According to the Institute for Economics and Peace Global Terrorism Index (GTI) of 2014, violent acts of terrorism have increased dramatically, with estimates indicating a five-fold upsurge since 2000. In total throughout the last 15 years there have been over 48,000 terrorist incidents which have claimed over 107,000 lives.
The majority of these incidents (over 60 percent) have occurred in Iraq, Afghanistan, Pakistan, Nigeria, and Syria. However, since 2013 the rest of the world has also observed a 54 percent increase in terrorist incidents. This increase and the impact associated to the activities of international terror organizations have been felt significantly among some of the Greater Caspian States. For example, Russia, according to the GTI, is now the 11th most likely nation (out of 124 states) to observe the highest impact of terrorism.
Out of the five littoral Caspian states this ranking places them as holding the highest risk. The nation observing the next highest risk indicator is Turkey, ranked as the 17th state to observe the highest impact of terrorism. This is becoming increasingly more relevant with groups such as DAESH encroaching upon its border. Next, Iran ranks as the 28th nation to observe a high to medium risk of terrorism. This is because Iran’s threat from DAESH manifests itself as a clash between a regional Shia power and a Sunni-driven extremist group. The nations of Russia, Iran, and Turkey have not just felt this impact in its violent form but have also felt the economic misfortunes associated with the financial impact of terrorism. This is a major underlying issue, yet one still far less emphasized in contemporary political discourse. This is because not only do acts of terrorism have an impact on the global market, but they also generate instability among national financial markets and alter domestic economic policies and practices. These consequences have significantly shaped the economic policies and behaviors of the Greater Caspian states.
There are two categories associated with the economic costs of terrorism. First, primary or direct costs related to immediate destruction or property and life in the aftermath of a terrorist event. For Russia, the primary cost of the Sinai Airliner bombing was the resulting 127 civilian casualties, the loss of one airplane, and the resultant impact on the lucrative Russian tourism industry. Turkey’s primary costs have been observed through suicide bombings against Turkish activists in Kobani, Syria, as well as similar acts of terror in its capitol of Ankara and the historic city of Istanbul. Moreover, Iran observed a psychological blow after Brig. Gen. Hosseiin Hamedani, a commander of the Islamic Revolutionary Guards Corps (IRGC), and more than a dozen other soldiers working as advisors to assist with Russian airstrikes were killed in Syria. And while each of these acts generates sizeable economic and psychological effects, the secondary costs are more complex with long-term cascading consequences.
For example, the aftermath of terrorist activities required each of the above-mentioned nations to increase security, generate new military expenditures, and fulfill subsequent insurance payments. Moreover, a nation on the receiving end of any act of terror will observe increased uncertainty in markets, decreased foreign investments due to this uncertainty, as well as altered trade, consumption, and savings and/or investment behaviors. The common theme with these secondary indicators is that each causes a disruption to the local economy that is quite significant. For instance, the price tag of Russian airstrikes in Syria are now costing Moscow up to $4 million USD per day; Iran’s commitment has topped $6 billion annually (out of its’ $15 billion USD military budget) to assist in propping up the Assad regime in its fight against DAESH; and Turkey has also increased its military spending 25 percent since 2014 (Up from $17 billion USD to 22.6 billion USD), while at the same time spending over $8 billion USD to host and assist in the Syrian refugee crisis. To aggravate matters even more, Turkey shot down a Russian jet after it violated its airspace, which in turn has strained international relations, increased regional tensions, and produced sanctions against them from Moscow in retaliation. These negative affects have now become collateral costs in the combined fight against Islamic extremist groups like DAESH, spilling over into the areas of tourism, trade, and energy, from which both Turkey and Russia are highly co-dependent upon each other.
Tourism, whose relationship with terrorism is strongly interconnected, has been significantly impacted not only in Russia and Turkey, but in the other Greater Caspian states as well. For example, terror attacks influence the entire tourism industry. An illustration of this phenomenon can be observed after the Russian airliner was proven to have been a target of DAESH militants and both Russia and Great Britain suspended flights to Egypt’s Sinai Peninsula. This decision has severely impacted Egypt’s tourist industry because Russia and Great Britain are Egypt’s biggest tourist markets and a critical source of industrial income. Estimates indicate that Egypt could lose 2.2 billion Egyptian pounds—about $280 million USD—per month due to these flight cancelations, while at the same time Russian tour operators have lost over 1.5 million Rubles—about $23 million USD—since flights were suspended.
There is no doubt that the cost of terror is larger than the initial psychological and physical blows delivered. The financial impact of terrorism and the economic consequences cascading from international terrorist activities has undoubtedly affected the Greater Caspian States in many secondary capacities. And while the result is not zero-sum to these economic anxieties, one should hope that the economic policies of the Greater Caspian States is stronger and longer lasting than the ideology of the diehard Islamic jihadists with whom they are currently at war with.