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East meets West, but will Lenovo and IBM come up like thunder outer China 'crost the Bay?


It is an understatement to say that, "Lenovo has shown an uncanny ability to extract expertise from its many technological partnerships" and distribution partners. Once it learned to make PCs from two distribution partners, AST Research and Acer, it ceased to distribute either brand.

My prediction is that Lenovo will monitor and mimic IBM's ongoing disengagement from the PC sector by its combination of open-source Linux on aggressively priced HW to "push [IBM's] own (high-margin) proprietary middleware, accompanying applications and services." No rocket science needed. One can expect Lenovo to maximize its knowledge gaining in R&D, advanced manufacturing, networking, enterprise architecture, and client-server apps. Were I in Chinese shoes, I would devote some effort to maximize my knowledge of this new customer base and its needs beyond PCs. For its part, IBM may be better able to weather the expected 2006-2008 down cycle while gaining access to a boom period of China's emerging market.

I would like to add an Asian perspective to Lenovo's purchase of IBM's PC business: face gaining, enormous quantities of it, that Lenovo, and by extension, China, is on a par with, and partner to, IBM. This need for prestige cannot be overestimated as China seeks to gain a global reputation as a respected nation. Lenovo moves from the ninth largest PC maker to third while China can be said to have 'bought the best' even though its current sales are primarily within China.

I remind readers that while Western observers yawned when the "divine ship," Shenzhou 5, made its 14 earth orbits and said 'what's new?' beyond a simple four decade-old copycat of US and Russian efforts, they overlooked its electrifying impact in Asia, that an Asian nation had joined the club a privileged Western, occidental club, and that it was China bringing respect to all Asians:

"By the very fact that it is a space power, China already has set itself apart from most other nations, and certainly all the other Asian states. [China's space infrastructure culminating in a manned space mission] place them above even the Japanese, in terms of demonstrated space capabilities. Instead, they are in the same category as ourselves and the Russians."

In Asian eyes, this was no "Great Creep Forward" as some western, even Indian observers mooted, but a massive short-term prestige effort (with military contributions to follow) as the CCP intended, which went so far as to deny foreign input by referring Shenzhou as "China's self-designed manned spaceship." Shenzhou launched with one "taikonaut" - from the Chinese for space - but unlike first Russian and US efforts, was designed from the onset to carry three.

Most of those observers also overlooked the fact that the PRC pushed the mission by Western and even Russian standards -- a marvel that even though Shenzhou was a modified Russian Soyuz with a number of European components -- as the Chinese Communist Party (CCP) made the decision that putting a taikonaut in orbit was an important prestige project, and they preferred it in the Year of the Dragon.

Bear with me as I harp on this: The symbolism of Shenzhou to Chinese and Asian alike was extraordinary. Xinhua News Agency ran specific headlines of "Chinese food for Chinese astronauts,'' noting that "The astronaut will enjoy himself over a rich variety of Chinese food" that included Chinese medicinal herbs and tonics to drink after eating to assist digestion. went further to note that "It will be more tasty than Western food.''

The symbolism of Lenovo's partnership and purchase should not be discarded.

While I agree that joint ventures "usually don't work" unless one partner is passive or there is a small chance of direction competition (and in this case, both firms compete in other sectors but I can see Lenovo quiescent at least through its knowledge gaining cycle), things can fail sooner than expected. I have found two overriding reasons for failure of a joint venture, merger, or any organizational initiative (in any venue and between any countries/ethnic groups) to be:

  • Failure to set and reset mutual expectations
  • Failure to build and maintain a sustaining relationship

When either or both of these needs are breached, the venture will be allowed to flounder onto one of the three "rocks of convenience" - finances, technology, and operations. Unless both sides design ongoing events/interactions that set realistic agendas and expectations, and attempt to develop a relationship that once built, is validated and renewed, one can expect to see the wheels come off sooner than later.

I've found it useful to employ the Three Tests of Gregory III. Active in the 8th century, Gregory applied three tests to every papal bull brought before him:

  • What fairness suggests
  • What the law allows
  • What will work

When things don't "work" as I think they should, I've failed to identify one or more stakeholders or a substantive interest of at least one stakeholder. That becomes quite hard to do in Asia.

IBM sells PC group to Lenovo
By John G. Spooner and Michael Kanellos
CNET December 8, 2004

Why Lenovo-IBM is a tough sell
By Michael Kanellos
CNET December 8, 2004

Gordon Housworth

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Wounds to the US, external and self-inflicted


It is appropriate to end this series with the direct threats to US economic, military, and diplomatic strength, and to note that many of those impacts are due to self-inflicted wounds which show no signs of amelioration.

I submit that bin Laden and al Qaeda is categorically winning the war on terror, despite any numbers of enemy killed or detained, if for no other reasons than the:

  • Vast expenditures that the US is diverting to non-productive military and counterterrorist efforts (deflection)
  • Induced uncertainty and doubt inhibiting business investment (deference)
  • Security efforts that virtually repel foreign nationals that seek employment, education, and safe haven here (personal deflection)
  • Collapse of support for US diplomatic and commercial initiatives in a startlingly large and growing portion of the globe (isolation, even some revenge)

Our own tunnel vision, reactionary steps, and misadventures make for self-inflicted wounds. For al Qaeda's part, they now knows that the best way to attack us is economically (Peter Berger says they know that a dollar expended costs the US a million) and if they cannot get at US soil, then Saudi Arabia will do. This is a war of attrition and al Qaeda can afford to buy time.

