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Olympian embarrassment coupled with central government revenue loss produce instant Chinese Intellectual Property (IP) compliance

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Excess optimism in the face of asset harvesting

This writer has long identified IP risks in China:

[E]dicts on IP infractions, or anything else, often rarely leave Beijing as provincial, city and enterprise zone mangers do largely as they wish and are tolerated so long as they bring growth and revenue without significant embarrassment to the Party (CCP)...

The CCP (Chinese Communist Party) can only maintain its "mandate from heaven" to govern by providing rising economic growth, nor can it maintain the PLA (People's Liberation Army) solely on the "imperial wheat" of government subsidy.

Various Chinese sources have pleaded the 'youth' of their nation, implying that foreign aggrieved targets must grant China more time to reform such practices. The reality is that China is unique among developing nations. Even in 1980 it had a "first world" mentality atop a "third world" industrial capacity. China's controlled economy closed off industrial penetration and investment that it did not like while it turned a benign eye on the means by which domestic industries nurtured growth, revenue and industrialization. The Chinese Communist Party (CCP) encourages IP collection and can and will suppress it when it suits state needs.

 

Suppliers and those with assets of interest to the PRC inhabit a Panglossian world if they do not believe that their assets are at risk or subject to interdiction by the authorities if party or state security is deemed at risk. For readers immune to the attractions of Voltaire, his novella "Candide" (Optimism) showcased a character Dr. Pangloss ("all tongue" or "windbag") in order to:

point out the fallacy of [Gottfried] Leibniz's theory of optimism and the hardships brought on by the resulting inaction toward the evils of the world. Voltaire's use of satire, and its techniques of exaggeration and contrast highlight the evil and brutality of war and the world in general when men are meekly accepting of their fate. Leibniz, a German philosopher and mathematician of Voltaire's time, developed the idea that the world they were living in at that time was "the best of all possible worlds." This systematic optimism shown by Leibniz is the philosophical system that believed everything already was for the best, no matter how terrible it seemed. In this satire, Voltaire showed the world full of natural disasters and brutality. Voltaire also used contrast in the personalities of the characters to convey the message that Leibniz's philosophy should not be dealt with any seriousness... Voltaire created the character Dr. Pangloss, an unconditional follower of Leibniz's philosophy. Voltaire shows this early in the novella by stating, "He proved admirably that there is no effect without a cause and that, in this best of all possible worlds...." Pangloss goes on to say that everything had its purpose and things were made for the best. For example, the nose was created for the purpose of wearing spectacles...

Intersection of state embarrassment, national pride, and central government revenue loss

The Summer Olympics in Beijing is the latest in a series of intrastate events that repeatedly demonstrate that the PRC can act decisively to curtail threats as diverse as Intellectual Property (IP) theft (below) and unrest in the aftermath of the Sichuan earthquake:

The furtive trade in the five official, adorable Olympics figures -- including Huanhuan, Jingjing the Panda and others -- is part of an Olympic-size battle that has erupted between the keepers of the Games' lucrative symbols and an army of Chinese citizens who traffic in counterfeit versions of the world's most coveted brands.

 

For years, China has been known as the leading exporter of fake goods, from Louis Vuitton handbags and Patek Philippe watches to auto and jet engine parts. The underground economy, which according to U.S. trade officials costs American companies $3 billion to $4 billion annually, has been allowed to flourish by a Chinese government that seldom prosecutes intellectual property violations.

 

But the Olympics have mobilized China's piracy police like never before. Beijing, the host city, stands to receive up to 15 percent of all revenue from Olympic merchandise, a figure expected to easily top the $62 million raised in Athens four years ago. Aside from the mascots, China is also reportedly collecting up to $120 million each from Coca-Cola, McDonald's, Adidas and other companies that have qualified as the highest-level Olympic sponsors.

 

With the world's gaze on China in the run-up to the Aug. 8-24 Games, officials have moved to make sure counterfeit goods don't reflect poorly on the festivities. Fake Adidas clothing that was widely available at popular Beijing markets a year ago is now hard to find.

 

"It's a political mission, and the government doesn't want anything to ruin the quality of the Games," said Wang Hai, a Beijing-based advocate who has campaigned against fakes and worked with government officials to crack down on counterfeiters. "The Olympics are about the country's image, so it has a priority."

 

Through stepped-up market raids and better interagency coordination, officials have demonstrated that they can reduce counterfeiting. But in doing so, they have forced the sale of fake Olympics mascots and other souvenirs onto the black market...

 

"It proves that China can do something about the problem when its own interests are aligned with the crackdown... More police have joined the fight against counterfeiting, which used to be primarily the domain of commerce and quality-inspection officials, Wang said. Companies are beginning to successfully sue markets for selling fake merchandise. And thresholds for the amount of illicit proceeds that constitute a crime have been cut in half, to about $7,000 for individual suspects and about $21,000 for companies.

 

The counterfeiting of Olympic products has cost other host cities, including Atlanta and Salt Lake City, millions of dollars. But the scope of the problem in China is particularly vast. At Yiwu market, for example, a major destination for Chinese wholesalers and tourists, there are tens of thousands of shops and more than 200,000 vendors.

Conversely, when the PRC is secure that no international embarrassment will occur, the penalty for even modest transparency is swift:

The Communist Party's Central Propaganda Department and the official All-China Journalists Association issued a directive ordering [Pang Jiaoming's] employer, the China Economic Times, not only to fire him, but also to "reinforce the Marxist ideological education of its journalists." In a separate notice to news organizations across China, Pang said, propaganda officials announced that he was also banned from further work as a reporter at other publications.

 

Pang's offense was a pair of articles reporting that substandard coal ash was being used in construction of a showcase railroad, the $12 billion high-speed line running 500 miles between Wuhan, in Hubei province, and Guangzhou, an industrial hub just north of Hong Kong. The ash is a key ingredient in concrete used for tunnels, bridges and roadbed, Pang wrote, and a substandard mix raised the specter of collapsing structures and tragic accidents.

 

Pang's report, which was published on the front page, illustrated the growing desire of young Chinese reporters to push the limits of the country's draconian censorship system. In a booming and fast-transforming economy riddled with corruption, they have found a fertile field for investigative journalism, along with readers increasingly hungry to know about malfeasance that affects their lives.

 

But his fate also dramatized how helpless China's journalists remain under the thumb of an authoritarian government that maintains a vast propaganda bureaucracy with unquestioned power to control what is published and decide who rises and falls in the news business.

"The Chinese government usually only manages during a crisis... When things reach a peak and they have to deal with it, they will."

