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Neo-Iraqi WMD capacity: Sunni on US/Coalition forces, Sunni on Shia, and Sunni on Sunni


Lost in the partisan struggles of assigning guilt or vindication of the US administration's decision to invade Iraq over presumed WMD stocks is that fact that Iraqis - primarily Sunnis - are attempting to produce a new WMD (primarily chemical) capacity.

I submit that this capacity will be used against US/Coalition forces, and Shias and other adversary Sunni groups.

And once made, those stocks will be sold to other insurgent groups within and without Iraq, a condition that Saddam Hussein had not allowed.

The release of the addendum to the Iraq Survey Group's report on Iraqi WMD, commonly known as the Duelfer report, dealing with such matters as prewar movement of WMD material out of Iraq; residual proliferation risks in people, equipment and materials, and Iraq’s military industrial capability, was reported out very differently in the US and EMEA (Europe, Middle East, and Africa) press.

Agence France-Presse focused on neo-Iraqi WMD capacity above all else:

Insurgents fighting against US forces and the new government in Iraq are making a concerted effort to gain chemical weapons capability… with the help of Iraqi scientists, who worked for Saddam Hussein, and that [they] used chemical munitions remaining from the 1980s Iran-Iraq war in attacks against coalition forces.

"There are multiple reports of Iraqis with general chemical and biological expertise helping insurgents to produce chemical and biological agents."

The CIA was aware of at least one unnamed Iraqi scientist associated with the pre-Gulf War weapons of mass destruction program assisting guerrillas, while another was involved in clandestine attempts to produce chemical mortar munitions.

a string of underground chemical laboratories allied with Sunni extremists known as the Al Abud network was found in and around Baghdad.

the Muthanna and Fallujah chemical production facilities [were] thoroughly looted following the US-led invasion, and the missing equipment "could contribute to insurgent or terrorist production of chemical or biological weapons."

Caught up in our domestically polarized politics, the addendum was reported out in the Washington Post with top line leads such as:

The [report] refuted many of the administration's principal arguments for going to war in Iraq

Iraq's ability to produce nuclear arms [has] "progressively decayed" since 1991. Investigators found no evidence of "concerted efforts to restart the program."

Although Syria helped Iraq evade U.N.-imposed sanctions…, the investigators "found no senior policy, program, or intelligence officials who admitted any direct knowledge of such movement of WMD."

Farther down the page:

Because of the insular nature of Saddam Hussein's government, [the] investigators were "unable to rule out unofficial movement of limited WMD-related materials" to Syria or elsewhere.

Towards the bottom was the interesting part:

As for the possibility that insurgents in Iraq will draw on the expertise of Iraqi scientists to develop unconventional weapons for use against the United States and its coalition forces, the report describes these efforts so far as being "limited and contained by coalition action." The survey group was aware of only one scientist assisting terrorists or insurgents. He helped them fashion chemical mortar munitions. The report found that missing equipment, however, "could contribute to insurgent or terrorist production of chemical or biological agents." In most cases the equipment appeared to have been randomly looted, but in selected cases it appeared "to be taken away carefully."

I submit that there is an emerging neo-Iraqi chemical capability by one or more combinations of insurgents, Baathists, criminals, and opportunists that is being paid insufficient attention in the unclass press. That multipolar capacity will emerge as the possibility of civil war has never been greater between Sunni and Shia and, less well known, adversarial Sunni factions.

Seeds of heightened civil strife in Part 2.

CIA warns Iraqi insurgents trying to fashion chemical weapons
Agence France-Presse
Apr 26, 2005

Report Finds No Evidence Syria Hid Iraqi Arms
By Dana Priest
Washington Post
April 26, 2005

Addendums to the Comprehensive Report of the Special Advisor to the DCI on Iraq’s WMD
March 2005

Comprehensive Report of the Special Advisor to the DCI on Iraq’s WMD
30 September 2004
Key Findings, Volume 1, Volume 2, Volume 3

Gordon Housworth

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Immediate self-policed, self-notification of flaws buttressed by workarounds and security recommendations


It was pleasantly startling to see Microsoft announce a program, albeit in 'pilot' status, that I have long been on record as favoring: a security advisory service that will "strive to issue an alert within one business day of [Microsoft's] becoming aware of a problem and offer ways to mitigate it."

In Vast differences in major flaw handling separate software and manufacturing firms, I noted:

How different the handling of analysis and subsequent disclosure of security flaws between software and computer makers on the one hand and hardware and industrial vendors on the other. Whereas the software industry too often seeks to muzzle "amateur and professional researchers who have found flaws in their products" to the point of imprisonment via the Digital Millennium Copyright Act (DMCA), hardware vendors tend to work with those investigators who discover faults, if not outright halt production before their customers halt deliveries.

I am equally disturbed that "all the special-interest organizations created by vendors for vendors" such as Microsoft's Organization for Internet Safety are designed to shield said vendors from public censure. I have less patience from governmental entities, especially those from the intel community, that should know that that criminal and terrorist groups are working just as quickly to build a repository of hacks and will employ them when it is financially rewarding or when DDOS or other strike is ordered.

Such a possible about face deserves the benefit of the doubt, and while it was clear from the talkback entries to the announcement that much ill will was sent in Microsoft's direction, it is noteworthy that Microsoft, given its visibility and market leadership position, has elected to establish a threat watch list.

In that spirit, I find it quite acceptable to "include alerts that do not necessarily relate to a flaw, but to issues that could pose a security risk," e.g., phishing. While some, myself included, could think that this is a means to dilute the focus from purely Microsoft generated issues, it is also long overdue to have a general security threat list as even the most fearsome defense can be undone by a well-socially engineered attack that entices Homo Boobus to click on a link or open a file. See Malware, phishing, cracking, and social engineering all point to increasing criminal profit.