Add to that our:

  • Unbounded borrowing for military (some related to the GWOT) and domestic purposes that do not result in increased manufacturing output
  • Demographics race which the US is losing not only to China, but closer to home, Mexico -- which in the case of China had significant GDP impacts that will increasingly impact our military readiness and force projection
  • Cost overhangs of a mature workforce which I do not limit to retirement per se but, say, the roughly $US 2000 tax that goes into the glove box of every US car for health care and pension (all major US competitors have combinations of national health insurance, younger workforces, or little ability to protest)
  • Catastrophic lapse in fostering investment in general higher education, especially the sciences and engineering, especially so as I feel education is an essential national strategic weapon, and was the instrument - not crop production - that allowed the US to make its economic breakout in the 19th century. The PRC can sift the best of its populace and field a technical body equal to the population of the US.
  • Outsourcing of an increasingly larger portion of our GNP to low cost countries with no greater thought than short term lower production costs, and with no national strategic plan - at least to this writer - to replace maturing and sunset industries with sunrise industries (No, I am not against outsourcing per se but we are reaching an accumulative percentage of GNP based upon individual corporate action that the issue deserves some attention from the administration before it significantly awakens voter anger and visits us with equally dim alternatives)

For a thoughtful look at requirements and impacts of globalizing and outsourcing, I recommend World assembly required? which looks at Boeing's efforts retain market share, fend off Airbus, and gain a larger share of Asian markets. As of early 2003, Boeing made 36% of an average aircraft while buying in 64% from domestic and foreign suppliers. That figure is expected to tilt to outsourcing with the new 7E7 Dreamliner (Japan will make a third of it), especially as Boeing holds out the US auto industry as a model. While Boeing forecasts that China will need some 2,400 new aircraft (197 billion USD) over the next 20 years, is earnestly seeking more Chinese participation, the Chinese are categorically not resigned to foreign domination of its airspace. In China tries to break Boeing, Airbus domination with self-made aircraft, the People's Daily says:

China now pins its hopes on ARJ21, (short for Advanced Regional Jet for the 21st century), a self-designed passenger aircraft of the country's own intellectual property rights, to lead its fight against domination by Boeing and Airbus in the aviation industry. ARJ21 is not a large mainline plane, but its birth means [it] will fly side by side with Boeing and Airbus planes. Unlike earlier planes jointly developed with foreign countries, ARJ21 is a completely China designed airplane [and] although a regional jet, ARJ21 is of a higher grade that lies between feeder and mainline jets. "China is now able to make large mainline aircraft, on top of designing, China can also produce and manage mainline aircraft.."

I was amused at this comment:

Since it adopts general equipment of mainline jets, such as Boeing 737, its designing work is more difficult because it's harder to put equipment of the same size for large aircraft into a smaller one.

Applying common product migration strategies, that also means that they are designing in the next generation of aircraft needs that will be able to absorb ARJ21 modules. Difficult, possibly, but more like good family of parts design to me.

The US must have the strategic infrastructure in engineering, manufacturing, and education to compete in that coming environment. A few more allies so that we look less like Snow White and the Seven Dwarfs would also be helpful, but I digress.

We'll wrap up tomorrow with some GDP implications on the ability of the US to support a substantive military-industrial complex.

Part 5

Gordon Housworth

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What could go wrong.. go wrong.. go wrong.. in Asia?


Quite a lot. While it is reasonable, based on current trend lines, to envision the PRC as the center of an Asian mercantile empire, and the Yuan to merit reserve currency status, it is by no means certain if, or when, this will occur. Similarly, it is not yet certain that the US will contract but that is where my trends now point.

The Asia Society and the National Intelligence Council considered key issues influencing Northeast and Southeast Asia through 2020:

Regional scenarios: Fragmentation and Intrastate Conflict, Regional Cooperation / Local Autonomy, Competitive States, China Japan Conflict, China’s Benevolent Dominance

Drivers grouped by: Demographics; Governance; Identity, Ideology and Political Religions; Future of Force, Technology, Globalization

Global scenarios into which these Asia-specific drivers and scenarios might fit: Pervasive Insecurity, Regionalization, U.S.-China Conflict, Heterogeneous Globalization

Here's a wager on an Asian relationship model: China will expand its Shanghai Cooperation Organization (SCO) security buffer by promoting the ASEAN Treaty of Amity and Cooperation in Southeast Asia as a model for political operation within and without the FTA bloc as it a virtually unenforceable nonaggression treaty in which "the settlement of differences or disputes between their countries should be regulated by rational, effective and sufficiently flexible procedures, avoiding negative attitudes which might endanger or hinder cooperation."

By this standard, United Nations resolutions are a model of probity and fierce enforcement. China, India, Japan, Pakistan, South Korea, Russia and New Zealand have now signed Amity, but Australia balks as it would muzzle member state criticism while circumscribing the ANZUS Treaty between Australia and the US (further reinforcing Asian fears that it is the US' "deputy sheriff" for security in the region). The US may not even/ever be invited to join the FTA and it would certainly take issue with the limitations of the Amity treaty.

This would suit China's diplomatic aims as Beijing 'consistently characterizes the US as a "hegemon" "connoting a powerful protagonist and overbearing bully that is China’s major competitor."' I note in Hegemons come and go: a renewing Chinese hegemon eyes a mature US hegemon, that:

the Chinese perceive the moderate Peaceful Rise -- Peaceful Development as a ‘permanent’ approach so long as Washington demonstrates a "constructive U.S. response to the moderate Chinese approach." One must presume that a different US policy would occasion a different Chinese policy.