 

While the following action outcome was written in 2008, it could have easily been 2002 0r 2006:

Counterfeit mascots were produced almost immediately after the government unveiled the official versions in November 2005. For a time, fake versions of Beibei the Fish, Yingying the Tibetan Antelope and Nini the Swallow, as well as Jingjing the Panda and Huanhuan the Olympic Flame, were easily found at Beijing subway stops. Now, in the capital, they are harder to spot. "When the authorities feel more pressure from America, they can do it, they take it seriously...

 

[Chinese] officials were generally taking a greater interest in protecting [Chinese] intellectual property, in hopes of encouraging entrepreneurs to create their own brands while assuring them that those brands will be protected. But the Olympic Games provide another incentive. "The Chinese government usually only manages during a crisis... When things reach a peak and they have to deal with it, they will."

In 2002, the authorities made a determined and largely successful effort to protect the film release of Zhang Yimou's "Hero," as the Chinese government was intent on protecting the revenue of a Chinese director well known in the west and whose film needed recognized attendance figures:

When the members of the preview audience showed up at China's fanciest new movie theater here this week, they were treated to much more than just the first look at Zhang Yimou's big-budget martial-arts film, ''Hero.''

 

Viewers had identity card numbers inscribed on their tickets. They were videotaped as they entered the theater's foyer. They handed over all cellphones, watches, lighters, car keys, necklaces and pens and put them in storage. Before taking their seats, they passed through a metal detector. Then they got a welcoming address.

 

''We are showing this preview for your enjoyment tonight,'' announced Jiang Wei, an executive with the film's Chinese distribution company. ''I plead with you to support our industry. Please do not make illegal copies of this film.''...

 

Security guards heightened the drama at the theater. They ordered people to leave behind jewelry and pens to protect against ''needlepoint'' digital camcorders, though varying descriptions of how such devices worked sounded more like something Q made for 007 in a James Bond movie than a common pirate's tool. Uniformed policemen roamed the aisles during the film. A few sat in front of the screen and watched the audience with what appeared to be night-vision binoculars...

 

The belt-and-suspenders security procedures during the limited release of ''Hero'' at New South Country Cinema here, just across the border from Hong Kong, were aimed at protecting what China's film industry hopes will be the biggest martial arts sensation since ''Crouching Tiger, Hidden Dragon.'' The movie, with an all-star cast led by Jet Li, cost $30 million, making it China's most expensive film production to date. Beijing will submit it to the Oscars as a candidate for best foreign-language film. Miramax, a division of Disney, has bought the international rights...

In 2006, the authorities summarily suppressed and gerrymandered showings of foreign films in an effort to prime attendance figures for Zhang Yimou's "Curse of the Golden Flower" submission as an Academy Awards candidate. (Zhang Yimou is one of the most successful of the Fifth Generation group of filmmakers - talented graduates who emerged from the Beijing Film Academy after the Cultural Revolution. Yimou achieved international acclaim in 1991 with "Raise the Red Lantern."):

In the midst of a boffo three-week run, Chinese authorities suddenly plucked "The Da Vinci Code" from theaters. Even though "Mission: Impossible 3" was made in China with full approvals and scrutiny, local bureaucrats abruptly delayed its release... The big question: Is China limiting Hollywood pics to keep its local movie industry in the race?

 

While such speculation reflects tinges of paranoia on the part of frustrated executives -- and would be difficult to prove -- the situation is being taken seriously enough that the Motion Picture Assn. has commissioned an internal report to examine what has happened...

 

Day-and-date releases are hugely popular -- the recent gala opening of "Da Vinci Code," which had its world preem in China, was one of the social occasions of the year -- and big premieres are used to showcase China's growing openness and tolerance. But while the politicos are happy to enjoy the night out, they are less happy with the commercial and political ramifications of hugely successful foreign product...

 

A heavy hint that the government is prepared to take action favoring Chinese film at the expense of others came during last month's Shanghai Film Festival. While opening-night addresses are usually congratulatory and banal, State Administration for Radio, Film & Television (SARFT) director general Hu Zhanfan dropped a couple of sentences into his speech describing "preferential treatment for commercial Chinese cinema" and the "opportunities ahead for domestically produced movies to increase screenings...

 

State news agency Xinhua also quoted Liu Shusen, distributor of a number of recently released low-budget local films, saying, "The box offices of these movies would be guaranteed by SARFT, which required theaters across the country to allocate time spaces, and to organize officials, students and soldiers to watch."...

 

[US] Studio execs do not view China's film restrictions as malicious, but they fear worse is to come, and that administrative tools are being used to make commercial reality fit a policy goal. Specifically, they worry that:

  • the 20 films imported into China each year and eligible for revenue-sharing distribution are being selected to keep B.O. on Hollywood pics down;
  • there is an unofficial ceiling of RMB100 million ($12.5 million) placed on the revenues of foreign films. In other words, "Da Vinci" may not be the last Hollywood film whose run is cut short prematurely in China;
  • censorship and approvals bureaucracies are being used to delay the release of Hollywood movies. This keeps marketers in the dark until the last minute and allows disc piracy to erode theatrical potential;
  • the number of "blackout" periods in which foreign films are not allowed to release is on the increase from a typical two or three to perhaps five this year.

Chinese authorities deny any attempt at market manipulation... While most individual instances of release difficulties for foreign movies can be attributed to plausible explanations, taken together the list of complaints looks to some like the manifestation of a policy to suppress Hollywood's B.O. in China...

 

Trouble is, 2006 has been a lousy year for Chinese releases. And in order to maintain the very important Asian concept of "face," which roughly translates as "respect," films of other nationalities are being held down...

 

The regular April blackout of foreign films -- intended to allow room for local movies in theaters -- appeared to protect nothing much at all [while]  Zhang Yimou's crucially important "Curse of the Golden Flower" was [not scheduled for release until] December.

Beijing's willingness to damp down its long awaited international coming out party

It is hard to overstate the CCP's attention to, and expectations for, the 2008 Summer Olympics in Beijing. It was to be nothing less than an international showcase for China as well as an ambassadorial and financial windfall to the state. With party and state image now at risk, the state has reluctantly but forcefully opted for the state:

[With] the Olympics less than two months away, China has been restricting foreign visitors from entering the country in the hope of guarding against terrorist threats or unruly visitors who might plot to disrupt the Games, which begin Aug. 8. The government appears to be approving fewer tourist visas. Business executives say they face new bureaucratic hurdles to visiting the city. And hotels are being asked to give the government detailed information about foreign guests.

 

The measures, combined with the tragic news about the powerful earthquake in Sichuan Province last month, have already sapped tourism in China and cast a pall over Beijing during what was supposed to be a busy and jubilant tourist season leading up to the Olympics.

