Abstract
This paper examines how states deliberately employ terrorist organisations as instruments of foreign and domestic policy, distinguishing between active sponsorship, passive enabling, and varying degrees of commitment ranging from strong to antagonistic support. It first situates state-sponsored terrorism within broader debates about the definition of terrorism, emphasizing how definitional ambiguity and plausible deniability enable states to frame proxies as autonomous actors while reaping strategic benefits. Drawing on theories of asymmetrical warfare, realism, and constructivism, the study argues that sponsoring terrorism functions as a cost-effective “weapon of the weak,” allowing states to erode stronger adversaries’ will and capacity without incurring the political and material costs of conventional war. Through contemporary case studies of Iran and Pakistan, it analyses how proxy networks such as Hezbollah, the Taliban, Lashkar-e-Taiba, and Jaish-e-Mohammed are cultivated, funded, and integrated into state strategy, including the financial and organisational infrastructures that sustain them. The paper further explores the phenomenon of blowback, showing how long-term reliance on jihadist proxies in arenas like Kashmir and Afghanistan has generated severe internal instability, sectarian violence, and enduring security liabilities for sponsor states themselves. It concludes that understanding the mechanisms, motivations, and unintended consequences of state-sponsored terrorism is essential for designing nuanced policy responses that move beyond treating all sponsors as uniform and instead target the specific configurations of support that make proxy violence such a resilient feature of global politics.
Keywords: State-Sponsored Terrorism, Proxy Warfare, Asymmetric Conflict, Non-State Actors, Pakistan
Introduction
States and terrorist groups have long had a deadly relationship. During the 1970s and 1980s, almost every important terrorist group had some ties to at least one supportive government. Iran backed the Lebanese Hezbollah, the Palestine Liberation Organization (PLO) (as well as its rivals) drew on support from a host of Arab states. At times, these connections were far-flung and seemingly bizarre. Libya, for example, helped arm the Provisional Irish Republican Army (PIRA), and Damascus had links to the Japanese Red Army (JRA). The Soviet Union and several Eastern European states backed Palestinian and Western European terrorist groups, among others.
With the end of the Cold War, one of the major sources of state sponsorship, the communist government in the Soviet Union and its puppet regimes in Eastern Europe ended. The severing of the link between the US-Soviet competition and terrorism decreased the strategic importance of fighting terrorism in the eyes of many observers, as did the decline or collapse of many Marxist groups whose credibility fell along with the Soviet regime. While the importance of terrorism grew again in the 1990s and skyrocketed after al-Qaeda's devastating September 11, 2001 attacks, the focus on state sponsorship continued to decline. Indeed, in the wake of the September 11 attacks, policymakers made much of al-Qada's non-state nature and dismissed a focus on states as unimportant or "old thinking."
Such a dismissal, however, suggests a superficial understanding of terrorism in general and of al-Qaeda in particular. The Lebanese Hezbollah, HAMAS, and the Kashmiri Hizb-ul-Mujahedin are only a few of the many successful terrorist groups active today that maintain close links to states and work with them in a variety of ways to advance their goals. Even al-Qaeda itself relied heavily on states, first working with the Islamist regime in Sudan and then in 1996 becoming closely intertwined with the Taliban's Afghanistan. Investigations of the September 11 attacks suggest that an operation of such scale and lethality would have been far more difficult for al-Qaeda to pull off had it lacked a haven in Afghanistan.
Policymakers have recognized this convergence between states and terrorists in their rhetoric at least. In his historic speech to Congress in the wake of the September 11, 2001 attacks, President Bush declared, "Every nation, in every region, now has a decision to make. Either you are with us, or you are with the terrorists.
From this day forward, any nation that continues to harbor or support terrorism will be regarded by the United States as a hostile regime." This logic was used to justify the 2001 invasion of Afghanistan. Moreover, President Bush's linkage of terrorist groups and their sponsors established what many called "the Bush Doctrine."