I despair of an already angered future Chinese generation:

Public opinion also was widely regarded as a constraint on US-China cooperation, at least for the time being. Chinese strategists described PRC public opinion as highly nationalistic, deeply resentful of US policy on Taiwan, and highly suspicious of US global objectives. Relatively young Chinese, they added, are notably more nationalistic than their elders. Indeed, several Chinese interviewees observed that the outgoing generation of leaders, and Jiang Zemin in particular, frequently has been criticized in private for being too soft and accommodating toward the United States. PRC interlocutors also contend that US suspicions of China remain high, both in and out of government.

As the Sino American relationship lacks the confidence-building measures (CBMs) that China has put in place with other front line states, surprises could blindside either party. I refer readers to Hegemons for themes, more Chinese proactive and US omissive, of the relationship.

Japan also may not so easily fall into line. Tokyo predicts China will ''strengthen its military capability in order to demonstrate its capability to Taiwan and the United States, and will be the greatest military power in the Asia-Pacific region in the future.'' Tokyo defines three Chinese attack scenarios noting that while China ''is cautious about using military force to solve international issues as it understands that doing so will hinder its own development,'' it is ''likely that the Chinese Communist Party will go its own way to secure its sovereignty and territory as well as expand its interests in the sea.''

Hoge notes that "China and Japan have never been powerful at the same time," which presents an unknown to the Asian equation, especially as I believe that Japan can go nuclear in a matter of months or less (components made, needing only assembly, a technicality that allows Tokyo to say that it 'does not possess'). Given that Japan is well aware of the impact of nuclear weapons, it could conceivably go to first use to forestall Nagasaki redux.

Conversely, while it is true that India and China "have not resolved their 42-year-old border dispute and still distrust each other," they have not let it stand in the way of commercial cooperation (unlike Pakistan's approach to India that inserts a Kashmiri resolution into the most trivial bilateral discussions). China will still play with Pakistan as there is no reason not to and it holds a path into the Stans, but Beijing will forge a larger commercial relationship with New Delhi.

It will be interesting to see how these three states will coexist, share regional control, access energy sources, obtain maritime security, and a multitude of sovereignty matters such as the Spratly Islands in the South China Sea.

Part 4

Gordon Housworth

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American subsidence in Asia: the poisoned chalice of hubris and loss of focus


China's diplomatic and economic presence is forcing all regional players to "reassess where their strategic interests lie," and those players are seeing China winning by default as the US continues to act in a dismissive, highhanded manner, retains a monomaniacal focus on terrorism -- worse Iraq -- effectively becoming another 'Pakistan' in linking all bilateral issues to the GWOT, and has already dropped to number two in terms of trade with key Asian nations.

Readers are referred to 'Peaceful Rise' overcoming 'China Threat' and Testing and strategic encirclement versus force on force, bluffing and risk-taking for an introduction to the means by which the PRC is extricating itself from the 'threat' posture framed by the US. In Failing to strengthen and rebuild functionally viable interstate relations , I note:

While it is a necessary requirement for the US to focus on al Qaeda and international terrorism, as opposed to Iraq per se, we must simultaneously look to the longer term of preventing erosion of access to resources, and the continuity and strengthening of functionally viable interstate relations. While we have treated a number of states in an offhand manner, notably those in the third world, those offended states had no counterbalance in terms of a market to which they could sell their goods and services and a sympathetic partner with whom to form beneficial alliance for economic and political gain. The economic resurgence of China has changed that balance. China's human-intensive form of diplomacy at all levels, levels that would fall beneath the attention and reach of US diplomacy, are changing the landscape.

I would also refer readers to China, the US, and the International Criminal Court for detail on China's skillful means of distinguishing its diplomatic approach from that of the US. On the best of days, Asian strategic thinkers worry about "long-term US staying power" and now wonder if and when our detachment over terrorism and the Middle East will end. While many seem to be "relatively relaxed about the current state of US engagement [and seem] relatively confident that the US will return to Asian pursuits," it may well be too late, even now:

Most US diplomacy with leading Asian states remains almost obsessively focused on Iraq and Afghanistan, and high-level visits are rare and rushed. As important as these concerns are to America and Asia alike, critical regional business is being left unattended.

The US reluctance to engage North Korea in direct bilateral talks has been difficult to explain or excuse, and now Japan and South Korea are venturing forward in direct bilateral interactions with Pyongyang, subtly forsaking a common front approach with Washington.

In Asia, however, security challenges have evolved rapidly with enormous strategic implications. China's rise is evident in virtually every walk of life and its considerable influence is now felt in every corporate boardroom, diplomatic gathering and military planning session throughout the region. By any aggregate measure (except in population size) the US remains the great power of Asia, but China now wields considerable hard, soft and every other kind of power in an increasingly interconnected region.

 The US has come far from the 1930s when it:

faced a world rapidly descending into regionalism; [responding] with the 1934 Reciprocal Trade Act that eventually became the GATT-WTO system. That system has been integral to the postwar revolution in trade, and to the widespread and unquestionable global economic growth it helped produce.

Bernard Gordon believes that the US is reaping the poisoned fruits of its earlier drive for FTAs and bilateral agreements, all essentially "preferential trade areas," that the US employed as "an instrumental tactic to achieve global trade progress in the WTO. The US "encouraged more of them everywhere, but nowhere more importantly than in East Asia, the world's most dynamic economic region and the scene of a developing economic "community."