 

The high published rates for Beijing hotels during the summer and difficulty getting Olympic tickets have also dampened expectations, even though many five-star rated hotels say they are fully booked during the Olympics...

 

The government does not seem to have come to its decision lightly. In a year plagued by riots in Tibet, protests of the Olympic torch relay, a terrorist plot to kidnap journalists covering the Olympics (according to Beijing officials) and the Sichuan earthquake, the government is stressing public safety, above all else.

 

Beijing appears less concerned about being the host of a global party, experts say, and more concerned with making sure no one spoils it... If there were any doubts about Beijing's priorities, they were made clear [with] the announcement that 100,000 commandos, police officers and army troops would be placed on high alert during the Games, signaling that China is prepared for anything...

 

Nothing is hurting more than the visa policy... Hotel operators are also frustrated. A massive hotel building boom - which has bolstered the number of four- and five-star hotels in Beijing from about 64 in 2001 to 161 as of April 30, according to government figures - is beginning to look frothy. Many operators are depressed...

If any supplier believes that their assets will fare any better in the face of state interest, Dr. Pangloss has a world for you, the best of all possible worlds.

Visa limits undermine Beijing's tourism hopes

By David Barboza

IHT

Friday, June 20, 2008

 

China's Olympic Turnabout on Knockoffs

Fake Games Merchandise Targeted

By Maureen Fan

Washington Post Foreign Service

June 13, 2008

 

Chinese Parents Call Off Quake Memorial After Official Warning

By EDWARD WONG

New York Times

June 13, 2008

 

China Vows Harsher Punishment on Piracy amid "Grave" Situation

Xinhua

CRI English

2008-06-13 20:17:23

 

The "ten firsts" that follow China's massive quake

China View/Xinhua

2008-06-13 04:14:05

 

Some Chinese Officials Punished, Some Promoted for Actions After Quake

By Edward Cody

Washington Post Foreign Service

Tuesday, June 10, 2008; 10:39 AM

 

DPRK media: Chinese army's response to quake shows high combat capacity

China View/Xinhua

2008-06-03 16:59:26

 

Quake Is Formidable Challenge to China's Government

Rescue and relief efforts continue in China as the death toll from Monday's 7.9-magnitude earthquake neared 15,000 and is expected to rise, with tens of thousands still buried in rubble. An analyst examines how the country and its government have handled the disaster.

Gwen Ifill, Judy Woodruff

NewsHour

May 14, 2008

 

China moves quickly in quake zone

The country's deadliest quake in three decades hit central China Monday.

By Peter Ford

Staff writer of The Christian Science Monitor

from the May 13, 2008 edition

 

News Analysis: China's response to quake is unusually open

By Andrew Jacobs

IHT

Tuesday, May 13, 2008

 

Powerful Earthquake Destroys Buildings, Builds Mountains in China

There's a saying among seismologists: "Earthquakes don't kill people. Buildings do." The powerful 7.9 magnitude earthquake that rocked central China on Monday afternoon, killing upwards of 8,500 people, was a grim reminder of that common phrase.

By Jenny Marder, NewsHour with Jim Lehrer

May 12, 2008

 

Dishonesty in world of luxury brand goods

By Dana Thomas

China Daily

Updated: 2007-11-29 07:22

 

Chinese Muckraking a High-Stakes Gamble

Propaganda Authorities Intervening With Increasing but Unpredictable Frequency

By Edward Cody

Washington Post

November 12, 2007

 

China's global luxury brand workshop
By Olivia Chung
Asia Times
Apr 14, 2007

 

Zhang Yimou Blames China's Movie System

Shanghai Daily

CRI English

2006-12-25 14:38:00

 

Curse of the Golden Flower not violating copyright!

Posted by Joel Martinsen

DANWEI

December 22, 2006 3:39 AM

 

Chinese film industry split over "Curse"

UPI/M&C (Monsters & Critics)

Dec 20, 2006, 2:08 GMT

Original scrolled off

 

Curse of the Golden Flower breaks Chinese box office record

AFP

2006-12-19

Mirror

 

U.S. trade visit to China yields piracy promise, business deals

By JOE McDONALD

The Associated Press

Wednesday, December 13, 2006 - Page updated at 01:50 PM

 

Curse of the Golden Flower

Anne Thompson
Risky Business Blog
November 15, 2006

 

KEYNOTE ADDRESS TO THE ASIA PACIFIC ENTERTAINMENT AND MEDIA SUMMIT 2006

by Michael Schlesinger

Partner, Smith, Strong & Schlesinger LLP

NOVEMBER 6, 2006

LOS ANGELES, CALIFORNIA

 

Chinese checkers

The Great Wall shatters H'wood's hopes for pic blitz

By VARIETY STAFF

Posted: Sun., Jul. 16, 2006, 6:00am PT

 

Chamber of Commerce Asks U.S. to Crack Down on Chinese Copyright Violations

By ELIZABETH BECKER

New York Times

February 10, 2005

 

HERO (YING XIONG)

Zhang Yimou, China/Hong Kong, 2004

Interview with Zhang Yimou conducted by The Culture Show production team

BBC Four

November 2004

 

REALITY BITES: HOW THE BITING REALITY OF PIRACY IN CHINA IS WORKING TO STRENGTHEN ITS COPYRIGHT LAWS

By: Graham J. Chynoweth

iBRIEF / Copyrights & Trademarks

Duke Law & Technology Review 0003

2/11/2003

PDF

 

SHANGHAI TRIAD

Zhang Yimou, Hong Kong, 1995

Clare Norton-Smith

BBC Four

Saturday 1 February 2003 11.45pm-1.30am

 

The Pinch of Piracy Wakes China Up On Copyright Issue; It's More Than a Trade Dispute When the Victims Are Chinese

By JOSEPH KAHN

New York Times

November 1, 2002

 

Gordon Housworth



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Congressional Quarterly's remarkable recap of Israeli espionage

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Congressional Quarterly (CQ) recently released a startlingly candid analysis of Israeli espionage, including the process of Mossad's seeking "spotters" able to identify members of the Jewish-American community susceptible to recruitment:

Mossad agents also scout for people to help them in the Jewish-American community, he said, based on their religious and political commonality. It's a vast community of potential "spotters," who can point them to other Jewish Americans in government, law, finance and banking who might be susceptible to recruitment, as is the case with potential Chinese and Cuban recruits.