States sponsor terrorists as their proxies for a variety of reasons. The most important is often strategic interest: terrorists offer another means for states to influence their neighbors, topple a hostile adversary regime, counter US hegemony, or achieve other aims of state. Pakistani-backed radical groups have undermined the governance of Kashmir and tied down hundreds of thousands of Indian Army forces.
Defining State Sponsored terrorism
Defining terrorism is not a straightforward matter. There is no single internationally accepted definition of what constitutes terrorism, and the terrorism literature abounds with competing definitions and typologies.
The primary challenge in analyzing state sponsored terrorism lies in the persistent lack of a universally accepted definition. Academic literature and government sources contain at least 250 distinct definitions of "terrorism," many of which are shaped by ideological or political biases. This definitional ambiguity is strategically leveraged by states, which often possess the power to frame the actions of adversaries as "terrorist" while categorizing their own use of force, or that of their allies, as "counter-terrorism" or "legitimate self-defense". In the context of international law, the term typically refers to the intentional use of violence against civilian or military targets by private groups that possess covert state support, intended to achieve political objectives outside of acknowledged war zones. A lack of a definition, however, creates more problems than it solves. Labeling an act as terrorism quickly becomes meaningless. Depending on the speaker, terrorism becomes a synonym for crime, for peaceful political activity, for state repression, and for other phenomena - both desirable and horrid - that are quite different in purpose, nature, and impact. Similarly, by lumping all state actions with regard to terrorism into one category, we lose the opportunity to recognize different motivations and, more importantly, to craft more effective solutions that require a nuanced understanding.
State-sponsored terrorism refers to the covert or overt support of terrorist groups by a state,providing them with resources, intelligence, or protection to carry out acts of violence against another state or group (Collins 2014). This form of terrorism is often used as a strategic tool, allowing states to achieve geopolitical objectives without direct involvement or accountability. Proxy war, by contrast, involves indirect engagement in conflict, where states utilize non-state actors,militias, or other third-party groups to fight on their behalf.
This form of terrorism can be divided in several classifications and sub-categories, spanning from a state’s direct domination of terrorist-related activities to its incapacity to obstruct terrorist groups operating from within its territories. In other words, there are active and passive forms of state-sponsored terrorism. This type of terrorism in its active type is the intentional action taken by a certain regime to harbor terrorist groups, either in the form of weapons’ supply, financial support or provision of safe haven or other logistic support. In some rare cases, states go as far as coordinating the operations of terrorist cells in the event that such behavior serves the state’s national and strategic interests. On the other hand, passive state-sponsored terrorism emerges when the deliberate negligence, regardless of the reasons, whether a) incapacity or b) tolerance or c) lack of concern, of a certain regime leads to terrorist groups active within the territory of a given state, which results in an increased operational capacity by such terrorist groups. (Byman,2007)
At times, the greatest contribution a state can make to a terrorist’s cause is by not acting. A border not policed, a blind eye turned to fundraising, or even the toleration of recruitment all help terrorists build their organisations, conduct operations and survive.
Passive support has the following characteristics: i) the regime in question itself does not provide assistance but knowingly allows other actors in the country to aid a terrorist group; ii) the regime has the capacity to stop this assistance or has chosen not to develop this capacity; and iii) passive support is given by political parties, wealthy merchants or other actors in society that have no formal affiliation with the government.
Such passivity in the face of terrorism can be deadly. In conducting the 11 September 2001 attacks, al-Qaeda recruited and raised money in Germany with relatively little interference, enjoyed financial support from many Saudis unobstructed by the government in Riyadh, and planned operations in Malaysia. None of these governments are active sponsors of al-Qaeda but their inaction proved vital to al- Qaeda’s success.
Daniel Byman (2007) defines state sponsorship of terrorism as “a government's intentional assistance to a terrorist group to help it use violence to bolster its political activities, or sustain the organization.”
