From Bengal to Baghdad: Three Centuries of Corporate Warriors

Picture the scene: The head of a private military company is appearing before the legislature. For years, his firm has prospered from the occupation of a resource-rich Asian country, protected by its shareholders' powerful political connections. Only now are years of long-ignored abuses coming to light.

The setting is not Washington 2007, but London 1787. The occasion is the trial of Warren Hastings, the first governor general of India and an employee of the British East India Company, the government-backed private monopoly that had conquered Bengal in 1757.

The company ran Bengal as a business, tripling the land tax and ordering farmers to plant cash crops instead of rice, a policy that contributed to the Bengal famine of 1770, which killed 10 million people.

Its monopolies brought about Britain's Opium Wars with China, and they were the immediate cause of the Boston Tea Party, which sparked the American Revolutionary War.

The company's harshest critics included economist Adam Smith and the father of modern conservatism, Edmund Burke.

Smith was particularly critical of the company's use of its political and military power to repress its commercial competitors.

"A company of merchants are, it seems, incapable of considering themselves as sovereigns, even after they have become such," he wrote in The Wealth of Nations. "Trade, or buying in order to sell again, they still consider as their principal business, and by a strange absurdity regard the character of the sovereign as but an appendix to that of the merchant, as something which ought to be made subservient to it, or by means of which they may be enabled to buy cheaper in India, and thereby to sell with a better profit in Europe."

Burke led the attempt to impeach Hastings in the House of Commons, arguing that "there is no action which would pass for an act of extortion, of peculation, of bribery, and oppression in England, that is not an act of extortion, of peculation, of bribery, and oppression in Europe, Asia, Africa, and the world over."

The case dragged on for seven years before ending in Hastings' acquittal. Nevertheless, the East India Company Act of 1784 marked the beginning of attempts to subordinate the company's military power to the state, a process that would not be completed until after the Indian Rebellion of 1857.

The history of the East India Company remains relevant today, not least because it has been cited as a precedent by Tim Spicer, whose company Aegis Defense Services holds the largest private military contract in Iraq.

Spicer's own career illustrates the roots of the modern private military industry in a business model that uses military power to distort markets.

According to his autobiography, Spicer was approached in 1993 by Tony Buckingham and Simon Mann to take part in their operations in Angola. Buckingham's company, Heritage Oil, had interests in the town of Soyo which had been overrun by UNITA rebels. To retake the town, Buckingham hired Executive Outcomes (EO), a South African mercenary firm staffed by apartheid-era veterans. After successfully gaining control of Soyo, EO helped the Angolan Army take back the diamond fields of the northeast, where a concession was granted to another Buckingham company, Diamondworks.

Spicer declined to take part on that occasion, as he was still serving in the British Army, but was approached again by Buckingham and Mann in 1995. At a meeting between the three men in the La Famiglia restaurant in Chelsea, West London, the modern concept of the Private Military Company (PMC) was born. The acronym was – ironically, in light of later events – intended to contrast with what Spicer called "the headbanded dogs of war" image.

Spicer was to head up Sandline International, a new vehicle, established because, in his words, "it was becoming clear that EO, however well-established, carried a lot of political baggage." Sandline undertook its first major operation later that year, when it was hired by the government of Papua New Guinea to subdue the rebel-held island of Bougainville, home to one of the world's largest copper mines. The mission turned into a fiasco when regular army troops rose up against the employment of Sandline's rival mercenary force, which largely consisted of subcontracted EO troops.

In 1997, Sandline was hired by the ousted president of Sierra Leone, Ahmed Tejan Kabbah, to fight rebels in the war-torn West African state, a mission previously carried out by EO. That episode also ended in controversy when Sandline was found to be shipping arms in contravention of an embargo. It later emerged that the operation was funded in return for diamond concessions by Rakesh Saxena, an Indian businessman wanted in Thailand for embezzlement.