Furthermore, the level of Israeli penetration is so great that many or all trials on the topic may be hamstrung:

A former senior CIA counterintelligence operative believes the [Ben-Ami Kadish] case "will never go to trial, because of all the ugly stuff that would come out" about Israeli activities in the United States. Indeed, Justice Department attorneys have fought to keep "ugly stuff" from emerging in the trial of two officials of the American Israel Public Affairs Committee, or AIPAC, charged with accepting classified documents from Pentagon official Larry Franklin.

NOTE TO READERS: If you are already aware of pro-Israeli efforts to deflect frank discussions of US geopolitical interests, or are immune to comments critical of Israel, skip down to the full text mirror of the CQ article by Jeff Stein. If you are unfamiliar with Congressional Quarterly or the efforts to stifle debate I submit the next comments are worth the read as a follow-on to Israel was planting malicious chips in US assets before China.

For those unfamiliar with CQ, it is the gold standard in Capitol Hill and congressional reporting, fielding more than 150 reporters and researchers while maintaining substantial databases on both Congress and government. Founded in 1945 by husband-wife team of Nelson and Henrietta Poynter as a explanatory link between newspapers and the opaque operations of DC, Nelson Poynter stated that "government will never set up an adequate agency to check on itself," foundations were "too timid," thus client-driven commercial effort was needed. (Most of CQ's products are subscription based but the espionage item was among the subset flagged for public release.)

One would think, but cannot be certain, that CQ is above reproach from the hyper-Israeli press sentinels of which I have written:

The pro-Israeli HonestReporting is often not, but it is only modestly apologetic in comparison to the Committee for Accuracy in Middle East Reporting in America (CAMERA), the velocity of whose text barely holds onto a claim of legitimacy in presenting an Israeli issue.

A month has elapsed since the CQ National Security Editor, Jeff Stein, released Israel Might Have Many More Spies Here, Officials Say and as of today neither CAMERA or HonestReporting has attacked CQ, Stein or the article so there may be limits after all. If so, it is the first in recent memory. As the UK's Financial Times observed in its 2006 American and Israel:

Reflexes that ordinarily spring automatically to the defence of open debate and free enquiry shut down - at least among much of America's political elite - once the subject turns to Israel, and above all the pro-Israel lobby's role in shaping US foreign policy.

 

Even though policy towards the Middle East is arguably the single biggest determinant of America's reputation in the world, any attempt to rethink this from first principles is politically risky.

 

Examining the specific role of organisations such as the American Israel Public Affairs Committee, commonly considered to be the most effective lobby group in the US apart from the National Rifle Association, is something to be undertaken with caution...

 

Moral blackmail - the fear that any criticism of Israeli policy and US support for it will lead to charges of anti-Semitism - is a powerful disincentive to publish dissenting views. It is also leading to the silencing of policy debate on American university campuses, partly as the result of targeted campaigns against the dissenters...

 

Doctrinal orthodoxy was flouted [in] a paper on the Israel lobby by two of America's leading political scientists, Stephen Walt from Harvard's Kennedy School of Government and John Mearsheimer from the University of Chicago. They argue powerfully that extraordinarily effective lobbying in Washington has led to a political consensus that American and Israeli interests are inseparable and identical.

 

Only a UK publication, the London Review of Books, was prepared to carry their critique, in the same way that it was Prospect, a British monthly journal, that four years ago published a path-breaking study of the Israel lobby by the American analyst, Michael Lind...

The irreverent Texan political commentator, Molly Ivins, observed from our side of the pond:

For having the sheer effrontery to point out the painfully obvious - that there is an Israel lobby in the United States - Mearsheimer and Walt have been accused of being anti-Semitic, nutty and guilty of "kooky academic work." Alan Dershowitz, who seems to be easily upset, went totally ballistic over the mild, academic, not to suggest pretty boring article by Mearsheimer and Walt, calling them "liars" and "bigots."...

 

In the United States, we do not have full-throated, full-throttle debate about Israel. In Israel, they have it as a matter of course, but the truth is that the accusation of anti-Semitism is far too often raised in this country against anyone who criticizes the government of Israel.

 

Being pro-Israel is no defense, as I long ago learned to my cost... It's the sheer disproportion and the vehemence of the denunciations of those perceived as criticizing Israel that make the attacks so odious. Mearsheimer and Walt are both widely respected political scientists - comparing their writing to "The Protocols of the Elders of Zion" is just silly...

That disproportion was demonstrated against a renown economist attempting, at US military request, to estimate the cost of conflict:

A good example was the furor made over Thomas Stauffer's estimation of the cost of conflict of US policy in the Middle East which was disputed by pro-Israeli sources. Stauffer made his initial comments under US Army War College auspices at a conference at the University of Maine but that presentation seemed to be obscure, ultimately yielding only one HTML copy on the web, with a PDF mirror at an appallingly anti-Semitic site. That led to more developed items in Middle East Policy Council (MEPC) and the Middle East Economic Survey (MEES).

Stauffer suffered the same withering criticism as did any source mirroring his conclusions as the very reliable Christian Science Monitor (CSM) found when it attempted to cover the topic.

 

Preface concluded, here is Stein's article: 

Israel Might Have Many More Spies Here, Officials Say

By Jeff Stein, CQ National Security Editor

CQ Homeland Security

Congressional Quarterly Inc.

April 25, 2008 - 8:13 p.m.

The elderly New Jersey man arrested last week on charges of spying for Israel years ago was probably still working for the Jewish state's espionage service in tandem with another, as yet unidentified spy, former American intelligence officials say.

Ben-Ami Kadish, now 84, was employed as a mechanical engineer at a U.S. Army weapons center in New Jersey when he allegedly supplied his Israeli handler with classified military documents, according to charges filed last week.

The handler was named only as "CC-1," or co-conspirator 1, in the criminal complaint. But its description of him as the same man who was handling the notorious Israeli mole Jonathan Pollard all but identified him as Yosef Yagur, formerly the consul for scientific affairs at the Israeli consulate in New York.

Pollard, who gave Yagur thousands of highly classified documents while working as a navy intelligence analyst in the 1980s, is in the 21st year of a life sentence for espionage.

Kadish, who worked at the U.S. Army's Picatinny Arsenal in Dover, N.J., from 1963 to 1990, could also spend the waning years of his life in jail if he is convicted.

A former senior CIA counterintelligence operative believes the case "will never go to trial, because of all the ugly stuff that would come out" about Israeli activities in the United States.

Indeed, Justice Department attorneys have fought to keep "ugly stuff" from emerging in the trial of two officials of the American Israel Public Affairs Committee, or AIPAC, charged with accepting classified documents from Pentagon official Larry Franklin.

