their divisions and levels and will ?-
nally have a reduced impact compared to the goals that have been set.
Summarising the practice of strategy, it is supported by the existence of
a competitive intelligence process and in turn CI requires the existence of
some strategic priorities in order to be able to efectively contribute and
support the organisation’s performance.
CI ?eld of activity
CI activity focuses its attention outside the organisation but to do this it
has to start from solid inside knowledge. Fleisher (2001) pointed out how
with regard to CI’s outside role it focuses on the comparison of:
• The industry structure and its evolution: special emphasis on the
attractiveness of the sector;
• The macroeconomy seen in another way, as those social, techno-
logical, economic, ecological and political/legal (Steep
3
) aspects of
the environment associated with the company itself;
• The interested parties: those organisations that can afect or are af-
fected by the achievement of the organisation’s competitive goals, and
• Issues or problems: these are the gaps that exist between the or-
ganisation’s actions and the expectations of those (for example,
stakeholders such as clients, suppliers, etc.) that can afect its
competitive goals.
Bene?ts that ci provides to the organisation
Professional practice and literature on the subject lists the most common
bene?ts:
• It reduces risks and uncertainty. Gilad (2008) stated, “it proposes
a speci?c perspective for risks and external opportunities… and
therefore it is part of the organisation’s risk management activity”.
• Warnings about technological and commercial surprises and those
from the local environment. This bene?t originates from the ability
to manage anticipation. This will be dealt with later in the chapter
on CI Basics.
• It contributes to the companies’ non-structured decision making
process, both in strategic decisions and in many of the tactical ones.
• It identi?es “opportunities, threats, weaknesses and strengths”.
3
Also known as PESTEL.
Fernando Palop Marro
134
In the case of strategic planning we should emphasise its capacity for
characterising the business sector through the preparation of pro?les
about the sector itself, its players, special competitors or the technology
that determines it, thereby satisfying the speci?c needs of the decision
maker. Prescott (1989) pointed out the capacity to provide answers to
questions that demand the preparation of these pro?les, such as:
– What are the basic characteristics of my industry and the
competitors?
– What is the current position of my competitors?
– What could my competitors’ most likely movements be?
– What movements can our organisation make to achieve a compet-
itive advantage?
It transforms collected information into practical intelligence aimed at
action:
• The collaboration of all members in an organisation in the intelli-
gence process as “antennas” or “lookouts”.
• Its adaptation to the time dynamic, to deal with the evolution of
critical matters and thereby make organisational reform easier.
• The monitoring and anticipation of changes in market structure
and competitive activities such as: the emergence of new busi-
nesses, new alliances, capacity expansion, mergers and acquisi-
tions (Fleisher, C., 2001).
• The analysis of competitive models: processes, products,
organisations.
• Technology security and monitoring and its implications: R+D ac-
tivities, innovations based on technology, emerging technologies.
CI as a process
In general terms CI is the process through which organisations collect and
analyse information (evidence that can be translated into action) about
competitors and the competitive environment and that ideally can be ap-
plied to their decision making and planning processes to improve their
performance. It involves understanding the signi?cance and implications
of changes and innovations to the environment in time. CI connects in-
formative signals of changes, with no apparent relationship, spread over
diferent sources, events, perceptions and data, establishing guidelines
and trends relating to the market environment.
According to the UNE 166.006:2011 standard, “competitive intelligence
includes… analysis, interpretation and communication of strategically valua-
ble information about the business environment, about competitors and the
organisation itself that is sent to those responsible for decision making as
a support element to adjust direction and indicate possible paths of devel-
Competitive intelligence: a new paradigm in the …
135
opment that are useful for the organisation”. This standard de?nes CI in its
chapter 3.3 as: “Ethical and systematic process of collecting and analysing
information about the business environment, about competitors and about
the organisation itself and noti?cation of its signi?cance and implications
used for making decisions” (Aenor, 2011).
CI uses public access sources to ?nd and develop information about com-
petition, competitors and the market environment (Vella and McGonagle,
1987, quoted by Fleisher, 2001). CI is not corporate espionage; it is ethical,
legal and legitimate, while corporate espionage is clearly illegal, unnec-
essary and does not form part of the description of CI tasks. Information
from public sources does not necessarily involve published information.
There is a set of data and evidence which can be accessed legally without
it needing to be published. (Fleisher, C., 2001).
Today, most organisations carry out CI in some basic form whether they
are aware of it or not. Many directors practice CI in their daily activities
when it involves understanding how to best position their organisation’s
products or services in the market. Not only large corporations but also
small companies (especially in sectors such as capital goods or those
more dependent on science such as biotechnology or health sciences)
are often more sensitive to the gathering of information and to the use of
IC efectively. Perhaps because their size does not allow many levels and
everyone has “their feet more on the ground”. It is not unusual in these
cases for motivated businessmen to be the ones that lead this demand
in their organisation, as they are personally used to ?nding out as much
as possible about the market that surrounds them and their competitors.
Case 1: Example of a small casting company.
Such is the recent case of a casting company with thirty employees in a
South American country. For years it had performed comfortably in its local
market using a highly manual process carried out with professionalism but
with one weakness; a high percentage of its turnover depended on projects
for an outside company. The development experienced in recent years in the
country led that foreign company to decide to invest in its own casting plant
in the country, thereby terminating the long-standing relationship. Just at
that same time, the small company made an investment to extend and mod-
ernise its facilities and process. The small company, after taking part in a CI
transfer of skills process and conducting market analysis for the ?rst time,
carried out a strategic re?ection exercise to redirect its current position be-
fore the consequences of the changes forced it to do so.
Source: own preparation with the collaboration of technicians and staf of
the company Templamos.
CI, its concepts and practices are shown to be of great potential value for
diferent types of organisations, not only companies but public entities,
Fernando Palop Marro
136
local bodies, institutions, universities and research centres with a need to
make decisions based on evidence, looking for risk anticipation and re-
duction. This is the case with a hospital institution making decisions about
investment in order to expand its accident and emergency department.
Case 2: Example regarding the introduction of Surveillance Technology and
CI in a leading hospital.
In 2011 Pablo Tobón Uribe Hospital (HPTU), Medellin, Colombia decided on
an ambitious plan to expand its healthcare capacity, which entailed improv-
ing the services in the accident and emergency department to put it among
the leaders in its ?eld in South America. In the same year the HPTU man-
agement decided to take part in an initiative
4
that a local innovation agency,
Ruta-n, coordinated, to de?ne and install CI practices among companies in
the Antioquia region. Health institutions increasingly have to face strategic
investment decisions that are more dependent on technology. At the same
time these can determine its future performance. As a CI pilot exercise, the
HPTU management selected the decision concerning efciency in the acci-
dent and emergency department. As a result, a hospital team in collabo-
ration with the local university institution, ITM (Metropolitan Technology In-
stitute), previously trained in CI, followed the known CI methodology and in
twelve weeks prepared an international report on best practices, trends and
processes in the organisation of the hospital emergency department. It iden-
ti?ed two communication technologies applied to emergency units that up
until then had only been installed in the USA. The management endorsed the
report’s results and gave approval to this surveillance technology (ST) and CI
practices in the hospital. The quality control manager and the systems and
ICT manager were integrated into the ST and CI task force.
Source: own preparation with the collaboration of HPTU technicians and
medical personnel.
Adapting a work by Professor Craig Fleisher (2001), a way of understand-
ing a CI operation is to see it as a progression from raw materials or con-
sumables up to ?nished products. From this perspective CI starts with
scattered pieces of raw basic data. This raw material is organised by CI
practitioners and turned into information. The information is turned into in-
telligence when, after obtaining the information originating from it (mean-
ings, implications and consequences for the organisation), it is put into a
useful format for the key or unique intelligence needs of a decision maker
(known as Key Intelligence Factors or KIF); good CI is driven by needs. With-
out CI customer orientation, it does not make the slightest bit of sense. The
decision maker’s involvement in the CI process starts with the de?nition of
the need and culminates in the interaction with the results or communica-
4
This initiative had the writer of this article’s address from the Polytechnic University
of Valence and was financed within a programme known as ERICA with support funds
from Spain’s cooperation through the AECI and local institutions.
Competitive intelligence: a new paradigm in the …
137
tion to make the decision. Therefore, intelligence is the information that is
analysed, interpreted and communicated with the explained implications.
Competitive intelligence is the more speci?c intelligence product that sat-
is?es the unique needs of a decision maker to understand a competitive
aspect of the organisation’s internal and/or external environment.
CI as an organisational function or management approach
CI is the aforementioned process but to ful?l all of its potential it also
needs to be administered as a management approach or system that
makes use of the learning potential of the entire organisation and of its
area of in?uence as a support network and by obtaining warning signals
about those changes that to a great extent involve the organisation.
In this regard it is considered as an organisational function and therefore
we should also discuss a system’s formalisation and organisation.
In fact this is the approach of UNE 166.006 when mentioning the pur-
pose of surveillance technology and a competitive intelligence system
in Chapter 1: “formalisation and structuring in the organisation of the
listening process and environment observation to support decision
making at all levels in the organisation, evolving into the introduction of
permanent surveillance technology and a competitive intelligence sys-
tem. In this regard the system will contribute to establishing bases for
de?ning the competitive position that the organisation has to take, its
goals (in the case of this particular standard its purpose especially relates
to matters of R&D+i) and the appropriate organisational diagram for said
position and goals”.
CI can provide the foundations for the construction, assessment and
modi?cation of both market and technological strategies and tactics
and in other ?elds. As a function mainly aimed at management, CI is
cross-functional. That is why in practice, organisations coexist where the
CI approach is functionally developed based on marketing and/or plan-
ning and to a lesser degree on other functions, such as R&D. While these
other practices appear, there are less common ones where CI is used,
depending on the need in question, whether purchasing or a corporate
need, including marketing, engineering, human resources, ?nance and
planning and there is CI coordination for the entire process. Later in the
chapter its organisation will be discussed in more depth.
On the other hand, CI can consider two possible approaches to work,
which are often complementary; contributing intelligence for decision
making at a particular time, and continuous tracking regarding the time,
surveillance and monitoring of a particular subject of interest. This is in-
cluded in the UNE 166.006 standard Chapter 7.1 as:
• The search and research into what is unknown, and
Fernando Palop Marro
138
• The search and systematic monitoring of innovations in areas that
have already been previously de?ned.
Essential stages in the ci working process
The CI process or cycle that is shown in Figure 1 brings together a series of
the usual steps or stages in a CI exercise or project that with some minor
variations in terminology and in the number of steps meet the standard
model in this scope of the intelligence function (Aguilar, F.J. 1967, Porter,
M. 1980, Bernhardt, D. 1994, whilst in Equipo CNI we can ?nd an abridged
Spanish version). Madureira, L. (2013) claims how the OODA (Observe, Ori-
ent, Decide, Act) Loop model by the American John Boyd is more suitable,
by prioritising immediate answers. It is important to emphasise that al-
though the stages appear as consecutive within a cycle, in reality it is not
like this. This means that it is good for clients/decision makers, as they are
up to date and direct the research advances throughout. Neither does the
analysis stage begin once the previous stages have ?nished. At the end
there is a high degree of group work and interactions that enable delivery
times to be cut from that of a strictly sequential process of these stages.
Figure 1. Competitive Intelligence process or generic cycle
Source: own preparation from the traditional Competitive Intelligence Cycle/Process in
Palop Marro, F. and Martínez, J.F., 2012.
Competitive intelligence: a new paradigm in the …
139
Planning
The CI process or cycle usually starts with a decision maker who has
a speci?c intelligence need (key intelligence factor or need or KIF) and
people who collaborate to construct it. It is important to determine
what needs to be discovered, for whom and how and when it is going
to be used.
Writers such as Herring, J. (1999) speak about three types of need that
are most common. These in turn make up the basis of the approach for
structuring the work process around the ST/CI subjects as projects or
Key Intelligence Factors, KIF. Each one of these three groups of needs
requires a diferent type of result and this determines the sources to be
consulted, the analysis techniques to be applied and also the structure/
report that will contain the answer.
Strategic decisions and actions. Including the development of strategic
plans and strategies. For example, decisions appear that are connected
to investments in technology, entrance into a market or alliance with a
company.
Early warning subjects. Possible initiatives regarding competition, tech-
nical and technological advances that can surprise, socio-economic and
geopolitical changes and their implications, modi?cations, regulations
and standards that have to be complied with.
Descriptions of the players and of a certain market. These include
competitors, suppliers, clients, possible allies or the regulator of a
market.
When CI is developed with a “spontaneous” nature there are no prede-
?ned formats for reports to organise the intelligence that it generates.
But this does not occur when we are in a planned CI situation. As a re-
sult of seeking productivity in tasks and ?exibility in the delivery periods,
some types of reports or CI products are de?ned, such as competitor pro-
?les, warnings about risks/opportunities, reports on the status of state-
of-the-art technology, comparisons or “benchmarking” of products/ser-
vices, monitoring services or synthesis reports etc., the communication
of which will be discussed later.
Each one of these reports or products is diferentiated from each other by
considering variables such as:
• Purpose and expected value in relation to the need that arises and
type of decision.
• Main client and other recipients.
• Sources of information to be used.
• Models, analytical methods and software tools to be used, as
appropriate.
Fernando Palop Marro
140
• Forms of communication and type of template for the report.
• Cost in terms of hours of commitment and acquisition of
information.
Obtaining information
The arrival of the internet, web sites and social networks meant a new
paradigm in the way in which electronically published information is ac-
cessed. However, despite its indisputable value, the role of primary con-
tact sources on the ground with the main players involved in the subject
cannot be underestimated. This in the Anglo-Saxon world is known as
“humint” or intelligence from information and tacit knowledge that only
resides in people. The need to access these “experts” or players about
the matters of interest, mainly by telephone, e-mail or professional
meetings has been shown as essential on numerous occasions in order
to compare and complete substantial pieces of the “puzzle” that enables
completion of the intelligence. It is also irreplaceable for the managing
of the other experts that ?nally enables completion of the task. In this
regard it must not be forgotten that globalisation also gives these ex-
perts access from a global viewpoint. We should also take into account
that in the full “kingdom” of the internet and electronic sources an en-
tire series of markets coexist, for example energy markets in distant
countries, where the scarcity of data from conventional sources takes
preference and where veri?cation “in situ” of the interlocutors is needed
before negotiating
5
.
Case 3: Example of how companies watch over each other: Microsoft – Google
MICROSOFT spent months on a massive project to bring down Google
when the truth began to dawn on Bill Gates. It was December 2003. He
was browsing on the web site of the company Google and found a page
with descriptions of all the jobs available at the company. Why, he asked
himself, were the requirements for many of these positions identical to
the speci?cations for working at Microsoft? Google started as a search
engine on the web, however, here on the screen were jobs for engineers
with experience that had nothing to do with search engines, whereas all
were connected with Microsoft’s main business; people quali?ed in things
such as operational system, compiler optimisation and distributed archi-
tecture systems design. Gates asked whether Microsoft could be facing
much more than a war in search engines. In an e-mail that he sent to a
handful of executives that day, he efectively said, “we have to watch these
guys. It appears that they are building something to compete with us”.
Source: adapted from Fred Volgestein, 2005.
5
I owe this teaching to a technique of a gas industry company.
Competitive intelligence: a new paradigm in the …
141
Analysis
From the CI approach, data and information are the starting point not the
?nishing point. Therefore, data and information collected in the prelimi-
nary stage are not intelligence. So that “sense making” is brought to de-
cision making (Jaworski, 2002), meaning and value, that is, intelligence,
must be selected, validated and organised through its analysis and in-
terpretation (Kahaner, L. 1996). In other words, this refers to construct-
ing, from unconnected fragments made up of data, personal testimonies
and information, a puzzle or outlook that makes it possible to understand
what the analysed scenarios are and intuit possible ways forward. In
short, building CI is transforming information into elements for deciding
and acting.
In this regard, although much has been written on the role of intuition
in CI and on the nature of the “art” of interpreting the collected facts,
while not ignoring its contribution, it does not appear to us that it is
an appropriate starting point to approach the learning of analysis. In
accordance with what we have explained in the basics of CI, we be-
lieve that the construction of CI reasoning based on the interpretation
of the collected evidence and its significance for the context of the
company to be key. A CI construction based on evidence and analyti-
cal models makes it possible to involve the decision makers within a
transparent chain of the decision making process. At the same time,
intelligence gains in objectivity by reducing its dependence on the
person(s) who formulate(s) the conclusions and interpretations. Fi-
nally it supports learning of this key stage in the CI process. This said,
of course over time experience accelerates the analyst’s capacity to
sense consequences derived from facts, but the analyst must try to
justify them through evidence so as not to introduce excessive biases
in the results.
The results produced by the analysis, as Fleisher, C. (2001)
6
recalled,
must be able to induce action, have a prospective nature and be directed
towards the future, provide the perspective of the facts within the con-
text of the business, (Gilad, B. 2008), help the decision makers to devel-
op better competitive strategies, provide a better understanding of the
competitive environment than their competitors have and identify not
only the current and future competitors, their plans and strategies but
also the key risks and opportunities. The ?nal goals of the analysis are
to obtain better business results, not achieve intermediate results from
better decisions or analysis. Good analysis provides a response to the
well-known question in CI, “if this is true, then what?” – in other words
collected information tells me something new and original that I need to
6
Adapted from Craig Fleisher with changes.
Fernando Palop Marro
142
know about the market that can satisfy the matter or KIF proposed by
the decision maker.
Fleisher, C. (2001) also completed this description of analysis when he
pointed out how an efcient CI practitioner must know about the inter-
action between the collection and analysis stages, use creativity and al-
ternative thought
7
, use deductive and inductive reasoning, understand
basic analytical models, introduce interesting and attractive models to
induce the idea of discovery from the analysis rather than a more unex-
citing research approach, know when and why to use the diferent ana-
lytical tools, recognise the inevitable existence of gaps and blind spots
and know when to stop analysing in order to prevent paralysis due to
over-analysing.
The relationship between people immersed in analysis using the CI
process with the diferent analysis tools must be that of experts re-
garding the possibilities that each of them ofers within the “toolbox”
and their ability to apply the most appropriate tool in each case. Pro-
fessors Fleisher and Bensoussan (2002), made a commendable efort
to compile analytical tools used in the business environment, many of
which were ignored or underused, and they also gave guidelines for
their application.
Finally, analysts need diferent training to people with an informational
pro?le, more focused on obtaining and organising information from dif-
ferent cultures. Large organisations develop a diferent function within CI
and sometimes from a diferent place.
Communication, application of what has
been provided and evaluation
The communication stage presupposes an interactive process be-
tween the decision maker who is going to put the intelligence into
practice and those who contribute to it. What is provided does not
become intelligence that is directly applicable by the decision maker
unless the decision maker gets involved and interacts especially in
this team stage so that the team directs and personalises its results
just as the decision maker needs. This is why the reports mentioned
earlier in the planning stage give the specific decision maker differ-
ent types of communication such as personalised reports, personal
communications, scheduled presentations, special notes, archives,
computerised databases, along with memos, regular meetings, train-
ing seminars, electronic notice boards in the intranet or the removal
of tasks.
7
Writer’s note: in the sense of outside the box of conventional thinking.
Competitive intelligence: a new paradigm in the …
143
Generally, application of the results also includes certain sub-pro-
cesses that are no less important. Among these is control of the CI
process. In other words, the evaluation and communication of what is
provided, its effectiveness regarding the decisions taken and their re-
sult. In short, the capacity shown by the CI to contribute to generating
value. Also, from the point of view of quality, the experience acquired
and its development, resources used, etc., will be taken into account
in the feedback for improving the CI process – the driving force of
quality – as UNE 166.006:2011 proposes. Finally the results can also
influence the need to review or reconsider some aspect of the organ-
isation’s strategy.