Historically, state-sponsored terrorism has been a recurring feature in global geopolitics, particularly during times of heightened tension or conflict between states. A notable example is the Cold War, where both the United States and the Soviet Union supported insurgent groups and militant organizations as part of their broader strategy of global influence (Pfaff 2024). Iran's long-standing support for Hezbollah, Pakistan's involvement with militant groups in Kashmir, and the US backing of anti-Soviet fighters inAfghanistan during the 1980s exemplify how states have effectively used terrorism as a proxy tool to exert influence and destabilize opponents (Al-Aloosy 2023; Behera 2001; Hartman 2002; Khan and Zhaoying 2020). These actions allowed states to pursue aggressive policies while maintaining plausible deniability and avoiding direct-military confrontation.
The question of intention, however, is complex. Leaders of Iran and the Taliban's Afghanistan, for example, at times openly boasted of their support for terrorist groups. Other government leaders are less enthusiastic about their regimes' ties to terrorists and often try to hide the level of support. Posing yet another wrinkle when examining intentions, the citizens of some states, such as Saudi Arabia, often support terrorist groups with little government interference. In such cases, the govern-ments may have knowingly turned a blind eye to radical activities, but this is a far cry from open support
There are other several types of state
Strong supportersThese backers are both highly committed to the terrorist group and are able to offer it significant resources. Iran's support for the Lebanese Hizbollah exemplifies this category
Weak supportersIn this category fall regimes that support the terrorist group but have few resources to do so. The Taliban's backing for al-Qaeda would be an example of a weak supporter
Lukewarm supportersA regime may favor terrorists or their cause in a general sense but do little to advance it directly. Iran, for example, maintains ties to a number of radical Shia groups in the Persian Gulf, but after the 1996 Khobar Towers bombing has done little to advance their cause.
Antagonistic supportersSome states support a terrorist group but seek to control it or weaken its cause. Syria's often hostile relationship with several Palestinian groups, including Yasir Arafat's Fatah, typifies such an ambivalent relationship.
Why do states support terrorism?
Most governments shun terrorists both for their brutality and for the illegitimate nature of their tactics. Terrorism, after all, is murder. Moreover, terrorist groups often enjoy little support among the publics they purport to represent. Nor are terrorists promising horses to back, as they often have little chance of prevailing, particularly at the beginning of their struggles. Supporting a terrorist group also often carries a heavy price, as the group's opponents may seek to punish a sponsor. Not surprisingly, many states turn to diplomacy, economic pressure, or even conventional war before embracing terrorism. Yet despite being such unsavory and unpromising partners for states, many terrorist groups regularly receive state support. This support is forthcoming because the terrorist group can serve the strategic interests of foreign states, gain their leaders' sympathy for ideological reasons, or play a role in bolstering leaders' domestic positions.
Understanding motivations is vital both for predicting when a state might support a terrorist group and for determining how to end this backing. Regimes seeking to spread their ideology, for example, are in general far less amenable to standard forms of coercion or inducement, and such measures may even make them more likely to support terrorists. Regimes that are trying to gain a strategic advantage over their neighbors, in contrast, may be more willing to end their support if the costs become too high.
Key theoretical approaches such as asymmetrical warfare, realism, and constructivism offer distinct perspectives on why and how states resort to supporting non- state actors for violent means in pursuit of their geopolitical objectives. Asymmetrical Warfare theory is heavily influenced by the works of authors such asAndrew Mack in his essay, “Why Big Nations Lose Small Wars: The Politics of Asymmetric Conflict”, and Ivan Arreguín-Toft in “How the Weak Win Wars: A Theoryof Asymmetric Conflict” (Arreguín-Toft 2001; Mack 1975). These works explore how weaker non-state actors or smaller states can effectively combat stronger adversaries using unconventional tactics, such as terrorism. In the context of proxy wars, states often back terrorist groups because they offer a cost-effective means to wage warfare, targeting vulnerable areas of stronger adversaries. As Arreguín-Toft argues, asymmetrical warfare forces the more powerful state into prolonged conflicts that wear down their resources and political will, making terrorism a particularly useful tool in such engagements (Arreguín-Toft 2001).