But the federal judge in the case has indicated he might not go along with their strategy. Last month Judge Thomas Ellis III indefinitely postponed the trial of AIPAC officials Steven Rosen and Keith Weissman, which was scheduled to open next week.

Neither the United States nor Israel, strategic allies struggling with Middle East terrorism, the war in Iraq and the rising threat of Iran, can afford a breech in relations triggered by either case.

The Justice Department said Kadish brought home briefcases full of classified documents, which "CC-1" photographed in his basement. Among the documents was "restricted data" on nuclear weapons, classified information on a modified F-15 fighter that was sold to an unnamed foreign country (most likely Saudi Arabia), and a document relating to the Patriot anti-missile system, which the United States deployed to Israel during the first Gulf War in 1990.

Yagur fled New York in 1985 as U.S. counterintelligence agents closed in on Pollard. He has not been back since, U.S. officials believe.

They thought that was the end of his espionage operations here.

But Yagur evidently kept in touch with Kadish, exchanging e-mails and telephone calls with him long after he returned to Israel. Kadish went to Israel in 2004 and met with his former spy master, authorities said.

Just last month, on March 20, "CC-1" told Kadish to lie to FBI agents who had questioned him about the documents, according to a wiretap transcript produced by federal prosecutors.

"Don't say anything. Let them say whatever they want. You didn't do anything," CC-1 told Kadish. "What happened 25 years ago? You didn't remember anything."

Ron Olive, the navy investigator in charge of the Pollard case, said he was shocked when he heard about Kadish's arrest.

The description of CC-1 as Pollard's handler meant that "it has to be" Yagur, he said by telephone from Arizona, where he was giving a counterintelligence lecture to federal officials.

"I was like, 'holy cow, this is unbelievable,'" he said.

Olive said the arrest meant that Kadish was still working for Israeli intelligence.

"It means Israel still has an agent in place in the U.S. who can ferret out someone who has access to information they want," Olive said.

One role Kadish could play was as a "spotter," who could size up possible recruits for Israeli intelligence, even while living in a retirement community in Monroe Township, N.J., said Olive and another former federal agent.

"That jumped out at me," said Harry B. "Skip" Brandon, a former deputy assistant director of counterintelligence at the FBI.

"It is very unusual for a former agent handler and his former agent to remain friends. And it's dangerous for both," he added. Any communication between the two, no matter how innocent, raises the risk of detection and exposure.

Other aspects of the case suggest that Jerusalem has at least one, and maybe several more spies embedded in U.S. military services or intelligence agencies: As with Pollard, the Israelis asked Kadish for specific documents, indicating they knew what they were looking for, supplied by another spy.

"You know, it wouldn't surprise me one bit," said Olive, who in 2006 published a memoir about the case, "Capturing Jonathan Pollard: How One of the Most Notorious Spies in American History Was Brought to Justice".

Olive said Pollard stole "360 cubic feet" of classified documents during his six years as an Israeli mole. "It was the most devastating spy case I ever saw," he said. "No other spy in the history of the United States has stolen so many secrets, so highly classified, in such a short period of time."

"No other spy in the history of the United States has stolen so many secrets, so highly classified , in such a short period of time," he said.

There have long been rumors of a "Mr. X," Olive said, "another unknown government employee who had access to information that the Israelis could use."

Israeli intelligence had a spy, code-named MEGA, high up in the Reagan administration at the same time Pollard, and now allegedly Kadish, were stealing documents, according to a Washington Post story years ago that has never been confirmed.

In fact, according to past and present U.S. counterintelligence officials, Israeli agents were so aggressive even after the Pollard case that an FBI counterintelligence boss in the late 1990s, David Szady, summoned Mossad's top official for a tongue lashing.

"Knock it off," Szady said, according to a reliable source on condition of anonymity.

Szady has been pilloried in pro-Israel circles for pursuing the AIPAC case, which many critics say amounts to trumping up espionage charges against officials who were merely engaging in the kind of transaction officials and journalists conduct every day.

But the Israelis here have never stopped practicing the "world's second oldest profession," as espionage is sometimes dubbed, despite years of rote denials, many officials say.

"I guarantee you the same thing is happening now," said Olive, who trains Department of Energy security officials on detecting signs of espionage.

One effective espionage tool is forming joint partnerships with U.S. companies to supply software and other technology products to U.S. government agencies, intelligence officials say.

But Brandon, who retired in the mid-1990s but retains many intelligence contacts for his global security consulting business, says the Israelis are interested in commercial as much as military secrets. They have a muscular technology sector themselves.

"They are always looking for a leg up," he said.

Congress is a major target, too, Brandon said.

"God, they would work the Hill," he said. "They really worked the Hill. They were not necessarily interested in collection [of information] so much as they were in influence."

Influencing Congress is usually the domain of foreign diplomats, he said, but in Israel's case there was "very little distinction between Mossad and the diplomats."

"They were very sharp," he added. "Their best and brightest."

Mossad agents also scout for people to help them in the Jewish-American community, he said, based on their religious and political commonality. It's a vast community of potential "spotters," who can point them to other Jewish Americans in government, law, finance and banking who might be susceptible to recruitment, as is the case with potential Chinese and Cuban recruits.

Or just useful conversation. Israeli agents, Brandon said, are skilled at eliciting information from unwary Jewish Americans in strategically important positions.

"They make you feel good, feel important," he said. "They don't even realize they're giving up something" sensitive, or even classified - until it's too late.

At the same time, U.S. and Israeli intelligence officials have worked hand in glove on numerous fronts since 1948, when the Jewish state was founded.

Mossad had access to Russian Jews who supplied the West with Soviet military, scientific and technical secrets. American and Israel intelligence have always worked closely in counterterrorism.

But they don't tell each other everything, which is why the relationship sometimes veers from friendship to competition.

"They were never, ever allowed in our facilities," says a former CIA officer who was sometimes assigned a liaison role with Israeli counterterrorism agents.

Likewise, when CIA or other U.S. intelligence operatives visited Israel, Israeli security agents would "toss their room," he said, "just to show who's in charge."

Jeff Stein can be reached at jstein@cq.com.

Source: CQ Homeland Security
(c) 2008 Congressional Quarterly Inc. All Rights Reserved.

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In fair disclosure, following is my AIPAC series:

Israel Might Have Many More Spies Here, Officials Say

By Jeff Stein, CQ National Security Editor

CQ Homeland Security

Congressional Quarterly Inc.

April 25, 2008 - 8:13 p.m.

