Hostage Crisis: Key Implications

BMI View: The hostage crisis in eastern Algeria is a blow to the country ' s investment appeal, and demonstrates that the Sahel region is an increasingly important front in the war against Islamist militancy.

As of 12:30 GMT on Friday January 18, 2013, confusion surrounded the fate of hostages being held by the ' Battalion of Blood ' Islamist militant group at the natural gas plant in In Amenas, eastern Algeria, after Algerian troops stormed the complex the previous day. Most notably, there were conflicting reports over the number of hostages killed, and their nationalities. Several foreign governments, including those of the UK, Japan, and Norway, were s till trying to determine the fate of their citizens at the plant , but Reuters reported that at least seven foreigners were killed in the incident. Despite details being sketchy, several implications of the hostage crisis are already apparent:

Algeria ' s reputation has suffered: Clearly, the hostage crisis is very negative for Algeria ' s image as an investment destination. Algeria largely avoided the upheavals that swept across the Middle East and North Africa (MENA) in 2011, and this may have given the impression that the country was a relative safe haven. However, the hostage crisis has clearly underscored the risk s of Islamist militancy in Algeria. Following the collapse of the Qadhafi regime in Libya in late 2011, weapons and militants have flowed across the Sahel region, thus jeopardising Algeria ' s security . Consequently, we have reduced our short-term political risk rating for Algeria to 61.7 from 63.3, due to a lowering of the ' security threats ' component.

Oil and gas facility security will need to be scrutinised: The oil and gas industry is of overwhelming importance to the Algerian economy, and its facilities should theoretically be among the most secure in the country. The fact that Islamist militants were able to sweep into the relatively remote area and take over the complex means that there were some security failings. Following the siege, BP, one of the operators of the gas facility, stated that it planned to fly some non-essential staff out of Algeria. Similar moves are expected by Espanola de Petroleos and Statoil. More broadly, the siege could conceivably inspire ' copy cat ' attacks elsewhere.

Algeria ' s government was ' damned if it does, damned if it doesn ' t ' : Several foreign governments have criticised the Algerian leadership for failing to notify them in advance of storming the gas complex to end the siege. It is possible that foreign governments may have preferred that negotiations were held, or that the assault be delayed if this would have increased the chances of rescuing the hostages unharmed. However, the Algerian government appears to have decided that acting against the militants swiftly was more important than the safety of the prisoners. In that respect, foreign governments were at odds with Algiers.

Overall, the Algerian government was in a very difficult situation. Delaying the assault could have contradicted its stated policy of not negotiating with terrorists and allowed the latter to move the hostages elsewhere (i.e. to other countries) . However, acting quickly has also come at a high price.

The siege was the first sign of ' fall out ' from France ' s Mali mission: The Islamist militant hostage takers stated that their move was in response to France ' s military intervention in neighbouring Mali, which began several days earlier, and which they wanted to be brought to a halt. However, some security commentators have suggested that the siege was too complex to have been planned and orchestrated after the initiation of French air strikes. Regardless, France ' s mission has the backing of other Western countries and the cooperation of the Algerian government (through permission to use Algerian airspace), so the foreign-invested gas complex in Algeria was in many ways a logical target. Going forward, if France ' s intervention continues for an extended period, which seems quite likely, then we would expect to see further reprisals, or attempts at such actions.

The Islamist militants ' ' credibility ' has been boosted: The Battalion of Blood, which is presumed to have links with al-Qaeda in the Islamic Maghreb (AQIM), has arguably received a prestige boost , at least among radical Islamists . Even if the group is defeated at the gas complex, it has demonstrated the ability to take over an important facility and drawn awareness to its political objectives. The downside risk is that AQIM ' s higher profile will lead to more resources - both regional and Western - being mobilised against them.

The Sahel region is now clearly becoming a key battleground in the ' war on terror ' : For some years now, intelligence agencies have warned that Africa - mainly Saharan Africa - is emerging as a new front in the ' war on terror ' (a phrase which is used less often nowadays, but a conflict that nonetheless continues). The Sahel region is attractive to Islamist militants because of its vast empty spaces and weak borders, which provide them with hard-to- observe training grounds and easy passage. The collapse of Libya has been a boon to Sahel-based militants, because the country shares borders with three countries in the region and because Qadhafi ' s arsenals have been raided, thus provided militants with weapons. However, t he emergence of the Sahel front does not mean that the Middle East or Afghanistan-Pakistan will decline in importance as battlegrounds in the ' war on terror ' . Syria could become a safe haven for militants if the Assad regime collapses, and Afghanistan could fall under greater Taliban sway once the West withdraws from that country in 2014.

This article is tagged to:
Sector: Country Risk, Oil & Gas
Geography: Algeria, France, United Kingdom, Japan, Mali, Norway

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