When measuring and controlling the performance and value provided by
the resources spent on CI it is necessary to go beyond the quantitative in-
dicators of activity to the result. We must focus on measuring its capacity
for generating value. In this regard some questions of the following types,
frequently asked, can help to evaluate it. Who are the clients of the CI
process? What type of needs are they demanding? How do they value the
intelligence they receive? How are they applying the intelligence? What
are the costs of the resources spent on CI? To what extent has the work of
the CI team and this process contributed to turnover/pro?ts and savings
in costs for the organisation?
How CI is organised
Not only one organisational reference model can be mentioned but dif-
ferent scenarios that depend on the degree of maturity, on a person’s
experience in CI, the sector in which it occurs, etc. Writers that have
studied this aspect (from Rouach 1996 to Michaeli or Singh, 2006 among
others) essentially agree, although using diferent terms, in de?ning be-
tween three to ?ve situations. A ?rst, which is widely used, of reactive
CI, practiced spontaneously individually as a response to an urgent need
for collecting information and making decisions given the appearance of
certain changes. In many organisations these practices are formalised as
a work process in a team with a coordinator within any of the operational
divisions or any business unit but without developing synergies between
them. Finally, in some companies CI is organised as a cross-departmental
corporate process already consolidated with an assigned director or a CI
unit within the management personnel.
Although in many cases an evaluation process is con?rmed among the
diferent aforementioned situations from the spontaneous/reactive to
the planned and consolidated, each organisation ?nishes by ?nding the
model with which it is most comfortable. The most typical situations are
summarised below:
Fernando Palop Marro
144
From operational departments independently or jointly using the ?gure
of a coordinator or project manager.
• Michaeli, R. (2006) suggested evolution of their organisation as
from “islands” in the operational divisions or departments to being
organised as a “centre”.
• Fleisher (2001) highlighted the organisation starting from a com-
pany’s own speci?c programme.
• Cartwright, Boughton and Miller (1995), mentioned by Fleisher
(200) described 1) ad hoc, 2) continuous overall 3) continuous fo-
cused and/or 4) project-based CI. Ad hoc would be the most exten-
sive CI, done on demand and producing results that are by their
nature one-of and are focused on a particular competitor, event or
competitive product/service.
Regarding large corporations, Martín (2010) proposed a model for the
CI unit and operations manual where a study on the risks agenda was
provided.
From the nineties we see how CI has contributed to strategic decision
making integrated into formal dedicated units, whether independently
or more usually within marketing or planning. The activities of com-
petitive intelligence are focused on both tactical and strategic decision
making and include qualitative and quantitative analysis starting from
the evidence. Competitive intelligence receives moderate attention from
senior management and is often a useful factor for taking strategic
decisions.
Reference countries in the CI practice.
The situation in Spain. The range of training.
If we prepare an indicator for said purpose based on variables such as the
ofer of CI training with degrees and postgraduate studies in the academ-
ic ?eld, courses for companies, conferences and seminars and compa-
nies with formalised CI processes it is probable that among the countries
having a better score will be most countries in the OCDE (Organisation
for Economic Cooperation and Development). Among them some are tra-
ditionally mentioned as leaders: USA, Canada, France, Germany, United
Kingdom, Israel, Japan, South Korea, Finland, Sweden and Switzerland.
Many of the multinational companies from these countries are known for
involving their employees as antennas of observation in their business
environment.
With regard to Spain, it is con?rmed that CI public visibility still ap-
pears well below its use for business and its potential for generating
value in a globalised world. It is true that since the nineties, driven
Competitive intelligence: a new paradigm in the …
145
by internationalisation of many of its companies and the acceptance
of more complex risks, it has seen signi?cant promotion. However, its
awareness and practice is not comparable to the situation in neigh-
bouring countries. In any case, the role played in recent years in its dis-
semination by institutions such as AENOR with its UNE 166.006:2011
standard, ICEX (Spanish Institute for Foreign Trade), the National Intel-
ligence Centre (Centro Nacional de Inteligencia, CNI) or the Inter-Uni-
versity Masters between the Carlos III and Rey Juan Carlos Universities
in Madrid that the Autonomous University of Barcelona recently added,
should be considered.
CI promoted from institutions
Countries such as France, Germany, Israel, Japan, South Korea or Swe-
den maintain diferent policies and support instruments for their compa-
nies with institutional information networks. From there they have been
generating interactions and transfers to the commercial and economic
sphere.
We highlight the French approach of “intelligence economique” as France
is a neighbouring country and for the particular interpretation and in-
volvement of the institutions from that country in the development of CI in
the business environment as policy.
This idea was introduced in recent decades, driven by government ini-
tiatives and through working groups with extensive involvement in the
business world. It contains an appropriate interpretation for the inter-
ests of France and its economy regarding the consequences of globali-
sation. Therefore, it went from the priority consideration of strategic
surveillance to the appearance in 1994 of the Martre Report in which
the current concept of “intelligence economique” was already mentioned
and presented in relation to its important role in improving the country’s
competitiveness and its social cohesion
8
. It was in January 2003 when
there was a new step by motions from the French government’s Prime
Minister and what is known as the Carayon Report (2003) was prepared.
It was the Prime Minister Jean-Pierre Rafarin who asked his MP Ber-
nard Carayon “to make an inventory of how our country integrates the
functions of intelligence in its educational system and training into its
public performance and into the business world” and he pressured him
to make recommendations to improve this function. Said report consid-
ered the public policy of competitiveness, economic security and in?u-
ence, especially with international organisations and training. It is de-
8
Martre (1994), Intelligence économique et stratégie des entreprises, Commissariat Gé-
néral au Plan, 1994.
Fernando Palop Marro
146
rived from an original reading on globalisation that took into account
the daily life in markets, avoidance of their rules, games of power and
in?uence. Economic intelligence is considered in the report as a public
policy more aimed at the identi?cation of sectors and strategic technol-
ogies and at organising the convergence of interests between the public
and private spheres.
The report emphasised the trio formed by obtaining information (sur-
veillance of the environment...), protection and in?uence. Emphasis on
in?uence was presented as a characteristic of French researchers (both
in the form of pressure groups, of political in?uence to endorse market
conquests by companies, but also as an ability to impose international
standards, images, values and general ideas supporting their economic
intentions).
Therefore, today the concept of economic intelligence in a neighbouring
country is especially linked to:
• Surveillance and business intelligence (obtaining of important
information).
• Protection of the wealth of information assets (stopping secrets
from being revealed).
• Supporting decisions (analysis, decision mapping, scenarios and a
“war room”...)
• In?uence (spread information or forms of behaviour and interpre-
tation that support the strategy)
Therefore, the policy has involved diferent institutional and territorial
levels. So the French Chambers of Commerce have been very active for
years making this approach reach small and medium-sized companies.
Meanwhile in the territory around the concept of a group or “cluster”, dif-
ferent “technological poles” of specialisation throughout the country have
been prioritised with the idea of intelligence playing an important role.
This will be returned to later when discussing the concept of territorial
intelligence.
Harbulot and Baumard (1997) provided historic background to the French
concept of economic intelligence and, among other references, cited writ-
ers such as the aforementioned Harold Wilensky (1967), on his vision of
organisational intelligence. This writer proposed two main issues that
remain valid:
• Collective and cooperation strategies between institutions and
companies in the production of common knowledge for the de-
fence of a competitive advantage.
• The importance of knowledge on the economy and industry as a
strategic fact of development and change.
Competitive intelligence: a new paradigm in the …
147
Training ofer
It is necessary to distinguish between programmes from academic insti-
tutions for degree and postgraduate quali?cations and informal training
programmes.
Apart from exceptions in countries such as France, Canada, USA, Swe-
den and Finland, CI studies are still not present as such in degree pro-
grammes, although they are re?ected in closely related areas of knowl-
edge (information sciences and librarianship). In postgraduate studies
there is a better range of Master quali?cations in diferent countries; in
Spain particularly there is the aforementioned Inter-University course of
Intelligence Analyst and some short courses ofered by the UOC (Catalo-
nia Open University).
Informal training is full of courses with diferent contents and diferent
durations that involve the term CI. Recently the ESIC Business Marketing
School, Madrid, has become involved in this market with a specialised
seventy-hour course.
Speci?cally with a programme designed for company directors there are
programmes in various European Union countries from the Institute for
Competitive Intelligence (ICI) with headquarters in Germany to the North
American Academy of Competitive Intelligence LLC (ACI). The certi?cation
of the quali?cations that they issue is one of the key elements of these
programmes.
CI basics. The state of the art
I am not aware of an accepted model that integrates learning about the
business environment and the non-structured decision making process
into organisations. In this regard, I agree with Day and Schoemaker
(2006) when they, regarding the concept that they called the “peripheral
vision” of the organisation, particularly necessary when referring to intel-
ligence on emerging changes, considered that a universally assumed and
accepted model did not exist that sustained it. In this regard, one of the
challenges to be covered by competitive intelligence in its current context
is the analysis and forecasting of future opportunities that are still distant
from the activity itself.
That is why we write as a starting point in order to establish the CI
basics; the re?ections that for this purpose these writers carry out of
the “peripheral vision”. Among our many sources we have turned to
the decision-making ?elds (decision sciences), marketing, strategy, or-
ganisation theory and economy as well as to scienti?c ?elds applied as
scenario planning, competitive intelligence, market research, environ-
ment scanning and technological forecasting. This leads us to a ?rst
Fernando Palop Marro
148
conclusion; we are faced with a ?eld of an interdisciplinary nature and
still, as Fleisher and Blenkhorn (2003) stated, in the standardisation
process. These apply - starting with Ashley and Morrison (1995) - the
phases in the evolution time cycle of problems to the solution and reg-
ulation of some of the issues that are still under debate within CI, in-
cluding its name.
The non-existence of a reference model for CI or the persistent lack of
consensus with regard to certain issues has hindered its dissemination
in this still young ?eld as we understand it today, but not in its precedents
as we will explain below. On the contrary, as argued previously, the cur-
rent market challenges have helped to expand the concept and put it into
practice.
From a historical perspective, professors Juhari, A. and Stephens, D.
(2006), from the University of Loughborough in the United Kingdom, car-
ried out a valuable review on the background and development of CI. They
outlined the beginning of intelligence starting from military confronta-
tions, companies’ needs for information and government practices. This
process for con?guration of the CI ?eld meant a continuum that dated
back in time many centuries until reaching the current CI situation, where
it was positioned at the end of the 1970s.
This is how a multidisciplinary environment has been con?gured in
recent years. This includes the management of work processes, Com-
petitive Intelligence (CI) that requires a culture and skills in knowledge
management by the organisation and a process that integrates it for de-
cision making. In this regard it has obvious synergies with the concept
of organisational intelligence. This idea includes management of the or-
ganisation’s knowledge and learning. It has a ?nal purpose by directing
knowledge management towards its strategic adaptation to the environ-
ment and ful?lment of business goals, Halal, W.E. (1998). Its precursor
was Harold Wilensky (1967).
This process is necessarily cross-departmental in organisations as it in-
volves and needs contributions from people, from diferent departments
and operational departments in the organisation and the use of a set of
techniques inspired within strategic and prospective planning. Finally, the
model that the management of this efort requires is company strategic
management and innovation.
Palop Marro (2012) previously tried to show this interdisciplinary nature
but relating in particular to the ?eld of Surveillance and Intelligence in
technologies (see Figure 2). This had already been done by Masson, JL.
(2005), who, by con?rming how CI resulted from the integration of some
areas of knowledge, referred also to Information Technologies, Linguis-
tics and, within knowledge management, to Information and Documenta-
tion Management.
Competitive intelligence: a new paradigm in the …
149
FIGURE 2. Inter-disciplinary nature of CI
Source: adapted from Palop Marro (2012).
Having con?rmed its inter-disciplinary nature, we are next going to
outline to what extent CI represents a proposal for a change of the
paradigm on which the current strategic decision making process is
based. In particular the decision maker’s role in this process is inter-
esting, as is that of the people that make up the organisation and the
value of the evidence obtained as main support that is irreplaceable in
CI proposals for decisions. This role is explained below on three axes:
the information process aimed at decision making, learning mecha-
nisms for changes in the environment by organisations and the third is
the need to generate the anticipation that this learning demands. The
?rst two start from the Day and Schoemaker (2006) approach and we
add the third here.
It is con?rmed from a planning and decision making perspective how in-
dividuals are the receivers of the organisation and its internal procedures
are those that ultimately impose the matters that must receive attention.
There are major challenges on an individual, group and organisational
level to take responsibility for the appropriate issues at the appropriate
time (Stoner and Wankel 1989). To assess these matters, Day and Schoe-
maker (2006) proposed incorporating:
• At an individual level diferent criteria and choice biases.
• At a company level the organisational and strategic dynamic.
Fernando Palop Marro
150
Implications for organisations. Their use vs. Their protection
Three axes on which to locate the CI basics in organisations:
1. The information process focused on decision making.
In the past, Palop (2012) maintained how the slow rhythm of change
made it easier for a small group of directors with access to information
and the ability of prospective vision to successfully de?ne an organisa-
tion’s evolution. Today what we are seeing is that these same directors
must consider changing their traditional paradigm for decision making,
relying more on their organisation, in which it actively participates in the
timely integration of multiple sources of information and its analysis. In
a world where to compete means making decisions with a high degree
of uncertainty, the reasoning and construction of intelligence that these
decisions demand must be based on evidence. Senior management must
discover, if it has not already done so, that in this task its own organisa-
tion must play a leading role, including the networks of relationships that
it acquires.
Alan Newell and Herbert Simon proposed “a perspective of information
processing in the organisation’s decision making”. The heuristic nature
of human reasoning as understood by cognitive psychology continues to
fail to resolve interaction between emotion and cognition. When applied
to the problem of periphery vision of what surrounds an organisation,
Day and Schoemaker (2006) understood that the processing paradigm of
information indicates the presence of four key phases: perception, judge-
ment, action and feedback. At an organisational level the parallel stages
to this process can be described as: information acquisition, information
dissemination, shared interpretation, coordinated action and collective
learning. This interpretation of Day and Schoemaker seems important
to us as it shares the elements that in our opinion the new paradigm
requires.
Nor must we ignore how these writers remind us that “In all stages the
process is guided by a set of models or mental sketches that reside in
very deep levels of the organisation”. In other words it is not enough to
generate value with CI by implanting a process or investing in a cost-
ly software tool. A new type of leadership must be demanded that also
changes those aspects of the corporate culture linked to information
management and knowledge.
2. Learning about the changes in the environment by organisations
and their implications in the management of knowledge required
by CI.
There are many precedents and points of intersection with the point of
view of the information process for decision making.
Competitive intelligence: a new paradigm in the …
151
Peter Senge’s book The Fifth Discipline (1990) could be considered as a
turning point, by translating for a wider audience of directors the evalua-
tion of the importance of a focus on learning
9
. Senge combined his contri-
butions with other points of view, especially the importance of systematic
thought, to provide a comprehensive perspective of an organisation that
learns. The related work carried out by John Sterman
10
, Chris Argyris and
others helped to con?gure organisational learning as a diferent intellec-
tual perspective. The basic point of view is that in dynamic environments
learning is complex and therefore it is neither simple nor automatic. To
try to determine what happened and why, we ?nd – by following Day and
Schoemaker (2006) – the following: ambiguous “feedback”, late reactions,
multiple partial causality, interesting contributions, missing information,
processing efects, random noise and the illusion of controlling all at-
tempts to destroy the organisation.
When we add to this the probability and ambiguous nature of the signals,
lower in as much as it comes from the organisation’s business periphery,
the problem becomes a lot worse. Some writers have demonstrated that
people show a great aversion to ambiguity when faced with decisions
that involve unknown hazards. People prefer “the devil you know” to the
supposed known good. Consequently they never experience or learn well
in environments of great ambiguity. This tendency can be aggravated at
an organisational level where it is expected and desired that rationality
and the capacity for prediction dominates. However, new opportunities
usually lead to a high level of uncertainty and therefore demand a high
degree of tolerance to ambiguity. These thoughts by Day and Schoemaker
(2006) coming from an analysis of emerging technologies are perfectly
valid for many mature markets where the socio-political circumstances
give them high uncertainty. For example, decisions about nationalisation
that are being taken in some Latin American countries with populist gov-
ernments or the situation recently in some Arab countries emerging from
long periods of dictatorship.
For Day and Schoemaker (2006) the idea of cultures that are capable of
learning from complex environments might require some management
principles and values diferent to those that are necessary for maxim-
ising the organisation’s legal business. In this case a con?ict arises be-
9
In addition to P. Senge’s book the strategic importance of learning – above all about
the future – is underlined by Gary Hamel and C.K. Prahalad in their book Competing for
the Future (Boston, Harvard Business School Press, 1994). Chris Argyris in his book
Strategy, Change and Defensive Routines (Boston: Pitman Publishing, 1985) tackles the
organisational obstacles to learning and change. In the field of new technologies these
obstacles are a threat, as is shown by Clayton M. Christensen in The Innovators Dilemma
(Boston: Harvard Business School Press, 1997).
10
Morecroft, John and Sterman, John “Modelling for Learning Organizations”, Port-
land, 1994, Business Dynamics: Systems Thinking and Modelling for a Complex World (Mc-
Graw Hill, 2000).
Fernando Palop Marro
152
tween the culture of performance and that of learning and it is senior
management that is responsible for determining the correct balance be-
tween them.
3. The need to generate the anticipation that this learning requires.
Diferent studies frequently connect failures in business management
to the inability to: anticipate rapid changes in the markets, respond to
new competition and to its proliferation or to redirect a company’s new
technologies and strategic management towards the changing needs of
clients and a sector’s new standards (Fleisher 2001). Gilad expressed the
same idea that organisations frequently failed because they were not ca-
pable of reading typically weak and ambiguous signals that were ubiqui-
tous in their environments and markets.
By introducing the expression “Strategic Management”, Ansof (1975)
highlighted the need to focus on organisations’ capacity to anticipate
threats and opportunities in order to confront the turbulence in the envi-
ronment surrounding a company.
In fact, diferent ?eld studies con?rm this point of view. Successful organ-
isations are among those that detect the most important events through
“warning signals”. When uncertainty is high the directors report on a
greater frequency in the monitoring and surveillance of the environment
and a greater use of sources of personal information. The top directors in
high performance companies respond to strategic uncertainty by moni-
toring the environment more frequently and extensively than their equals
in low performance companies (Daft et al., 1988).
But in practice this challenge does not provide a simple solution (Ansof
et al., 1979, Porter, 1980). Even organisations that have implemented CI
systems often do not anticipate strategic surprises (Gilad, 1988; Blanco
and Lesca, 1998). In both cases (with and without CI systems) the majority
of them seemed to sufer from both an information overload and from a
lack of “strategic information” which for Blanco and Lesca 1998 led to a
questioning of their strategies of information collection.
However, in my opinion this situation is also due to a failing in the other
two aforementioned axes. Here we are to go a little deeper into the iden-
ti?cation and selection of the signals of change as a basis for anticipation
and into its management overcoming barriers and “blind spots”.
Ansof con?rmed the existence of a series of ?lters in the organisation,
shown in Table 1, which prevented the relevant signals getting to the de-
cision makers on time. Today these contributions continue to be very val-
uable. I personally had the chance to con?rm it. Such is the case of rapid
international growth in the last two decades of a new competitor in the
sector of lemonade drinks, the Peruvian family group AJE, by making the
most of opportunities for changes in the traditional business model. This
Competitive intelligence: a new paradigm in the …
153
growth occurred and people within one of the afected competitors told
me they were conscious of the appearance of the threat but did not have
the mechanisms available in their organisation to make senior manage-
ment aware of it and catalyse a change. This is an example that con?rms
how knowledge of events is not enough - the signals of change. Their
meaning and implications must be made available to senior management
so that it can set up the strategic direction before it is too late. Among
other challenges, this means overcoming these Ansof ?lters and com-
municating not the events but the intelligence about them.
Table 1. Barriers to early signals of change: the CI process helps to reduce them.