I agree that the US does not have the primacy, authority, and viable threats that it had in the GATT years. US actions look feeble in comparison and it is ill-equipped fight a four front trade war:

In Europe, trade conflict is simmering over aircraft, subsidies and dumping. In the Western hemisphere, the Free Trade Area of the Americas -- the major U.S. initiative -- is comatose, and a "South American Community" will be announced shortly by the region's presidents. In East Asia, China and the ASEAN nations have agreed a large new trade deal that excludes the U.S. and sharply raises the prospects for global trade blocs. And needless to say, at the global level, the WTO's Doha Round is stalled.

Taken together with China's regional economic might, the PRC is demonstrably capable of building the regional relationships needed to eject the US and in the process become the dominant mercantile center of an Asian trading block that includes Asia's "most vibrant economic sub-region" (China, Hong Kong, Taiwan, South Korea, and Japan).

Part 3

Gordon Housworth

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Think of the Yuan as a reserve currency and the Dollar in the gentile senility of the Pound


Barring disasters such as an Asian Flu pandemic or a tactical nuclear exchange on the Korean peninsula that would stampede millions of starving North Koreans into NE China, alongside the more mundane threats of internal economic disruption, the watershed signing at the 10th ASEAN (Association of Southeast Asian Nations) summit in Laos of a Free Trade Agreement (FTA) between China and ASEAN nations to create an Asian free-trade market of 1.8 billion people by 2015, possibly as early as 2010, launched what I believe is a concrete start to the Yuan becoming a reserve currency in a greater and more successful version of Japan's Greater East Asia Co-Prosperity Sphere.

Multilateral regional formations are proliferating with China rather than the US as the hub, sometimes without America even in attendance.

Its significance or its comparison to US achievements in the FTA arena (largely nil) seems to have passed without notice in US highstreet press despite the fact that the pact will compete with the US and Europe as it "aims to drop most tariffs over the next five years, [includes] an agreement to liberalize tariff and non-tariff barriers on traded goods and one to set up a mechanism to resolve trade disputes, [will] form the first component of a comprehensive accord planned for completion by 2010 that will include the full liberalization of the services sector [and if] completed on time, the overall ASEAN-China deal will result in the creation of the world's biggest free-trade zone.

It's not like one couldn't see it coming:

In 2002, China and ASEAN began talks on a free trade accord, and China soon called for a "China-ASEAN" free trade area within 10 years. Beijing continues to prod, as in some "early harvest" tariff-reduction steps, and last month saw agreements for further gradual reductions. They included large exceptions for ASEAN's "sensitive sectors," but the process, under China's impetus, is underway. Indeed, Beijing recently proposed a step that a generation ago would have struck cold fear into Asia's other capitals: It exhorted representatives of Asia's 20 million "overseas Chinese" to "play a positive role in enhancing the good neighborly friendship and political trust between China and…ASEAN."

This year has seen other previously unthinkable cooperative steps, including talks among all 13 Asian Foreign and Finance Ministers to create an Asian Bond Market. No less important are growing calls to turn the "ASEAN plus Three" framework "into a regular summit of the East Asian Economic Community." 10 In July, ASEAN'S leaders met with China, Japan, and Korea ("the Three") and agreed to formally discuss that proposal later this month. 11 And most revealingly, Singapore – with close US ties and the region's best antennae – added its voice. Calling for an "historic reconciliation" between China and Japan, former ambassador to the US and UN Tommy Koh in August declared, "The vision is to create an East Asian Community."

Japan and India courted ASEAN leaders during the summit, while India and China commenced some very public, high level bilateral talks. India's "landmark partnership document" permits New Delhi to build economic relations with ASEAN as well as Japan, China and South Korea (ROK). Japan will shortly commence talks with ASEAN to reduce tariffs. China, India, South Korea and Japan seek to match the North American Free Trade Area (NAFTA) and the European Union (EU) by 2020. These trade patterns have resuscitated earlier ideas of an Asian economic "Community" that had lacked an economic powerhouse (Japan was disinterested) and the region's interactions were primarily with the US.

Part 2

China and India steal the show
By Siddharth Srivastava
Asia Times
Dec 2, 2004

PART 4: China steady on the peg
By Henry C K Liu
Asia Times
Dec 1, 2004

China adds its might to ASEAN
By Alan Boyd
Asia Times
Dec 1, 2004

Time for America to Trade Up
Wall Street Journal
November 30, 2004

Chinese Recruit Top Executives Trained Abroad
November 30, 2004

Revaluing the Yuan
by Worth Civils
November 23, 2004
Wall Street Journal

US Trade Policy: Legacy of the Sorcerer's Apprentice
Bernard K. Gordon
YaleGlobal, 5 November 2004

PART 1: Follies of fiddling with the yuan
By Henry C K Liu
Asia Times
Oct 23, 2004

A Global Power Shift in the Making
By James F. Hoge, Jr.
Foreign Affairs, July/August 2004

The US Turns Its Gaze From Asia at Its Own Peril
By Kurt Campbell
Financial Times
Jun 21, 2004

Gordon Housworth

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Domestic Digital Pearl Harbor driven by offshore criminal and terrorist agents


While I had previously noted that, "Malware (malicious software), phishing, cracking, and social engineering, individually and in concert, increasingly point to the goal of criminal profit," it is increasingly apparent that while US residents remain the most attractive target (due I believe to our volume of ecommerce, the availability of broadband bot targets, and far too many dumb users unable to protect their PCs), the perps are Eastern European gangs. (US organized crime has been slow in comparison in its embrace of cybercrime.) While the US has the largest absolute number of fraudulent transactions:

countries such as the former Yugoslav republic of Macedonia, the African countries of Nigeria and Ghana, and Vietnam are homes of a higher percentage of fraud. [VeriSign] labels any credit card transaction from an IP address sourced in Macedonia as "risky," and more than 85 percent of such transactions from the other three countries are not be trusted.