It is also good that "advisories will notify [when] exploit code [has] been made public or "proof of concept" code that might be related to a released update or vulnerability" is released as the status of the attack - from discovery of the flaw to proof-of-concept code being shared in virus IRC chat rooms to code seen "in the wild" gives the thoughtful user a 'timeline to realistic potential attack.' I would also add which chat rooms the code is seen or discussed so as to build a geographical tracking history of how fast a particular group gets code into the wild.

Also good is the appending of a "tracking number that will enable people to follow any changes in the warning" on to patch release.

As large firms are loathe to self-flagellation, the advisories "will not rank the severity of the security problem," but I do not despair as many other firms will pick up the Microsoft list and append rankings and their rationale. Ultimately, I would expect Microsoft to harvest the best of these ranking systems for incorporation into its threat advisory series.

An open issue is when the clock starts on the advisory list and who can contribute to the advisory list beyond Microsoft. For example, a long standing fault list for Internet Explorer contains items that have been open for some time. Having opened the advisory list, Microsoft would be well advised to acknowledge legacy faults and get on with the business of resolving them - publicly - so as to also get an advertising and trust bounce from the effort.  Were I Microsoft, I would invite security firms to post their discoveries on the advisory list as well as their own websites. Over time, I could build a center of expertise around the handling of flaws and threats.

Given the current competitive environment, I think that this is a calculated gain for Microsoft. Done well, the advisory list puts Microsoft in the same tier as open-source software vendors that provide "alerts and list potential workarounds." While a self-policed "full disclosure" advisory list allows Microsoft some control over the spin that describes a particular fault, I would think that it would ultimately pressure Microsoft to reduce the lag time between identification and patch dissemination. If software liability, heretofore excluded in almost all US software contracts, does materialize in North America, Microsoft would be better positioned to show that it is proactive in resolving faults before litigation commences.

Long overdue, yes, but a very sound step for an industry software leader.

Microsoft to sound early alert for flaws
By Dawn Kawamoto, CNET
Published on ZDNet News
May 6, 2005, 11:08 AM PT

Gordon Housworth

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Nicola Calipari-Giuliana Sgrena incident report, part 2


Part 1

 Route Irish has seen all the insurgent attack methods used in the theater of Operation:

Improvised Explosive Devices (IEDs), Unexploded IEDs, Hand Grenades, Indirect Fire (mortars, rockets, and unidentified indirect fire), Rocket-Propelled Grenades (RPGs), Small Arms Fire (SAF), Vehicle-Borne Improvised Explosive Devices (VBIEDs), and Complex Attacks. The most common attacks along Route Irish are IEDs, VBIEDs, and SAF.

IEDs placed along Route Irish continue to evolve. Current techniques are:

  • Explosives positioned alongside guard rails. The large number of guard rails on the road make these devices difficult to detect and relatively easy to emplace by staging equipment in vehicles or near overpasses, and, in a matter of minutes, having the IED armed and in the desired location.
  • Explosives wrapped in a brown paper bag or a plastic trash bag. This is a particularly easy method of concealment, easy to emplace, and has been used effectively against Coalition Forces and civilians along Route Irish.
  • Explosives set on a timer. This technique is new to the Route Irish area, but is being seen more frequently.
  • Use of the median. The 50 meter wide median of Route Irish provides a large area for emplacing IEDs. These can be dug in, hidden, and/or placed in an animal carcass or other deceptive container.
  • Surface laid explosives. The enemy will drop a bag containing the explosive onto the highway and exit the area on an off-ramp with the detonation occurring seconds or minutes later depending on the desired time for the explosion.
  • Explosives on opposite sides of the median. Devices have been found along both sides of the median that were apparently designed to work in tandem, to counter Coalition Force tactics to avoid the right side of the highway while traveling Route Irish.
  • Explosives hidden under the asphalt. Insurgents pretend to do work on the pavement, plant the explosives, and repair the surface. These are usually remote-detonated devices.

Vehicle-Borne Improvised Explosive Devices (VBIEDs) contain two types of car bombs, e.g., when the vehicle is moving (suicide) and when the vehicle is parked and stationary. Both can be either command or remote-detonated:

  • Multiple suicide vehicles. The first vehicle either creates an opening for a second, more powerful vehicle, or acts as bait to draw other personnel, such as medics and other first responders, into the kill zone of the first vehicle. As people respond, the second VBIED engages the responders.
  • Suicide VBIEDs are typically used against convoys, Coalition Force patrols, or Coalition checkpoints where they can achieve maximum damage. Such vehicles will rapidly approach the convoy from the rear and attempt to get in between convoy vehicles before detonating.
  • Stationary VBIEDs are typically parked along main supply routes, like Route Irish, and often have been found near known checkpoints. These are usually remotely operated and may be employed in conjunction with a suicide VBIED.
  • A particularly devious technique is for a driver to approach a checkpoint and claim that he has injured people in his vehicle. The VBIED is then detonated when Coalition Soldiers approach.

Recent incidents in the Vicinity of Checkpoint 541 prior to the Calipari-Sgrena did not bode well for an unannounced, high speed arrival:

  • Overpasses... are particularly susceptible to attacks. Such sites provide excellent early observation in all directions, easy escape routes, and high speed access to Route Irish.
  • Checkpoint 541 has been the site of 13 attacks between 1 November 2004 and early March 2005. Two of those attacks involved VBIEDs. Other attacks included mortars, small arms fire, and IEDs.
  • On the evening of the incident, there were at least two cases of small arms fire in the immediate vicinity, one before and one after the incident... This site is under the observation of insurgents in the adjoining housing complex and local neighborhoods anytime a position is established at Checkpoint 541.
  • The two adjoining Route Irish checkpoints, numbers 540 and 542, were also the target of attacks [including VBIEDs] during the 1 November 2004 to early March 2005 period.
  • [Two] days before the incident, two Soldiers from the same unit (1-69 IN) were killed by an IED at Checkpoint 543. The Commander, A Company, 1-69 IN lost a very close friend in that attack.