Filtro o barrera Causa de la existencia del ?ltro
Filtro de vigilancia
Error al centrar el foco de atención. No hay directrices
ni prioridades
Filtro de mentalidad
No se reconoce la importancia de la novedad porque
sale del modelo o esquema mental predeterminado. Se
reduce la información
Filtro del poder
En la toma de decisiones lleva a los actores menos
poderosos en la organización a contener la expresión de
sus percepciones
Source: Ansof, I. 1984.
The existence of a CI process helps to reduce these barriers as Ansof, I.
(1984) pointed out, to those early or “weak” signals of changes and to
communicate not only the evidence but its implications for the business,
in short, intelligence. In this regard, supporting with evidence and with a
transparent process for everybody improves the credibility of the team
that promotes the CI exercise while minimising the possible power ?l-
ter by integrating decision makers into the CI process itself. That is why
the CI working team must try to diferentiate at all times between what
are valuations or interpretations regarding their facts. Once the case has
arrived it must be explicitly documented in such a way that the decision
makers are always clear about the process or the chain of value of the
information transformation
11
. In other words the sources from where the
data and information starts, the gathered evidence, and the perceptions
and meanings gathered from them that are managed for their decision.
The underlying supposition of “Early Warning Signals” (EWS) is that dis-
continuities do not arise without prior warning. These warning signals
11
This idea is from the French engineer Paul Degoul, Director for many years of ARIST
(Annual Review of Information Science Technology) Alsace and ADIT (Design, Industria-
lisation and Technology Consultancy).
Fernando Palop Marro
154
can be described as “weak signals” as they have a value while they are
scarce, scattered and fragmented. The capacity for anticipation and mar-
gin for reaction still exists there. The goal of the “weak signals” (Ansof,
1975) concept is early detection of the signals that could give rise to stra-
tegic surprises and to an event that would have the potential to put the
organisation’s strategy in danger. The CI process must integrate an or-
ganised and systematic response to the detection of these signals.
A major problem for organisations is to resolve the choice of these “Early
Warning Signals” (EWS). To conclude, Blanco and Lesca (1998) con?rmed
that EWS could not be approached objectively, but was a construct that
represented the knowledge of individuals. Therefore, the choice must be
necessarily considered as a collective process in which interpretation
played an important role. This led them to formulate both practical impli-
cations and theories. Mendonça et al. (2007) came to the same conclusion
when he stated that the practical meaning of weak signal information is
that it can be transformed into meaningful knowledge for action. Howev-
er, they con?rmed that as the value of this information did not material-
ise automatically, the carrying out of this potential required a collective
cognitive framework through which the weak signals could be collected,
evaluated and from there action be taken. The theory of stakeholders was
proposed by Comai and Tena (2006) to understand ?gures in a speci?c
industry within a EWS system.
Therefore, the approach from a CI process on how to focus the response
to EWS is not obvious, as has now been pointed out. Its solution has been
shown not to rely solely on information technologies. These are an instru-
ment and not an end and can help the human team’s productivity but not
replace it. The combination of information technologies and the human
team is shown as the approach with greatest potential.
As a result of the existence of these aforementioned ?lters reported by
Ansof, certain blind spots of incorrect perception regarding the view of
the environment appear in certain managers. This idea of a “blind spot”
was raised by Porter (1980, pp. 59-60), who used the term to refer to
elements of knowledge about the environment that were not certain but
that still guided business strategy. Speci?cally this writer mentioned
that, “they are areas in which a competitor or not sees the importance
of events absolutely (such as for example a strategic movement) or per-
ceives them in an incorrect way or only perceives them slowly”.
Behind the analysis of blind spots lies an assumption about the biases in-
herent to decision making among an organisation’s senior management
(companies and institutions), which overcomes those of their employees
or outsiders. Their foundations can be found in the Ansof ?lters. In 1994
and later, Ben Gilad developed a three-stage analysis method for these
blind spots that has been incorporated into the CI analyst’s toolbox. From
Competitive intelligence: a new paradigm in the …
155
a ?rst examination of ?ve market forces and their driving factors an anal-
ysis is carried out on the directors’ assumptions and perceptions of a
certain company to identify in them these possible blind spots in a third
step. The deterioration of the capacity of the managers to see reality as it
is and the most objective analysis of analysts and the medium-level plan-
ners (with less ego involved) means that this third step in the analysis of
blind spots can be a tool to manage those potential blind spots.
In?uence and security inside companies.
Although the bene?ts for the business and for world globalisation de-
velopment have been con?rmed, the fact remains that it represents an
increase in risks which companies must face in con?ictive and/or distant
markets. It is obvious that the complexity/uncertainty increases in those
countries where an information value chain does not exist or is incomplete
and therefore the performance of conventional sources will be very much
reduced. On the other hand, and purely as an example, recent events such
as those experienced in 2012 by the Spanish company Repsol YPF in Ar-
gentina (complexity of political and economic “drivers”, subsequent entry
of a competitor Chevron, “a dark horse” into the scenario) or the limited
situation experienced at the beginning of 2013 with the occupation of the
BP gas plant, the Norwegian Statoil and Sonatrach in Tiguentourine, in
southern Algeria (again the triggering factors were socio-political) are
re?ected in that growing complexity and uncertainty of the existing po-
tential for CI and of the need to emphasise risk management.
But today security also has to be considered in the EU’s own market. In
this regard, as an example we include some of the advice about economic
security that the French Chambers of Commerce, Chardon, V. and Bauquis
(2012) propose to research companies and entities based on three goals:
1. Identi?cation and analysis of the threats when French companies
are the target;
2. Protection of research companies and institutions, by their size or
sector in which they operate. In fact any business can be subject to
“attacks” when it is a prominent innovator and operates in a com-
petitive sector; the same is applied to research institutes;
3. Dissemination of a security culture for tangible and intangible as-
sets in all companies, both in large groups such as SMEs and re-
search institutions.
The strong tendency of organisations towards dependence on knowledge
management, their re?ection on the growing value of management of
intangible intellectual assets, and global electronic commerce also un-
derlines threats of a diferent kind to these intellectual assets and their
need for protection from a global viewpoint. An example of it is shown
in the aforementioned French idea of “intelligence economique”. This in-
Fernando Palop Marro
156
cludes, as has been seen, two additional dimensions to the surveillance
or monitoring of the environment and to the generation of intelligence for
decision making, which are:
1. The capacity for in?uence, in other words, the technique for using
the information for the organisations to project their in?uence into
the markets;
2. Protection of information assets, in other words, the company’s
ability to preserve the information relating to its knowledge, expe-
rience, strategy and prevention of risks connected to negligence or
fraud in the handling of the company’s information and knowledge.
Here we will limit ourselves from this con?rmation to explain the nega-
tive consequences of a type of traditional crime for the security of compa-
nies and research institutions, as is case with industrial espionage. This
situation, which nowadays takes on new forms through cyber crimes,
requires the ability to respond with active protection policies that also
deal with the organisation’s intangible assets. One of those derived from
CI is that the organisation as a collective becomes more aware of what
is really important to preserve (tangible and intangible assets) from the
knowledge, where their most vulnerable points are and as a result how to
adequately protect them.
The illegal nature of industrial espionage and its
negative consequences on CI in companies
Throughout history attacks on organisations’ intangible and tangible
assets have occurred. The attempt to use shortcuts breaking the law to
steal a competitor’s unique know-how has a lot of precedents. In fact,
now we will be using examples on how this type of crime has an im-
portance today that cannot be dismissed. What attracts attention is that
within this ?eld this crime, which is called “industrial espionage”, leads
the media to eclipse the work of the great majority of the professionals,
associations and training entities that respect legislation and are used to
generate value for their organisations by analysing the information ob-
tained from public access sources. In addition, as Gilad (2008) empha-
sised, this negative connotation is the result of ignorance and confusion
in general interest media, of the meaning of the concept of intelligence
with something more suitable to a military environment, where obtaining
information is the end that justi?es the means. This is where a crime can
appear if extrapolated to the civil sphere, but that is information obtained
illicitly and therefore unacceptable on principle. These same methods can
ignore that the meaning and value for the company lies in the result of the
information analysis; that is the CI. In all events, this confusion represents
a clear impediment to greater knowledge of CI and its role in companies.
Here are some examples and economic data about these crimes.
Competitive intelligence: a new paradigm in the …
157
Case 4: the German company Enercon GmbH was spied on at the order of a
North American competitor.
The facts place this criminal act in March 1994. At that time its in-house
technology of turbines with direct drive (without gears) and variable speed
gave incomparable advantages in the maintenance of machines that gave it
a diferentiation strategy. Its product was sold at prices higher than its com-
petitors. During this period, 1993-1994, the German manufacturer negotiat-
ed with New World Power Corp. (NWP) for its E-40 machine’s export to the
USA. What the Germans were unaware of was that its North American com-
petitor, Kenetech, in violation of the law, obtained the intimate details of an
E-40 and armed with them, directed a defensive battle against the planned
exports declaring a breach of one of its patents before the federal body, the
US Int. Trade Commission. The litigation lasted years and kept Enercon out
of the US market.
Subsequent to these events Wobben and its American lawyers received –
possibly accidentally – the evidence from the other party. In addition to a
large number of photos that showed the complete interior of the E-40, there
was also an eight-page report on the espionage by Ruth Hefernan. The re-
port describes in detail the way in which she and her Dutch colleagues from
the US competitor Kenetech, Jans-Robert “Bob” and Ubbo de Witt from Old-
enburg, spied on the Enercon system. According to it “they left Groningen in
the early hours of Monday 21st March 1994 with Bob”. In Oldenburg they col-
lected Ubbo, a physicist and meteorologist who had worked as a “freelancer”
for Kenetech. He was in contact with a farmer who owned an Enercon-40 on
his land and it was in use. The rest of the events are summarised as the
nocturnal and criminal entry of those persons into this machine, the dis-
covery of the facts, their statement and the scandal that in its day merited
the condemnation of the European Parliament.
Source: adapted by the writer from the original by Schröm, Oliver in Die
Zeit (1999).
Case 5: Convicted for stealing Motorola secrets including an unproved accu-
sation of selling them to China.
Jin Hanjuan, a nationalised American citizen, was about to board a ?ight to
Beijing on 28th February 2007 when a random check stopped her short.
In accordance with the judicial ?le and the sworn declaration of the FBI
presented as a case of economic espionage against her, when the customs
ofcers at O’Hare airport in Chicago inspected the bags of the 40-year-old
software engineer they found over 1,000 con?dential documents that were
allegedly stolen from Motorola, the US electronics group, for which Ms Jin
had worked until two days before the ?ight.
The court documents said that the Chinese ofcials also discovered military
manuals, catalogues of a European military products company, documents
Fernando Palop Marro
158
that detailed Chinese military applications for electronic equipment, etc. that
had been drawn up by an unidenti?ed Chinese telecommunications compa-
ny and 30,000 USD in cash
12
. In the criminal case against Ms Jin, held in a
Chicago court, Motorola alleged the research and development costs of the
information in the accused’s possession was more than 600 million USD. The
company lost major global revenue when the contents were made public, it
alleged. For her part Ms Jin pleaded not guilty.
In another civil case brought by Motorola, Ms Jin was one of those accused
along with Huawei, the Chinese telecommunications equipment manufactur-
er, through an allegation that her and the others were “secretly involved” in
the development of products for the Chinese company at the time when she
was employed by Motorola. Huawei said that the case presented by Motorola
was “inadmissible” and denied to comment on the criminal case.
Source: extract translated from the Financial Times original, 1
st
February
2011.
The economic losses that these crimes represented were, as seen in
these two cases, signi?cant. The ?gures involved were very inconsist-
ent according to sources. A report to the US Congress in 2002 included
some estimates (Xerox White Paper, 2003). The writers of the report in
the Financial Times (2011) con?rmed a growing preoccupation with the
appearance of these cases. Some of the most well-known recent cases
involved Renault and its battery technology for electric cars or Google and
its source code subject by cyber attacks. But cases were also presented
in very diferent sectors, such as the accusation of espionage in 2009 by
Starwood Hotels and Resorts against Worldwide Hilton, (Reuters 2012).
Among other protection measures, given these crimes, the work of the
Financial Times in 2011 set out to reduce the possibility of leaks to a min-
imum, whether through methods prepared with the help of information
technologies, or sometimes by starting from ideas that were due more
to common sense. Another approach can be to abandon hope that all
leaks can be avoided and concentrate on a continual innovation process
regarding the most advanced technologies and products that are difcult
to reproduce by any unconnected person due to their complexity and the
use of original ideas.
In any case, this type of crime has led to some OECD countries to actively
transfer advice on prevention and protection to their companies against
12
Bloomberg subsequently added at the start of the judgement that her flight ticket
to China was one way only, that the Chinese companies could be Kai Sun News Tech-
nology Co., also known as SunKaisens, and the Chinese army and iDEN the technology
in question. On 29th August 2012 the judge, after examining the proven facts, condem-
ned the accused to 4 years in prison for stealing secrets, but exonerated her from the
crime of selling them to the Chinesehttp://www.huffingtonpost.com/2012/08/29/han-
juan-jin-sentenced-for_n_1840304.html
Competitive intelligence: a new paradigm in the …
159
espionage. This is the case in Canada, whose national research services
on security are published on the Internet
13
.
Implications for territories: territorial intelligence
The development of a territory depends on various factors and variables
and the information and knowledge generated in it play an important role.
It makes use of this knowledge and of this information, through coordi-
nation of the players that work and participate in the same region; this
has come to be called territorial intelligence (TI). Although TI encompasses
more aspects than information management, this is one of its corner-
stones (Ortoll, Eva, 2012).
This term arose in France in the nineties and is used to name the function
and the intelligence process carried out by public administrations on a lo-
cal, regional or national scale. The goal is, through the use of information,
to know about the territory and its resources, to create wealth and plan
development policies and sustainability, (Bertacchini 2004). For Ferrari,
T. (2007) TI consists of systematically approaching the development of a
territory through the work of its players in a network aimed at its sustain-
able development.
This TI concept cannot be understood without starting from concepts such
as strategic territorial planning, triple helix, territory capital, “clusters”, dis-
tricts or poles of economic specialisation due to competition, drive to inno-
vation and CI. The Carayon Report, 2003, dedicated a large part to EI (eco-
nomic intelligence) and the territory. The idea of “territorial intelligence”
basically serves to promote innovation in the territory. In practice it is ex-
plained by the collection and analysis of information about the environment
with a focus on competitive intelligence and confrontation of the viewpoint
of local players to generate the most consistent policies to be applied.
For Ferrari, T. (2007) territorial intelligence is the domain of the methods
and resources of economic intelligence at the service of the territories; its
use is carried out with the goal of:
• Identifying projects and helping to put them into operation, creat-
ing employment, wealth and business in line with the strategy.
• Anticipating changes, risks and future evolutions, with regard to
the prospective vision and safeguarding assets.
• Assessing the territory and its most attractive performance in
terms of in?uence.
• Encouraging the territory’s technological and economic develop-
ment through networks.
13
The addresses are: www.csis-scrs.gc.ca/nwsrm/wr/wr2-eng.asp and www.csis-
scrs.gc.ca/nwsrm/wr/wr3-eng.asp
Fernando Palop Marro
160
Development perspectives
The present and future CI is linked to the way in which it is capable of
serving strategic decisions and integrating the decision maker. In many
cases a lack of client focus has been demonstrated. This de?cit in the
attention that is paid to the client and its involvement in the CI process
limit intelligence generation and the process becomes a mere supply of
information and documentation and this leads to the marginalisation of
the organisation.
This is why conversion of information into intelligence has become one
of today’s central CI issues. Wright, S. (2013) has recently worked on it
by starting from a consideration of how to make use of an organisation’s
unique intangible assets: its explicit and implicit acquired and derived
knowledge, and from a concept such as the traditional intelligence-based
competitive advantage or “IBCA”. For Gilad (2008) this was done through
interpretation (or what many call analysis) of information. For me, the
correct de?nition of intelligence must therefore be that of a viewpoint
regarding the facts and in this regard must be clearly distinguished from
information. This is why two currents are mentioned, the main one, the
“reporting school”, with emphasis on the collection and organisation of
information and another that responds to its position, and the “analysis
school” focused on generating intelligence.
Madureira (2013) put the emphasis on the CI proximity
14
or generation
time. For him the CI competitive advantage does not come from access to
the data, nor only from the quality of the analyses, but from the balance
between speed and quality of the vision, which we call “?exible insight”.
This means being ?rst to detect an opportunity or a threat and transform
it into applicable perceptions and understanding that can lead to strategy
and be put into practice to gain position in the market.
Professor Prescott, J.E. (1999) after analysing the evolution of CI spoke
about a tendency towards it becoming a central ability for companies, its
generalised integration into the training programmes of business school,
with an emphasis on attributes such as qualitative and strategic abilities
and its communication using direct components to the decision maker
provided by CI, marketing or planning units. In the past decade, I have
worked on the standardisation of a body of standardised contents that
de?ne the curricular contents for teaching CI.
If this is a more academic vision, interesting proposals also arise for the
future of CI from business practice. For example, that made by the Amer-
ican Brenner, M. from the corporation Air Products and Chemicals, who
saw the efectiveness of the CI specialists as facilitators or “coachers” of
14
I owe this term to Marcelino Huerta, former manager of FAMOSA.
Competitive intelligence: a new paradigm in the …
161
group decision-making sessions. This approach is supported by Fahey, L.
(2009) when he showed how intelligence ultimately is not the result of in-
telligence professionals by themselves. It is co-created through interac-
tion between intelligence professionals and decision makers. That is why
he insisted: “the key result of intelligence is understanding “insight”. This
is all the game consists of: this “insight
15
” involves the decision makers.
Speci?cally in line with the creation of mechanisms that will involve par-
ticipation together with CI specialists and decision makers and their staf,
there appears a form of developing the technique of analysing scenarios
that are known as the “war room”. Speci?cally for its capacity to confront
uncertainty in a timely way it has great potential in business.
Interesting integration experiences for librarianship professionals are
arising from university libraries in the academic ?eld, which are added
temporarily to research groups to provide them with access to the anal-
ysis results.
This need to obtain results from the analysis together with an explosion
of scienti?c, technological and market knowledge increasingly obliges
the incorporation of software tools for mining technical scienti?c texts or
‘Tech Mining’ or of syntactic and semantic analysis in order to understand
the emerging guidelines and their relationships.
Finally, standardisation is opening a path in this ?eld through R&D+i.
Therefore, the UNE 166.006:2011 standard in its latest revision has been
opened up to CI. The studies in progress by the group of the European
Standardisation Committee, CEN 389: on Strategic Intelligence Manage-
ment point towards an international presence in the near future with a
regulatory reference for companies in this ?eld.
Dedicated to Antonio Rico Gil, economist and teacher, in memoriam
(1947-2013).
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Chapter V
The economic risks of cyberwar
Henning Wegener
Abstract
The increasing acceptance and introduction of digital technologies in mil-
itary planning and armament opens the perspective of a cyber warfare
that, given the global interdependence of net structures, would unavoida-
bly and deeply afect the economy and vital societal assets. Hostile mili-
tary use of these technologies could, for factual and legal reasons, not be
cleanly separated from cyber con?ict in general and raises serious ques-
tions of controllability and legitimacy, thus opening up highly disturbing
damage perspectives. There is the perennial dilemma that the exponen-
tial growth and ultra-rapid development of cyber technologies and new
sophisticated uses are in con?ict with the equally exponential growth and
sophistication of attack options. The amazing quantitative and qualitative
growth of digital systems and infrastructures in a second digital revolution
comes accompanied by an equal or even superior growth in attack op-
tions and thus in vulnerabilities. Yet, the bene?ts of the digital age accrue
only if there is trust in the functioning, availability, integrity and safety of
the underlying technologies; thus, cybersecurity has come to be a global
challenge. The article describes actual and possible future cyber devel-
opments and the evolving threat landscape in terms of new attack modes,
new perpetrators, and new dimensions of economic risk and loss.
