The Role of Intelligence in International Political Economy

By Cyril Thomas
University of Dundee

First Draft (M.Sc Globalization Assignment 21 Oct. 2006)

International Political Economy (IPE) is often defined as the interaction between the state and
the market in the global level. The 1973 oil crisis1 and the decline of the Bretton Woods System
paved path to the new perspective of globalisation and alerted the intellectuals and academics to
delve deeper into various fields of economics, diplomacy, politics and international relations.
What the erudite studies ignored was the role of intelligence in the emerging globalisation, even
the intelligence agencies itself failed to measure their importance in the age of globalisation.2
What is defined here as intelligence? Moreover, why the intelligence is important in the
international political economy? Intelligence in this essay is primarily used to define intelligence
gathering agencies or institutions. While in the pre-globalisation era, the major function of such
agencies were matters dealing with national security especially the military issues rather than
economic ones.3 Until the end of cold war, even years after, that term intelligence was
synonymous with national security till the 9/11 terrorist attacks. It was only then the notion of
international security in the globalized world became more resplendent.
To understand the present, we have to look into the past. The post World War II era witnessed
the emergence of Cold War, a term used to denote the relations and tensions between the super
powers Soviet Russia and America. The term Cold War is aptly coined because there was no
direct war between Russia and USA instead the war took the form of arms race, espionage, and
embargoes. The espionage networks and the proxy wars of both countries made the whole world
part of the cold war. During the age of cold war, globalisation was more or less a concept of
being with or adhere to one of the superpower.4
The concept of global village came into existence with the advent of globalisation and the
realization that one event in any part of the world can be affected, directly or indirectly, any
other nations, anywhere in the world. In the global village or the globalized world, economic
security became as important as national security and the intelligence agencies new burden was
to monitor the international political economy to formulate new strategies for the national
interests.
During the cold war, USA pioneered this intelligence strategy through the studies and researches
of the Central Intelligence Agency.5
During the 1950s CIA was much concerned with the Soviet economy, Max Millikan6 set a
course for the CIA's economic analysis of the Soviet Union. Mililikan too, gave top priority to
military security, which in turn insures free markets and continued economic growth. He
considered the primary function of economic intelligence was "to estimate the magnitude of
possible present or future military or other threats to ourselves and our allies7..." Economic
Research Area Group, a support division of the CIA to study the Soviet economy was one of the
key factor and influential part of the agency. “By 1953, the group was in a position to suggest
that there might be a distinction between the weaponry the Russians knew how to produce and
the weaponry they could afford to produce.”8