 

Molly Ivins: Pro-Israel 'Nutjobs' on the Attack

By Molly Ivins

TruthDig

Posted on Apr 25, 2006

 

America and Israel

Financial Times

Published: April 1 2006 03:00 | Last updated: April 1 2006 03:00

 

Economist tallies swelling cost of Israel to US

By David R. Francis

Christian Science Monitor

December 09, 2002 edition

Editor's note to Economic tallies

Christian Science Monitor

posted December 16, 2002

 

Gordon Housworth



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Israel was planting malicious chips in US assets before China

  #

Reporting on the FBI investigation of Chinese counterfeit, some possibly malicious, electronics has made no mention that Israel had embedded malicious chips in nothing less than the White House phone system by 2000. Outside of members of the intelligence community and attentive technical readers of the period, this will come as a surprise, possibly coupled with the erroneous assumption of anti-Israeli bias, to many readers.

Nothing in open source then or since has convinced me that the US telecommunications network is either secure or immune to further interruption or breach. Whereas SCADA control networks, primarily for power grid generation, transmission and distribution applications (genco, transco, disco), and recently fiber optic networks have been identified as vulnerable to attack, little has been made publicly of telco vulnerability until the China Cisco counterfeits. The vulnerability of the US/EU telco network to a variety of state and nonstate actors is so great that it should be ranked adjacent to the vulnerabilities of our SCADA networks, for all applications, and fiber optic networks. See:

Telco supply chain analysis has again been reduced to function at lowest cost with the assumption of low risk. All tier providers from whatever state actor need to be examined and risk assessed in the design, fabrication, installation and maintenance phases. See Foreign vulnerability inherent in US globalization of its commercial and defense supply chains, 5/6/2008.

Israel as independent actor, often counter to US interests, not unlike China

From Palmerston, interests, and forms of governance, 5/22/2004:

Israel pursues an independent diplomatic policy at odds with US interests. Israel is a modest cooperative partner in the US war against terrorism. Just as the Russians, the Pakistanis, the Chinese and others did in the post 11 September period, Israel immediately offered the US data that painted their parochial adversaries as the architect or participant of the air liner assault so that we might attack them. Each country offers or withholds information so as to advance its national interests, and attempts to influence where it cannot command. Israel is no exception and I think that it applies Palmerston better than the US.

Israel ran Jonathan Pollard, a US Navy civilian analyst, as a spy to enormous and ongoing harm to the US. Israel not only used that information to US disservice but further went on to sell or broker that information to the Russians and the Chinese, perhaps others. The impact on the US is still being felt to this day and none of the attempts of his apologist spouse, Esther, will wipe that away. The effects of Pollard's espionage is so great that Director CIA threatened to resign if Clinton pardoned Pollard. (If a US national has strong loyalties, be it religious, tribal, cultural or geographic, that work to the detriment of US interests, then I am also at odds with them.)

Israel is not a devoted friend of the US and it has nothing to do with religion or its democratic governance. (We forget that France was the principal post-partition mentor of Israel before the US.) It is a nation state acting in its best interests, some of which correspond to our own...

Yes, there are tactical interests between the US and Israel. Examples being the identification of certain Palestinian assets to the Israelis... I was in some briefings by Israeli officers in which they used a metaphor that I think circulates within the IDF, as others have heard it, that Israel is like the man atop a burning building that can neither put out the fire or get down off the building. All actions are conducted within that narrow range of options.

Commentary follows on related Israeli collection efforts and how those events receded from the public consciousness. The note on sources for a series on the interaction of AIPAC, American Jews, the State of Israel and the Christian Right also applies here.

Recognition of intel collection events obscured by fog facts

Larry Beinhart, author of American Hero [snippets here] filmed as Wag the Dog, describes "fog facts" as an overlooked class of information that become increasingly obscure with the passage of time. (This analyst would add lack of simple search tool access by scrolling off of the original source, lack of mirroring or mirroring at sites that have an otherwise offensive character, original foreign or foreign language sources, or pre-2004 topical information before the advent of the web that is still less well captured than post-2004 data.):

Fog facts are things that have been reported, somewhere, sometime, but have disappeared into the mist - like the pre-9/11 hints that there were hijackers in our midst. The fog facts can still be found by enterprising reporters, but with time and news space increasingly crunched - and media priorities shifting to the trivial - they usually remain obscure, at least to the general public.

Diplomatic "dead air," from both the embarrassed target and successful collector, combined with dissuasion of national reporting creates fog facts in record time. In the case of Israel, two events have persisted in the public consciousness, out of the fog bank: the Jonathan Pollard and USS Liberty affairs. Almost all other Israeli intel collection efforts against the US have receded into fog facts as if they never existed.

Espionage at the pinnacle of impunity

Consider Bush43 standing before the State Duma (lower house) or the Federation Council (upper house) of the Russian Federation or the PRC's National People's Congress (NPC) or Central Committee of the CCP and making the equivalent declaration:

I have been fortunate to see the character of Israel up close. I have touched the Western Wall, seen the sun reflected in the Sea of Galilee, I have prayed at Yad Vashem. And earlier today, I visited Masada, an inspiring monument to courage and sacrifice. At this historic site, Israeli soldiers swear an oath: "Masada shall never fall again." Citizens of Israel: Masada shall never fall again, and America will be at your side.

Given the level of espionage directed against the US by the State of Israel, the comparison is pointedly appropriate.

 

Israel's espionage efforts against the US, despite Israeli diplomatic statements to the contrary, are long standing, and all too effective. From Who's on the National Security Threat List and why?, 4/27/2004:

The 2000 Annual Report to Congress on Foreign Economic Collection and Industrial Espionage uncloaked to identify six greatest offenders as China, Japan, Israel, France, Korea, Taiwan, and India. I surmise the temporary Russian absence was due to the disruption from the breakup of the former Soviet Union. Taiwan was greatly exercised by being publicly placed among 13 nations designated as a threat to US national security, "including Russia, China, North Korea"... Who doesn't get publicized on the list are our closest allies such as the UK, (then West) Germany, the Netherlands, Belgium, and Canada.

Commercial enterprises and individuals account for the bulk of international industrial espionage activity, roughly three times the percentage due to foreign government-sponsored efforts.  Even developing countries pose a threat as their intel agencies profited from training provided by the USSR, DDR (East Germany), Czechoslovakia, Bulgaria, and even the US and so have created a "reservoir of professionally trained intelligence mercenaries."

Israel's espionage efforts are rivaled by their technology diversion efforts. From the 2005 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."

Whatever one's opinion is of the State of Israel, the state is certainly unique in its ability to target US assets while retaining a more than cooperative relationship with the US.