It is worth remembering that while Dick Clarke was too "often dismissed as a Cassandra while cybersecurity czar," and thus the six trends he identified in October 2003 were received with what I would call polite inattention by IT and government (See Revisiting Clarke's six bleak IT trends from October 2003), all that he forecast has come to pass. Clarke said all six would increase, but the one that would go through the roof was 'Rising identity theft.' Not only has it gone through the roof but it is being used in combination with at least four others: Rising vulnerabilities, Rising patches, Falling "time to exploit," Rising rate of propagation, and Rising cost of cleanup.

Phishing (enticing users are to surrender financial data and passwords to fake Web sites) is being carried out "on a massive scale [such that the] price of a credit card number is dropping into the pennies now." Offshore perps are infecting US PCs with Trojans and worms, turning them into bots and bot nets, which then launch an interstate attack masking the attacker's origin.

One supposes better late than never, but it is still stunning to see the FBI just now publicly begin to say:

Tools and methods used by these increasingly skilled hackers could be employed to cripple our economy and attack our critical infrastructure as part of a terrorist plot. People had to assume that terrorists would seek to hire hackers to "raise money, aid command and control, spread terrorist propaganda and recruit more into their ranks and, lastly and most ominously, attack at little risk.

The Internet could allow attackers to remain anonymous, to strike at multiple targets from a distance and escape detection. Critical infrastructure such as water, power and transportation systems remained vulnerable. In the future, cyberterrorism may become a viable option to traditional physical acts of violence. Terrorists have figured out that we have a technological soft underbelly.

Back in Black hat meets white hat in the Idaho desert, I noted that:

Many "many once-isolated systems used to run railroads, pipelines and utilities are now also accessible via the Internet and thus susceptible to sabotage," as "More and more of these things are being connected to the Internet, so they can be monitored at corporate headquarters. It is generally accepted that the August blackout last year could have been caused by that kind of activity."

The Control Systems Center being built at DOE's INEEL by DHS and CERT is intent on addressing five areas: awareness, incident management, standards collaboration, strategic direction and testing. INEEL's head of national security programs is already on record as saying, "I am confident that there is no system connected to the Internet, either by modem or fixed connection, that can't be hacked into."

Given the disarray at DHS, one hopes that they talk to the bureau.

In Clarke's vision of securing the net, I said that at least a small "p" digital Pearl Harbor was possible, in part, due to the 2003 Federal Computer Security Report Card scored the critical 24 federal agencies into an overall D grade [and] that those still getting an F are the departments of Homeland Security, Energy, State, Justice, Health And Human Services, Interior, Agriculture, and Housing And Urban Development.  (Defense got itself into the D category along with Transportation, GSA, Treasury, OPM, and NASA.)

Many private industry sectors are no better even as they possess the Supervisory Control and Data Acquisition (SCADA) systems that are the C2 for critical infrastructure including electric, gas and oil distribution systems, water and sewer systems, and various manufacturing processes.

It is painful to think of phishing attacks merely being a money-spinning prelude to an infrastructure attack. We've passed the small 'p' and are now on the way to a medium 'p.'

FBI: Hidden threat inside cybercrime
November 10, 2004, 3:54 PM PT

Report: Crooks behind more Net attacks
By Robert Lemos
CNET November 16, 2004, 2:17 PM PT

Gordon Housworth

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China and Russia achieve in Iran what the US and NATO had in Turkey, part II


Part 1, the money. Now the power:

In a stroke, the October 2004 agreement between Sinopec and National Iranian Oil Company reduced Iran's isolation, raised its international stature, and gave it a major political ally in the Security Council.

Given that Iran's largest foreign agreement prior to the gigantic Sino-Persian gas agreement was a $25 billion gas affair with Turkey that has been plagued with problems, Iran expects, rightfully I think, that this deal will make states that "may still consider Iran untrustworthy or too radical to enter into big projects on a long term basis" to reconsider their position. It is expected that India will now begin to move forward with its stalled 1993 "Peace Pipeline" connecting India and Iran, traversing Pakistan in the bargain. It remains to be seen how soon Russia's Gazprom is allowed to sidestep US displeasure and increase its business in the subcontinent.

I would expect Iran to move towards entry into the Shanghai Cooperation Organization (SCO) comprising China, Russia, Tajikistan, Kazakhstan, Kyrgyzstan and Uzbekistan, but I think that Tehran can still extract more favors for this diplomatic plum even though:

China, Russia and Iran share deep misgivings about the perception of the United States as a "benevolent hegemon" and tend to see a "rogue superpower" instead. Even short of joining forces formally, the main outlines of such an axis can be discerned from their convergence of threat perception due to, among other things, Russia's disquiet over the post-September 11, 2001, US incursions in its traditional Caucasus-Central Asian "turf", and China's continuing unease over the Korean Peninsula and Taiwan; this is not to mention China's fixed gaze at a "new Silk Road" allowing it unfettered access to the Middle East and Eurasia, this as part and parcel of what is often billed as "the new great game" in Eurasia. Indeed, what China's recent deals with both Kazakhstan (pertaining to Caspian energy) and Iran (pertaining to Persian Gulf resources) [supports the view that] the new great game is not limited to the Central Asia-Caspian Sea basin, but rather has a broader, more integrated, purview increasingly enveloping even the Persian Gulf. Increasingly, the image of the Islamic Republic of Iran as a sort of frontline state in a post-Cold War global lineup against US hegemony is becoming prevalent among Chinese and Russian foreign-policy thinkers.