The article argues that the deliberate military use of digital technologies
in a cyberwar mode should be delegitimized or that at least its ofensive
Henning Wegener
168
component be deemphasized, but that the best course for all stakehold-
ers, including economic actors, would be to optimize strategies for the
prevention and mitigation of cyber damage. The key concepts – for all
forms of cyber con?ict – are self-defense, resilience, security improve-
ments in the IT industry, standard setting including standards for cloud
safety, technical redundancies, restraint, national and international co-
operation, emergency responses, efective information exchange and
warning systems, increased eforts to harmonize cyber penal law and
sanctions, advances in international law enforcement, and building in-
ternational norms of behavior for the cyber age The article concludes
emphasizing the need for a universal culture of cybersecurity, and ofers
an outline of a concept of cyber stability and “cyber peace”.
Keywords
Cyberwar, cybersecurity, cyber con?ict, cyber attack, cyber infrastruc-
ture, critical national infrastructures, new digital technologies, cyber law,
threat landscape, resilience, culture of cybersecurity, cyber law, cyber
stability, cyber peace
The economic risks of cyberwar
169
Cyberwar and Cyber Con?ict: the Economic Dimension
An earlier volume of this series of Cuadernos de Estrategia, published
in December of 2010, concentrated its analysis of cyber threats on the
national security dimension
1
. The current essay will examine the conse-
quences of cyber insecurity and cyber con?ict for economic security and
economic intelligence. As the underlying threat factors are the same or
similar – and economic security is, after all, an essential ingredient of
national security – the analysis will build on the earlier publication, which
remains entirely timely and valid, although some more recent develop-
ments and ?gures have of course been incorporated.
Understood literally, our topic appears to focus on the economic damage
that may be in?icted by the hostile use of cyber technologies in a military
context, thus positing a direct relationship between economy and war.
Indeed, history has shown that war – traditionally conducted with kinetic
weapons – has always spelled enormous risks and damage to the eco-
nomic assets of a belligerent country: by its indirect efects on infrastruc-
ture, consumption patterns, economic processes and client relationships,
the general functioning of society, etc.; as unintended, collateral damage
where the efect on strictly military targets spills over into society at
large including essential infrastructures – or directly, as part of a deliber-
ate strategy to destroy the economic grid of an enemy country, especial-
ly with regard to its armament industry or transport infrastructure, the
“war economy”, or beyond, to break the morale of the adversary and to
undermine the will of its populations to ?ght and resist.
Modern war has increasingly engulfed societies as a whole. Its intend-
ed comprehensive destructive efect has certainly seen its climax in the
Second World War, a “total” war, where the practically unlimited explosive
power of weapon systems, including nuclear weapons, and the strategic
will of the parties entailed the wholesale destruction of enemy territory,
economic assets, cities and populations included, with new dimensions of
violence and human sufering.
When we enter the digital realm, other laws govern. Digital attacks in-
cluding those with a military purpose are primarily non-violent and rela-
tively low-cost – “bits instead of bombs”, exclusively by way of electronic
invasion of systems and net structures. That also holds for military as-
sets. ITCs, Information and Communication Technologies have revolution-
ized military afairs, including battle?eld information and communication
and weapons systems, but at the same time increased vulnerabilities to
such invasions. A cyber attack comes from an invisible enemy, is hard
1
Ciberseguridad, Retos y Amenazas a la Seguridad Nacional en el Ciberespacio, Minis-
terio de Defensa, Madrid
Henning Wegener
170
to track and trace, is asymmetric, difcult to assess in its amplitude and
?nal efect, uncertain in the overall damage caused to assets beyond the
accountable economic consequences. And while there will be less blood-
shed and physical destruction, the consequences could yet be disastrous
and touch profoundly on the economy.
Many de?nitions where authors venture to de?ne cyberwar, describe it as
politically motivated actions by a nation state to in?ict upon an adversary
damage of military relevance – damage to military computer networks,
command-and-control systems, air defense networks and “network-cen-
tric” weapons systems by digital means
2
. More than 100 countries have
reputedly established cyber commands and understand cyberspace
as the ?fth domain of warfare, just as critical to military operations as
land, sea, air, and space. More than 30 countries are known to have de-
veloped explicit cyberwar doctrines; more than a hundred possess the
technical prowess to develop ofensive military capabilities. There is a
general understanding that cyberwar is a real and portentous military
warfare option that has to be taken very seriously, although scenarios
and predictions as to its likelihood difer. One concern in this respect is
the autonomous growth of cyber commands and cyber war doctrines that
may follow traditional military thinking patterns as if aficted by autism,
oblivious of the interconnected cyber context. Thinking in terms of cy-
berwar may lead one into a terminological trap. We will return to this
worrying aspect.
However, a brief review and juxtaposition of the various available de?ni-
tions of cyberwar quickly reveals that they clarify little, and that cyberwar
remains an elusive concept at best. The naked minimum substratum is
that we are dealing with digital attacks on systems and cyber infrastruc-
tures. Almost any further de?nitional criteria are open to doubt or ambiv-
alence. Politically motivated attacks? If espionage, including espionage
in armament industries and national infrastructures, is a prominent ele-
ment in cyber war, as most of the de?ners claim, political and economic
motives are naturally intertwined, and economic gain or data theft may
well be the dominant motive
3
. Cyber terrorism (a concept to which this
2
Wikipedia, Cyberwar. See also Glenny, Misha, Das Ende der Nettigkeiten. Cyberkrieg
und Sicherheit im Internet, Internationale Politik, November/December 2012, p. 80
3
Recent reports about cyber exploitation from China do not only demonstrate the
huge and indeed alarming dimension of cyber espionage from that country, but also
the great variety of perpetrators: big spying units that steal technological blueprints,
negotiating strategies, corporate and government databases from the US in terabyte
quantity appear to be part official, part contracted, part independent, and as these stu-
dies claim, at least linked with, if not coordinated by, a Chinese army unit. This opaque
relationship shows a mix of actors and purposes that defies definition and renders the
cyberwar notion ambivalent. See David E. Sanger, David Barboja, Nicole Perlroth, Chine-
se Army Unit Is Seen as Tied to Hacking Against US, New York Times, February 19, 2013,
and the Mandiant Report cited therein and widely commented in other organs.
The economic risks of cyberwar
171
analysis will return) certainly has political motives, but does not pursue
state-to-state war aims. Action by States and governments? Yes, attacks
may be state-run, but the more likely and more efective scenario is that
crime consortia, digital mercenaries as it were, are employed to in?ict
digital havoc at least as auxiliaries – unholy alliances between rogue
States and organized crime as a provider of “crime as a service”. “False
?ag attacks” could occur when states or non-state actors undertake a
cyber attack in the disguise of another state; the resulting misperception
could entail consequences that defy imagination, as generally mispercep-
tion that follows from errors of attribution or wrong interpretation of an
innocuous intrusion as a preparation of major attack could be fatal. Am-
biguities abound. ¿Military targets? Indeed, should governments lead a
determined attack on an enemy country, cyber commands may be spear-
heading the campaign, military assets will be at the center of any attack,
and modern network-centric military systems are sure to be aimed at as
preferential targets. Yet, what about comprehensive military and indus-
trial espionage? Even a schematic outline of principal scenarios proves
that the spectrum of targets is much wider, and that military planners
already include by implication at least critical infrastructures and vital
non-military communication systems in their target list, as most of these
are dual purpose. All four of the scenarios most frequently mentioned in
military-political analysis – the Estonia “cyberwar” in 2007 with its mas-
sive attacks on government and important infrastructures by distributed
denial of service saturation, the combination of cyber attacks and kinetic
means in the Georgia con?ict in 2009, the persistent “low level” threat
of military espionage, or the hypothetical “all out” cyberwar on defense
assets, governments, the economy and infrastructures described in a
somewhat sensationalist, but in the last analysis realistic way by Richard
A. Clarke
4
– are multi-target, half military, half civilian attacks and show
that cyberwar in its pure de?nitional form is very difcult to ?nd; the heu-
ristic value of the cyberwar concept is thus very limited, and an integral
assessment of cyber con?ict and cyber threats is by consequence una-
voidable. It is exactly such an integral perspective that can demonstrate
the tremendous destruction potential of a far-reaching cyber attack. This
author is not given to dwelling on dramatic doomsday scenarios, but the
extant literature on possible “digital Pearl Harbour” events can neither be
disregarded nor trivialized
5
.
The key factor that renders any de?nitional efort to characterize cyber
war as a distinct category of hostile behavior so difcult lies in the digital
4
Clarke, Richard A. and Knake, Robert K., Cyberwar. The Next Threat to National Security
and What To Do About It, New York, 2010.
5
Citable literature with plausible assumptions and calculations is hard to find, but it
can be assumed that governments and security institutions dispose of substantiated
threat assessments shielded from the public eye.
Henning Wegener
172
technology itself: the means of attack between civilian and military are
identical, almost always dual-use, whatever the motives and targets. Any
attack on the now all-pervasive net structures afects (all) digital partici-
pants in an unforeseeable and often uncontrollable way. One may regret
the absence so far of a systematic investigation on the likely cascade ef-
fects of even a limited military cyber attack and its international reper-
cussions, which is to say, a lack of estimates as to the basic risk of the use
of cyber weapons
6
. Digital interdependence between various sectors of
the economy is likely to create situations where failure in one sector not
only creates damage in another, but various mutually reinforcing feed-
backs. It is thus clear that the cascade efect of any attack on systems
and net structures in a closely interconnected world may be enormous
– and, as the assets of the attacker may also be endangered this may in
the best case serve as an implicit deterrent
7
. Characteristically, all eforts
to de?ne cyber weapons have failed in the past, although some partial
identi?cation of dedicated attack malware has resulted.
The truth is thus that cyber attacks pose an even greater threat to society
at large and its social and economic fabric than indicated in any variant of
military doctrine, planning and forebodings. The growing dependence on
digital technology puts public and private facilities, electricity supply, tel-
ecommunications, banking and ?nance, transportation, manufacturing,
medical installations, education and government just as much at risk as
military assets (more on these critical infrastructures further down). We
must speak of an integral risk exposure of our countries and their econ-
omies. In this perspective, the diferences between cyberwar, cyber ter-
rorism and cybercrime become blurred, and it appears more adequate
to speak of cyber attacks and cyber con?ict when analyzing the broad
threat pattern now emerging and impinging so clearly on the economy.
In popular parlance, cyberwar has often been understood with this broad
connotation, as a re?ection of the unspeci?ed, but massive fear cyber
6
It is as yet an open question whether the often-cited Stuxnet virus, a very sophistica-
ted malware, specifically geared to attacking the Siemens-produced dedicated control
software (SCADA) of nuclear enrichment installations in Iran, breaks this cascade effect
and can be the precursor of smart surgical cyber attacks. In any event, the Stuxnet at-
tacks were not directed at a military installation, and did not emerge in the Internet, but
were applied via smuggled flash memory sticks within a plant, thus posing a problem
more of physical access control and insider misbehavior. See in this context, James P.
Farewell and Rafal Rohozinski, The New Reality of Cyber War, Survival, August-Septem-
ber 2012, p.107
7
The cascade effect may be less effective if data – for instance, military data – are
managed in Intranets, or if other forms of net segmentation have been installed. Yet, the
insulation is only relative, and network defense is always needed to combat the same
invisible enemy. The same logic holds with respect to presumed plans of certain coun-
tries to opt out of the worldwide Internet structure, creating national digital borders in
a “cybered Westphalian age”. Such a national net segmentation will never be complete
and finally ineffective.
The economic risks of cyberwar
173
con?ict evokes among citizens. These public intuitions demonstrate that
cybersecurity, or rather cyber insecurity, is among the great challenges
of our time.
It is these broad threat patterns that most directly impinge upon the econ-
omy by way of an integrated threat perspective, and on which this essay
will concentrate in keeping with the general theme of this book. A realistic
economic risk analysis requires a comprehensive, integrated analysis of
the entire spectrum of cyber risks, whether the primary purpose of a cy-
ber attack is to reach economic gain or not, and an integrated strategy to
combat cyber con?ict. The vital contribution digital technologies make to
our era and especially to economic security, depends on the functioning,
integrity and reliability of these technologies, and of the con?dence they
inspire. Cybersecurity must thus be a central theme of this essay, as it
was in the 2010 publication cited above.
We will, then, ?rst explore the extent to which digital technology has al-
ready permeated all economically relevant segments of society. In a pre-
dictive mood, we will then analyze, even if somewhat speculatively, the
likely growth and mutation of the digital world in years to come. The fol-
lowing chapter will focus on the vulnerabilities and exposure to risk this
ever more interconnected world will generate, and the security threats
thereto as they are shaping up. An attempt will then be made to measure
the resulting economic damage, and the tenuous relationship between
cyber attack and cyber defense, i.e. the state of the security industry.
In the second part of the essay, the accent will be on counterstrategies,
damage mitigation and prevention, exploring the full panoply of cyber de-
fense. An important emphasis will be placed on the legal aspect, as there
is as yet little provision made to efectively control the escalation of cyber
con?ict by norms, and as there is at best an incipient understanding of
how the existing norms of international law would apply
8
.
Cyber as the Agent of an Economic Paradigm Shift
Any realistic threat assessment requires an overview over the state-
of-the-art digital technology employed by key economic actors. Infor-
mation and Communication Technologies (ICT) increasingly become the
new dominant paradigm of all aspects of human endeavour, providing
the all-encompassing operative system of human societies. Cyber Tech-
nology has become a de?ning characteristic of our age. The well-nigh
total dependence on ICT confers vital importance upon the performance
robustness, security and reliability of digital systems and networks, con-
8
Further down more detailed reference will be made to the “Tallinn Manual on the
International Law Applicable to Cyber Warfare”, Cambridge University Press 2013, the
first comprehensive treatise on the subject
Henning Wegener
174
?dence in their functionality and integrity, and in the protection of privacy.
These increasingly become framework conditions for the functioning of
society. Information security thus needs to be ranked as an overarching
societal challenge of global proportions.
The progress and growth of ICT which we currently observe in the econo-
my and elsewhere, including in military afairs, is breathtaking and justi-
?es designation as a second digital revolution.
As mentioned by diferent sources and studies, rapid advancements
regarding the integration density and performance of very large-scale
digital circuits which form the base technology in the digital age will be
going on for at least another decade. Moore’s law of doubling comput-
er performance every 18 months continues to be valid. As these digital
components are getting smaller and cheaper, more and more of these
components like microprocessors, sensors and actuators are embedded
in technical or physical systems and interconnected via various kinds of
networks. According to a recent paper by Manfred Broy, currently about
98% of all microprocessors are embedded (and invisible), and are con-
nected via sensors (e.g. RFIDs) and actuators with the physical world and
with the internet. As Broy mentions, “… the physical world merges with
the virtual world of cyberspace leading to Cyber-Physical Systems and to
an Internet of Things, data, and services”
9
.
With more than 2,3 bn computers on-line, billions of microprocessors and
microcomputers thus employed in embedded systems, RFIDs and other
sensors, mobile devices, evolving network technologies and bandwidth,
ultra-miniaturization of digital circuits and the resulting ubiquity of new
miniaturized computing elements, the steady progress towards an “In-
ternet of Things” with miniature computers soon inserted in cloths or the
frames of eyeglasses, the possible resulting threat spectrum goes in-
?nitely beyond traditional computers and the current Internet. Basically,
all digital devices and networks are vulnerable, and increasing intercon-
nectivity of digital systems can easily result in “snowball”-like distribu-
tion of errors, faults and failures – or damage caused by cyber attacks.
And these are ongoing processes. We are already witnessing an explosive
growth of digital actors and an exponential growth curve of interconnec-
tivities, an all-pervasiveness that automatically spells a parallel increase
in vulnerabilities.
The phenomena of migration – migration of ?xed line telephone to mobile
systems and to VoIP, migration of computing processes, software man-
agement and data storage from individual and business computers to
huge server farms (grid computing in the “cloud”) with petabyte capac-
9
“IT” – Information Technology, Special Issue, 6/2012, p. 255, Manfred Broy, Editorial,
Cyber Physical Systems (Part 1), München 2012
The economic risks of cyberwar
175
ity (1PB = 10
15
bytes) and cloud computing services – and convergence
– resulting in an undistinguishable mesh of mobile and ?xed systems –
add up to a huge integrated global network structure with a universe of
connectivity.
Counting traditional computers, mobile devices, embedded systems –
omnipresent, but sophisticated microprocessors often miniaturized to
the size of a sugar cube – some analysts estimate that the total number
of interconnected systems, civilian and military, has already reached – or
will soon be reaching – the level of 50 bn. The exponential propensity of
their mutual connectivity potential – and thus also their vulnerability to
cyber attack if not speci?cally protected – is difcult to calculate, but in
any event a matter of evidence and concern.
The development of mobile devices is particularly noteworthy. Recent
statistics indicate that worldwide smartphones trading alone will have
reached more than 650 million units in 2012, bringing the worldwide
mobile subscriber base to nearly 8.5 bn by 2016, an annual growth rate
of more than 7%, with mobile penetration exceeding the point of 100%
soon. The annual business ?gure of the mobile handset business stands
at appr. US$250 bn
10
. This does not count in other mobile devices, nor the
innovative potential of all smart mobile systems: such as smartphones,
tablet computers etc. with mobile Internet connection. They are making
computing ubiquitous.
In OECD countries and in emerging markets, nearly all companies are
connected to the Internet, and an increasingly higher percentage of busi-
ness sector value-added can be attributed to Internet-related activities;
developing countries are catching up with increasing speed, often pre-
dominantly based on mobile techniques.
The production apparatus of our societies is already digitized to a large
extent. Internet-connected machines that operate comprehensive au-
tonomous machine-to-machine information exchange systems within
factories, often interconnected through wireless protocols, so-called cy-
ber-physical production systems, increasingly characterize today’s – and
tomorrow’s – production processes and are the basis of the fourth indus-
trial revolution, even though this development is as yet incipient. Net-con-
nected and imbedded IT systems like RFID responders become the driver
of innovation, replacing central production control and management by
self-organization and ?ne-tuned process adjustments.
“Smart factories” go hand-in-hand with smart grids for essential public
support functions. A rational energy economy has to move to smart grids,
a production and consumption control and steering process predicated
upon the functioning of millions of sensors. Smart systems are by no
10
Figures from Portio Research Report Smartphone Futures 2012-2016
Henning Wegener
176
means the property of OECD countries: New Delhi has recently introduced
smart grids for the energy management of the metropolis.
The second digital revolution manifests itself also in the unprecedented
quantitative growth of data trafc. The new dimension of information
storage, transfer and processing, and the availability of new ICT services
is speci?cally enabled by the tremendous growth of data centers, “Big
Data”, colloquially referred to as the “cloud”, which have become a prime
driver of economic growth. The various and fast-growing “cloud” servic-
es (Infrastructure as a Service, IaaS, Software as a Service, SaaS, etc.)
allow for the reduction of company hardware and software acquisition
and maintenance, and ofer ?exibility, savings, and universal availability
of company data from anywhere. The explosion of data production is in-
deed fomented by the cloud phenomenon. Cloud computing is the fastest
growing segment of IT operations, with data in the cloud expected to grow
sixfold over a ?ve year span, and to produce, for the EU alone, almost
€600 bn additional revenue, creating 2.5 mn new jobs in the process.
The Cyber World of Tomorrow
Before appreciating fully the threats and economic risks of cyber con?ict,
one must also appreciate, if in a summary manner, evolving cyber devel-
opments, although predicting is risky business by itself. Yet, the grand
lines can be drawn, as they develop from current trends, provided a re-
alistic accelerator is built in. It is safe to assume that miniaturization and
the all-pervasiveness of devices – the Internet of things, based on the
much more potent Internet Protocol IPv6 – will continue at an even fast-
er pace, that the ubiquity and pervasiveness of invisible computing will
grow, that data growth will accelerate and that new forms of computing
leading to diferent and novel structures of processing con?gurations in
digital nets, e.g. neural computing, will evolve. We will see the develop-
ment of minute computers with self-organizing potential (“organic com-
puting”), able to communicate autonomously with other digital devices,
new human mind-machine communications (to name just some of the
“next generation” computing trends
11
). These developments will gener-
ate a continuing explosive growth wave of digital devices, dwar?ng the
quantitative evolution we have seen so far. Computing power, especially
through grid and cloud computing, becomes virtually unlimited. The in-
corporation of smart processing modes in industry will accelerate, and
smart grids, today still in an experimental stage, will be a regular feature
of the economic environment.