Security risks in telco supply chains

This analyst would have the same concerns of employing a Chinese telco to build and/or maintain sensitive telecommunications systems, or provide service via their systems, as I would an Israeli firm as we have already had three significant, verified breaches courtesy of Tel Aviv, most notably the breach (also here) of the White House phone system by Telrad during the Clinton administration. I would have equal interest in the master purchase agreement between Sprint and ZTE, and the presence of Huawei of Telrad in telco installations.

PTT (Post, Telegraph and Telephone) applications should be on a national security-level footing regardless of who builds, and the pen testing and on-going monitoring should be done externally. Yes, this approach requires more money, assets and training but that is part and parcel of a national security footing. Witness the recent penetration of the Greek cell phone system (details here) and the recording of calls by senior government officials. Due to both architecture and insufficient patching, the perpetrators were able to penetrate and monitor even as they shielded their efforts.

 

Possible targets must examine their entire supply chain well into the lower tiers, the ostensibly more innocuous the better. Witness the Israeli firm, Amdocs Ltd, which did, and may still do, the bulk of directory assistance calls and call records and billings in the US. It was said that it was virtually impossible to make a landline call without generating an Amdocs record. NSA long felt that while Israel may not have been intercepting the contents of the calls, it did have a perfect "traffic analysis" of who called whom when and for how long. Combine that with external events and you have amazing abilities.

 

Israel penetrates the White House communications network

 

Said to have been operational in 1998 during intense Israeli speculation about US intentions of the ongoing peace process:

The tip-off about these operations [appears] to have come from the CIA... A local phone manager had become suspicious in late 1996 or early 1997 about activities by a subcontractor working on phone-billing software and hardware designs for the CIA. The subcontractor was employed by an Israeli-based company and cleared for such work. But suspicious behavior raised red flags. After a fairly quick review, the CIA handed the problem to the FBI for follow-up...

 

"It's a huge security nightmare,"... "The implications are severe,"... "We're not even sure we know the extent of it...All I can tell you is that we think we know how it was done... That alone is serious enough, but it's the unknown that has such deep consequences."

 

Sources in Israel say intelligence agents infiltrated Telrad, a company that had been subcontracted by Nortel, America's [then] largest telecommunications conglomerate, to help develop a communications system for the White House.

 

Company managers were said to have been unaware that virtually undetectable chips installed during manufacture made it possible for outside agents to tap into the flow of data from the White House.

 

Information being sent from the president to his senior staff in the National Security Council and outside government departments could be copied into a secret Israeli computer in Washington, the sources said. It was transferred to Tel Aviv two or three times a week.

 

One opportunity for Israeli agents to mount the operation arose when Nortel, Telrad and another firm won a 33m contract to replace communications equipment for the Israeli air force. Members of the air force were allowed access to manufacturing areas as a result...

 

As for how this may have been done technologically, the FBI believes it has uncovered a means using telephone-company equipment at remote sites to track calls placed to or received from high-ranking government officials, possibly including the president himself, according to Insight's top-level sources. One of the methods suspected is use of a private company that provides record-keeping software and support services for major telephone utilities in the United States.

 

A local telephone-company director of security, Roger Kochman, tells Insight, "I don't know anything about it, which would be highly unusual. I am not familiar with anything in that area."

 

U.S. officials believe that an Israeli penetration of that telephone utility in the Washington area was coordinated with a penetration of agents using another telephone support-services company to target select telephone lines. Suspected penetration includes lines and systems at the White House and NSC, where it is believed that about four specific phones were monitored -- either directly or through remote sites that may involve numbers dialed from the complex.

 

"[The FBI] uncovered what appears to be a sophisticated means to listen in on conversations from remote telephone sites with capabilities of providing real-time audio feeds directly to Tel Aviv," says a U.S. official familiar with the FBI investigation. Details of how this could have been pulled off are highly guarded. However, a high-level U.S. intelligence source [said] "The access had to be done in such a way as to evade our countermeasures .... That's what's most disconcerting."

Supply chain breach of the US telecommunications network

 

As part of, or in concert with, the Telrad penetration, the FBI was investigating Bell Atlantic and Amdocs Ltd., a "Chesterfield, Mo., telecommunications billing company [that] helped Bell Atlantic install new telephone lines in the White House in 1997":

Amdocs provides billing and customer services to telecommunications companies around the world, including Bell Atlantic, BellSouth, Sprint and Vodafone. The Israeli-owned company has grown at an incredible rate since opening an American base in 1997, tripling its U.S. revenues to more than $600 million in 1999. Amdocs software handles 50 percent of all local calls in the United States and 90 percent of all local calls in Germany...

 

Amdocs, once a small Israeli software company, is the world's leader in the $20 billion telecommunications billing software industry, with expected revenues this year of $1.1 billion, said Debra Katz, an analyst with Gerard, Klaur and Mattison in New York. The company employs 5,600 people worldwide and is run by "an amazingly high caliber of people."...

In what was a stupendous opportunity for traffic analysis, the US offered significant parts of its telephone logs (date, time, duration, to, from, likely more) to Israeli assets:

In 1997, the White House had a new, state-of-the-art phone system installed by Bell Atlantic. The system installed was not the secure, military-installed system for classified conversations but rather a commercially secure phone system. The classified phone lines presumably remain secure and are not involved in the alleged breach, sources said...

 

[A]  senior-level employee of Amdocs had a separate T1 data phone line installed from his base outside of St. Louis that was connected directly to Israel. [Investigation centered on] whether the owner of the T1 line had a "real time" capacity to intercept phone calls from both the White House and other government offices around Washington, and sustained the line for some time... An interceptor could allegedly place the location in the White House or other buildings where phone calls originated Sources familiar with the investigation say FBI agents on the case sought an arrest warrant for the St. Louis employee but Justice Department officials quashed it...

A US cryptographer and security specialist asked the same question that first came to mind when the breach was discovered:

Why should we be freely giving to Israeli corporations information (call records, CALEA information) that requires court orders to obtain in this country?  Such information is obviously sensitive, and the well-motivated efforts to strengthen and protect our national infrastructure should reasonably include mandating that such information not be routinely handled by any foreign entities...

 The balance tipped further in Israel's favor by its ownership of the major Lawful Interception (LI) products producer, Comverse Infosys. As US domestic calls transit telco routers, "Custom computers and software, made by companies like Comverse, are tied into that network to intercept, record and store the wiretapped calls, and at the same time transmit them to investigators":

The [Lawful Interception (LI)] manufacturers have continuing access to the computers so they can service them and keep them free of glitches.  This process was authorized by the 1994 Communications Assistance for Law Enforcement Act, or CALEA... [W]hile CALEA made wiretapping easier, it has led to a system that is seriously vulnerable to compromise, and may have undermined the whole wiretapping system...