I cannot imagine why an observer would think that China would halt at the Stans when the greater political and economic suzerain is one that extends across the Persian Gulf. (And while the SCO launched as a joint Sino-Russian condominium, I feel that China is now securing the stronger position. And while the substantial military assets in the region are Russian and American, I think China can extend its reach by its unique commercial and diplomatic means without an immediate entry of arms.

I do not agree with the comment that the "The SCO initially was established to deal with border disputes and is now well on its way to focusing on (Islamist) terrorism, drug trafficking and regional insecurity." On the contrary, as far as Beijing is concerned, it was designed to produce a quiescent political belt on China western and northern flanks. I think that the parallels of China and Iran as two proud ancient states now seeking to restore what they perceive as the historic spheres of influence has much merit. In the case of Iran, I agree with the opinion that its nuclear weapons program is aimed not at Israel but at its Arab and Muslim neighbors:

Iran's history does not support the view that the weapons it is amassing are for fighting Israel. [Al-Rashid] concluded that Iran's presumed nuclear capability was aimed at targeting neighbouring countries, basing his assumption on the fact that there has never been a single clash between Israel and Iran. Iran does not share borders with Israel and has had no direct conflict with it. It supports forces that are against Israel although its weaponry cannot be sent to these parties. "Then who is at the receiving end of these [Iranian] sophisticated weapons? There is only one logical answer: [Arab] neighbouring countries."

To that end, China, one of the five permanent members of the Security Council, became a powerful Iranian ally in forestalling a breakdown with the International Atomic Energy Agency (IAEA) over weapons grade uranium enrichment that would see the Europe support US calls to refer Iran to the Security Council for sanctions.

"There is no reason to send the issue to the Security Council," Chinese Foreign Minister Li Zhaoxing said at a press conference in Tehran with his Iranian counterpart, Kamal Kharazi. "It would only make the issue more complicated and difficult to work out," Li said. The Chinese foreign minister refused to speculate on whether China would use its veto in the Security Council in the event of Iran's case being sent there.

Russia will restore, perhaps strengthen is the better word, its relationship with Iran as it continues to recover dominance over the "near abroad" states lost upon the breakup of the USSR, and eject the US from the Stans. Iran will respond by pressuring Moscow to halt its foot-dragging over completion of the Bushehr reactor. The affected states realize this and are making security diversifications that spawn reinforcing commercial alliances across the Stans and the Persian Gulf. China again becomes counterweight.

Pressure on Iran could backfire
By Saloumeh Peyman
Asia Times
Nov 9, 2004

China rocks the geopolitical boat
Kaveh L Afrasiabi
Asia Times
Nov 6, 2004

So long US, hello China, India
By David Fullbrook
Asia Times
Nov 4, 2004

Gordon Housworth

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China and Russia achieve in Iran what the US and NATO had in Turkey


To geopolitically position Iran in the mid-21st century, think Turkey in the later-20th century. Just as Turkey anchored a US and NATO flank while projecting US forces and forward basing into Russia, the Caucasus, and the Middle East, so now will Iran anchor a Chinese, Russian, and SCO (Shanghai Cooperation Organization) flank while projecting Russian and Chinese interests into the Persian Gulf, SW Asia, and the Middle East. Think of Russian angst reversed, with the US on the receiving end this time unsupported by France and Germany as they seek to gain commercial and political capital as they too attempt to restrain the US "hyperpower."

Why we can't see this coming is utterly astonishing to me. One cannot grasp the flow of near-superpower political action without adding China and Russia to France's view that "Its sacred duty is to check American power by publicly and ostentatiously objecting to it from without. The French are so concerned by the dominance of American powermilitarily, economically, culturally, and technologicallythat a former French foreign minister felt the need to coin a new word to describe it: hyperpuissance, or "hyperpower." Think of it this way: France thinks the United States has so much power that the French language didn't have a word for it.

First, the money:

Middle East energy, and Saudi energy in particular, is no longer a US preserve. Sinopec (China Petrochemical Corp) signed a major gas exploration contract in Saudi Arabia's Rub Alkhali Basin in March 2004. (Russia's Lukoil and a consortium of Italy's ENI and Spain's Repsol YPF also gained exploration rights as the Saudis sought to diversify away from US oversight.)

Refinery-heavy Sinopec has always been keen to find oil and gas resources in foreign countries, as it imports more than 60 per cent of the crude it refines. Saudi Arabia is one of the most important countries where the company is considering to add to its upstream reserves.

While Exxon Mobil and other American companies remain active in Saudi Arabia's petrochemicals and refining industries, the demise of the earlier gas deal highlighted important differences between the Saudi government and American investors. Problems emerged over financial terms and Saudi requests for companies to operate power plants and desalinization projects as well as search for gas. The deal was also scrapped amid growing security concerns [as] Saudi Arabia's traditionally close ties to the [US] have come under increased scrutiny. "It is newsworthy that no U.S. companies have been successful in the tender and perhaps more significant that none of the successful bidders have a substantial current portfolio or recent track record in the Middle East."

China significantly extended its energy and political access into the Stans with the May 2004 agreement with Kazakhstan between China National Petroleum Corp (CNPC) and KazMunaiGaz to build an oil pipeline from Atasu, NW Kazakhstan, to China's NW Xinjiang province. Kazakhstan wants to both diversify away from Russia and become a major exporter, thus its continuing talks with China for a pipeline to connect Caspian Sea gas fields to the east.

