Op-Ed: 3 Ways European Domestic Terror is Changing the Defence Industry

Pola Zafra-Davis
Posted: 07/22/2016

Security London

The aftermath of the Bastille Day Attack, where a Tunisian Lorry driver ploughed into a crowded celebration in Nice is the latest incident in Europe claimed by Daesh and the third to occur in France within 1.5 years. The driver appeared to have been radicalised very quickly with no prior religious proclivity. Radical Islam preys on the vulnerable. Couple this with France’s well known social-fragmentation in the suburbs and political demands of the Far Right, and it foments a new reality. Terrorism in Western Europe has become a societal-internal problem rather than one exclusively rooted in a foreign source. As a result the global defence industry will encounter many additional opportunities to aid in the fight against terrorism and protect societies closer-to-home, as well as encounter new competition in the market.

The global defence industry will witness the following 3 changes: (1) Western Europe’s defence-spending will increase specifically through paramilitary policing personnel and operations conducted inside individual nations; (2) the popular approval of (para)military operations to protect society will lead to greater international alliances and thus larger geographic market opportunities for defence contractors; and (3) the widening of the domestic security market opens the defence industry to non-defence commercial competition from solution providers.

1. The Rise of Gendarmes and Urban Operations


We can expect that Europe’s defence spending will increase, but not only through  obvious spending in air, land and sea forces and munitions needed for NATO, EU, and member state overseas operations. In the future, national defence spending within Europe will be funnelled toward the greater need to finance military forces tasked with policing civilian populations.  

One consequence of domestic terrorism is a focus on police forces; the domestic insurers of population safety and security. Because of the new terror tactics being employed through consumer purchases of firearms, the up-armouring of commercial vehicles, and the out-of-state issue of border security; domestic terrorism demands more than regular policing. The solution lies in the increased use of hybrid police-military forces commonly referred to as gendarmes. France has the Gendarmerie; Spain, the Guardia Civil; Portugal, the Guardia Nacional Republicana ; and the Netherlands, the Royal Marechaussee.

Financing these specialised military police forces still falls under the rubric of national defence spending. Gendarmes are considered ‘paramilitary’ and, in the case of France, Portugal, the Netherlands and Spain, are part of the national armed forces operating under the ministry of defence as well as ministries of the interior, given civilian policing duties. The increase in the 2003-2008 French military budget was towards bolstering the gendarmerie. In 2015, the Dutch cabinet discussed extending to 100M EUR by 2020, from 2014 to 2016 spending on the Royal Marachaussee nearly doubled while spending on other forces fell. In 2000 the Guardia Civil had an annual budget of 1.8B EUR rising to 7.8B EUR later in 2012.

The nature of vehicle spending with the defence industry will also need to suit ground-based urban environments in the fight against domestic terrorism, rather than countryside battlegrounds. Much of the French budget on the gendarmerie went towards the replacement of their fleet of wheeled armoured vehicles of 122-VBRGs. The Spanish Guardia Civil also invested in 195 new vehicles in 2015. 111 of which were all-terrain and 65 to be used for patrol purposes in an 8.7M EUR budget partially funded by the EU.

Domestic terrorism inside Western Europe and modern terrorism in general has become a growing problem in public safety where defence and not just security can play a positive role. Growing emphasis is being placed in national governments in making civilian populations safer and, in kind, their personnel more specialised. For a more prepared police force, the gendarmes provide skills from military training, but also absorb a share of the defence budget to operate more effectively in the new urban terrain.

2. Rallying against Domestic Terror and the Widening of the Private Security Market for Defence


While Western Europe grapples with fears of Islamist domestic terror, their new experiences find sympathy from allies like the US and new non-Western powers such as China. It is uncommon and extraordinary that now most major world powers have a common non-state enemy, whether it is Daesh or another criminal/terror group. The new age of terror provides the potential for alliances built on collaborative combatting of groups in other parts of the world, but also for these collaborations to bolster protection of vulnerable borders. More international political alliances will mean more markets for global defence contractors overall. This will be in part because of (a) a strengthening of defence spending between Western European countries through the EU (due to fears of cross-border security and immigration) and (b) the normalisation of extreme counter-terrorist operations to secure the safety of national populations.

European countries now cope with the influx of immigration and increased domestic terrorist threats while simultaneously weighing the pros and cons of burden-sharing in a political union. The EU’s current financing for anti-terror operations is through the Internal Security Fund (ISF), split between border and visas and police elements. Between 2014 and 2015, the overall budget in Security and Citizenship decreased but counter-terrorism spending increased. What was prominently featured in the ISF was its ISF-Police component, with a budget of around 1B EUR out of the overall 3.8B EUR ISF budget. It is no coincidence that national gendarmes are also tasked with border patrol duties given their growing importance in national defence budget spending and these are often co-funded by the EU.