Terrorism itself is often considered a "weapon of the weak." As Bruce Hoffman notes, many terrorists argue that the "bomb-in-the-rubbish-bin" is simply a "poor man's air force." This rationale, while of dubious moral force, does have a strategic logic. Many states lack the instruments of national power that Americans, and citizens of other advanced industrial countries, take for granted and thus have few means of achieving their ends. Moreover, using terrorist proxies rather than government agents allows a degree of deniability, which in turn reduces the chances of retaliation from more powerful states that possess stronger economies and militaries.
However, many state leaders do not support terrorists, considering it an illegitimate instrument of statecraft, despite having strategic or domestic incentives to do so. Terrorism and war crimes have many similarities, the most important of which is the deliberate targeting of non-combatants. States that employ terrorists are in essence knowingly supporting the commission of war crimes (albeit by a non-state actor). While states have committed, commit, and will commit war crimes, many shy away from doing so or at least try to limit such acts to highly unusual circumstances. This may be because of the morality of the leaders themselves, the difficulties of maintaining public support for a cause if it involves innocent suffering, the inevitable decline in inter-national backing that comes with war crimes, or all three. States with robust media may be particularly loath to go down this road, as covert use of terrorists is far more likely to be revealed, thus negating the advantages of deniability.
The idea of plausible deniability enables states to advance interests while evading international condemnation and military retaliation. By maintaining organizational separation between the sponsoring state and the terrorist group, governments can claim they merely host autonomous actors rather than actively directing violence.
The strategic value of proxy warfare lies in Liddell Hart's "indirect approach"—eroding an enemy's resistance through attrition rather than decisive confrontation. States perceiving conventional military inferiority leverage proxies to impose cumulative costs on adversaries, creating stalemate conditions that alter strategic perceptions. The elongation of conflict through proxy support drains resources and political will from target states, even if ultimate military victory remains elusive.
Financially, state sponsorship proves cost-effective compared to conventional military operations. Training, arming, and sustaining non-state actors requires a fraction of resources needed for direct military engagement while enabling states to maintain influence over regions where open intervention would provoke international resistance or prove politically infeasible. States resort to terrorism sponsorship for rational strategic calculations rooted in cost-benefit analysis. Cost reduction and risk management constitute primary motivations: proxies absorb combat casualties and military expenditures, shielding sponsor states from domestic political blowback and military losses. A state can achieve geopolitical objectives , destabilization of rival regimes, territorial control, regional influence expansion without the massive investment and public exposure required for direct military intervention.
Contemporary Case Studies
Iran:
Iran exemplifies the sophisticated, sustained model of state-sponsored terrorism in contemporary geopolitics. Designated a state sponsor of terrorism continuously since 1984, Iran has developed a comprehensive proxy network spanning Lebanon, Syria, Iraq, Yemen, and Palestine. This network serves Iran's twin strategic objectives: a) in the absence of conventional military parity with regional rivals it becomes easier to adopt a different model b) furthering ideological goals that are rooted in the 1979 Islamic Revolution. Hezbollah stands as Iran's primary beneficiary. Iranian financial support exceeded $700 million annually as of 2018, according to the U.S. Treasury Department estimates, though this figure declined subsequent to U.S. sanctions and oil price collapses. Beyond funding, Iran's Islamic Revolutionary Guard Corps (IRGC) provided intensive military training, explosives instruction, and direct operational integration. Iran expanded its proxy network significantly following interventions in Syria and Iraq. By 2013, Iranian-aligned militia groups (IAMGs) received advanced weaponry, artillery, rockets, and drones, with Syria serving as the crucial transit corridor for weapons shipments to Hezbollah. One of the most studied examples is Iran's support of Hezbollah, which began in the 1980s and continues today. This relationship is grounded in both strategic and ideological motives. From a realist perspective, Iran's support for Hezbollah serves as a strategic tool to counterbalance Israel’s influence in the region (Khan and Zhaoying 2020; Mens 2024; Nilsson 2020). By financing, arming, and training Hezbollah, Iran enhances its geopolitical reach in Lebanon without engaging in direct military confrontation
Pakistan:
The Soviet-Afghan War of 1979 was the point when Pakistan’s Inter-Services Intelligence (ISI), backed by U.S. funding, systematically cultivated jihadi infrastructure that evolved into today’s sophisticated terror network. Pakistan's Inter-Services Intelligence (ISI) agency has maintained continuous support for the Taliban since the movement's inception in 1994, exemplifying how proxy relationships can produce blowback when strategic priorities diverge. The ISI provided foundational training, funding, and military equipment to Taliban forces fighting the Soviet-backed Afghan government and, later, Soviet forces themselves during the 1979-1989 occupation. Even following 9/11 and Pakistan's nominal alignment with U.S. counterterrorism efforts, the ISI sustained Taliban operations through covert channels. A key outfit is the Lashkar-e-Taiba (LeT). The LeT emerged in the 1990s as Pakistan’s premier proxy organisation against India; it operates under Hafiz Muhammad Saeed, a designated terrorist operating in Pakistan despite international sanctions sanctuary in Pakistani border regions and training camps.The group’s operational sophistication is demonstrated through attacks such as the 2008 Mumbai attacks where 166 people were killed; the 2006 Mumbai train bombings (209 killed) and more.