11
A more complete list would look to the advancements of nanotechnology, material
science, new semiconductor-based sensor technology, the formation and management
of virtual systems, new architectural concepts etc.
The economic risks of cyberwar
177
Broadband availability and coverage, and bandwidth, will increase to a
point of providing entire societies, including in the developing world, with
efective and powerful on-line access, in many third world countries pre-
dominantly by mobile techniques
12
. We will see new very high speed ?ber
connections, and new high-speed wireless connections, two technologies
that will shape the near future of connectivity. Mobile devices will become
more sophisticated and versatile – serving as means of payment, replac-
ing traditional keys and even chip cards, able to receive high resolution
television anywhere.
Mobile technologies will be so efcient that they allow work at home with
full access to company data as a normal feature, thus changing the work
structure and enabling savings in infrastructure and travel. Bring your
own device (BYOD), a work form where the employee takes on his comput-
ing and data management tasks from anywhere, fully connected, already
in use in some companies today, will become a routine procedure. Noth-
ing will be as before.
Threat Development – the New Economic
Reality of Cyber Insecurity
The foregoing analysis has placed emphasis on the exponential current
and future growth of systems and actors, all interconnected, that make
up the cyber world. And it is evident that the multiplication of systems
and actors are the principal indicators of new opportunities to imperil
cyber security on a grand scale, military and in a civilian context. Growth
of objects, at this exponential rate, indicates growths of threats, equally
exponential. One must bear in mind that any digital object, if not protect-
ed, can be an object of cyber attack, and if it is part of a connectivity mesh,
this spells multiple infection potentials and profusion of damage.
The tremendous growth process simultaneously afecting cyber systems,
actors and net structures has generated the famous quantity to quality
jump. Rather than old-style crime merely going on-line, cyber attackers
are today taking advantage of the increasing dependence of our day-to-
day life on IT by developing creative strategies to exploit the vulnerabili-
ties of IT systems.
The resulting change is nothing less than dramatic. The various dimen-
sions of the threat surge have to be assessed in conjunction. The explo-
sive growth of systems and interconnectivity – here already described
– the growing intensity, sophistication and diversity of attack modes and
attack technology, and the radical change in the characteristics of cyber
con?ict perpetrators, all interact and multiply the damage potential. With
12
For current percentage figures see OECD Internet Economy Outlook 2012
Henning Wegener
178
the second digital revolution we enter a new world of perils which makes
analyses of the cyber threat of, say, ten years ago, appear idyllic.
All operations in cyber con?ict have in common that they intervene in the
functioning of digital processes, whether they afect data, their storage,
their handling, or their transmission, thus undermining the reliability and
authenticity, integrity and privacy of data and processes.
But the aim of an attack can difer. Some leave the normal functioning of
the systems and computing processes unafected: their purpose is to ob-
serve and possibly to copy (“steal”) data. The key applications are military
and industrial espionage, data and personality theft. If the attack remains
undiscovered for a length of time, it can be pursued, and even more data
can be retrieved as they emerge; espionage and data theft operations aim
at this long-term covert use. The usual term for these practices is persis-
tent threat, or in case of an organized crime perpetrator and systematic
use over time, Advanced Persistent Threat (APT).
Other attacks, using for instance “logic bombs”, aim at altering or de-
stroying the functions of the attacked system, falsifying its efect (e.g.
the operating instructions of a weapons system) or making it inoperative.
Still other attacks change the normal functions for abusive or illegal pur-
poses for a given time, for instance in bank or credit card fraud, or more
permanently by defacing the sites. The massive sending of spam, unsolic-
ited bulk e-mail, frequently with commercial content, to an indiscriminate
set of recipients, can also be termed an attack, as it is frequently used
to dispatch viruses and other malware as a technique to enact ?nancial
theft, identity theft, data and intellectual property theft, fraud or simply
deceptive marketing.
Evolving Attack Modes
The con?ict modes which we will review subsequently, together with
their development trends and evolving dimension, fall in one or several of
these attack scenarios. As this essay does not purport to deal with their
information-technological characteristics, the references to them will be
general.
Topical information and ?gures are amply collected and made available
by the globally operating cyber security companies Symantec, Norton,
McAfee, Microsoft, KasperskyLabs, PandaLabs and CISCO, among oth-
ers
13
. In addition, many national cyber security services like the German
BSI, the US Homeland Security Department, and the European agency
13
Symantec Internet Security Threat Report, Norton Cybercrime Report, McAfee Threat
Reports. These reports are issued periodically, and 2011 and, in part, 2012 data and
developments are already covered in their latest editions.
The economic risks of cyberwar
179
ENISA
14
collect and often publish data. While extremely revealing, such
compilations still have to be read with a grain of caution. Commercial IT
security companies, while certainly correct and conscientious with their
information, tend to highlight the perils of attack in the interest of their
business. And victims tend to underreport incidents – businesses too,
like banks, in order to protect business con?dence, individuals because
of shyness or lack of interlocutors, national security services, especially
when information networks relate to military secrets, weapons systems,
or an essential security dispositive that has been penetrated.
But it is exactly the exploitation of espionage possibilities that have been
displaying lately one of the highest growth factors. As they access the se-
cure systems of target states, organizations and industries encounter in-
creasingly lower barriers to entry, and the ubiquity of techniques used to
undertake such collection, many of which have been developed by crimi-
nal groups, is evident – some States make an increasingly aggressive use
of cyber espionage. There is detailed information on China’s cyber oper-
ations in the US, where the intruders concentrate on key corporate infra-
structures aiming at the theft of intellectual property
15
. For many years
China has been practicing nuclear espionage, collecting highly classi?ed
information on long, documented lists of nuclear warheads, while also
accessing networks of major defense and ?nancial institutions. The most
commonly used penetration technique is Trojan attacks, where a virus
is introduced and can over long periods be instructed to download data
without being perceived by the target system’s operator. While China’s
cyber exploitation operations have received special publicity because of
their extent and aggressiveness, all other great powers are also involved
in intense espionage battles. At the moment, viruses with espionage
functions enjoy a positive business cycle. Lately the spyware variants
Madi and Flame have become particularly prominent
16
. Their appearance
shows that even relatively simply constructed spyware can serve to ob-
tain very valuable and sensitive information on a large scale.
From state-run espionage networks with a high Trojan penetration, it is
only one step to the direct attack, degradation of weapons systems, and
sabotage, e.g. through sleeping logic bombs, although these need to be
14
ENISA’s Reports, as recently the ENISA Threat Landscape: Responding to the Evolving
Threat Environment, of January 2013, stand out because of their broad database, incor-
porating findings from most other reports, and because of the systematic and definitio-
nal analysis of the various types of threats and risks.
15
Wikipedia, Chinese Intelligence Operations in the US; IISS Strategy Survey 2012, Inte-
lligence Agencies and the Cyber World, p. 33. See also Nigel Inkster, Chinese Intelligence in
the Cyber Age, Survival, February-March 2013, p. 45. See also fn. 3 above.
16
The Duqu virus, often cited in the Flame context, also has excellent espionage and
data theft properties, but is substantially more complex, possibly related in structure
and origin to Stuxnet. Its primary target is also control software like SCADA. Duqu disa-
ppears from the affected systems after 36 days which complicates detection.
Henning Wegener
180
able to resist the vigilance and ongoing software upgrades of the soon-
to-be attacked party.
All reports from security companies agree in their latest editions that
malicious attacks continue to grow rapidly and, according to McAfee, have
presently reached an all-time high in database breaches. At the same
time there is growing sophistication of attacks and malware develop-
ment. Mobile malware, a new central focus of attack, has almost doubled
in a one-quarter period. With the number of vulnerabilities in the mobile
space rising – Symantec has detected a 93% rise in one year – and mal-
ware authors creating speci?c malware geared to mobile opportunities,
2011 was the ?rst year that mobile malware presented a tangible threat
to businesses and consumers, not least because workers tend to bring
their smartphones and tablets into the corporate environment faster
than many organizations are able to secure and manage them. “BYOD”
poses enormous new security challenges. It may lead to a further long-
term increase in data breaches. The new threats to mobile are designed
for activities including data collection, the sending of content, and user
tracking.
There are quantitative jumps in all categories of attack mode. Syman-
tec alone blocked more than 5.5 billion malicious attacks in 2011, an in-
crease of 81 percent over the previous year. In addition, the number of
unique malware variants increased to 403 million during that period.
Financial damage to banks and individual customers (credit card fraud,
phishing and carding, spearphishing, direct ?nancial extortion) continues
to rise fast. Last year cybercriminals set up an automated transfer sys-
tem (ATS) that was used to attack European ?nancial institutions, and set
out to target a major U.S. multinational ?nancial institution. “Mobile Mon-
ey Transfer”, MMT, a catchword for novel digital ?nancial systems, servic-
es that are bringing banking to millions of people in the Third World, will,
if not quickly and efectively regulated, display the “dark side of cyber
?nance” and will become a playing ?eld for cyber attack and crime
17
.
Given the still persisting quasi-monoculture of operating systems where
one producer dominates the market, the vulnerabilities inherent in its
products are particularly widespread and, if exploited, lead to substantial
damages. The main source for distributing computer viruses are there-
fore innocent users of personal computers and company computers, who
often are not aware of the risks inside the web.
Virus attacks have also been greatly facilitated by the huge presence of
“new social networks” that act as gratuitous distributors for infection.
17
Bronk, Christopher; Monk, Cody and Villasenor, John, The Dark Side of Cyber Finance,
Survival, April-May 2012, p. 129. A specific virus, Gauss, targets financial transactions;
there are others.
The economic risks of cyberwar
181
Moving beyond spam attacks, cyber criminals are turning to these social
networks. Their seemingly very innocent nature makes users incorrectly
assume they are not at risk, and attackers are using these sites to target
new victims. Due to social engineering techniques and the viral nature of
social networks, it is much easier there for threats to spread from one
person to the next. Yet spam, although now better controlled by anti-spam
?lters of the Internet Service Providers, and in addition in many countries
subject to anti-spam legislation, is still rampant; more than 86% of Inter-
net trafc – 62 bn messages globally per day – was spam in 2010, (with
a slightly lower percentage of 75%, 42 bn messages, in 2011)
18
, which by
inundating the accounts causes appreciable damage in lost production
time, apart from its potential to spread virus attacks.
There is another move away from indiscriminate spam: attackers indi-
vidualize their attack, focusing on those victims on whom they have pre-
viously accumulated actionable knowledge through data and personality
theft. One individualizing method is spearphishing. The term denotes a
targeted email attack on persons who are known to frequent speci?c on-
line businesses and may have relevant account information for banks,
speci?c businesses or distribution chains. It is so called because the
move to target is precise and narrow, like the tip of a spear. Although
credit card data may not be stolen, email addresses are compromised,
and these addresses can be sold on the black market. Furthermore, the
information gathered from spearphishing can also beget more sophis-
ticated phishing attacks on other customers acting upon the legitimate
looking message from a retailer or bank with whom they are already do-
ing business. Targeted attacks are increasingly directed at smaller com-
panies, because they may be less well defended or occupy an important
place in a given supply chain.
At the same time, malicious code is less and less programmed to directly
cause irreparable damage. Rather, attackers try to bring infected com-
puters under their control so that they can continue to misuse them by
way of Trojan infection and remote control.
One important and efective element in such schemes are targeted DDoS
(Distributed Denial of Service) attacks. In this attack method, the attacker
?oods the server with useless data packages, thus overloading the sys-
tem in order to provoke business interruptions in the victim’s systems
and net structures. In a business context, such attacks could be launched
by competitors, dissatis?ed personnel, or otherwise motivated groups of
people. Obstructing the smooth operation of web sites massively can re-
18
Figures from Symantec. Spam may grow less rapidly also because there is increa-
sed pressure on spammers; some huge specialized spam botnets having been taken
out over the last two years. By contrast, the content of criminal spam has become more
sophisticated.
Henning Wegener
182
sult in considerable economic consequences, especially for companies
practicing or relying on e-commerce. In military or political con?ict sce-
narios, DDoS attacks – a central feature of the cyber attack on Estonia
in 2007, where, however, economic damage was minor – can paralyze
defense installations and communications, neutralize or destroy weapon
systems, paralyze government services, provoke breakdowns in critical
infrastructures and economic sectors, and may thereby, in extreme cas-
es, lead to massive loss of life.
While the latest reports of the security companies clearly put their ?nger
on the new threats to mobile devices – and through them to the whole
interconnected universe – they do not yet quantify the new vulnerabilities
that spring from the explosive growth of the cloud centers. Yet, apart from
the mobile threat, the insecurity of massive migration of data to the cloud
has for some time been a hot topic in security discussions, in the words
of an ENISA report from 2009
19
, “The massive concentrations of resourc-
es and data present a more attractive target to attackers”, although the
agency believes that “cloud-based defences can be more robust, scalable
and cost-efective”.
Underpinning this list of new attack modes is the emergence of a wide ar-
ray of new highly sophisticated destructive software programs appearing
with an ever increasing rapidity and sophistication
20
and targeting pre-
cision. National boundaries are of course no longer relevant to this type
of threats, and it is impossible to con?ne the protection of information
technology and IT infrastructure to domestic policies. The authors and
vendors – and pro?teers – of computer viruses and other malware are
operating globally, and cyber defense has to adopt that same mode.
The New Enemy: Collective Actors of Cyber Con?ict
Internet criminality is more and more conducted in a professional and
commercial manner. Targeted attacks are increasingly carried out by
organised criminals. Financial interests are the decisive driving power.
Cyber con?ict is developing into a powerful branch of the international
organized crime scene. Crime consortia command armies of cyber ex-
perts and malware developers and systematically organize crime cam-
paigns for gain. Over years of operation they have built professional
teams for sophisticated malware development, bene?tting from massive
crime-generated resources. This also allows for a new magnitude of at-
19
Cloud computing: benefits, risks, and recommendations for information security, No-
vember 2009, www.enisa.europa.eu
20
One example is a new technology to segment malware into minute data packets
that enter a target system, unrecognized by firewalls and anti-virus systems, but reas-
semble automatically once inside the host system
The economic risks of cyberwar
183
tacks. Already in 2004, sixteen percent of hacking activities were aimed
at e-commerce companies. This represented a 400-percent-increase
compared to the previous year, but since then the individual hacker has
terminally faded into the dark, and organizations have taken over.
They systematically plant Trojans into large numbers of computers – in-
creasingly also into mobile devices, and thus have thousands and even
millions of devices at their command where they can activate malware
and use it for attacks, Botnets – the word is composed of robot and net –
are on the rise. These aggregates of zombie computers have several uses.
Their operators – the botherders – can proceed to money-making directly,
or collect espionage knowledge, commit data and identity theft. Botnets
provide an efective and increasingly used infrastructure to distribute
spying programs in a wide range of variants, and to do business in online
banking. Botnets are the ideal platform for DDoS attacks, as these need
a large number of activated email-emitters to reach the desired large-
scale saturation efect. Botnets can also be rented out to other criminal
perpetrators – or to governments, as digital mercenaries, creating an
opaque state-non-state actor mix. They are not the only merchandise
on the black market, accessible to criminals and governments alike; ag-
gressive attack software, email addresses and credit card numbers in
huge packages are available for almost token prices. There is no lack
of zombies either. Almost every 10th email is estimated to be infected
by relevant viruses, and, accordingly, the botherders can count on large
herds, functioning unbeknownst to their owners. Already in 2010 McAfee
had estimated that the number of zombie computers grow by at least 5
million systems per month, and that identi?ed malware variants increase
annually by a factor of 5. At the best time of the Con?cker virus which
was, and is, autonomously able to recruit new computers into the botnet,
the dimension of that net alone may have reached more than 10 mn de-
vices. Without the push of the new collective actors this growth would be
inconceivable.
One alarming aspect of the new criminal cyber scene is the aforemen-
tioned technical and ?nancial prowess to develop malware ahead of cy-
ber defense and in spite of the undoubted efciency of the international
cyber security industry. At the same time, the digital dependency of mod-
ern societies is growing; infrastructures are ever more net-dependent
(e.g. smart grids). Even the numerical aspect alone is worrying. McAfee’s
reports indicate that identi?ed malware variants increase annually by a
factor of 5. The timeless dilemma of attack vs. defense thus takes on a
new meaning, especially due to these new collective operators in cyber
space, and the defenders of a functioning, peaceful and crime-free cyber
space do not always have the upper hand
21
. The attack potential of these
21
“There is and always will be a permanent race in cyber space between attackers
and defenders. Unfortunately, at the moment attackers are one step ahead.” ENISA
Henning Wegener
184
organized evil forces also gives an idea of the possibilities of a true cyber
war if states and organized crime cooperate.
There are several analyses with theories about the countries or places of
residence of these crime groups, based in part on the URL of the attack
messages. But given the unlimited possibilities of station-hopping and
combining inputs from various sender countries, this essay refrains from
any such attribution.
With all these developments it has certainly become clear that the term
security has reached an entirely new meaning and dimension in cyber
space; national boundaries provide less protection today than ever be-
fore. Such terms as internal and external security are increasingly dif-
cult to de?ne or might indeed merge in most cases.
Cyberterrorism can also be subsumed under the new collective threats.
Under the dominant de?nition, cyber terrorism denotes the use of In-
ternet attacks by political-ideological groups, aiming at large-scale dis-
ruption of systems and networks, potentially creating destruction, alarm
and panic. If the purposes of these terrorists are not economic gain, they
would not be genuinely within the purview of this study. If they go eco-
nomic, for instance, to extort funds for the ?nancing of terrorist activi-
ties, they are not essentially diferent from other criminal operators, and
would only form part of the integral cyber con?ict and threat landscape
here described. That does by no means trivialize the dangers they pose,
especially with attacks on critical infrastructures, and they are rightfully
within the focus of governments in their anti-terrorism and general se-
curity campaigns
22
.
Measuring the cost of cyber con?ict: is quantifying possible?
Several international cybersecurity companies periodically undertake
to put a price tag on overall economic damage caused by cyber con?ict,
based on their own activities and insight.
The Norton Cybercrime Report 2012 calculates the immediate ?nancial
loss to come to US$110 bn for 24 countries (Symantec arrives at 114
bn), with 556 mn victims; but if the money equivalent of lost time trying
to respond to incidents and resolve cybercrime is added, the ?gure rises
to roughly 390 bn. Whatever the exact methodology in arriving at these
?gures, it is certain that – apart from the limited number of countries
Threat Landscape, January 2013, cited above.
22
See Candau Romero, Javier, Estrategias Nacionales de Ciberseguridad. Ciberterro-
rismo. In: Ciberseguridad, Retos y Amenazas a la Seguridad Nacional en el Ciberespa-
cio, Instituto Español de Estudios Estratégicos, Cuadernos de Estrategia nº 149, Madrid
2010.
The economic risks of cyberwar
185
covered – the cost of long-term damage and business disruption, direct
cash spent in incident response, and the damage to business reputation
have not been fully factored in, and, for all countries, if included, should
reach important additional proportions. And as pointed out before, any
damage statistics have to cope with the huge number of unreported and
unassessed attack cases
23
.
Preventive and cyber defense measures do not appear to be covered ei-
ther. Taking the US Government eforts at enhancing its cybersecurity
capabilities (protecting critical infrastructures, cybersecurity operations,
information sharing and analysis, etc.) as an example, the budget allot-
ment of the Department for Homeland Security for these purposes alone
amounts to US$1,2 bn for FY 2013
24
, surely less than the private sector,
all businesses told, has to invest in cybersecurity and cyber vigilance.