The concern of the economic intelligence analysts were (a) the assessment of economic
resources available to a targeted country, (b) how targeted countries or how potential enemy
states have invested their resources, (c) understanding the intentions of targeted countries and
evaluate how they act in the economic sphere is likely to reveal intention, (d) understanding the
means to reduce the military threats by impairing a potential enemy state's capabilities.
In 2004 The Washington Post reported a story that “in January 1982, President Ronald Reagan
approved a CIA plan to sabotage the economy of the Soviet Union through covert transfers of
technology which are programmed for malfunctions, including software that later triggered a
huge explosion in a Siberian natural gas pipeline...”9 The authenticity of the story may be not
proven, yet, there are debates on the role Reagan played in the collapse of the Soviet Union,
which could be interpreted as CIA was partially responsible for the collapse of the Soviet block
through its economic intelligence. Thomas C. Reed, who was part of the National Security
Council at the time, describes the covert intelligence operation as an example of "cold-eyed
economic warfare".10 Still economic intelligence more or less classified as the field of academics
and the priority was given to military operations and warfare.
The end of cold war abruptly ended the myth of military warfare as the major weapon to
incapacitate a country. It has been said that intelligence agencies all around the world were
facing the new uncertainty, which is, in fact, in the new globalised world, it is difficult to
distinguish who your enemy is or will be! Instead there was a new truth revealed, that every war
is disastrous to everyone. The U.S. also recognized that their economy and the “American
economic decision-making must be...adapted to an emerging global economy that no longer
revolves around the United States.”11 No matter how small the threat is, its ripples will sooner or
later reach every corner of the world. The Yom Kippur war is a classic example that the
intelligence agencies have never learned lessons from the history.
The U.S. intelligence agencies failed to perceive the brewing war, which not only forced
European nations, under the threat of an Arab oil embargo and trade boycott, to stop supporting
Israel arms and munitions12 but eventually led to the 1973 oil crisis. According to Ray Cline,
Assistant Secretary of State Intelligence and Research, said "Our difficulty was partly that we
were brainwashed by the Israelis, who brainwashed themselves."13
The international global economy is often proved volatile and fragile despite all its strength and
vigor, the role of intelligence is to protect it from the imminent threats of wars and economic
depressions. Unfortunately, the world is not always a global family or village, and the need for
national security and national interests may demand more than noble causes. There are times
when intelligence flaws which could lead to war and or fail to prevent major conflicts. For
example, the central focus of national intelligence reporting and analysis prior to the Iraqi war
was concern of developing or developed weapons of mass destruction (WMD). However the
analysis relied heavily on old information acquired largely before late 1998 and was strongly
influenced by untested, long-held assumptions.14 Moreover, the analytic judgments rested almost
solely on technical analysis, which ignored the updated and total understanding of the Iraqi war
machine and capabilities. As a result the analysis, although understandable and explainable,
arrived at conclusions that were seriously flawed, misleading, and even wrong.
Intelligence agencies should be thoroughly analytical and careful when evaluating sanctions,
policies, and military threats as these factors are volatile which could lead a major economic
crisis. Policymakers often totally rely on intelligence and make decisions solely on the reports
they were provided with.
United Nations' sanctions on Iraq cripple the economy and the economic breakdown was evident
in the 1990s (which) was also the legacy of the 1991 Gulf War.15 Yet, the economic collapse was
not the only result, sanctions faced sever criticism on humanitarian grounds. The the U.N. Food
and Agricultural Organization (FAO) published a study in the British medical journal Lancet
estimating that as many as 576,000 children had died as a result of the sanctions.16 The moral
implications of sanctions and economic warfare cannot be ignored in a globalized world, callous
or Machiavellian as it may sound, it is the responsibility of the intelligence agencies to neutralize
this threat.17
The ultimate purpose of the intelligence services lie in the total understanding of targeted states.
In another words “...economic warfare in time of war and cold economic warfare in time of
peace aim to weaken or bring about the collapse or defeat of the target state, with the ultimate
aim of changing its political regime. The difference lies in the intensity with which these goals
can be pursued and...the range of instruments available with which to pursue them.”18
Today the Central Intelligence Agency, with the help of other agencies, provides economic
intelligence for U.S. policy, monitor international transactions, international economic and
environmental problems, including trade and finance; defense markets and logistics; geographic
resources, including demographics and commodities; civil technology, including aerospace,
advanced manufacturing, and emerging technologies; and energy resources.19 The intelligence
gathering agencies are awakening to the face of the dynamic and volatile international political
economy. They have to thread carefully as it is the responsibility of the agencies to prevent the
potential war or economic anarchy by understanding the international political economy. In such
a dimension, the intelligence agents and analysts have a crucial role as important as the policy
makers.