A difficult environment when US soldiers did not know that the Italians were coming ("Not coordinating with U.S. personnel was a conscious decision on the part of the Italians as they considered the hostage recovery an Intelligence mission and a national issue."), the Italians did not know that the on-ramp to Route Irish was blocked, the vehicle approached at a rate of speed higher than any other vehicle that night and refused to respond to a spotlight and laser pointer aimed on the windscreen as the vehicle closed on, and then passed, the warning line.

Gordon Housworth

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Insurgents harvest Secret NOFORN materials from botched redaction of Nicola Calipari-Giuliana Sgrena incident report


In misapplying a graphics editing function as a legitimate redaction tool, a botched redaction of Nicola Calipari-Giuliana Sgrena incident report revealed some interesting statistics on the number and severity of attacks on coalition forces while allowing insurgents to fall beneficiary to classified materials.

A 1 May DefenseLINK News item stated that "Calipari's death, according to a recently completed [29 April] Army investigation, was wholly unintentional and not attributable to negligence by the soldiers," recommending "that no disciplinary action be taken against any soldier. A 'related site' link to Multinational Force Iraq carried a highly redacted report of the incident at BP 541 briefly here but it was soon removed as its redaction process was so flawed that it could be effortlessly defeated.

As tempers and interest in the Calipari-Sgrena affair were unabatedly strong in Italy, Gianluca Neri of took the original 'redacted' US PDF text, converted the formerly "hidden" text into visible text highlighted in yellow for easy reading, and then posted the process along with the original detacted text and recovered cleartext. Unlike other mirrors, Neri retained all paragraph security classifications so that readers could see that many of the redacted items were classified S/NF or Secret NOFORN (NO FOREIGN DISSEMINATION).

As Neri's recovered text does not allow a reader to cut and paste text, one can visit one of the many major Italian newspapers that mirror the text. La Repubblica mirrors both the original redaction and even a copy translated into Italian

At roughly the same time, readers in the US were doing much the same thing from a copy posted to the NPR website. By 2 May, articles were rising in English to explain how the 'redaction' fails in both MS Word and Adobe Acrobat.

Insurgents will be interested in the Effectiveness of their attacks, page 9; Procedures for Entry Control Points (ECPs) Traffic Control Points (TCPs) and Blocking Positions (BPs), page 14; Rhino bus (armored bus) convoy details, page 19; Blocking Position (BP) training, page 20; Rules of Engagement (ROE), page 21; Mission positioning of men and equipment, page 27; Mission Communication, page 29; Forensic Evidence, page 34; and Recommendations, page 38.

US readers learn that:

  • From 1 November 2004 to 12 March 2005 there were a total of 3306 attacks in the Baghdad area. Of these, 2400 were directed against Coalition Forces.
  • The number of IED detonations from 15 June 2003 through 4 March 2005 (the date of the incident), has steadily increased. Although the effectiveness of those detonations has decreased over that timeframe, the overall average number of casualties during that period is nearly one per IED detonation.

The incident site, BP 541, is on Route Irish, "commonly referred to as "the deadliest road in Iraq" by journalists, Soldiers, and commanders. There is no corresponding alternative route from downtown Baghdad (and the International Zone) to BIAP [Baghdad International Air Port], which gives the route a heavy traffic flow and causes Coalition convoy movement to become more predictable. These conditions make Route Irish a lucrative target area for insurgents to employ improvised explosive devices (IEDs) of varying types and to achieve effects in terms of casualties. Soldiers in 1st Cavalry Division and 3d Infantry Division have come to refer to Route Irish as "IED Alley.""

Part 2

Military mistake caused data leak
The Associated Press/NEW YORK
May 2, 2005

Il rapporto Calipari senza omissis
Gianluca Neri
Domenica 1 Maggio 2005

Investigation Finds Italian Officer's Death a 'Tragic Accident'
American Forces Press Service
WASHINGTON, May 1, 2005

Ex-Hostage's Italian Driver Ignored Warning, U.S. Says
New York Times
May 1, 2005

Gordon Housworth

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Autonomous Chinese 'smart mobs' outside of Party control


While many have noted the risk to the Chinese Communist Party (CCP) of promoting nationalism as a distraction to social and economic matters, the recent near miss of nearly "losing control over xenophobic crowds" in promoting anti-Japanese protests must have driven home the risk to both the CCP as governor of the nation and to personages and factions within the CCP.

While China has punished Japan and reduced its chance of gaining a permanent seat on the UN Security Council in the near-term, thereby delaying Japan's effort to morph itself into a "normal" state whose duties require its self-defense forces be converted into conventional armed forces, there is evidence that China has lost more it gained when one considers that the xenophobic display:

  • "Blamed [China for] "instigating" or at least failing to control the anti-Japanese demonstrations," thereby blighting its foreign policy aims
  • Blamed the "CCP [Fourth-Generation] leadership's apparent mishandling of the crisis," thereby offering an encore to the Anti-Secession Law (ASL) as another reason to prolong the EU arms embargo
  • Opened a possible resurgence of "China Threat" over a quite successful "Peaceful Rise"
  • Alienated virtually all sectors of Japanese society rather than a targeted "minority of right-wing militarists"
  • Impacted, at some level, badly needed Japanese investment and technology transfer
  • Reduced Sino-Japanese relations to a near postwar low

I submit that technology stole a march on CCP leadership:

[While] police and Ministry of State Security agents had closely monitored the activities of various "anti-Japanese" NGOs which were responsible for organizing protests and internet petitions Beijing had far from adequate control over the extent to which such "people-level" organizations would go… "Hu and a number of his PSC colleagues have come to the conclusion that the authorities' ability to control nationalistic outbursts has declined markedly compared to [1999 when Beijing was] largely successful [in stopping] the anti-U.S. protests a few days after the embassy-bombing incident."

