On installment

Spiegel has a detailed account of how Germany paid millions of dollars to ransom two engineers held hostage by a criminal or terrorist gang in Iraq only a short period after it had finished ransoming German national Susanne Osthoff. The crisis began when two Germans were sent by their employer to provide technical assistance to a new factory. Unfortunately the factory was a short distance from the volatile Sunni triangle and the Iraqi charged with guarding the two Germans may have been complicit in the kidnapping of his charges.

When the two men arrived on January 21, each was carrying two salamis in his luggage. Before they'd even had breakfast, they realized that they wanted out. "We were not aware that this was one of the most dangerous parts of Iraq," Nitzschke told the Leipziger Volkszeitung after returning to Germany. Within three days, on January 24, heavily armed, masked men plucked the two Germans from the street on their way to work. At first, Nitzschke thought the kidnappers had made a mistake, and that he and Bräunlich couldn't possibly be important enough to be targeted in a kidnapping. Besides, the man who had been assigned to keep the two engineers safe had repeatedly told them that Beiji was completely quiet. The man, an Iraqi exile who speaks German, had turned up at Cryotec's headquarters in the eastern German city of Bennewitz weeks before and had accompanied Bräunlich und Nitzschke wherever they went in Beiji. Authorities now have their suspicions about the man's motives in the case.

A military rescue option presented itself in the hours immediately after the kidnapping, but it was rapidly foreclosed by indecision. No one was willing to take responsibility for authorizing an armed rescue mission which might go wrong.

On the first day of what would become a 99-day ordeal, when every minute was crucial, the authorities faced a dramatic decision of which the public was still completely unaware. United States military personnel had managed to pinpoint the location of a mobile phone that had been used by one of the two hostages. The Americans wanted a go-ahead from Berlin to send ground troops to the location while there was still hope of finding the two men. The signal from the phone was fading and time was running out. The German government, acutely aware that their window of opportunity would close once the phone's battery was empty, was faced with a difficult choice: Was it willing to risk everything? Even the possibility of both hostages being killed in an attempted rescue? In a surprisingly open discussion, German authorities in Berlin refused to rule out a military strike. But the phone's signal died before they could reach a decision.

Without a military rescue option left the German crisis team was reduced to finding ways to negotiate their ransom.

Although Merkel insists that it is the German government's policy not to yield to blackmail when it comes to political demands, demands for ransom are another story. From this standpoint, a government that simply pays a ransom -- without giving in to political demands -- isn't truly making itself a victim of blackmail. ... an Iraqi informant ... contacted the BND and gave them directions he claimed would lead them directly to the hostage-takers. The first thing the BND agents wanted ... was reliable evidence that the two hostages were still alive. [Code name] "Helper" was dispatched with questions only the hostages could answer: Which schools did they attend, and what were their girlfriends' birthdays? The informant did in fact return with the correct answer to one of the questions, and it was then that the haggling began.

The main problem with running intermediaries was the chance that they might be picked up or engaged by Coalition forces. In order to de-conflict the negotiations from Coalition surveillance the German team arranged for the US to provide aerial transportation for their operation.

Everyone was ready and everything had been prepared: a suitcase of cash, a small delegation from the BKA and BND, a team from Germany's GSG 9 special forces and a helicopter provided by US forces to fly the hostages to Baghdad upon their release. Without backup from the Americans, the crisis task force feared, even the German agents could fall into the hands of the kidnappers during the planned handover near Beiji.

Just then the Golden Mosque in Samarra was bombed and fighting between Sunnis and Shi'ites aborted negotiations as the kidnappers went deeper underground. Berlin was left to sweat as their slender line of communication to the kidnappers was cut. At this point another pair of intermediaries turned up promising to put Berlin back in contact with the kidnappers. The Germans debated whether to trust the new middlemen, who rapidly ratcheted up the ransom price into the $20-30 million range.

The Germans were faced with a difficult choice. On the one hand, they reasoned, more intermediaries could increase the chances of success. On the other hand, could it be that the kidnappers were simply opening a bazaar and sitting back to see which intermediaries could deliver the biggest ransom from Germany?

The Germans decided to reject the new contacts and stick with their original go-between, code-named "Helper". Further intelligence brought disturbing news: some of the kidnappers were mentally unbalanced or pathological and could break away from the main group to start a game of their own. There was the real prospect that the German engineers would be kidnapped from the kidnappers by an internal faction seeking a higher ransom or the sadistic fun of killing them. "In a frantic attempt to prevent the Iraqis from losing their nerve, the Germans even considered paying an advance".

But despite every inducement no deal could be closed. Finally the German Ambassador, acting on his own, made contact with "an influential sheikh from the Shammar tribe" who produced a handwritten note from the engineers to show he was in touch. There were now two channels to the kidnappers and a auction which would not have been out of place at Sotheby's commenced, one through "Helper" and the other through the Shammar sheikh. The price spiraled higher as auction proceeded. Finally, just when the gavel was set to bang another actor entered the picture to muddy the waters: Al Jazeera.