Such amounts of funds have to be scaled up for the entire international
community. The cybersecurity industry itself runs a multi-billion euro or
dollar business.
Estimating the budgets for safeguarding military installations, com-
munication systems and weapons will be even more difcult. But it
is evident that the availability and maintenance of one’s own military
communications and command structures as well as the capacity to
neutralize hostile military action – cyber defense – must enter, as they
do, into calculation and planning.Given the uncertainties of calculation,
it is thus not surprising that there are no handy overall ?gures. Yet, at
the recent First World Summit on Cybersecurity organized by the East-
West Institute in Dallas, Texas, in 2010, authoritative speakers have
estimated the total economic damage of cyberinsecurity at appr. US$ 1
tn (1000 billion) annually, and this indicative ?gure has been used since
without anybody seriously objecting. In the same order of magnitude,
an authoritative speaker from the US House of Representatives has
estimated the annual loss from cyber espionage – presumably from
Chinese intruders – to have reached $300 bn in 2012, no breakdown
of ?gures included
25
. At the World Economic Forum at Davos 2013 it
has been assumed that over the next decade there is a 10% chance of
a major digital breakdown – presumably of criminal origin – costing
23
The European Commission through its Vice President Neelie Kroes is currently con-
templating to establish a legal obligation for business to report cyber attacks. News
agencies, 26 November 2012. The EU Commission is preparing a Directive in this sense.
EU-wide, more than 40,000 enterprises would have to submit to the reporting obliga-
tion. The initiative has encountered resistance from industry and IT service providers.
ENISA has estimated that 25% of attacks in the EU and the US are not reported to law
enforcement authorities. For an initiative calling for voluntary industry reporting, see
fn. 55 below.
24
www.dhs.gov
25
Article in El País and US press, February 21, 2013
Henning Wegener
186
over a quarter of a tn dollars
26
. These ?gures, and at least their order
of magnitude, are enormous.
While the ?rst part analyzed current and evolving cyber threats and their
enormous economic cost, and emphasized that an integral risk situation
required also a comprehensive and integral response, this second part
will concentrate on combating cyber con?ict, developing cyber defense
strategies and devising strategies for the mitigation of consequences.
Limits on Cyberwarfare Proper
Although we have found the concept of cyberwar to be ambiguous and of
doubtful relevance to the present analysis of economic risks, a brief sum-
mary of the constraints international law places on hostile cyber action
appears in order, as they may limit the potential of damage.
International law and especially the law of armed con?ict antedate the
cyber age, but as cyber space is now increasingly recognized as a new
theater of war, it is generally assumed that the jus ad bellum and the jus
in bello, suitably adapted, also govern hostilities in cyberspace. There is
much academic literature on the analogies that can and must be drawn
from the UN Charter, the Hague, Geneva and ICRC Conventions and Ad-
ditional Protocols and other treaties on Humanitarian Law, UN General
Assembly resolutions announcing general principles for state conduct,
extant international case law and customary International Law. Govern-
ments have published manuals and cyber strategies that also de?ne con-
straints, but at the same time provide the underpinning for huge invest-
ments in cyber armament. Much of the debate centers on the de?nition
of “attack” and “armed attack”, but also cyber-suited de?nitions on the
principles of the laws of armed con?ict (necessity, distinction, propor-
tionality, non-discrimination, prohibition of attack on civilian objects and
certain persons, objects and activities, neutrality, etc.
27
The views expressed range from the acceptance of broad options of at-
tack, where targeting critical infrastructures is considered within the
realm of legality
28
, to more restrictive interpretations
29
.
26
Cited by Vice President Kroes at the Global Cyber Security Conference, Brussels, 30
January 2013
27
For a summary of the issues, see Westby, Jody R. A Call for Geo-Cyber Stability in ITU
(Hamadoun Touré and the Permanent Monitoring Panel on Information Security, World
Federation of Scientists), The Quest for Cyber Peace, ITU, Geneva, 2011, p. 66. In the same
publication, see Barletta, G.A., Barletta, W.A. and Tsygichk, V.N., Cyber Conflict, p. 53.
28
For a cautious assessment, stressing the complexity of “line-drawing” in the use-
of- force debate, see Waxman, Matthew C., Cyber Attacks and the Use of Force: Back to the
Future of Art. 2(4), The Yale Journal of International Law, Vol 36 (2011), p. 421.
29
In 1999 Amato, Anthony D,, International Law, Cybernetics and Cyberspeace, 76 Intern.
Law Studies, p. 59, predicted that “attacks in the Internet will soon be seen as clearly
The economic risks of cyberwar
187
There is no point in belaboring these various perspectives, as the prin-
cipal reference work is now quite clearly the recently published “Tallinn
Manual on the International Law Applicable to Cyber Warfare”
30
elaborat-
ed by “The International Group of Experts at the Invitation of The NATO
Cooperative Cyber Defence Centre of Excellence”. This comprehensive
treatise seeks to establish 95 “Rules” covering the jus ad bellum and jus
in bello for cyber con?ict exhaustively.
The Manual has obvious merit. The prestigious assembly of co-authors
proposes under the international regime de lege lata plausible de?ni-
tions and rules and puts an end to many previous controversies. Yet, the
members in dealing with the military-civilian relationship, and in try-
ing to distinguish between military and civilian assets, and dealing with
non-discrimination, etc. have to admit that cyber “weapons”, “by their na-
ture generate efects that are incapable of being controlled and therefore
can spread uncontrollably into civilian and other protected computers
and computer networks that create an uncontrollable chain of events”
(p.122), and that most possible targets, especially critical infrastructures
and cyber infrastructures, are dual-use, and that an attack on them cre-
ates more than the “collateral damage” to be assumed in kinetic con?ict.
Could a critical infrastructure of mixed military-civilian use also be tar-
geted if it supports targets that are protected by the Geneva Conventions?
The Manual seems to give preference to the military purposes. Rules such
as “The civilian population as such, as well as individual civilians, shall
not be the object of cyber attack” (Rule 32), thus they are likely to lose
their protective efect. Rules 14 and 55, specifying that cyber operations
in self-defense must be necessary and “proportionate” become blurred,
if, because of lack of controllability, the proportion cannot be measured
reliably. Other uncertainties concern the treatment of hidden non-state
actors, combatant status, de?nition of “war-sustaining” economic ob-
jects, neutrality, anticipatory self-defense – when can a cyber attack that
occurs with lightning speed be judged to be imminent? The authors are
more successful in de?ning “attack” and “armed attack”, employing the
“efects” rule in the latter (“Whether a cyber operation constitutes an
armed attack depends on its scale and efects”, Rule 13)
31
. Yet even here
illegal in international law, and customary international law may already have reached
that point”, but clearly developments since then have not gone that way.
30
See footnote 7 above.
31
The Manual also makes clear that not all transfrontier cyber attacks, even though
issuing from a state, constitute a violation of the law of armed conflict or international
law generally. Thus cyber espionage, in “peace” or armed conflict, does not fall within
the purview of international law (except in special cases, e.g. when disregarding the in-
violability of diplomatic archives and communications). One of the important elements
of cyber conflict, massive intrusion into digital systems for purposes of espionage, an
Advanced Persistent Threat, is thus to be judged under national cyber laws and sanc-
tions, such as the Budapest Convention defines.
Henning Wegener
188
the ambiguities are preoccupying. The “armed attack” rule is so broad
that it lowers the barrier to war; it is unwise and dangerous for interna-
tional stability to treat con?icts that imply no clear threats to human lives
or essential societal disruption as “armed attack” with the accompanying
consequences under international law
32
.
On the whole, the Manual, far from constraining the cyberwarfare option,
rather underlines the great new possibilities of cyber attacks and the un-
controlled damage it can in?ict. Very little harnessing is done. Instead, the
uncertainties and the risk to civilian cyber structures become more ap-
parent. That refers speci?cally to Critical National Infrastructures which
are not only predominantly privately owned, i.e. part of the national econ-
omies, but indirectly penetrate the whole social fabric so much that econ-
omies are ever more dependent on them. Cyber attacks on them not only
generate massive economic damage, but also seriously compromise the
security and safety of society, putting human life at peril.
More importantly, the Manual accepts the option of warfare in cyberspace
in an unre?ecting way and dodges the question of whether unbridled cy-
ber armament in view of future use is a wise course for civilized nations
to take. The Manual starts of course from the underlying assumption that
state-sponsored cyber hostilities respect the UN Charter, and are only
invoked in self-defense. Yet, the ?nal impression is that the wholesale
transfer of the traditional Law of Armed Con?ict and the thinking in mili-
tary terms does end up as a cloak of legitimacy for the cyberwars of the
future, neglecting the huge dynamics both of digital developments, and
the growing societal vulnerabilities and unpredictability of consequences.
A similar approach can also be detected in the military cyber manuals
many governments have prepared, to the extent that they are publicly
accessible.
Some countries are incorporating ofensive cyber capabilities into con-
ventional warfare strategy, foreseeing conventional military responses
even to information sabotage on the Internet, even independent of the
presence of an “armed attack” or human casualties. Others call for unlim-
ited use of cyber weapons (”exploit potential fully, maximum efect, joint
?ring process, retaliation, punishing blow“) indicating that planning also
follows military lines (”war-?ghting doctrine“) with the corresponding
analogies and thinking patterns
33
. Yet, concepts like deterrence, retalia-
tion, ”rules of engagement“ do not take account of the speci?city of cyber
attacks and, for instance, the problems of attribution and proportionality.
32
Barletta, Barletta, Tsygicho, op.cit. p.60
33
A brief list of the various “warfare” modalities has been offered by ITU Secretary
General Touré in The international Response to Cyberwar, in The Quest for Cyber peace,
op. cit, p. 86
The economic risks of cyberwar
189
Fortunately, these concepts do not stand uncontradicted. The destruction
potential and unpredictability of cyber attack options are increasingly
recognized, and have nuanced the purely military viewpoint or are juxta-
posed to it. In many military and political doctrine documents, cyberwar
prevention, prioritization of cyber defense, and cooperation of all stake-
holders are now moving to the foreground. One interesting example is
the US Department of Defense Strategy of Operating in Cyberwar of July
2011 which clearly opts for cyber defense, close cooperation between
Government agencies, Government and industry and international co-
operation. NATO’s summit documents, like the Declaration of Lisbon (20
November 2010), do not conceal defense needs, placing the emphasis,
however, on central cyber protection and the optimization of collective
cyber self-defense and internal alliance cooperation as well as interna-
tional cooperation (§ 40). It is also signi?cant that cyber attacks are not
subsumed under the attack concept of Art. 5 of the NATO Treaty, but rath-
er mentioned in the context of the consultation regime under Art. 4.
34
This indicates that the mastering of cyber attacks is in many quarters
healthily recognized as falling under a new security paradigm that places
prevention, ”resilience“, strengthening of threatened digital infrastruc-
tures and a defense ”network of partnerships“ up front.
As this article will substantiate further down, this movement to a defen-
sive mode should lead one to introduce the concept of cyber peace.
To opt for the positive side in the war-peace antinomy implies an impor-
tant change in perspective and scale of priorities, as it orients the mind
towards the bene?ts and positive potential of the Information Society and
provides a goal post to that efect, reinforcing the negative connotation
of cyberwar and related terms and calamities – delegitimizing it as it
were – and fomenting dynamic movement towards a global culture of
cyber security.
In attempting to reverse the above described belligerent perspectives,
one must be fully aware that digital infrastructures are now all-perva-
sive, and will unavoidably also be used for hostile, non-peaceful purpos-
es. The overriding objective, then, is to harness such uses and to provide
the strictest possible limits for any attack situation. As the very term
34
Another good example for this emerging instinct of prudence can be found in cu-
rrent reports on a draft US Presidential Directive embodying legal rules for the military
in defending or retaliating against a major cyber attack, fully respecting International
Law. The rules will reportedly endow the President with broad powers, including for a
preemptive strike, but, given the consequences and the attribution problems, also re-
flect an attitude of substantial restraint, ruling out “automatic” retaliation, and reserving
the prerogative of ordering strikes to the President as Commander-in-Chief. David E.
Sanger, Tom Shanker, Broad Powers Seen for Obama in Cyberstrikes, New York Times:
February 2, 2013. See also Jamie E Condliffe, Obama Has Signed a Secret Directive to
Stymie Cyber Attacks, Washington Post, Nov. 15, 2012
Henning Wegener
190
“cyberwar” is conducive to stimulating thinking in military categories, an
attempt must be made to combat this mental automatism and to substan-
tiate a plea for peaceful behaviour in cyber space.
Active and Passive Cyber Defense
If an “armed attack” is carried out by a state – or if such attack is pre-
sumed – the victim, the attacked state, has, under the UN Charter, the
right to proportionate self-defense. But if the attack in?icts damage on
private interests, e.g. an enterprise or a privately owned infrastructure
(energy, banking, aviation, etc. – for a more precise de?nition see fn. 42)?
Can the attacked then slap back? And can he do so also if there is un-
certainty as to attribution and the perpetrator is, or may be, a non-state
actor or simply an ordinary cyber criminal? Here national cyber law with
its penal sanctions and law enforcement tools comes into play. The de-
bate as to whether “active” defense is legal, even though it implies intru-
sion into systems and networks and in?icts damage, has been waged for
some time
35
.
Active defense tactics such as have been proposed could include hack-
ing back into systems to retrieve data, shutting down systems, sabotag-
ing data, infecting the attacker with malware, taking over the attacker’s
botnet, or hiring a botnet to attack the attacker. Feeding an attacker
data (so long as it is not malware) may not be illegal, but these other
active defense actions likely are. Just because actions are being taken
against a criminal attack does not make them legal in most jurisdic-
tions. Moreover, these actions can trigger lots of other laws (particu-
larly if botnets are involved), such as intellectual property, spam, fraud,
contract and tort laws. Plus, they can cause collateral damage to third
party systems
36
.
Some of the justi?cations that are being suggested for active defense
tactics include self defense, hot pursuit, and ownership of stolen data.
However, none of these justi?cations hold water; self-justice will not do,
and the right course to take instead is to make systems and nets more
resilient, and to improve (passive) cyber defenses and national and inter-
national law enforcement
37
.
35
See article of Jody R. Westby on Forbes bloghttp://www.forbes.com/sites/
jodywestby/2012/11/29/caution-active-response-to-cyber-attacks-has-high-risk/
36
Examples taken from Westby, fn. above
37
If attribution of origin of an economic attack is reasonably certain, some economic
counter measures, like discontinuation of relationships, refusal to deliver, withdrawal
of trade benefits, or – for a government – withholding of most favored nation status or
other punitive trade measures, may be legitimate. Responding to the current surge of
cyber attacks on US corporate assets and infrastructures, President Obama has recent-
ly spoken of such measures.
The economic risks of cyberwar
191
An Emerging Comprehensive Information
Security Management System
After the foregoing excursion into the territory of cyber warfare with its
ambiguities, de?cits and scary implications, the discussion shall now
once again focus on the overall threat panorama, with cyber con?ict orig-
inating from states, non-state actors – or a combination of both – ter-
rorist groups, organized crime consortia, and cyber criminals in general.
Commensurate with the near total penetration of our societies by cyber
technologies, one can now increasingly observe that international organ-
izations, governments, the economy in general, the IT industry and IT se-
curity industry, as well as civil society, the entire stakeholder community
as the accepted term goes, join forces to combat and mitigate threats in
cyberspace. In a paper of limited length, this movement, in part concert-
ed, in part autonomous, is impossible to cover. Thus, an attempt will only
be made to list and evaluate its major forms of expression. The overriding
key words are cyber defense, self-protection and resilience.
Resilience – the defensively oriented policy that maximizes the ability of
possible target systems to prevent, deter and withstand cyber attacks
and, if they occur, to minimize and mitigate their efects – is a multidi-
mensional concept and has technical, organizational, political and legal
components that need to be combined to be efective
38
. We will discuss
in turn the legal framework requirements, the requirements of self-de-
fense at enterprise and end-user level, the improvement of attack-resist-
ant technical design, the potential of standard-setting and best practic-
es, the bene?t of redundancies and societal assistance and cooperation,
international cooperation and law enforcement, the role of information
exchange, warning systems and emergency responses, and, of crucial
importance, the national and transfrontier protection of Critical Informa-
tion Infrastructures.
Creating a harmonized legal framework to
combat cyber crime and cyber con?ict
Cyberspace could not remain a lawless space, and, with the advent of ICT
legislators, has faced a double task: capturing the new technologies with-
in their national legal system, and providing a harmonized international
framework for penal prescriptions and sanctions and law enforcement, as
38
The European Commission, a trailblazer in constructing digital strategies for the
27 members of the European Union, thus unifying their digital policies and defense, is
using the “resilience” concept as an overriding finality, for instance by creating – throu-
gh ENISA – a “European Public Private Partnership for Resilience” (EP3R), and placing
its recent draft Cybersecurity Strategy of the EU in a major way under the plank “Achie-
ving cyber resilience”.
Henning Wegener
192
cyber attacks can take their origins in any part of the globe. Most industri-
alized countries have now cyber laws and cybercrime laws, many of them
very adequate, but signi?cant variances in de?ning what constitutes a cyber
ofense, in detecting and identifying cyber crime, and in the applicable pro-
cedural provisions have until recently signi?cantly hindered cybercriminal
investigation. The Council of Europe Convention of Cybercrime
39
(Budapest
Convention, signed in 2001 and entered into force in 2004) has brought a
major advance in the harmonization of global cybercrime laws, and I join
Professor González Cussac in his praise of this instrument; I also agree with
him that new digital developments and attack mode will make a revision
of the text necessary over time, however valuable it is at this moment
40
.
Yet, the Convention, as of this writing, has only been signed and rati?ed by
39 countries, with 10 rati?cations pending. Signi?cantly absent are Russia,
China, as so often Israel, and most third world countries, presumably reti-
cent to adopt a document of European origin. The ITU Toolkit for Cybercrime
Legislation has been developed as an alternative, with proposed legislative
language that is harmonized with the Convention and cybercrime laws in
industrialized nations. Broader use of these texts, or adopting compara-
ble autonomous language by countries not yet party to the Convention, will
hopefully soon advance the harmonization process further. This is time-crit-
ical. The Convention, of course, has to be translated into national legislation
by countries ratifying the international legal commitments..
Self-Protection
Cyber defense begins at home or at enterprise level. Among the obvious
obligations of the Chief Information Ofcer should be the introduction of
state-of-the art ?rewall, antivirus and incident information technology,
encryption of con?dential information, access control for premises and
digital equipment, including a rigorous and diferentiated password man-
agement (“need to know”) and other sophisticated authentication tech-
niques. If BYOD is permitted, rigorous controls should cover the brought-
in equipment. Vigilance is especially required as regards the SCADA
systems of critical infrastructure installations, as these are particularly
vulnerable to state, non-state or terrorist attacks with a military or other-
wise disruptive purpose. This should be obvious, but experience demon-
strates that theft of con?dential information, both in enterprises and
governmental agencies, is predominantly due to negligent insiders. More
than 9 out of 10 breaches would have been prevented if the organizations
had followed data protection and information security best practices
41
.
39
www.conventions.coe.int
40
Estrategias legales frente a las ciberamenazas, Cuadernos de Estrategia nº 149, op.
cit., p. 116
41
Figures from ENISA
The economic risks of cyberwar
193
One of three top causes of data breach is physical theft or loss of devices.
Also, a report from German industry shows that only a small percentage
of e-mails with highly sensitive information, like industrial design blue-
prints, are encrypted. There is a systematic lack of encryption on mobile
company devices. In many cases, no provision is made for redundancies
that could, in case of attack, conserve or rapidly re-establish functionality
of systems or connections.