Diplomatic analysts in the Chinese capital said Beijing was nervous over the fact that, owing to the internet and other sophisticated forms of organization and mobilization, several relatively new and inexperienced groups were so successful in turning out the crowds. The analysts said many protests in recent Chinese history… started out as expressions of patriotism. Once the genie is out of the bottle, however, it would be difficult even for the CCP to prevent mass movements from suddenly becoming anti-government in nature.

Spontaneous smart mobs independent of government control have come to China's youth where an approximate 100 million internet users grow at 30% per annum and 350 million (27% of China's 1.3 billion people) own cellphones for voice and text messaging:

[As] the protests grew larger and more unruly, China banned almost all coverage in the state media. It hardly mattered. An underground conversation was raging via e-mail, text message and instant online messaging that inflamed public opinion and served as an organizing tool for protesters.

"Chain letter" e-mail and text messages urged people to boycott Japanese products or sign online petitions opposing Japanese ascension to the United Nations Security Council. Information about protests, including marching routes, was posted online or forwarded by e-mail. Banned video footage of protest violence in Shanghai could be downloaded off the Internet.

[Demonstrators in the Shanghai march] learned of the march from an Internet posting that included a suggested route for the march and tips like bringing dry food and not bringing Japanese cameras.

Alarmed at the growth of demonstrations fueled by the momentum of electronic chatter and the inability of the authorities to identify any of its leaders, Shanghai police sent out a mass text message to cellphone users the day before the march in Shanghai asking for calm and restraint on the part of the marchers. The Chinese government ultimately moved to silence the protests and marches by "banning the use of text messages or e-mail to organize protests."

New technologies may keep total censorship in China at bay [not to mention the rising number of Chinese having multiple e-mail accounts some of which are with ISPs outside China not subject to filtering]. "The changing nature of web-based communications toward more dynamic and distributed communications, like RSS and P2P, may make things trickier [but not impossible] for the censors in China to keep up."

While public animosity towards Japan and weeks of government signals that the marches were "politically safe" made public mobilization easier and thus not a perfect judge of future behavior, one has to wonder about the Chinese equivalent of an After Action Report that will ask:

"If people can mobilize in cyberspace in such a short time on this subject, what prevents them from being mobilized on another topic, any topic, in the near future?"

Anti-Japanese Protests Pose Long-Term Challenges for Beijing
By Willy Lam
China Brief, Volume 5 Issue 9
The Jamestown Foundation
April 26 , 2005

Short-Lived Strike Reflects Strength of Japan-China Ties
By Edward Cody
Washington Post
April 26, 2005

A Hundred Cellphones Bloom, and Chinese Take to the Streets
New York Times
April 25, 2005

Internet Filtering in China in 2004-2005: A Country Study
Principal investigators, Jonathan L. Zittrain and John G. Palfrey, Jr.
OpenNet Initiative
April 14, 2005

Net Censors Active in China
RED Herring
April 15, 2005

Gordon Housworth

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Supply chain paradigm shifts, part 2: SeaCode's floating Maquiladora


Part 1, Chrysler's mooting importation to US of a new vehicle segment produced in China

SeaCode’s intent to anchor a 24/7 floating programming factory off the US coast

[I recommend readers first review The world is flat save for the depression that we occupy: Friedman on global opportunity and competition so that they share a baseline of understanding as to how dire the trend lines are for maintaining a critical mass of US technological laborers, and how increasingly attractive offshoring will become.]

Continuing our review of 'tweaked progressions of trends already in motion,' SeaCode's very near offshore seaborne platform solves a number of nettlesome problems:

  • H1B visa requirements avoided by anchoring the vessel outside US territorial jurisdiction
  • Lack of communication and poor program management that dogs so many offshoring projects is remedied by clients being a short water taxi ride away while the vessel is always within the client's 'day' window for telephone access
  • High performing programming staff as I wager that good programmers and engineers will vie for the 600 positions if the pay and working conditions remain as advertised
  • High output as teams will work in team "pods" of overlapping shifts, thereby shortening development time
  • Higher security and potentially better intellectual property (IP) control
  • Total costs to clients are commensurate with genuinely offshore project costs but a goodly portion of costs are envisioned to revert to US firms and coffers
  • Client staff trips to offshore destinations for project collaboration conferences are eliminated

SeaCode "sweet spot" clients are seen as:

  • "projects that are under significant time constraints and are driven by market forces that are beyond the company’s direct control"
  • industries that have "multi-generations in a year and they need to have that high level of collaboration."
  • enterprise-type projects that require advanced coding and project management skills
  • pieces of projects being run by other service providers

The early focus is on video games and cellphones. Such are the possibilities of the appropriate offshore vessel populated with "600 of the brightest software engineers… (both men and women) [run as] a 24-hour-a-day programming shop." This intermediate form of IT outsourcing rose from a merger of merchant marine and IT backgrounds where it was the norm to continuously pursue complex tasks on a shift basis. The relatively low cost platform is a used cruise ship with its passenger amenities intact:

[Workers] will each have private rooms with baths, meal service, laundry service, housekeeping and access to on-board leisure-time activities... Staff can make the three-mile voyage into town in their off hours by calling a water taxi [because programming staff will have to have US tourist visas as part of their employment contract]. Or they can spend time shopping in the on-board duty-free shop.