That palled with the October 2004 agreement between Sinopec and Iran's National Iranian Oil Company to "buy 250 million tons of LNG over 30 years from Iran and develop the giant Yadavaran [oil] field" which may contain over three billion barrels of recoverable reserves with a total production capacity of 300,000 bpd.

Iran's effort to tie LNG purchases with oil field development is seen "as more beneficial for Sinopec than the traditional buyback contracts, which apply to most foreign development deals in Iran"… Iran's petroleum minister [has] urged Chinese oil firms to play a bigger role in developing the industry in his country… Collaboration with Beijing would bring Tehran a new source of skills and investment at a time when U.S. sanctions block U.S. oil companies from doing business with Iran. "We have invited Chinese companies ... to actively participate in our exploration and development projects [promising them] the greatest incentives," including tax exemptions.

China saw that it could step across a prior barrier, the Iran Libya Sanctions Act (ILSA), without significant US reprisal of penalties the act permits. While European and Asian firms had avidly sought Iranian energy contracts, notably Japan's INPEX's $2 billion 2004 agreement to develop the Azadegan field, China had previously limited itself to modest investments in Iran, including Sinopec's construction of an oil terminal and refinery upgrades.

It is supreme understatement to say that:

It is perhaps too early to digest fully the various economic, political and even geostrategic implications of this stunning development, widely considered a major blow to the Bush administration's economic sanctions on Iran and particularly on Iran's energy sector, notwithstanding the Iran-Libya Sanctions Act (ILSA) penalizing foreign companies daring to invest more than $20 million in Iran's oil and gas industry.

To be continued

Pressure on Iran could backfire
By Saloumeh Peyman
Asia Times
Nov 9, 2004

China rocks the geopolitical boat
Kaveh L Afrasiabi
Asia Times
Nov 6, 2004

So long US, hello China, India
By David Fullbrook
Asia Times
Nov 4, 2004

Gordon Housworth

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Face to face with the chasm between elements of Islam and the West


The chasm between Anglo-European nationals, Christian, Jewish, and secular, and what I would call Western educated Muslim fundamentalism, i.e., a Muslim that speaks English or another European language, holds employment in a commercial firm, be it in the West or within a Muslim state, while holding strong Islamic views, was brought directly to the fore by a thread in an unlikely place -- an industrial design forum.

Hosted by York University in Canada, the Industrial Design Forum, or IDFORUM, has some 800 + subscribers around the globe. The IDFORUM charter states that it "provides a global electronic meeting place for all involved in industrial design. Practicing designers, design educators and design students are invited to subscribe." Hardy a place that one expects to come face to face with fundamentalism.

In a thread devoted to "World Issues" (affecting design and consumers of design), a Muslim designer offered this comment, with no deletions or changes):

-----Original Message-----
From: Industrial Design Forum [
mailto:IDFORUM@YORKU.CA] On Behalf Of Habib Hussein [habib_hussein1@HOTMAIL.COM]
Sent: Friday, 05 November, 2004 13:23
Subject: Re: World issues

Dear Jan,

This may sound harsh to some of you but, in my humble opinion, The Quran (and only in Arabic) is the Word of Allah - the ultimate designer. All others are wrong or outdated. There is no other Holy Text - as are writings of the atheist! I believe that anything else comes from Satan. One day the world will realise this as we will all be one people. The Holy Cites in and around Jerusalem will be controlled by Muslims one day instead of those who kill my people. I believe this will be the only way we will have world peace not by america or bush. He is a man of conviction and blindness. He wants to spread democracy but democracy too is the work of Satan. Look at them, they are places of lying, cheating, porn, drugs, alcohol, smoking, caffiene, greed, Machiavellian, insabordination to the autorities...

The more the world is divided, and it is doing a nice job of this, the more people will realise that Islam is the only way. Just look at all the new converts the world over, especially in Africa and Asia. Europe is next.

That is what motivates me to design and develop technology, results for the Kingdom of Allah.


It is effortless to imagine that a much more isolated Muslim fundamentalist would decide to kill the artist Theo Van Gogh on an Amsterdam bicycle path.

It is always useful to see the post that occasioned the above response lest the Muslim's reply be due to baiting. Not so. Following is what I felt was a thoughtful post from a forum member at the University of South Australia:

Dear Habib,

Perhaps some fundamentalists everywhere have a lot in common whether they are Christian, Jewish, Moslem, or Hindu, or anything else. If a person who believes deeply in God, in religious law, and in the truth of their Holy Text and still somehow manages to ignore where it says we should love each other, then they may not be very fundamental in their beliefs at all only in their dogma which may be based on the word of other men, not the Holy Text. All those Holy Texts direct us to treat others with respect, live dignified and honourable lives and help others to do so as well. If a person who claims to believe fundamentally in the Truth, chooses for what ever reason to kill, torture, force, steal from, destroy, demean, leave to starve, arm, or in any other way injure another human being, regardless of circumstance; they are probably behaving in a way contrary to the spirit and purpose of loving God. Loving man and those creatures less able than us is I think a path to internal coherence described in all the Holy Texts.

And there are by the way some of us who do not choose to speak for others or design for destruction. I think we should speak from our own hearts to other people's hearts. Not as a group to a group we do not know as individuals. I agree we need to see each other as friends and share our understanding. The world needs all of us.