Then there is the Jaish-e-Mohammed (JeM). Established in 2000 by Masood Azhar following his ‘release’ during the IC-814 hijacking, the JeM represents Pakistan’s suicide terrorism capability. JeM’s operational history includes the 2001 Indian Parliament attack, and the 2019 Pulwama suicide bombing where 40 security personnel were killed. The group pioneered fidayeen (suicide) attacks in Kashmir and have demonstrated sophisticated capabilities with respect to vehicle-borne Improvised Explosive Devices (IED) and military installation infiltration.
The most damning evidence comes from Pakistan itself — former President Pervez Musharraf openly admitted to training terrorists for Kashmir operations, while former Prime Minister Nawaz Sharif confirmed state support for terrorist groups. Recently, the current Pakistani minister for foreign affairs said that they have been doing the “dirty work” for Western powers for a long time. A similar statement was also recently made by Bilawal Bhutto.
The funds sustaining this infrastructure operate through sophisticated mechanisms designed for plausible deniability. Religious charities serve as the primary collection points, with 40+ identified front organisations raising $150-200 million annually. Other sources include state funding through classified budget allocations (estimated $100-125 million annually); money laundering operations through hawala networks, with major hubs in Dubai, Karachi, and Peshawar; narcotics trafficking along the Afghanistan-Pakistan-India corridor generating an estimated $75 million annually; and cryptocurrency, with inputs indicating $15+ million moved through crypto channels in 2023
Blowback of state sponsored terrorism
The risk of proxy defection escalates when sponsorship ends or diminishes. Mujahideen fighters trained and armed by the U.S. and Pakistan against Soviet forces in Afghanistan during the 1980s included figures like Osama bin Laden who later directed violence against both former sponsors. The organizational and technical capacity developed through state sponsorship persists regardless of state intent, creating generational security liabilities.
Since the outbreak of violence in Kashmir that has claimed perhaps 60,000 lives, Pakistan has worked with a range of militant organisations – most of them Islamist ones – active against Indian rule there. These organisations have regularly split, merged and changed names, but among the most important are Jaish-e-Mohammad, Harkat-ul-Ansar/Harkat-ul-Mujahedin, Lashkar e-taiba and Hizbul Mujahideen. With the support of the government, these jihadist groups raise money and recruit militants to fight in Kashmir and have access to training and weapons for their volunteers. Equally important, they have worked with Islamist political movements in Pakistan.