Non-US developers will "take-home money the same as if someone was working as an H1B inside this country [but will be] far higher than the country you’re from. You’re getting paid so well that Indian [workers] will be able to go home and pay cash for a house."

US nationals perform two roles:

  • land-based service group comprised of "high end individuals managing engagements and [acting as] the liaisons to our customers
  • Ship-based project management acting as "the bridge between the work that gets defined and designed on land and to make sure that it gets executed properly"

Despite carping about an "Indian slave ship" (here and here), US firms provided significant services: telecommunications, cellphone and internet access, infrastructure and facilities, food and provisions, and fuel which are purchased domestically rather than offshore. As a US firm, taxes and fees are paid to US and state agencies while profits are repatriated to US shareholders. Short of direct wages, all monies return to the US.

Using US infrastructure components aids (but does not guarantee) protection of IP [it is not enough to control data streams ashore] but it does address IP ownership as, "Under international law [the] first point of contact with land determines whose laws will apply."

As offshoring goes, the adverse effect is modest (and I can see clients feeling virtuous about selecting this over conventional offshoring). If you think this won't work, think of hospital ships in the commercial sector such as Project HOPE's U.S.S. Hope. Think of a floating Maquiladora and it becomes more digestible.

Outsourcing off Los Angeles?
By Linda L. Briggs

From Offshore to Ship-to-Shore
Dian Schaffhauser
4/5/2005 11:18:00 PM

Gordon Housworth

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Supply chain paradigm shifts: read the tea leaves and add minor twists


Chrysler's consideration of a Chinese JV to make Chrysler vehicles in China and export them to North America and SeaCode's intent to anchor a used cruise ship converted into a 24/7 floating programming factory off the US coast are seen by some as a shock, a new departure, but are in reality a tweaked progression of trends already in motion.

DaimlerChrysler's 'export Chryslers' made in China

DaimlerChrysler's effort is an attractive proposal to a Chinese firm in that it:

  • Builds a new substitute supply chain in China for "a totally new [DCX] segment"
  • Provides technological assess to the technology and design of that new segment
  • Offers an early export exit path against other Chinese competitors
  • Reduces buyer reticence as the Chinese vehicle is sold as a 'Chrysler' and not as an unknown Chinese badge
  • Provides an opportunity to intimately study Chrysler marketing and brand awareness process (much like two of China's largest state-run tobacco companies will do as part of permitting Altria/Philip Morris to manufacture and sell Marlboros in China)

While it has been suggested that DCX "may just be sending a warning shot across the bows of the United Auto Workers union in the United States [because the] costs of making a car in China today [despite low labor costs] are still not competitive when factoring in logistics, the supply network and import tariffs," I think that it is far more than that - although that will have an undeniable effect on the UAW. DaimlerChrysler is accelerating trends already in motion.

Morgan Stanley has long held that "exports are likely" from the principal global manufacturers now in China, e.g., Honda, General Motors (GM), Volkswagen (VW), Toyota, Ford, Daimler-Chrysler (DCX), Nissan/Renault, and Hyundai. Morgan Stanley believes that all these manufacturers:

have at least a "Plan B" to export cars from China if domestic demand does not absorb domestic capacity. We would point out that most OEMs have located manufacturing facilities near the coast and, thus, have easy access to shipping. To be an efficient exporter, manufacturing costs need to come down [for Chinese made vehicles] and quality needs to improve. With domestic volume ramping up rapidly, and more supplier investment coming into China (reducing the need for imported components), we would expect costs to fall sharply [for Chinese made vehicles] in the near term.

Current currency evaluations "would clearly favor exports" as Western direct labor, benefits included, of $1,500-$2,300 per car is significantly offset by Chinese direct labor at "one-tenth of Western levels" plus some $400-$500 in shipping costs:

While current domestic demand is too strong to allow for any significant exports, we believe that as production costs come down, exports will be an option if domestic demand slows... Currently, auto parts comprise the bulk of automotive-related exports from China to the US...

Morgan Stanley says that the "three biggest questions investors currently have about China" are:

  • Are there likely to be significant vehicle exports from China?
  • Will margins in the region fall to more normal levels in the near future?
  • Is there a bubble in the vehicle market?

Morgan Stanley's opinions on answers are, respectively, Yes, Yes, and Maybe.

China's long-term potential as "a significant export base for vehicles" is not limited to Western OEMs (manufacturers). Despite demand growth that should continue as Chinese automotive consumers proliferate and move up-market, the possibility of significant excess capacity remains high for domestic and foreign manufacturers. Conservative estimates point to a 25-30% annual growth in demand to absorb announced additions in capacity without taking into account the rapid pace of announcements by "major OEMs [racing] to stake out future market-share positions."

Chinese OEMs are competing among themselves, with foreign OEMs, and with Joint venture partnerships made with other Chinese and foreign OEMs. Profits in an excess capacity condition have favored firms "that are low cost and deliver product that consumers are willing to pay for." It defies imagination that China will not follow the export path of Japan in the 1960s and Korea in the 1980s, increasingly delivering better car content at low cost, but domestic shocks could accelerate Chinese OEM export:

If China fails to become the world's second-biggest car market by 2010 [McKinsey prediction], the country could suddenly find itself saddled with millions of unsold cars... "If you have all this capacity, you'll have to consider going abroad. This is the route all Chinese companies are going to take, and car makers are no exception. Eventually the market will become saturated." A market downturn is fueling fears. After nearly doubling in 2003, car sales growth braked to just 15 percent in 2004 and should grow at an even slower pace in 2005.

If DCX proceeds, I would expect to see accelerated actions by other foreign OEMs, all of which will accelerate Chinese vehicle export and impact US vehicle manufacture.