I was among the early few that called the threat from al Qaeda and prophesied a conflict that could achieve the magnitude of a Holy War. I fear that it will require prodigious efforts to retain it at that daunting level. I further submit that until we come to terms with this possibility, that interim decisions will be insufficient to deal with the issue. And if we have indeed "become Israelis" as Mark Levine's guest editorial on Juan Cole' weblog suggests, we will have a combative, unproductive, and costly path on way there.

We’re all Israelis Now
Mark Levine, University of California, Irvine
November 05, 2004

Gordon Housworth

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Watching the front door, the wrong door, while mayhem occurs at the back door


It is unlikely that the State Institute of Organic Synthesis Technologies (GITOS), its two facilities, Shikhany-1 and Shikhany-2, and the regional storage facility at Gornyi, all in Russia's Saratov region would mean much to US nationals. They should, as so should their state of deterioration and neglect, of both staff and facilities. We are speaking of one of Russia's larger chemical weapons design and storage facilities. Shikhany-2 is "Russia's primary center for the development of chemical weapons as well as protective measures against chemical, bacteriological and nuclear weapons" and includes the "Defense Ministry's test range for chemical and radiological weapons and defense systems." Shikhany-1 is (was) one of the primary research centers on hazardous chemicals with civilian applications until almost half the staff left after being unpaid for a year.

It is also worthwhile to remember the "Willy Sutton" rule in relationship to WMD fissile packages, bomb-grade nuclear materials, chemical and biological agents, their precursor components, and, of course, the research and production staff able to assemble any of them. (When Sutton was asked by a reporter why he robbed banks, the bank robber replied "Because that’s where the money is.") Al Qaeda certainly has, and their agents and criminal intermediaries are constantly paying attention to weak links in order to buy what they cannot yet fabricate.

Scientists from a former chemical weapons factory in Russia's Saratov Region have written to Russian Emergencies Minister Sergey Shoygu warning him of an impending disaster at the facility. The State Organic Synthesis Technology Institute in the village of Shikhany faces bankruptcy after years of declining demand. The scientists say the facility owes millions of roubles in debts and the 500 personnel have not been paid for months. They warn that no provisions have been made by the state to safeguard the stockpiles of toxic agents at the institute when it goes into liquidation. The scientific associates of the federal state unitary enterprise State Organic Synthesis Technology Institute (GITOS) located in the settlement of Shikhany in Saratov Region, have written a letter to Russian Emergencies Minister Sergey Shoygu. They likened the current state of affairs at the enterprise to a natural disaster.

The institute, which specialized in the development of chemical weapons for 40 years and accumulated an impressive stockpile of toxic agents, owes R100m to energy companies and to its own personnel. All of the power has been shut off at the institute. The institute's wage arrears were accumulated over a period of 11 months and ultimately amounted to R17m. "This is not a current problem. We have lived with it for more than 10 years," the chemists wrote. During that time, the personnel staff was cut to one-seventh of its previous size, decreasing from 3,500 positions to 500. The remaining personnel have nowhere to go: They cannot afford to move (they do not even have money for food, and hunger strikes are no longer a rare occurrence here), and there is no demand for such highly specific specialities in the country today. The institute's conversion plans (entailing the production of scarce medicines) have been difficult to implement: Investors face almost insurmountable difficulties because the institute still has the status of a restricted facility.

Russia commenced the decline of GITOS when it signed the international Chemical Weapons Convention, reducing its demand for continued chemical and biological agent production, and most recently forcing GITOS into bankruptcy:

According to the letter's authors, the Federal Agency for Industry, which took control of the institute along with the rest of the Russian Munitions Agency's charges, feels no responsibility for the hazardous production facility. According to the chemists, the agency only cares about the profitable portion of the enterprise (the one that barely makes a living on pharmaceuticals). For most of GITOS, the reorganization will mean liquidation (some of the institute buildings are already being dismantled). No one knows how the toxic agents, whose containers have to be renewed regularly, will be stored in the absence of personnel. In addition, no one knows what will happen to the personnel. An official resettlement programme has been instituted for them, but it can only handle a few families a year. "People are losing their patience," the chemists informed Shoygu. "There have been demands for mass hunger strikes and highway traffic blockades. It has become exceptionally difficult to keep the work team within the law." The authors of the letter suggested that the failure of the Russian government to take action in this situation could lead to a man-made disaster.

This conditions sound tailor made for theft, diversion, and corruption from staff, guards, or external penetration. I find it frightening that there are so many WMD facilities in the former Soviet Union, now the Commonwealth of Independent states (CIS), that are simply falling apart along with the security charged with their protection.

If the US can profess to be concerned about areas of Africa hollowed out by AIDS that can become new al Qaeda havens, why are they not concerned with the hollowing out of key portions of the former Soviet weapons enterprise. A fraction of what we spend in Iraq could sequester and/or destroy these WMD assets. Al Qaeda has demonstrated the ability to 'hit us where we ain't' and it would be a masterstroke on their part to hold our attention in Iraq while they obtain materials from Russia to create disaster here in the US.

Chemical weapons storage methods spark protests
Gateway to Russia/BBC Monitoring/Nezavisimaya Gazeta
25 October 2004 13:07

Shikany / Volsk-18
Global Security
last data 1997

Chemical Weapons in Russia: History, Ecology, Politics
[Khimicheskoye Oruzhiye V Rossii: Istoriya, Ekologiya, Politika]
by Doctor of Chemical Sciences Lev Aleksandrovich Fedorov Moscow
Center of Ecological Policy of Russia
27 July 1994

Gordon Housworth

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