Designing for Security
One important loophole for attackers almost from the inception has been
that hardware and software designers, focusing primarily on design ben-
e?ts arising from technical advances for performance, have given less
interest and efort to information security and privacy. Also, building in
security from the outset may entail additional cost reducing pro?t mar-
gins. Traditionally, there has been a gap between the production and the
security industries, helped by the lack of awareness of end-users of in-
formation security and privacy risks inherent in their equipment; for a
long time, there has been incongruence between factual and perceived
security. Many smaller enterprises may not have the resources or profes-
sion skills set to design the means of protection themselves. These gaps
are now increasingly ?lled by a more security-conscious industry, higher
end-user awareness, closer cooperation and even common ventures of
the various stakeholders (see, for instance the recent acquisition of the
important IT Security company McAfee by Intel).
Also it would be wrong not to give credit to major industry alliances
formed to promote the security performance of hardware, software and
net architecture, collective exercises that started mostly in the nineties
of the last century. Most prominent is the Trusted Computing Group with
more than 100 members, contributors or adopters from industry. Its
Trusted Platform Module (TPM) has been standardized by ISO/IEC
42
.
Yet, given the threat landscape, the obligation of the hardware and soft-
ware industry to “design for security” remains permanent, and there is
also a permanent responsibility for public and private institutions and for
countries to establish security procurement and certi?cation policies and
standards
43
. Collective eforts to securize SCADA system design would
42
www.trustedcomputinggroup.org. The TPM is used in the operating systems of
most major providers. Trusted Computing does, however, face severe criticism from
the free software community on the ground that it produces customer lock-in.
43
The ITU in its Global Security Agenda is committed to the “Development of strate-
gies for the creation of globally accepted minimum security criteria and accreditation
schemes for hardware and software applications and systems”. See also the chapter
Designing for Security in Information Security in the Context of the Digital Divide, Recom-
mendations submitted to the World Summit on the Information Society (November
Henning Wegener
194
appear particularly useful. All this is based on the insight that there is still
a lack of design and analysis methods, scienti?cally proven, to master the
enormous complexities of future interconnected digital systems, espe-
cially regarding safety, reliability, functioning and security. The IT security
industry deserves high marks for keeping abreast, at a very professional
level, of the challenges it increasingly has to confront; the security com-
panies run a rapidly expanding and highly demanding and competitive
multi-billion dollar business.
Standard-Setting and Best Practices
Government action and self-organization by industry have created a
universe of technical and operational standards to secure IT structures.
Many of these are voluntary, but a system of certi?cations provides in-
centives to adopt them with public visibility. Enterprises that do not vie
for excellence in this area, and consequently sufer attacks and data
breaches, not only lose money, but also reputation and clients. The most
important standards for the management of IT technology, of practical-
ly global applicability, have been elaborated by ISO/IEL
44
in the series
27.000 and 13.335, for the aforementioned Trusted Platform Module
in norms 11889-1 to 11889-4 on information technology (2009). In the
USA the norm-setting function is entrusted to the American National
Standards Institute ANSI. For years, the community of users, develop-
ers and vendors of Internet technology have joined in the Internet Engi-
neering Task Force (associated with the Internet Society) to develop and
promote standards for the Internet infrastructure, routing, transport
security. Then, on the special problems of distributed computing, there
is the Open Grid Forum for standard-setting in grid computing and grid
architecture.
The International Information Systems Security Certi?cation Consortium
(ISC), described as “the world’s largest IT security organization” (“securi-
ty transcends technology”), promotes the standardization idea by award-
ing certi?cates for excellence in secure IT operations (Certi?ed Informa-
tion Security Professional, CISSP); the areas eligible for certi?cates also
include software development, security architecture and design; 85,285
members from 143 countries currently hold the certi?cate. The issuers
of certi?cates beyond the traditional norm-setting agencies – institutes,
associations, individual enterprises, intergovernmental agencies – are
many, obviously re?ecting a need for recognition of excellence and con-
2005) by the Permanent Panel on Information Security of the World Federation of Scien-
tists, Doc. WSIS-05/TUNIS/CONTR/01 at www.itu.int
44
www.iso.org, www.iec.ch. The Spanish member organization of both is AENOR,
which is also setting standards of its own (in this context see UNE 71502) and provides
certification.
The economic risks of cyberwar
195
?dence-building. An indicative compilation on the Wikipedia web page of
CISSP lists 70 diferent certi?cations
45
.
Protection of Critical Infrastructures
CIIP, the protection of critical information infrastructures
46
, has for many
years been at the center of attention of information security policies and
strategies to enhance resilience, both on the part of Governments and
international bodies, and of the operators of these infrastructures them-
selves. Indeed, in a “cyberwar” context , it would be the centerpiece of
defensive strategies and of any efort to optimize system resilience. Giv-
en their vital importance for the functioning of society, the increasing vul-
nerability of infrastructures in an interconnected and Internet-dependent
environment, and the possible cascade efects of their failure, this prior-
ity is understandable. Critical infrastructures are ?rst in the line of ?re of
military attack, terrorists, and crime consortia – organized crime – in the
latter case as a basis for blackmail.
In the US, presidential directives since the time of President Clinton have
ordered the necessary protective measures. Securing critical infrastruc-
tures and information systems is an essential part of the brief of the
Department of Homeland Security, generously endowed in each annual
budget. CIIP policies ?gure prominently on the DHS home page www.dhs.
gov. Capping intense previous eforts, the US President on February 13,
2013 signed an Executive Order (EO) on Improving Critical Infrastructure Cy-
bersecurity and a Presidential Policy Directive (PPD) on Critical Infrastruc-
ture Security and Resilience, which provide instructive reading. Another
major actor is the European Commission, assisted by its net security
agency ENISA. Mindful of the still existing diferences in systems and lev-
els of protection in the 27 member countries, the EU has been working
on CIIP and the harmonization of protection standards for some time. In
2009, the Commission adopted an Action Plan and a Communication on
45
The Revista Seguridad en Informática y Comunicaciones, www.revistasic.com, an ex-
cellent publication, and certainly the best journal in Spain in the information security
field, helps the non-professional reader to keep track of these various distinctions as
they are earned by Spanish enterprises. The editor of this journal, SIC, also organizes
periodic cybersecurity conferences in Spain.
46
These infrastructures are generally understood to include, in the broadest sense,
electricity generation, transmission and distribution, gas production, transport and dis-
tribution, oil and oil products production, transport and distribution, telecommunication,
water supply (drinking water, waste water/sewage, stemming of surface water (e.g.
dikes and sluices), agriculture, food production and distribution, heating (e.g. natural
gas, fuel oil, public health (hospitals, ambulance transportation systems (fuel supply,
railway network, airports, harbors, inland shipping); financial services (banking, clea-
ring), security services (police, military). The energy component is often considered the
most vulnerable part.
Henning Wegener
196
CIIP
47
and has organized a EU Ministerial Conference on CIIP
48
. The Euro-
pean Public- Private Partnership for Resilience has already been referred
to. ENISA has been organizing several European Cybersecurity Exercis-
es with broad government and private sector participation, the latest in
2012
49
, aiming at strengthening the cyber incident management commu-
nity. On February 7, 2013, the Commission published, in a Joint Communi-
cation with the other major EU bodies, the Cyber Strategy of the European
Union which, in a broad sweep, intends to set common minimum require-
ments at the national level for each member of Network and Information
Systems (NIS), touching very much on resilience and infrastructure pro-
tection
50
. The European Parliament is also active; it held its latest meeting
on CIIP on February 6, 2013.
For more than a decade the International Telecommunication Union
(ITU) has been dealing with Critical Infrastructures Protection in a global
perspective, lately in reference to its Global Cybersecurity Agenda, al-
though no uniform regulatory framework has as yet emerged. Yet there
is a wealth of studies, publications and conference reports, easily to be
found at the ITU web page and that of its executive arm, the International
Multilateral Partnership Against Cyber Threats (IMPACT)
51
. The foregoing
survey is no more than indicative; supplementing it with an overview over
national initiatives would exceed the possibilities here. Yet many, if not
most, countries participating in the cyber world deal with CIIP in their
national organs, complementing international eforts. The German Fed-
eral Information Security Agency, for instance, runs a specialized Internet
Platform for CIIP and sponsors a series of publications
52
Resilience in Cloud Computing and Mobile Computing
The rapid advance of cloud computing in huge data centers, and the mas-
sive migration to mobile, as described in earlier sections of this article,
make it useful to analyze the resistance to attack of both these new ven-
ues of data management and cyber operations, and to point to novelties
in this respect.
Cloud computing is a new way of delivering computing resources, not a
new technology. The concentration of data and services delivery, scalable
to demand, ofers huge economic bene?ts and accordingly has attracted
47
COM/2009/149, endorsed by the European Council in Resolution 2009/C 321/01. See
also the Directive 2008/114/CE on the Protection of European Critical Infrastructures
48
www.tallinnciipeu.eu/?id=conference
49
For key findings, see www.enisa.europa.eu
50
JOIN (2013 1 final). The Strategy is accompanied by a draft directive on measures to
ensure a high common level of cyber protection
51
www.itu.int; www.itu.int/ITU-D/cyb/cybersecurity/impact.html
52
www.bsi.bund.de, for the CIIP platform see www.kritis.bund.dE
The economic risks of cyberwar
197
massive global investment. The worldwide forecast for cloud services in
2013 indicates a likely volume of $44.2 bn. As ENISA has tangibly ex-
pressed it, the cloud’s economies of scale and ?exibility are both a friend
and a foe from a security point of view. The massive concentrations of
resources and data present a more attractive target to attackers, but
cloud-based defenses can be more robust, scalable and cost-efective.
Attacks on data centers of this dimension ofer a military or terrorist at-
tack important new opportunities, including tampering with the energy
supply entailing massive loss of data (if energy supply redundancies are
overcome), physical destruction, or cyber intrusion into the data bases.
Clients’ fears are heightened as data masses are moving seemingly ar-
bitrarily and untraceably from rack to rack, as supervisory personnel be-
comes anonymous, and as con?dence in the integrity and privacy of the
data becomes harder to maintain. The risks in cloud computing are major,
and provide a major security challenge.
It is thus not surprising that cloud security has become a central theme
of the current cybersecurity debate. In the very competitive cloud market,
suppliers and security companies outdo one another in con?dence-build-
ing. They can indeed show that there is also a premium in cloud security
management. All kinds of security measures are cheaper when imple-
mented on a larger scale; the same amount of investment in security buys
better protection (cheaper physical perimeterisation and access control,
better scaling of resources, timeliness of response, more efective threat
management, etc.). Clients – governments among them – make their
economic choices in good measure on the resilience of security servic-
es ofered, reputation of con?dentiality, and transparency of the internal
center procedures. Lately, one important diferentiating factor for Euro-
pean enterprises has been that they judge the legal data protection in
Europe better than in the US, given the more intrusive data policy of the
Department for Homeland Security.
Cloud security currently appears to be everybody’s business. The refer-
ences of this article to current analytical work and recommendations on
the subject are therefore limited to ENISA’s recent studies, “Cloud Com-
puting: bene?ts, risks and recommendations for information security” –
mentioned before – and “Critical Cloud Computing: A CIIP perspective on
cloud computing” (14 February 2013), both at www.enisa.europa.eu.
Further up, ?gures have been cited on the breath-taking growth of the
number of mobile digital devices, mobile services and applications, and
the consequences of the migration to mobile technologies. It had also
been pointed out that the threat to mobile computing and communication
is growing out of proportion, making cyber attacks to mobile one of the
dominant features of the threat landscape. Although exceedingly vulner-
able to cyber attacks, mobile systems have long gone virtually unpro-
tected. Only at this juncture, new anti-attack software for most mobile
Henning Wegener
198
operative systems appears on the market. But the future may well lie
not in software downloads to individual devices, but in central vigilance
of mobile customers from the cloud, such as an alliance between Voda-
fone and BAE Systems that is presently being introduced into the market
via a 5 year strategic partnership
53
. The promise of this cloud vigilance
approach is that not only smartphones, but also tablets, and eventual-
ly smart RFIDs, the controlling systems in smart factories and other cy-
ber-physical systems could be efectively protected.
National and International Cooperation in Cybersecurity
Given the seamless and global nature of the digital net structures, broad
national and international cooperation of the entire stakeholder commu-
nity in combating and mitigating the consequences of cyber con?ict is
a matter of indubitable necessity – and this necessity is globally recog-
nized. The cooperation patterns that in part already exist, and need to
be enhanced, include efective information exchanges including incident
reporting, mutual assistance, also to activate redundancies, organized
incident responses, warning systems, contact points within and between
nations, improved cooperation on law enforcement – and the organiza-
tional prerequisites to make all these desiderata function.
These measures – and other, related ones – appear quite straightforward
and their usefulness within a strategy of preventing, defending against,
sanctioning and mitigating incidents of cyber con?ict is fairly self-evident.
It is thus not surprising that the categories and numbers of stakeholders
involved in them are huge and multifarious. We are dealing here with on-
going and expanding processes, very hard to capture in a brief analysis.
Sufce it to mention a few recent developments to indicate tendencies.
Entrusted by the World Summit on the Information Society with coordi-
nating cyber security responses, the ITU has worked out a Global Cyber-
security Agenda that promotes many of the cooperation tasks globally,
culminating in “a framework of a global multi-stakeholder strategy for
international cooperation, dialogue and cooperation”. The Agenda has dy-
namically pursued its goals, as can be gathered from the ITU web pages.
One important element of cooperation strategy is time-critical informa-
tion across borders. The key mechanisms is the “24/7” approach, the per-
manent availability of contact points for cyber incident management. The
?rst international plan originated with the G8 in 1998. The group created
a 24-hour network of law enforcement experts among its members, but
other governments joined. In the EU, the ?rst 24/7 program came with
the Council Framework Decision on attacks against information systems
53
BAE and Vodafone in cyber safety deal, Financial Times, and news services, 18 Fe-
bruary, 2013
The economic risks of cyberwar
199
of 2003. A more systematic approach is part of the (Budapest) Convention
on Cyber Crime, which, apart from harmonizing criminal substantive law
of cybercrime, has provided for domestic criminal procedural law powers
necessary to investigate and prosecute such ofenses, but has also set
up a fast and efective regime of international cooperation and mutual
assistance (art. 23 et.seq. of the Convention) for “tracking and tracing”
that includes rules on the expedited preservation of stored computer and
trafc data, etc. In art. 35 a permanent 24/7 network with appropriate
equipment and trained personnel is set up in order to ensure the avail-
ability of immediate assistance for purposes of investigation and prose-
cution, including the collection of evidence and the locating of suspects.
Many governments, even beyond existing treaty obligations, participate
in the 24/7 set-up.
An element of growing importance in the incident reporting, mutual
assistance, early warning, risk information etc. area are the Computer
Emergency Response Teams (CERT), also labelled Computer Security In-
cident Response Teams (CSIRT). Pioneered by Carnegie Mellon University
with funding from the US Department of Defense in 1988, the CERT is
now a network of global dimension. In many countries there is a central
government CERT, mostly charged with the coordination of other national
CERTs and speci?cally with securing government digital infrastructures.
CERTs are teams of IT experts that follow and process information on
computer incidents, analyze, advise, coordinate, lend assistance in com-
batting cyber attacks and in restitution, and often issue news bulletins
and warnings on new threats. Worldwide there are presently more than
250 organizations that use this name and deal with cybersecurity re-
sponses. In many countries industry and academic institutes have taken
the initiative to establish CERTs. In the US, the Department of Homeland
Security has established the US CERT. It coordinates CERT/CC, the in part
federally funded US CERT community led by Carnegie Mellon. In Germany,
a similar task is ful?lled by the BSI with its CERT-Bund, in Spain with the
Centro de Respuesta a Incidentes de Seguridad TIC by INTECO, an organ
of the Ministry of Industry and its executive ofce red.es. The ITU, as part
of its Global Cybersecurity Agenda, assists developing countries in creat-
ing national CERTs. In September 2012, the EU set up a CERT-EU, at ?rst
for the protection of its own entities, but also to liaise with national and
government CERTs in the EU area. At the same time, in its Digital Agen-
da for Europe of 2010 the EU called on members to establish their own
national CERTs, a development to be completed by 2012, thus paving the
way for an EU-wide network of efective incident responses.
In a related move, the EU has, in February of 2013, created a European
Cyber Crime Centre (EC3) at EUROPOL that is to focus speci?cally on or-
ganized groups aiming at large criminal pro?ts, and their hostile impact
on infrastructures with enhanced investigative powers.
Henning Wegener
200
In the future it is necessary that the CERT movement be universalized,
and that CERTs become more operative and interconnected, but they cer-
tainly form a major defensive weapon against cyber attack and to har-
ness cyber con?ict
54
.
At the time of this writing, one does not only observe a surge of cyber
attacks on governments and industry, mostly in the APT vein, but also
a growing awareness that all stakeholders must become more active
and forthcoming in information exchange and sharing of cyber defense
resources. One prominent example of such broad industry self-help en-
deavors is the collective cybersecurity alliance pioneered in Europe by
René Obermann, the CEO of Deutsche Telekom, who has called for more
voluntary incident reporting and transparency
55
A Culture of Cybersecurity: Norms of Behavior for the Cyber Age
So far, only some broad legal aspects have been dwelt upon: International
Law as it ambiguously de?nes the limits to cyber warfare and “armed
attack”, and the harmonization of criminal cyber law in its national and
crossfrontier dimension. Not mentioned, but valid in most countries, is, of
course, a civil law regime that governs torts and damages, as well as the
pertinent International Private Law.
But all that is far from ?lling the requirements of a functioning cy-
berspace regime able to combat and withstand cyber con?ict. Legally
speaking, the new area of cyberspace was initially a void, in need of
a comprehensive framework of norms not only for states, but for all
stakeholders. The task was to develop over time a set of norms for con-
vivial behavior – of a culture of cyberspace and cybersecurity, including
a comprehensive legal framework to manage and control the all-per-
vasive, in?nite potential of digital technologies. Consequently, there is
as yet little or no ability to efectively control by law the escalation of
cyber con?ict and to guarantee the peaceful use of cyberspace – and
as we have seen no unambiguous understanding of how the existing
norms of international law would apply. A dangerous, precarious state
of afairs indeed. The cybersecurity group within which I have been ac-
tive, the World Federation of Scientists, has early on ambitiously called
for a UN-led efort to create a universal and comprehensive Law of
54
CERTs since 1990 are coordinating and exchanging information in an informal in-
ternational organization FIRST; there is room for more effective coordination. Already in
2004 this author has recommend that the CERT approach should not only be universal,
but should, beyond individual information processing and assistance, develop a sys-
tematic lessons-learnt approach, see Henning Wegener, Learning Lessons from Cyber
Attacks: Broadening the CERT Framework, at www.unibw.de/infosecur
55
See, for instance, Obermann, René, Uniting for Cyberdefense, New York Times op.ed.
page, February 21, 2013
The economic risks of cyberwar
201
Cyberspace
56
. Yet, for many reasons a one-shot cyber treaty has not
proved to be a realistic option. Fortunately, collective thinking about the
necessary processes of cyber strategy has notably evolved. To make a
long story short, a new age of cyber diplomacy has begun around 2008
with a manifestly emerging international consensus to concentrate ef-
forts on an alternative to formal treaty-making: the elaboration of con-
?dence-building measures or codes of conduct as normative tools. We
may be witnessing a turning point in cybersecurity diplomacy.
The prevailing view now is that CBMs and codes of conduct open a win-
dow of opportunity to make real progress towards common de?nitions
and behavioral standards. CBMs have the potential to reduce threat, en-
hance transparency, make State behavior predictable, are ?exible, volun-
tary, and ofer a variable geometry in terms of participants – it is possible
to include non-State actors – and follow-up: contrary to coherent trea-
ty-making, participants are free to adopt partial solutions and enact them
without delay and independently or with other like-minded stake-hold-
ers. CBMs which States embrace do not require rati?cation; they invite
emulation, and are at most – and at best – politically binding. They are
thus uniquely suited to foment international consensus-building on an
evolutionary scale. A well negotiated package of CBMs with a critical
mass of participants may set in motion a process of further incremental
change and heightened sensitivity. Clari?cation of behavioral standards
may provide an incentive for going for more.