Part 2 SeaCode's floating Maquiladora

Daimler ponders exporting Chryslers from China to North America
Reuters / April 21, 2005
Automotive News

China's Car Makers Ready to Go Global?
By Ben Blanchard
Sat Apr 16, 2005 08:11 AM ET

Chinese Auto Market: Reading the Tea Leaves
Team Leader: Stephen J. Girsky, Analyst
Morgan Stanley
Global Autos & Auto Parts, Manufacturers Group
February 17, 2004

Gordon Housworth

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The human side of 'Public radio deposes a sitting president'


Part 1, Public radio deposes a sitting president, described how Radio La Luna and other stations in Ecuador created an improvised 'battlefield' communications network that forces a sitting president from office by orchestrating virtually continuous peaceful demonstrations against him and his administration. This is a 'human supplement' to those mechanics in two parts: two of the emails that swirled through Ecuador, and snippets of the impacts orchestrated by these stations over that past five days.

It should also be noted that humor made its appearance among the drama. Stores in downtown Quito hire clowns to promote their stores. One of them "was among those in front of the presidential palace singing and demonstrating, very spontaneous and funny."

Emails [private communications]:

The Chamber of Commerce of Quito (CCQ) openly rejected President Gutiérrez by calling him a dictator and announcing a hotline to capture actions against affiliated businesses:

La Cámara de Comercio de Quito, por el respeto a la dignidad ciudadana, rechaza la violencia que ha generado el abuso del dictador Gutiérrez, Ayerve y Borbúa.
Rechacemos la violencia y defendamos nuestros derechos, movilizándonos y haciendo escuchar nuestras voces de protesta para enaltecer nuestra dignidad.
La CCQ abre un canal de comunicación directa para recibir denuncias sobre agresiones a los negocios de los afiliados a través de la línea 1-800 CCQ CCQ
( 1800-227-227 )

PRESIDENTIAL JOKES (Chistes Presidenciales) circulated widely at Gutiérrez's expense. Here are three:

A black dog bites Gutiérrez's daughter. Upon hearing this, the father orders all black dogs of Ecuador killed. As black dogs everywhere begin to flee, they are joined by a small white dog. A black dog asks, 'Why do you run? He said to kill the black dogs,' to which the white dog replied, 'And you are going to believe that liar?'

Un perro negro muerde a la hija del coronel Lucio. Ella informa a su papá y éste ordena matar a todos los perros negros del Ecuador. Los perros negros empiezan a correr por la carretera y al fondo corre un perrito blanco. Un perro negro le pregunta : -Y tú, ¿ porqué corres? El mandó matar a los perros negros. -"Y tú, ¿vas a creer a ese mentiroso de mierda?"

A drunk demands access to the presidential palace, wanting to the new president of the Ecuador, only to be asked by the guards if he is a fool, crazy, retarded, or has crap in his head. In a moment of reflection, the drunk reflects, 'Maybe not, I didn't know that there were so many requirements for the job.'

Llega un borrachito a la Plaza Grande y habla con uno de los guardias del palacio: - ¡Apártense, voy a pasar!... ¡Yo quiero ser el nuevo presidente del Ecuador, carajo! - ¿Quéeee?, ¿Eres tonto...?, ¿Estás loco..?, ¿Eres retrasado mental...?, ¿Tienes excremento en la cabeza...? -¿Ah? ¡No! ¡Que va! Mejor no; no sabía que pedían tantos requisitos...¡HIP!

Another drunk wanders into the grand plaza shouting, "THE PRESIDENT IS A SON OF BITCH! THE PRESIDENT IS A SON OF BITCH! Two policemen quickly appear and begin to beat him, accusing him of treason. The poor drunk implores the police, 'But I was referring to the U.S. President!,' to which the police officers respond, 'Idiot, do not try to confuse us! We know who is the Son of a Bitch!'

Un borracho está en la Plaza Grande gritando : ¡EL PRESIDENTE ES UN HIJO DE PUTA! ¡EL PRESIDENTE ES UN HIJO DE PUTA! Rapidamente aparecen dos chapas (policías) y le empiezan a dar de golpes por traición a la Patria, y luego se lo llevan a rastras. El pobre borracho empieza a implorarles: - ¡Pero si me refería al Presidente de Estados Unidos! Y los policías le contestaron : - ¡No trates de confundirnos! Nosotros sabemos quién es el Hijo de Puta!!!

Drumbeat of events orchestrated by these stations over that past five days:

Ecuador's President Says He Won't Quit
The Associated Press
April 20, 2005; 7:59 AM

Hours after Ecuador's embattled president said he would not resign, at least 30,000 people tried to march to the presidential palace in the capital's largest demonstration yet against the country's leadership, demanding that [Gutierrez] resign. [Gutierrez was removed later in the day.]

Ecuador Police Tear Gas Protesters Near Palace
April 20, 2005; 1:32 AM
By Carlos Andrade and Alexandra Valencia

Ecuadorean police fired tear gas at tens of thousands of protesters marching on the presidential palace on Tuesday night to demand the resignation of President Lucio Gutierrez... Demonstrators, who had been peaceful, responded to the gas by throwing stones at police.

Thousands in Ecuador Protest President
The Associated Press
April 19, 2005; 9:15 AM

Chanting "Lucio, get out," a river of demonstrators poured into the streets of Guayaquil, Ecuador's largest city, Monday night to demand that President Lucio Gutierrez step down, as anti-government protests spread from Quito, the capital…

Gutierrez… also declared a state of emergency Friday that banned public protests in Quito. But the moves only escalated the street marches as residents reacted indignantly… Thousands of people disobeyed the state of emergency Saturday and staged a peaceful demonstration.