Officials at the crisis task force had heard that Arab news network Al-Jazeera had gotten wind of the upcoming hostage transfer and might air a story ... the deal could fall apart ... and in the early morning the sheikh had Bräunlich and Nitzschke ... driven from Beiji to Baghdad ... instead of driving them directly to the German embassy, the intermediary first took Bräunlich and Nitzschke to another hiding place where they spent the last few hours ... waiting for the German negotiators to deliver the ransom money.

The money was paid and the engineers were released. A sigh of relief was breathed in Berlin as even as the hostages celebrated their freedom with their girlfriends who had been flown to meet them. But although 76% of Germans surveyed supported the ransom payments, officials were worried about where it would all lead. Where 5 million dollars was enough to ransom 14 hostages in the Sahara in 2003, the same amount was barely enough to secure the release of one hostage -- Susanne Osthoff -- in Iraq; and the ransom for the two engineers was "reportedly much higher" than Osthoff's. "Security officials are especially concerned that the affair could now mean that every German carries a price tag, and that the price placed on German hostages' heads is likely to balloon because their government is seen as being all too willing to give in to ransom demands."

Commentary

Nothing except scale distinguishes the kidnapping of the two German engineers from the Mohammed cartoon shakedown. Both identically involve the demand for concessions in exchange for the removal of a threat. Both exploit the asymmetry between short and long term interests to force the result. The short term interest of a kidnapping victim's relatives is to pay just as the immediate interest of a newspaper is to apologize to get the circulation numbers going. And so they pay and they apologize. Politicians with an eye on the opinion polls operate on similarly short time scales. Whatever damage appeasement or ransoms may cause to the country, it can safely be dumped on future generations of politicians, who will most likely belong to the opposition party anyway, and isn't that a good two for one value deal? What matters is the next election cycle; the next day's headlines; the next talk show's soundbites. Political externalities, like environmental ones, are borrowings against the future. They represent a kind of inter-generational debt.

What ultimately keeps this scheme from progressing indefinitely is the rapidly decreasing interval between the time a new political debt is incurred and the time it falls due. At first the consequences of appeasement will be slow in appearing but gradually they present themselves with increasing rapidity. Eventually the consequences of appeasement come so quickly that they occur within the same election cycle and politicians find the need to reinvent themselves as "statesmen". Upheavals are history's way of retiring the mountain of political debts earlier generations of hacks have accumulated. The Germans who supported the ransoms should be told that despite the millions disbursed they haven't paid yet.

The best extortionists understand the necessity of limiting shakedowns to keep from spoiling the market. If a thug asks a saloon keeper for a small amount of money each month to ensure "protection" the saloon keeper will likely pay because it is too much bother to fight over a trivial sum. But if the extortionist progressively increased the amount and the frequency of his demands, the saloon keeper would eventually resist. Either personally or in concert with other saloon keepers; either directly or by hiring muscle to resist the extortionist. Therefore the minimally organized criminal will keep other thugs off his turf and sustainably harvest his resource. Extortion like fishery means that unless limits are imposed on the catch the resource will collapse or in this case, rebel.

Terrorism, especially of the Islamic extremist variety, is characterized by the absence of central authority. There is no religious Supremo, or if you prefer, no Godfather. In the case of the two engineers the German authorities were confronted by a plethora of "intermediaries" each offering to sell the victims back to Berlin. At one stage the German negotiating team feared factions would kidnap the engineers from the kidnappers, as sharks snatch bloody mouthfuls from each other in a feeding frenzy. The Germans were also dismayed by the fact that, shortly after having shelled out $5 million for Osthoff that they should be hit again so soon. They had paid for "protection" and were disappointed that it bought them no respite.

The inability of terrorist groups to stay bought, or if you prefer, to keep a deal, was a principal problem in dealing with the Palestinian "leadership". Despite the billions given to Arafat there was always some faction, some new terrorist group that refused to go along with the latest ceasefire or keep the latest deal. If one paid Fatah, Hamas would come calling. If one paid Hamas, yet another group would present itself. Each Peace Deal collapsed because there was always someone on hand to break the deal; to make a new a demand. The reason why nuclear weapons in terrorist hands are so dangerous is that unlike Russia during the Cold War, there is no one to deter; no Godfather to show Respect; no single Boss to pay off; no one with which to make a deal. That makes the short term impulse to accommodate radical Islam so dangerous. Rather than strike a deal it creates the incentive for every storefront Imam or neighborhood leader to get in on the act. Perhaps the sheik of Shammar had nothing to do with the original kidnapping, but once it clear what the game was the temptation to join became irresistible. He too became an "intermediary".

In the end the upward spiral in ransoms will "spoil" the market. Things eventually reach the point where even the most supine politicians will refuse to pay and transform themselves into statesmen, where statesmanship is defined as the act of rediscovering vision long after darkness has fallen.