By supporting the jihadist cause, Pakistan has weakened its own stability. Many Islamists, including those not linked to violence, do not separate domestic Pakistani politics from their actions in Afghanistan and Kashmir. The result has been tremendous sectarian violence. Many of the Islamist activists also want a new regime in Islamabad. As one member of Lashkare-Taiba commented, ’We won’t stop – even if India gave us Kashmir ... We want to see a Taliban-style regime here.” And several groups are good to their word. Even before the post-11 September crackdown, in 1999, one Sunni group, Lashkar-e-Jhangvi, tried to assassinate Prime Minister Muhammad Nawaz Sharif. Musharraf also suffered repeated assassination attempts after 11 September. The 11 September attacks made supporting al-Qaeda, even indirectly, far riskier for the Musharraf government. Angering Washington might have moved the United States permanently into India’s camp and risked destroying Pakistan’s wobbly economy. Siding with the United States halted the tilt toward India and provided a sorely needed financial infusion. Pakistan’s military in particular benefited. The United States pledged $3bn to Musharraf’s government in security and development aid and waived many sanctions that had been imposed due to Pakistan’s nuclear programme.
Conclusion
State-sponsored terrorism remains a powerful tool that many governments quietly use to pursue their interests while avoiding open war. By funding, training, arming, or sheltering terrorist groups, states can weaken their enemies, influence neighbouring regions, and project power without putting their own soldiers directly on the battlefield. This “indirect” method fits especially well within asymmetric warfare, where weaker states or those facing military disadvantages look for cheaper and more flexible ways to challenge stronger opponents. However, the article shows that this strategy is not only morally problematic but also extremely risky for the sponsoring states themselves. The cases of Iran and Pakistan demonstrate how long-term reliance on proxies such as Hezbollah, the Taliban, Lashkar-e-Taiba, and Jaish-e-Mohammed can produce serious unintended consequences. These groups often gain their own autonomy, develop independent agendas, and contribute to regional instability, sectarian violence, and even direct threats to the sponsor’s internal security and political order. For the international system, state-sponsored terrorism blurs the boundaries between war and peace and makes it harder to assign responsibility for violence. Because support can be both active and passive, and because states hide behind plausible deniability, it becomes difficult to hold them accountable under international law or through traditional diplomacy. Any effective response must therefore move beyond simple blame and instead focus on understanding why states choose this strategy, how their support is organised, and how those networks can be disrupted. The key takeaway here is that state-sponsored terrorism is not an accident or side-effect, but a deliberate and rational instrument of foreign policy that shapes regional politics and creates long-term security problems that are hard to reverse.
References:
Al-Aloosy, M. (2023). Proxy warfare and the transformation of Middle Eastern conflicts. Arreguín-Toft, I. (2001). “How the Weak Win Wars: A Theory of Asymmetric Conflict.” International Security, 26(1), 93–128.
Behera, N. C. (2001). Demystifying Kashmir.
Byman, D. (2007). Deadly Connections: States that Sponsor Terrorism. Cambridge University Press.
Collins, A. (2014). Contemporary Security Studies (3rd ed.). Oxford University Press.
Hartman, A. (2002). The United States and the Cold War’s “blowback”: Afghanistan and the rise of militant Islam.
Hoffman, B. (2006). Inside Terrorism. Columbia University Press.
Khan, A., & Zhaoying, L. (2020). “Iran’s Proxy Strategy and the Hezbollah Model.” Journal of Middle Eastern Politics, 14(3), 45–67.
Liddell Hart, B. H. (1967). Strategy: The Indirect Approach. Faber & Faber.
Mack, A. (1975). “Why Big Nations Lose Small Wars: The Politics of Asymmetric Conflict.” World Politics, 27(2), 175–200.
Mens, J. (2024). “Hezbollah as a Strategic Arm of Iranian Foreign Policy.” Middle East Policy Review, 18(1), 22–40.
Nilsson, M. (2020). “Patron–Client Dynamics in the Iran–Hezbollah Relationship.” Studies in Conflict & Terrorism, 43(10), 850–873.
Pfaff, C. (2024). Great Power Competition and Proxy Warfare in the 21st Century. U.S. Army War College Press.
United States Department of the Treasury. (2018). “Treasury Designates Iran’s Financial Support to Hizballah.” Press release.
United States Department of State. (Various years). Country Reports on Terrorism (Iran, Pakistan sections).United States Department of State. (Various years). Country Reports on Terrorism (Iran, Pakistan sections).