Thousands in Ecuador Protest President
The Associated Press
April 18, 2005; 10:22 PM

[Gutierrez] said he recognized that the marches showed there is "discontent in part of the population of Quito." But he said the people participating represented only a small portion of the capital's inhabitants. "We have more than 2 million inhabitants and I think that the marches have not exceeded 10,000, 20,000 people," he said. "We could say that 1 percent of the people are actively participating.

Ecuadorans Defy Ban on Protests to Demand Leader Quit
By Monte Hayes
Associated Press
April 17, 2005

Ecuador's president called off a state of emergency in the capital on Saturday -- as thousands of Ecuadorans defied his ban on demonstrations and demanded his resignation… Gutierrez imposed the emergency after three days of street marches demanding his resignation.

Ecuador's Gutierrez Lifts Emergency After Protests
April 16, 2005; 8:25 PM
By Alexandra Valencia and Carlos Andrade

President Lucio Gutierrez on Saturday retracted a state of emergency [less than 24 hours after imposing it] he decreed less than a day earlier in the capital Quito after thousands took to the streets in open defiance of his orders… Thousands of people bashed saucepans and honked car horns in Quito, calling for Gutierrez to resign.

Gordon Housworth

Cybersecurity Public  InfoT Public  Strategic Risk Public  


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Public radio deposes a sitting president: Ecuador, Radio La Luna, and improvised battlefield communication networks


Given that the President of Ecuador, Lucio Gutierrez, was ousted an hour ago, one would have to agree with the Post's comment that Radio Is Blamed For Unrest In Ecuador. An interest in South American politics and ad hoc, low cost C3 (Command, Control and Communication) 'citizen systems' outside government control coincided in Ecuador where Radio La Luna, first among equals of several radio stations that included Radio Democracia, and some TV stations coordinated and retransmitted events that led to the President's removal [private email communication].

These radio and TV stations acted as a tactical battlefield communication network. Radio La Luna, a local FM station that is part of a NGO called the Popular Education Center, alone "directed the public to an estimated 200 demonstrations in the past six days."

[La Luna] regularly informed listeners where and when demonstrations would occur. During the height of tonight's chaotic demonstrations, the station provided directions for protesters wishing to navigate street closures and avert police blockades to reach the presidential palace. [La Luna's owner] said his station had not organized any protests, but instead had relayed information from helpful callers. He said cell phones had been the instruments behind the widespread demonstrations… "I am just trying to respect the dynamic that is out there among the people... The people want the government to leave, and we're just providing them with a place to be heard. We simply opened our microphones to the public."

For its efforts, La Luna, a "small station that has adamantly criticized the government's handling of the crisis and has called for the dismissal of Gutierrez," saw its signal "cut for several hours Monday, during the evening, when most street actions have been organized." (A small price to pay, the government also shut down a state-run TV station among others. Ecuadorians were not impressed.)

This morning I asked a trusted colleague in Quito, Ecuador for his opinion:

It is amazing what is happening. This revolt is organized by the citizens and coordinated by this radio station and a couple of other radio stations. [The] politicians have been unable to stop the chaos [over] the supreme court [and] the pressure of the pacific demonstrations is forcing the government to change course.

These questions immediately followed:

  1. Are Luna and other stations acting cooperatively or independently? (It would be a much bigger deal if they cooperated.)
  2. Do these stations try to cover for one another, i.e., if one goes off air, does one or more try to cover their content?
  3. Do they carry complementary information, i.e., each one focusing on certain categories of information?
  4. Who owns these stations?
  5. Do you hear anything of these "smart mob" type activities in addition to the radio broadcasts?

Reply was rapid:

  1. at this point there are several radios and TV stations retransmitting the events . Radio Democracia is also transmitting live the events and coordinating the people. Celular phones are playing a key role as ordinary citizens report to the radios the events and what people should be doing.
  2. the government has lost control and at this point it would be impossible to formally act against these radios. What they are doing is bringing thugs from other regions and inciting to go and burn these radio stations.
  3. these stations are owned by known news people, simple people. their only power is the information.
  4. email is also playing a key role. I will forward to you some of the emails.

Shortly thereafter, I received this email:

it was announced that tomorrow [CONATEL] the communication commission formed by the government, armed forces, etc… will cancel the license of la Luna. All the other radios are protesting. The USA ambassador just entered a meeting with the President! I guess the outcome of this meeting will be crucial since so far they have supported the president.

Then another announcing that the "head of the police just resigned . He could not continue giving orders to combat the population."

 Radio La Luna and its cellular 'reporters' prevented a much grimmer outcome:

the government in order to protect itself ferried in [as many as] 50 buses [of] thugs from the coast and the oriente region, once the people saw these buses [approaching, the] major of quito ordered the municipal tractors and garbage trucks to block the highways [thereby closing] access to the city and prevented these guys from entering the city and creating chaos… several of them entered the city the night before and from the ministry of social welfare [Ministro de Bienestar Social,] they [started] to shoot at the crowds with 2 people injured… the end of the story would have been different had these guys entered the city.

Three hours after the resignation of the police chief:

The president has been deposed as of some minutes ago. The Vice President has taken over. The Luna is alive and well! They deserve a Pulitzer prize

My reply:

Public radio at its best. Yes, La Luna probably does deserve a prize, yet its greatest challenge may lie ahead in helping to guide the discussions, even the agenda of discussions, that will follow in the new political vacuum. While it is the harder job, it is the greater prize.

My friend closed with:

The radio deserves a prize (as well the US Ambassador!)

The radio station is a "one-to-many" network that is mostly thought of as unidirectional (station to listener) transmission to a low cost "receiver" - a radio that most people have. In this case the stations acted as mass relay or rebroadcast links based on cellphone and email input, although to be fair to La Luna and its peers, I imagine that like most "command centers" they integrated their inputs into a coherent action plan.