BIBLIOGRAPHY
Millikan, Max F., "The Nature and Methods of Economic Intelligence," Studies in Intelligence,
Spring 1956
Noren, James., 'CIA's Analysis of the Soviet Economy,' in Watching the Bear: Essays on CIA's
Analysis of the Soviet Union, (eds.) Gerald K. Haines and Robert E. Leggett. Washington, DC:
Center for the Study of Intelligence, 2003.
Jeffrey-Jones, Rohdri., 'The CIA and the American Democaracy'. Yale University press, 1989
Simpson, Christopher., 'Science of Coercion: Communication, Research and Psychological
Warfare, 1945-1960. Oxford University Press. 1994
O' Sullivan, Meghan L., 'Shrewd Sanctions: Statecraft and State Sponsors of Terrorism.'
Brookings Instituition Press, Washington D.C
Dobson, Alan P., 'United States Economic Statecraft for Survival, 1933-1991: Of Sanctions and
Strategic Embargoes' Routledge Advances in International Relations and Politics.
Robarge, David S., Getting It Right: CIA Analysis of the 1967 Arab-Israeli War, Center for the
Study in Intelligence, Vol. 49, No.1, 2005

Periodicals, Journals, Online Archives and News Media

National Security Archives
Economic Intelligence Forum
National Intelligence Council Archives
Studies in Intelligence: Journal of American Intelligence Professional
Washington Post
Center for the Study of Intelligence: CIA Archives
CIA Unclassified document
Wikipedia
1The crisis was the direct result of the Yom Kippur War or the Fourth Arab-Israeli War, which
was fought from October 6 to October 26, 1973, between Israel and a coalition of Arab nations
led by Egypt and Syria. The Organization of Arab Petroleum Exporting Countries (OAPEC), on
October 17, 1973, avowed that they would not ship petroleum to nations which supported Israel
in the October War or Yom Kippur War, which affected the USA and the Western European
countries. OPEC also used their leverage over the world price-setting mechanism for oil in order
to quadruple oil prices all over the world, by 1974 to nearly 12 dollars per US gallon barrel.
2Cold War might have consumed most of the intelligence network is not an argument here
because academics ignored the intelligence even after the cold war.
3It is true military issues are often entangled with economic ones, still the importance were given
to the former ones than the latter until the end of cold war.
4Though there are the so called non-aligned nations, they too had the tendency to incline to one
of the superpower.
5The Office of the Strategic Services, the predecessor of the CIA also belived that every aspect
of postwar intelligence operations should employ social scientists.
6Max Franklin Millikan, was the professor of economics at the Massachusetts Institute of
Technology, who later became the dirctor of CIA's Office of Research and Reports (ORR) and
the assistant director of CIA helped to develop economic intelligence for the CIA.
7Max F. Millikan, "The Nature and Methods of Economic Intelligence," Studies in Intelligence, Spring 1956
8Jeffrey-Jones, Rohdri., The CIA and the American Democaracy. Yale University press, 1989
p.105
9Hoffman,David E., 'CIA slipped bugs to Soviets:Memoir recounts Cold War technological
sabotage', The Washington Post., Feb. 27, 2004
10ibid.
11Aho, Michael, 'Global Economic Rivalry: New Perspectives on Germany (The EC), Japan and
the United States. Paul J.J. Welfens (ed.) Economic Aspects of German Unification: National
and International Perspectives, Springer-Verlag Berlin. Heidelberg, 1992.
12In a different perspective it is not entirely a failure of CIA, because Israel was totally
dependent on the United States to its military supply and practically became a side kick.
13Burr, William (ed.), 'The October War and U.S. Policy' October 7, 2003 The National Security Archive.
14 Kerr, Richard et. al., Collection and Analysis on Iraq: Issues for the US Intelligence
Community,
15O' Sullivan, Meghan L., Shrewd Sanctions: Statecraft and State Sponsors of Terrorism.
Brookings Instituition Press, Washington D.C. p. 123
16Hayes, Christopher, Were Sanctions Worth the Price?, In These Times, March 06, 2006
17I have to use the term threat because, humanitarian concerns often lead to uncordial terms
among allied nations and may thwart the greater purpose.
18Dobson, Alan P., 'United States Economic Statecraft for Survival, 1933-1991: Of Sanctions
and Strategic Embargoes' Routledge Advances in International Relations and Politics.
19Manning, Martin J., Economic Intelligence, Economic Intelligence Forum.