Who has benefited most from $16.7 billion worth of war on terror spending over the last decade?

Let’s start outside the Defence portfolio. The big spending outside Defence has been in the Australian Federal Police, ASIO and DFAT. DFAT’s expenditure on improving physical security at its embassies — hundreds of millions of dollars — has primarily gone to building contractors and security firms overseas. But the additional spending for ASIO and the AFP – and agencies like Customs that received over $600 million — has gone on additional staff.

In a huge boost for bureaucratic empire builders, the AFP has expanded from 2851 staff in 2001 to over 6700 in 2010; ASIO has increased even more, from 584 to 1692.

One of the biggest beneficiaries of this increase in staff — part of a significant, government-wide expansion in the public service under the Howard government — are commercial property owners, particularly in Canberra. ASIO is in the final stages of building a vast new headquarters but has until now had to squeeze its additional staff into buildings in the Defence precinct at Russell in Canberra, expanding demand for floorspace in Canberra along with every other expanding department and agency.

The rise in demand for floor space has driven a big increase in commercial property accommodation in Canberra in recent years – in 2010 alone there was an 8% increase in the total stock of office floorspace in Canberra as developers responded to rising demand from valuable government tenants.

We noted yesterday the bulk of war on terror spending has been in the Defence portfolio, and most of that relates to the Iraq and Afghanistan attacks and ensuing occupations. Of those, our Afghanistan role has been far more costly — $6.1 billion so far, and more billions to come over the coming years.

Plainly the expense of outfitting and equipping our 1500-plus troops in Afghanistan is a key cost, with local and foreign defence industries the prime beneficiaries. For example, Defence has ordered a total of nearly 840 Bushmaster vehicles, manufactured by Thales at its Bendigo facility, in recent years, including a new order in May for a further 101 vehicles for use in the Middle East, costing $133 million.

Numbers on a precise distribution of costings for Australia’s role in Afghanistan are hard to come by publicly, and given Defence’s long history of being unable to keep track of assets, might be hard to believe if they existed. But one of the largest costs must be fuel.

Studies of the cost of keeping US troops in Afghanistan have offered various costs per soldier, ranging up to US$1 million per soldier year. The biggest component of that cost is fuel — estimated to cost over US$350,000 per year for every soldier. Western forces are heavily reliant on fuel to stay mobile and provide power, and transporting fuel into Afghanistan and then distributing it within the country consumes further fuel (at a ratio, one estimate suggests, of seven litres for every litre consumed). It also costs allied lives trying to protect fuel convoys.

The ADF role in Afghanistan is quite different to that of the Americans, and we don’t support a large fleet of helicopters, so Australian fuel costs would certainly be much lower than the 35% of total costs suggested by US figures. But at even 10%, rather than 35%, of total costs, we would have spent at least $600m in fuel while in Afghanistan.

The obvious beneficiaries of that spending are oil producers. This creates the intriguing outcome that the campaign in Afghanistan to fight Islamic terrorism is pumping hundreds of millions of Australian dollars, and billions of US dollars and pounds sterling, into the economies of Saudi Arabia and other Gulf States that, as a Wikileaks cable revealed in December, are still regarded by the US State Department as the key sources of private funding for al Qaeda. That’s on top of propping up some of the worst human rights abusers in the region (the justification of fighting the Taliban because of their attitude to women is rather undermined given Saudi Arabia is currently arresting women for “driving while female”).

This isn’t the first instance of counter-productive war on terror spending. As no less than AFP chief Mick Keelty stated in March 2004, Australia’s involvement in the Iraq war increased the likelihood of Australians being targeted by terrorists. Alexander Downer, Arthur Sinodinos and others tried to discredit Keelty’s judgement at the time, and Keelty tried to back away from his comments, but he has since been vindicated: last year the former head of MI5 said she’d reached a similar conclusion about the UK. And former Defence Chief Peter Cosgrove, who join in the attack on Keelty in 2004, changed his mind and apologised to Keelty in 2006, saying it was “pretty obvious” the Iraq war had energized the jihadi movement.

The cost of energizing Islamic terrorism and increasing the risk of terrorist attacks on Australians to taxpayers was around $2.4b, unindexed.

Next week: how to calculate whether we’ve got value for money from our war on terror billions.

Peter Fray

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