I'm fascinated by this concept. I'm accustomed to military contractors, being one myself; but watching State do what MPRI does is really interesting. We know why the story is in the news now, but it's still bigger news than most people realize. My sense is that this story is correct: State and CIA are both so tied to Blackwater in Iraq that they hit a period where they were stalled because it was stalled.
That's something that shouldn't be allowed to happen; but it's not clear why it did happen. If State were guarding its own convoys with internally owned security assets, it wouldn't allow them to become shut down. The separation here is artificial -- State needs these assets, whether it owns them or contracts them -- but it allows State to plausibly deny responsibility.
For a diplomat, that would be a useful advantage. "It's not me!" he can cry, pointing his finger at the guy he hired to do the job. It won't hurt Blackwater, not in the long run, because the country needs what they've got. It isn't honest, but then, diplomacy often isn't.
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