Spicer left Sandline in 2000. The company ultimately ceased operations in 2004, not long after Spicer had been called into the Foreign Office to discuss a coup attempt that was about to be launched by his former colleague Simon Mann in Equatorial Guinea.

Mann hoped to put in place a puppet government that would allow real power in the oil-rich West African state to be exercised by the Bight of Benin Company, an entity explicitly modeled on past British imperial ventures like the East India Company. Instead, the attempt collapsed with Mann's arrest in Zimbabwe, where he remains in prison.

Researchers later discovered that Mann's plan closely resembled an earlier attempt in 1973 involving acquaintances of the author Frederick Forsyth, who presented a thinly fictionalized version of the episode in one of his best known novels – The Dogs of War.

Forsyth was himself an investor in Spicer's new company, Aegis Defense Services, which by this time had won one of the largest U.S. security contracts in Iraq.

Unlike the weak governments that previously employed PMCs, the U.S. does not have to resort to paying off contractors with mineral concessions. Nevertheless, there are signs that the older business model is reemerging in Iraq.

"I don't subscribe to the view that there is a civil war going on, but if the coalition left it could very easily disintegrate into one," Spicer told the Guardian last year. "The Iraqi security forces are not ready to take control. And therefore there would be a very significant increased role for private security – protecting critical infrastructure like oil, power station and water supplies, otherwise the insurgents will blow them up."

Tony Buckingham's Heritage Oil has been present in Iraq for several years. Earlier this month, it was one of four companies to receive production-sharing contracts from the Kurdish regional government, in the face of opposition from the Iraqi central government and the U.S. State Department.

"The Kurds are basing the agreements on a regional Kurdish hydrocarbon law, and that law still needs to be married up with a federal hydrocarbon law," one U.S. embassy official told the Canadian Press. "The real question is why would any company be willing to invest significant capital in a deal that would likely be at some point subject to challenge within the Iraqi courts."

The Financial Times report on the deal suggests one answer to that question: "Industry sources said the status of Heritage in Iraq could be boosted because of Mr. Buckingham's connection to Tim Spicer, who ran Sandline and whose company Aegis provides security services to the U.S. government in Iraq."

Given the fault lines between the Iraqi government and the Kurds over the oil law and possession of the oil-rich city of Kirkuk, the perception that Tony Buckingham's business comes with Tim Spicer's military muscle could prove a destabilizing factor.

The dangers are illustrated by the current situation in the Great Lakes region of Africa, where Heritage Oil is a key player in oil exploration along the border between Uganda and the Democratic Republic of Congo.

In recent months, the company has been embroiled in two border incidents that have sparked new fears of war in a region already devastated by conflict.

In August a British geologist, Carl Nefdt, was killed aboard a Heritage Oil barge on Lake Albert, during a firefight between Congolese and Ugandan troops.

Uganda's Sunday Monitor later suggested that Heritage Oil had benefited from the resulting military standoff: "Sources say it is now getting better cooperation from Joseph Kabila's government (in the face of threats by Uganda to reenter). Before this, Heritage had made it publicly known that Kinshasa was at best dilly-dallying about activating the exploration concession agreement it signed with Kinshasa."

A Heritage barge was also said to be involved in border clashes last month.

Years of war have left the resources of the eastern Congo open to plunder by neighboring powers. Given its weak hold over the region, the Congolese central government is particularly wary of Heritage's track record.

"Sources familiar with this matter say Kinshasa is unhappy about the relationship Heritage might be enjoying with Executive Outcomes (EO) – a mercenary outfit of ex-South Africa army commandos," the Monitor of Kampala reported earlier this month. "They also see EO's probable links with President Museveni's brother, Gen. Salim Saleh, through his Saracen Guards company, as being potentially problematic."

By enlisting private military companies, the U.S. has turned to an industry that has its roots in the struggle for the resources of weak African states. In doing so, it may have unleashed forces that have little to gain from successful state-building in Iraq.