During the Iraq war, private Blackwater security employees guarded U.S. State Department employees at the U.S. Embassy in Baghdad. Now the rent-a-soldier business is booming even as the wars in Iraq and Afghanistan wind down.

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Bullets for hire

  • Article by: THE ECONOMIST
  • November 19, 2012 - 5:35 PM

Over the past decade the business of renting out private soldiers has grown from a specialized niche into a global trade, worth as much as $100 billion, according to the United Nations.

When the American consulate in Benghazi, Libya, was torched in September, locals hired by Blue Mountain, a British firm, were on guard. When a few weeks later African Union forces kicked fighters for Al-Shabab, a terrorist group, out of Kismayo, Somalia, South African private soldiers gave training and support to the African Union forces. In Iraq and Afghanistan, more than 20,000 private guards are employed by the U.S. government.

The industry's growth has been paid for by Western governments, keen to limit the political cost of military boots on the ground. Supply has also come mostly from the West: 70 percent of firms are British or American.

As the big conflicts of the past decade come to an end, however, private armies are beginning to chase new business, according to Sean McFate of America's National Defense University. Industrial firms, which are increasingly setting up shop in unstable places, are expected to be a growing chunk of the customer base.

One company, in particular, is preparing for the change: Academi, an American private military giant (which, before it was sued over the death of 17 civilians in Iraq in 2007, carried the less silly moniker of Blackwater and in 2009-11 was called Xe Services).

More than 90 percent of the firm's business to date has come from governments, but it thinks that half of its future customers could be corporate. Among the early adopters are energy firms and a hotel chain. By the end of the year Academi expects to have opened a new "several thousand acre" training site, probably in east Africa, to help meet the changing demand.

As the market opens up, non-Western firms want a piece of the action. When Chinese road workers were kidnapped in South Sudan in January, Chinese armed guards were enlisted to help secure their release.

Moreover, big firms keep spawning smaller, local outfits. Large companies entering a new area typically employ locals as subcontractors. Emboldened by their new training, "subs" can spin off when a job ends, as a pool of hardened guns for hire. In June a U.N. monitoring group found a private anti-piracy unit in Somalia to be among the best-equipped forces in the region; it had been started with the help of Erik Prince, the former boss of Blackwater.

Small, informal groups are a particular cause of concern. They might work for the highest bidder, whether an oil firm or a frustrated despot (Col. Moammar Gadhafi hired mercenaries in the weeks before the Libyan revolution that killed him in October 2011).

McFate worries about the long-term impact of these private armies. As in 16th-century Europe, he says, Africa's rich may employ mercenaries to carve out regions of control, leaving those left outside to fend for themselves.

A more immediate issue is how to regulate the fragmented industry. Ted Wright, the boss of Academi, says its leadership has been replaced since the Blackwater days, and now makes subcontractors sign a set of rules and work under observation. Several states, including China, have signed the Montreux Document, a voluntary code of conduct.

Yet self-regulation is unlikely to be sufficient in a business known for its cutthroat competition. Some say that private firms should be barred from jobs more suited to conventional armies, and governments should impose sanctions at home for infractions abroad.

But making rules that apply internationally will be difficult, said Thomas Hammes of America's Institute for National Strategic Studies. Corporate responsibility, however, might help. Customers need to ensure that those hired to protect their sites are qualified and accountable -- with the U.N., itself a customer, taking the lead. Otherwise, the market for private soldiers might spin out of control.

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