The combination, even in rural areas such as Nigeria, of cellphone, IM (Instant Messages) Text Paging and, in this case, radio produced an effective "many to many" C3 network that deposed a government.

Part 2, for the determined reader, will have a few of the emails that circulated in Ecuador as well as snippets of the impacts orchestrated by these stations over that past five days.

Radio Is Blamed For Unrest In Ecuador
Small FM Station Is Fomenting Protests, Officials Contend
By Monte Reel
Washington Post
April 20, 2005

Ecuador's President Says He Won't Quit
The Associated Press
April 20, 2005; 7:59 AM

Gordon Housworth

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Israel as serial violator, temporarily the chicken killed to scare the monkeys


It is appropriate to class Israel as a serial violator in terms of its diversion of US weapons technology and weapons systems embedding US technology to states such as the PRC. Israel regards such sales as essential both to bolster its own defense industry and to secure greater independence from US strictures on its diplomatic action. Israel is also a purchaser of US weapon systems as well as a creator of weapons systems of interest to the US, thus it becomes a multi-edged proposition in purchases, technology, diplomacy, and US domestic politics.

Despite its violations Israel has succeeded in deflecting the bulk of US displeasure, thus is was interesting to see the US move to "sideline" Israel from "participating in developing the Joint Strike Fighter because of violations of agreements about arms sales to China."

In what may be a version of the Chinese idiom, "Kill the chicken to scare the monkeys," Israel may have temporarily become the chicken, especially as it position as a Security Cooperation Participant" (SCP) included "Israeli technologies [that] could be included in their [JSF variants], which has required the sharing of sensitive information":

According to a former senior official, the Bush administration has in recent months ratcheted up pressure on Israel to curb arms sales to China. The renewed pressure is also partly aimed at gaining leverage with the European Union, which, until recently, was poised to lift its embargo on arms sales to China.

The official said Ariel Sharon, the Israeli prime minister, was expecting a statement of support from President George W. Bush for Israel's involvement in the JSF programme when he visited the US this week. But US officials told the Israelis Mr Bush would not make the statement because of the China arms issue.

Haaretz repeated the Reuters article that noted:

The U.S. and Israel have been at odds for years over advanced technology transfers to China. Washington fears some sales could tilt the balance of power and make it more difficult to defend Taiwan... "Technology has made its way inappropriately to China via Israel. There have been many violations of technology transfer agreements." "We continue to discuss our concerns about technology transfer issues with our allies, friends, and partners and look for them to take a responsible approach with regard to China, including Israel."

Censure and concern is appropriate given the level of Israel diversions. In a discussion of the impact of a continuation of the EU arms embargo with respect to China:

China continues to purchase the bulk of essential military modernization from Russia, and secondarily Israel, both unaffected by the EU boycott

In a note on Israel being a poor role model for nations such as the Ukraine whom we wish to refrain from selling sensitive technology and weapons to China:

Israel has long been a supplier of advanced military technologies to China, diverting US technology in the bargain. Forced to discontinue what was to be the first domestically built Israeli jet fighter, the Lavi, based on the US F-16 with $1.5 billion in US funds, the Israelis transferred the design to China where the Lavi's near identical twin appeared as the F-10. The Israeli STAR-1 cruise missile technology which can loiter above a battlefield for a considerable time searching for targets and incorporates US stealth technology and parts. Only the most fierce US diplomatic pressure prevented the Israelis from selling its Phalcon phased-array radar systems to China as part of a Chinese AWACS (Airborne Warning and Control System).

In speaking to supply chain infrastructure risk assessment, specifically software design for weapons systems, in which an adversary can seek to acquire technology to jumpstart its own weapon system or to devise a future attack on the target weapon system:

With the Telrad (Israeli) penetration of the White House phone system never far from mind, the presence of foreign contractors in the F-35 Joint Strike Fighter aircraft is a concern and the prime’s (Lockheed Martin) contention that "98 percent of the F-35's software was "U.S.-sourced" and two percent came from abroad" offers no solace when a few lines of malicious code can prejudice aircraft stability, avionics, or weapons.

What good does it do to have an aircraft that can turn sideways on a dime if someone can turn off its fly-by-wire system. It would be the singular software trapdoor of a future air superiority engagement. Were I a bad guy, it would rank high on my penetration list...

With a history of diverting US technology, Israel recently joined the eight JSF full partner countries as a lower "security cooperation participant" (SCP). As late as mid-2002, the US was still resisting Israeli participation requests due to concern that classified technology might be leaked to unfriendly countries, notably the PRC.

"Unlike the other full partners, Israel will not be able to impact JSF requirements or have a presence in the JSF program office. However, Israeli industry will be able to compete for SDD [system development and demonstration] work on the JSF like the other full partners."

A post to the Chinese Military Forum noted that "Doubtful it is for real. The curb will be removed soon or the research will continue unofficially without interruption. Its unrealistic that US can keep Israelis out of this," which may well be true. That post went on to indicate that Israel employs "psychological manipulation" giving the "general appearance that Israel also suffered for dealing with China: "what I have done to you has also happened to me too", thus soften the impact" of its actions. I would be surprised that such a tactic will work this time.

U.S. curbs Israel's involvement in development of fighter jet
By Reuters
Last update - 11:55 16/04/2005

U.S. sidelines Israel over Joint Strike Fighter
BY: Demetri Sevastopulo, London Financial Times
US Air Force AIM Points

Israeli-United States Relations
Updated November 9, 2004
Clyde R. Mark
Foreign Affairs, Defense, and Trade Division
CRS Issue Brief for Congress IB82008

Gordon Housworth

InfoT Public  Strategic Risk Public  


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