It is still in the best interests of European Countries to contribute to EU spending on counter-terrorism, not just to reap the benefits of more secure borders and regulated immigration—but also as an economic safeguard in times of increased domestic conflict. A RAND study on Israeli Defence companies amidst the Israel-Palestinian conflict shows that an increase in terrorist activity has a positive effect on domestic defence industries. These benefits are undoubtedly not lost on the likes of Europe’s Airbus Group, Dassault or Leonardo-Finmeccanica. However, another study on incidences from Basque separatists in the 1980s have shown that other national industries suffer overall negative economic impact. Participation and membership of the EU-wide trading bloc provides an important safety net in these times of crisis and therefore the financing of EU-wide counter-terror operations will continue to supplement single-country efforts in security.

A second point is that the stigma of militarised responses to domestic terrorism will decrease across the world stage. Domestic terrorism is not isolated to Western powers amongst the global economic giants in the 21st century. Russia’s war with Chechnya cost the country over 175M USD for a single campaign. Likewise another big spender in defence, China, spent 115B USD on ‘Public Security’ in 2013 following unrest in Xinjiang, Inner Mongolia and Tibet provinces. What is also common between Russia and China is that both came under criticism for Human Rights abuses for conduct in the second Chechen War and the Chinese restriction of Ramadan in Xinjiang, respectively. An additional benefit with the new global security environment is that these countries will also be held up to less internationally-scrutiny for their security and defence purchases.  

The liberal-democratic, authoritarian divide between countries used to be apparent in national spending habits when it came to defence versus social spending. Traditionally, illiberal regimes spend more on defence than liberal democracies due to expansionist policies linked to their legitimacy. Russia and China’s terrorism concerns spring from contested territories of ethnic minorities. Conversely, liberal democracies focus on social spending for their citizens .

And that is where the current rash of European terrorism comes in. The Western-citizen supporters of Daesh have felt isolation in societies to which they are meant to feel a belonging. Keep in mind that Russia and China were historically multicultural multi-ethnic empires. Just as Chechens are expected to submit to Russia and Uighurs and the Tibetans are to integrate into the larger Han Chinese majority, Europe and France’s current struggles with multiculturalism have wrought frustrated and violent individuals. After the 2015 Paris Attacks, China extended a plea for aid in counter-terror efforts against the Uighurs in the G20 summit. This combined meeting of the hearts and minds will provoke additional opportunities and freedoms for the global defence industry.

3. Defence’s New Competition with Private Security


As the line between internal security for a country and external defence blurs, the global defence industry will inevitably be in increasing competition with non-military civilian firms. This would be true even if overall opportunities for defence contractors are greater when more countries are willing to take on the fight of within their walls. One reason for caution in an optimistic defence market is an increased reliance on surveillance in national counter-terror operations.

The participation of civilian-companies will have a growing stake in the market for national protection. Modern terrorist attacks employ the use of non-military technologies – such as the internet – to plan and recruit followers. The growing trend is ‘Lone-Wolf’ terrorism, committed by individuals without a command structure or material assistance from a group. The message of terrorists can reach isolated individuals and e-commerce facilitates purchases of common items used to create dangerous explosives. Policing of the population becomes not only reactive, in the case of the gendarmes, but also preventative and requiring cooperation from commercial companies. Google is in the planning stages of launching anti-terror ad campaigns in the UK. Last year, the White House met with Google and Facebook to discuss how to disrupt Daesh’s online activities. In Spain the Guardia Civil is in close cooperation with private security companies through the COOPERA programme, and with Accenture in creating an operating system.

The increasing use of surveillance drones is also a way in for commercial drone manufacturers and robotics companies to have a stake in the new domestic-terror market. Eurocontrol and EuroCAE predicts up to 70,000 drone-related jobs and a value of 14B EUR by 2016. But new regulations restricting the public use of drones would affect sales and prompt robotics companies to seriously consider government clients. Aerovironment, maker of the RQ-11 Raven, holds a portfolio of surveillance drones in addition to consumer electric-vehicles and energy products. Even purely consumer drones are finding their way into surveillance, with Iraq police using hobbyist drones, as one example.

One last concern is competing with or sharing the market with private security contractors which appear to have claimed surveillance and intelligence as their industry. One notable provider is Booz-Allen Hamilton, which won a contract with the US Department of Defence to provide intelligence services worth 5.6B USD in 2013. Surveillance industry trade shows, such as ISS World, are attended by most major government agencies. If the evolution of drones is any indication, the market in surveillance services will soon trump surveillance hardware.

The defence industry would have to diversify or adapt-and-partner, to meet these new challenges.


After 9/11, the US crafted allies with Russia and China in the Global War on Terror because all were experiencing problems with domestic terrorism. Europe was not so vocal politically after-the-fact due to its long history of domestic terror.

But what is different in 2016? After Nice, after Brussels, after Paris-Saint Denis and after Charlie Hebdo is that Europe’s domestic terrorism has become linked to a very post-90s problem of immigration, societal integration and multiculturalism. And with this, the global defence industry must adapt to the new emphasis on protecting from inside national populations. 2001 seems a long time ago and the gendarmes have increased their budgets in 2003 but, as a Nice observer said, “We have to prepare ourselves to become habituated to this.”

The views and opinions in this article are solely those of the author and do not necessarily reflect or represent those of Defence IQ.

Pola Zafra-Davis
Posted: 07/22/2016

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