There are currently many parallel international activities that jointly con-
tribute to consensus-building. Sufce it to cite some. A UN Group of Ex-
perts has been instituted in 2011 with the concrete mandate to de?ne “co-
operative measures … including norms, rules of principles of responsible
behaviour of States and con?dence-building measures with regard to in-
formation space”
57
and will report out in 2013. Governments have provid-
ed numerous inputs to the Group at the request of the UN Secretary Gen-
eral
58
. Their views have strongly supported the idea of identifying CBMs.
In a short time, ?urries of other national statements to the same efect
have surfaced: from Australia, the UK, Germany, at least by implication
56
Toward a Universal Order of Cyber Space: Managing the Threat from Cybercrime to Cy-
berwar, Document WSIS-03/GENEVA/CONTR/6-E,, www.itu.int/dms_pub/itu-s/md/.../
S03-WSIS-C-0006!!PDF-E.pdf,, also at www.unibw.de/infosecur. See also Kamal, Ah-
mad, The Law of Cyber Space: An Invitation to the Table of Negotiations, UNITAR, Geneva
2005, www.in.int/kamal/the_law_of_cyber_space. At the United Nations, Russia has, as
of 1998, in a series of resolutions advocated a Cyber Treaty, proposing to some extent
conflictive and probable unimplementable contents, see Res. A/53/70 up to A/65/41.
These resolutions had, however, the undoubted merit of keeping the argument alive
that a major universal normative effort was required.
57
A/Res/66/24 of 13 December 2011
58
A/66/152 and A/66/152 Add.1
Henning Wegener
202
the US, among others
59
. An authoritative academic voice from India has
joined the concert
60
. China, Russia, Tajikistan and Uzbekistan, re?ecting
work within the Shanghai Cooperation Council, submitted to the UN Sec-
retary General, in September 2011, a draft international code of conduct
for information security
61
. Although the document, by virtue of its choice
of authors, did not seem to display a sufcient ?avor of political correct-
ness, the catalogue of commitments, ofered for voluntary subscription by
states, should not be disdained. In the meantime, member countries have
organized prestigious international conferences, where the CBM idea has
been ventilated, and more or less detailed catalogues of CBM contents
or contributions to it have ?gured in the conference summaries (London,
Berlin, Beijing, Vienna, Budapest). Apart from the ongoing UN exercise,
regional organizations are also getting into the act. The ASEAN Regional
Forum with its representative membership and participants, 27 nations
going much beyond Asia, has zoomed in fully on the CBM theme
62
. The
OSCE, mindful of its earlier experience with East-West CBMs, is intensive-
ly working on a draft code of conduct (see “A Comprehensive Approach
to Cyber Security”)
63
and APEC
64
, as well as the Shanghai Cooperation
Organization
65
are also working on regional arrangements. The Council of
Europe, famous for its contribution to a world penal law on cyber crime
through the Convention on Cybercrime, has adopted 10 Principles on In-
ternet Governance
66
. UNIDIR helps to provide the academic underpinning
59
See previous footnote and the positive utterances at the cyber session of the Sha-
ngri-La Dialogue, IISS news July 2012. For Germany, see also “Challenges in Cyber Se-
curity: Risks, Strategies and Conference Building, Conference Report, December 13 and
14, 2011, Berlin,http://www.auswaertiges-amt.de/DE/Aussenpolitik/Friedenspolitik/
Abruestung/Projekte/ Cybersicherheit.html. The German Federal Foreign Office, in ad-
dition, supports a 2012 UNIDIR project on International Cybersecurity and CBMs
60
Gupta, Arvind, CBMs in Cyber Space: What Should Be India’s Approach?, IDSA, Ins-
titute for Defence Studies and Analysis, June 27, 2012
61
A/66/359. See also the Agreement between the Governments of the Member States
of the Shanghai Cooperation Organization on Cooperation in the Field of International
Information Security, signed in Yekaterinburg on 15 June 2009
62
Secretary of State Clinton at the Pnom Penh ASEAN meeting on July 12, 2012,
“This Forum includes some of the world’s largest cyber actors. So this is an appro-
priate setting for a sustained, meaningful dialogue on cyberspace issues. In the years
ahead, we should work together in support of responsible norms and standards, and
pursue practical measures to build confidence and reduce risk”. The ARF is organizing
a Seminar on Confidence-Building Measures in Cyberspace in Seoul next September. In
May of this year ASEAN defense ministers called for an ASEAN “master plan of security
connectivity”.
63
www.osce.org
64
See the APEC TEL Strategic Action Plan 2010-2015, www.apec.org
65
No home page in English of the SCO could be detected. News is best gathered from
the web pages of the member countries.
66
www..coe.int
The economic risks of cyberwar
203
for these endeavors
67
. ONGs in the cyber area, as well as individual re-
searchers, ofer catalogues of rules of conduct of their own. These cat-
alogues can obviously not be reproduced or analyzed here but provide
efective tools for spurring the debate and facilitating CBM negotiations
68
.
It is to be hoped that the present dynamics in moving to negotiations on
such con?dence-building measures and codes of conduct be maintained,
and that agreement on an appropriate negotiating venue is reached soon.
In order to provide the reader with at least some ideas of content on the
current normative endeavors, a brief reference to a short list published
by the ITU Secretary General is included:
1. Every government should commit itself to giving its people access
to communications.
2. Every government will commit itself to protecting its people in
cyberspace.
3. Every country will commit itself not to harbor terrorists/criminals
in its own territories.
4. Every country should commit itself not to be the ?rst to launch a
cyber attack on other countries.
5. Every country must commit itself to collaborate with each other
within an international framework of co-operation to ensure that
there is peace
For the ITU this concise list constitutes the essence of cyber stability and
an important part of cyber peace. In the same direction goes the Erice
Declaration on Principles for Cyber Stability and Cyber Peace, (2009) ema-
nating from the World Federation of Scientists, whose list of tenets cul-
minates in the plea “to avoid the use of cyberspace for con?ict”. Cyberwar
can be avoided, and it should not be considered a legitimate instrument of
military con?ict. That would go a long way to alleviating the ambivalence
of cyber technology, and would sensibly reduce economic preoccupations
and economic risks. Cyber peace is the better choice
69
.
67
UNIDIR, www.unidir.org, organizes conferences and participates in others. Particu-
larly relevant the 2012 conference on The role of Confidence-Building Measures in Assu-
ring Cyber Stability.
68
For a tentative listing of principles to be embodied in a global code of conduct,
see Henning Wegener, La ‘ciberguerra’ se puede evitar, Política Exterior, Madrid, No. 146,
March/April 2012, p140; from the same author, Die Diplomatie des Cyber-Friedens, 2011
at www.unibw.de/infosecur, and also Regulating Cyber Behavior: Some Initial Reflections
on Codes of Conduct and Confidence-Building Measures, August 2012, The Science and
Culture Series, World Scientific, Singapore 2013 (in press).
69
See also Henning Wegener, A Concept of Cyber Peace in The Quest for Cyber Peace,
op. cit., 2011. In the same publication, the Erice Declaration is also reprinted.
205
Composition of the working group
Coordinator: Mr. Eduardo Olier Arenas
President of the Institute Choiseul Spain
Director of the Department of Geoeconomics at San
Pablo CEU University
Member Secretary: Ms. María José Caro Bejarano
Analyst at the Spanish Institute of Strategic Studies
Members: Mr. Antonio M. Díaz Fernández
Professor of Political Science and Administration
Faculty of Law, University of Cadiz
Mr. Christian Harbulot
Director of l’École de Guerre Économique in Paris.
Associate Director of Spin Partners
Mr. José L. González Cussac
Professor of Criminal Law, Faculty of Law,
University of Valencia
Mr. Fernando Palop Marro
Co-Founder of Triz XXI.
Associate Professor at the Politécnica University of
Valencia.
Mr. Henning Wegener
Former Ambassador of Germany in Spain.
President of the Permanent Observatory for Cyberse-
curity of the World Federation of Scientists
207
Strategic Dossier
01 La industria alimentaria civil como administradora de las FAS y
su capacidad de defensa estratégica
02 La ingeniería militar de España ante el reto de la investigación y
el desarrollo en la defensa nacional
03 La industria española de interés para la defensa ante la entrada
en vigor del Acta Única
04 Túnez: su realidad y su influencia en el entorno internacional
05 La Unión Europea Occidental (UEO) (1955-1988)
06 Estrategia regional en el Mediterráneo Occidental
07 Los transportes en la raya de Portugal
08 Estado actual y evaluación económica del triángulo España-Por-
tugal-Marruecos
09 Perestroika y nacionalismos periféricos en la Unión Soviética
10 El escenario espacial en la batalla del año 2000 (I)
11 La gestión de los programas de tecnologías avanzadas
12 El escenario espacial en la batalla del año 2000 (II)
13 Cobertura de la demanda tecnológica derivada de las necesida-
des de la defensa nacional
14 Ideas y tendencias en la economía internacional y española
Strategic Dossiers Collection Title
208
15 Identidad y solidaridad nacional
16 Implicaciones económicas del Acta Única 1992
17 Investigación de fenómenos belígenos: método analítico factorial
18 Las telecomunicaciones en Europa, en la década de los años 90
19 La profesión militar desde la perspectiva social y ética
20 El equilibrio de fuerzas en el espacio sur europeo y mediterráneo
21 Efectos económicos de la unificación alemana y sus implicacio-
nes estratégicas
22 La política española de armamento ante la nueva situación inter-
nacional
23 Estrategia finisecular española: México y Centroamérica
24 La Ley Reguladora del Régimen del Personal Militar Profesional
(cuatro cuestiones concretas)
25 Consecuencias de la reducción de los arsenales militares nego-
ciados en Viena, 1989. Amenaza no compartida
26 Estrategia en el área iberoamericana del Atlántico Sur
27 El Espacio Económico Europeo. Fin de la Guerra Fría
28 Sistemas ofensivos y defensivos del espacio (I)
29 Sugerencias a la Ley de Ordenación de las Telecomunicaciones
(LOT)
30 La configuración de Europa en el umbral del siglo XXI
31 Estudio de «inteligencia operacional»
32 Cambios y evolución de los hábitos alimenticios de la población
española
33 Repercusiones en la estrategia naval española de aceptarse las
propuestas del Este en la CSBM, dentro del proceso de la CSCE
34 La energía y el medio ambiente
35 Influencia de las economías de los países mediterráneos del
norte de África en sus respectivas políticas defensa
36 La evolución de la seguridad europea en la década de los 90
37 Análisis crítico de una bibliografía básica de sociología militar en Es-
paña. 1980-1990
38 Recensiones de diversos libros de autores españoles, editados
entre 1980-1990, relacionados con temas de las Fuerzas Armadas
39 Las fronteras del mundo hispánico
40 Los transportes y la barrera pirenaica
41 Estructura tecnológica e industrial de defensa, ante la evolución
estratégica del fin del siglo XX
Strategic Dossiers Collection Title
209
42 Las expectativas de la I+D de defensa en el nuevo marco estra-
tégico
43 Costes de un ejército profesional de reclutamiento voluntario.
Estudio sobre el Ejército profesional del Reino Unido y (III)
44 Sistemas ofensivos y defensivos del espacio (II)
45 Desequilibrios militares en el Mediterráneo Occidental
46 Seguimiento comparativo del presupuesto de gastos en la déca-
da 1982-1991 y su relación con el de Defensa
47 Factores de riesgo en el área mediterránea
48 Las Fuerzas Armadas en los procesos iberoamericanos de cam-
bio democrático (1980-1990)
49 Factores de la estructura de seguridad europea
50 Algunos aspectos del régimen jurídico-económico de las FAS
51 Los transportes combinados
52 Presente y futuro de la conciencia nacional
53 Las corrientes fundamentalistas en el Magreb y su influencia en
la política de defensa
54 Evolución y cambio del este europeo
55 Iberoamérica desde su propio sur. (La extensión del Acuerdo de
Libre Comercio a Sudamérica)
56 La función de las Fuerzas Armadas ante el panorama internacio-
nal de conflictos
57 Simulación en las Fuerzas Armadas españolas, presente y futuro
58 La sociedad y la defensa civil
59 Aportación de España en las cumbres iberoamericanas: Guadala-
jara 1991-Madrid 1992
60 Presente y futuro de la política de armamentos y la I+D en España
61 El Consejo de Seguridad y la crisis de los países del Este
62 La economía de la defensa ante las vicisitudes actuales de las eco-
nomías autonómicas
63 Los grandes maestros de la estrategia nuclear y espacial
64 Gasto militar y crecimiento económico. Aproximación al caso es-
pañol
65 El futuro de la Comunidad Iberoamericana después del V Cente-
nario
66 Los estudios estratégicos en España
67 Tecnologías de doble uso en la industria de la defensa
68 Aportación sociológica de la sociedad española a la defensa na-
cional
Strategic Dossiers Collection Title
210
69 Análisis factorial de las causas que originan conflictos bélicos
70 Las conversaciones internacionales Norte-Sur sobre los proble-
mas del Mediterráneo Occidental
71 Integración de la red ferroviaria de la península ibérica en el resto
de la red europea
72 El equilibrio aeronaval en el área mediterránea. Zonas de irra-
diación de poder
73 Evolución del conflicto de Bosnia (1992-1993)
74 El entorno internacional de la Comunidad Iberoamericana
75 Gasto militar e industrialización
76 Obtención de los medios de defensa ante el entorno cambiante
77 La Política Exterior y de Seguridad Común (PESC) de la Unión Eu-
ropea (UE)
78 La red de carreteras en la penísula ibérica, conexión con el resto de
Europa mediante un sistema integrado de transportes
79 El derecho de intervención en los conflictos
80 Dependencias y vulnerabilidades de la economía española: su
relación con la defensa nacional
81 La cooperación europea en las empresas de interés de la defensa
82 Los cascos azules en el conflicto de la ex-Yugoslavia
83 El sistema nacional de transportes en el escenario europeo al
inicio del siglo XXI
84 El embargo y el bloqueo como formas de actuación de la comuni-
dad internacional en los conflictos
85 La Política Exterior y de Seguridad Común (PESC) para Europa
en el marco del Tratado de no Proliferación de Armas Nucleares
(TNP)
86 Estrategia y futuro: la paz y seguridad en la Comunidad Ibe-
roamericana
87 Sistema de información para la gestión de los transportes
88 El mar en la defensa económica de España
89 Fuerzas Armadas y sociedad civil. Conflicto de valores
90 Participación española en las fuerzas multinacionales
91 Ceuta y Melilla en las relaciones de España y Marruecos
92 Balance de las primeras cumbres iberoamericanas
93 La cooperación hispano-franco-italiana en el marco de la PESC
94 Consideraciones sobre los estatutos de las Fuerzas Armadas
en actividades internacionales
Strategic Dossiers Collection Title
211
95 La unión económica y monetaria: sus implicaciones
96 Panorama estratégico 1997/98
97 Las nuevas Españas del 98
98 Profesionalización de las Fuerzas Armadas: los problemas sociales
99 Las ideas estratégicas para el inicio del tercer milenio
100 Panorama estratégico 1998/99
100 1998/99 Strategic Panorama
101 La seguridad europea y Rusia
102 La recuperación de la memoria histórica: el nuevo modelo de
democracia en Iberoamérica y España al cabo del siglo XX
103 La economía de los países del norte de África: potencialidades y
debilidades en el momento actual
104 La profesionalización de las Fuerzas Armadas
105 Claves del pensamiento para la construcción de Europa
106 Magreb: percepción española de la estabilidad en el Mediterrá-
neo, prospectiva hacia el 2010
106-B Maghreb: percepción espagnole de la stabilité en Méditerranée,
prospective en vue de L’année 2010
107 Panorama estratégico 1999/2000
107 1999/2000 Strategic Panorama
108 Hacia un nuevo orden de seguridad en Europa
109 Iberoamérica, análisis prospectivo de las políticas de defensa en
curso
110 El concepto estratégico de la OTAN: un punto de vista español
111 Ideas sobre prevención de conflitos
112 Panorama Estratégico 2000/2001
112-B Strategic Panorama 2000/2001
113 Diálogo mediterráneo. Percepción española
113-B Le dialogue Méditerranéen. Une perception espagnole
114 Aportaciones a la relación sociedad - Fuerzas Armadas en Ibe-
roamérica
115 La paz, un orden de seguridad, de libertad y de justicia
116 El marco jurídico de las misiones de las Fuerzas Armadas en
tiempo de paz
117 Panorama Estratégico 2001/2002
117-B 2001/2002 Strategic Panorama
118 Análisis, estrategia y prospectiva de la Comunidad Iberoamericana
Strategic Dossiers Collection Title
212
119 Seguridad y defensa en los medios de comunicación social
120 Nuevos riesgos para la sociedad del futuro
121 La industria europea de defensa: presente y futuro
122 La energía en el espacio euromediterráneo
122-B L’énergie sur la scène euroméditerranéenne
123 Presente y futuro de las relaciones cívico-militares en Hispa-
noamérica
124 Nihilismo y terrorismo
125 El Mediterráneo en el nuevo entorno estratégico
125-B The Mediterranean in the New Strategic Environment
126 Valores, principios y seguridad en la comunidad iberoamericana
de naciones
127 Estudios sobre inteligencia: fundamentos para la seguridad in-
ternacional
128 Comentarios de estrategia y política militar
129 La seguridad y la defensa de la Unión Europea: retos y oportu-
nidades
130 El papel de la inteligencia ante los retos de la seguridad y defen-
sa internacional
131 Crisis locales y seguridad internacional: El caso haitiano
132 Turquía a las puertas de Europa
133 Lucha contra el terrorismo y derecho internacional
134 Seguridad y defensa en Europa. Implicaciones estratégicas
135 La seguridad de la Unión Europea: nuevos factores de crisis
136 Iberoamérica: nuevas coordenadas, nuevas oportunidades,
grandes desafíos
137 Irán, potencia emergente en Oriente Medio. Implicaciones en la
estabilidad del Mediterráno
138 La reforma del sector de seguridad: el nexo entre la seguridad,
el desarrollo y el buen gobierno
139 Security Sector Reform: the Connection between Security, Deve-
lopment and Good Governance
140 Impacto de los riesgos emergentes en la seguridad marítima
141 La inteligencia, factor clave frente al terrorismo internacional
142 Del desencuentro entre culturas a la Alianza de Civilizaciones.
Nuevas aportaciones para la seguridad en el Mediterráneo
143 El auge de Asia: implicaciones estratégicas
Strategic Dossiers Collection Title
213
144 La cooperación multilateral en el Mediterráneo: un enfoque inte-
gral de la seguridad
145 La Política Europea de Seguridad y Defensa (PESD) tras la entra-
da en vigor del Tratado de Lisboa
145 B The European Security and Defense Policy (ESDP) after the entry
into Force of the Lisbon Treaty
146 Respuesta europea y africana a los problemas de seguridad en
África
146 B European and African Response to Security Problems in Africa
147 Los actores no estatales y la seguridad internacional: su papel en
la resolución de conflictos y crisis
148 Conflictos, opinión pública y medios de comunicación. Análisis de
una compleja interacción
149 Ciberseguridad. Retos y amenazas a la seguridad nacional en el
ciberespacio
150 Seguridad, modelo energético y cambio climático
151 Las potencias emergentes hoy: hacia un nuevo orden mundial
152 Actores armados no estables: retos a la seguridad
153 Proliferacion de ADM y de tecnología avanzada
154 La defensa del futuro: innovación, tecnología e industria
154 B The Defence of the Future: Innovation, Technology and Industry
155 La Cultura de Seguridad y Defensa. Un proyecto en marcha
156 El gran Cáucaso
157 El papel de la mujer y el género en los conflictos
157 B The role of woman and gender in conflicts
158 Los desafíos de la seguridad en Iberoamérica
159 Los potenciadores del riesgo
160 La respuesta del derecho internacional a los problemas actuales
de la seguridad global
161 Seguridad alimentaria y seguridad global
161 B Food security and global security
162 La inteligencia económica en un mundo globalizado
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