 

[Comverse] insists the equipment it installs is secure. But the  complaint about this system is that the wiretap computer programs made by Comverse have, in effect, a back door through which wiretaps themselves can  be intercepted by unauthorized parties.

 

Adding to the suspicions is the fact that in Israel, Comverse works closely with the Israeli government, and under special programs, gets  reimbursed for up to 50 percent of its research and development costs by  the Israeli Ministry of Industry and Trade. But investigators within the DEA, INS and FBI have all told Fox News that to pursue or even suggest  Israeli spying through Comverse is considered career suicide.

Significant elements of the US/EU telecommunications network are neither secure or immune to further interruption or breach from a variety of state and nonstate actors. To focus on only one state, possibly erroneously, only does us harm.

 

President Bush Addresses Members of the Knesset

The Knesset

Jerusalem

Office of the Press Secretary

For Immediate Release

May 15, 2008

 

USS Liberty Summary of Events

USS Liberty Memorial

 

I busted Pollard

By RON OLIVE

Jerusalem Post

Nov 20, 2006 20:18, Updated Nov 20, 2006 20:41

 

telnetd root Backdoor in Vodafone's Ericsson Systems?

Sascha Welter

Betabug

1 March 2006

 

Phone Tapping Scandal in Greece

Sascha Welter

Betabug

02 February 2006

 

Why Jonathan Pollard is Still in Prison?

By EDWIN BLACK

Forward

JUNE 28, 2002

See the section: 'THE CRIME'

 

Allies and espionage

Jane's Intelligence Digest

15 March 2002

Original

Mirror via Nucnews

 

AN ENIGMA: VAST ISRAELI SPY NETWORK DISMANTLED IN THE US

ARTICLE 3 OF 7

By Sylvain Cypel

LE MONDE

05 March 2002

Translated by Malcolm Garris

Original

Mirror

 

The Israeli Spy Flap Will Fade Away, But At What Cost?

By Douglas J. Brown

GOPUSA

February 7, 2002

 

Israeli News Reports On The Fox Series Of Israel Spying On US
IsraelNationalNews.com
12-28-2001

Mirror

 

U.S. phone eavesdropping software open to spying --Fox News

From: Declan McCullagh

Politech

Date: Fri, 14 Dec 2001 14:51:51 -0500

A Fox series of 4 items, of which this is part 3, is mirrored at Cryptome

 

FBI Probes Espionage at Clinton White House - suspected telecommunications espionage

by J. Michael Waller,  Paul M. Rodriguez

Insight on the News

May 29, 2000

Mirror

 

POSSIBLE PENETRATION OF WHITE HOUSE EMAIL BY ISRAELI AGENTS

Weekly  Intelligence Notes
Association of Former Intelligence Officers (AFIO)
26 May 2000

 

Israeli spies tapped Clinton e-mail

by Uzi Mahnaimi

Sunday Times (UK)

May 21, 2000

Original scrolled off

Mirror

 

TECH ASSESSMENT OF ISRAELI SPY ALLEGATIONS

Weekly  Intelligence Notes

Association of Former Intelligence Officers (AFIO)

19 May 2000

 

ISRAEL ESPIONAGE PROBE

Weekly  Intelligence Notes

Association of Former Intelligence Officers (AFIO)
12 May 2000

 

President, Senior Officials Briefed on Possible 'Penetration' of White House Phones

By Carl Cameron

FOXNews

6:57 p.m. ET (2257 GMT) May 5, 2000

Original scrolled off

Mirror

 

The ABC's of Spying

By ROBERT M. GATES

New York Times

March 14, 1999

 

Why Pollard Should Never Be Released (The Traitor)

Seymour Hersh

The New Yorker

January 18, 1999

Mirror

Gordon Housworth



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FBI Cisco counterfeit investigation is live fire demonstration of failed supply chain oversight

  #

The recent bureau investigation outlined in FBI Criminal Investigation: Cisco Routers of counterfeit Cisco routers, switches, interface converters (GBIC), and WAN interface cards (WIC) is a long overdue spotlight on the failure to properly manage and assess critical supply chains. Two themes stand out:

  1. Validation of insufficient supply chain analysis at tier: From a supply chain analysis standpoint, the problem is worse that the FBI notes. If the tier 0 is the OEM or top level consumer as it is in the manufacturing sector, then the malicious entry is coming in at tier 4, not tier 3, as the "GSA IT Vendor" is the tier 1. The 'tier 3' to the tier 1 is thus a tier 4 to the OEM/top tier consumer and thus well below superficial oversight limits. Alternately, federal purchasing guidelines were so loose that malicious equipment could be effectively sanitized at tier 2 as noted in the eBay and federal credit card procurement paths. As noted in Foreign vulnerability inherent in US globalization of its commercial and defense supply chains, the lack of effective means and metrics had led to complacency and ignorance.
  2. Probably PLA participation at overt/covert subsidiary: From a motivation standpoint, this analyst believes that the question of "For profit or state sponsored?" is not an 'or' but an 'and,' i.e., both motives are cooperating within the People's Liberation Army (PLA) and have been for well over a decade.

Extensive supply chain 'undersight'

 

While there are many things of interest in FBI Criminal Investigation: Cisco Routers, these caught my eye.

 

Foil #10, "Sub-Contracting Process":

  • Material is coming in via a drop ship GSA vendor to a tier 3 sub, i.e., well below the tier 2 boundary and largely sanitized from the nominal tier 3.
  • The problem is worse that the FBI notes as if tier 0 is the OEM or top level consumer as it is in the manufacturing sector, then the entry is coming in at tier 4, not tier 3, as the "GSA IT Vendor" is the tier 1 and thus well below superficial oversight limits

Foils #13-14, "Directly from PRC" and "Through Foreign Country":

  • Material is sanitized through US and nominal friendly states which confer validation in the absence of investigation.

Foils #15-16, "eBay" and "Government Credit Card":

  • Material apparently bypasses all tracking as a discrete federal group uses their fed credit card or PayPal account to buy from eBay or non-GSA vendor.

Foils #22-23, "U.S. Navy Project":

  • Lockheed Martin is the tier 1, thus the material is again coming in at tier 4 from PRC, whereupon the tier 4 ships direct to the Navy.

Foil #48, "Intelligence Gap"

The scope of criminal activity by insurgent and terrorist groups is vastly underestimated by lay readers; It is as if operational money appears as Minerva from the head of Jupiter, if it is thought about at all. Terrorist organizations build criminal funding arms that have the real possibility of dwarfing the military mission, and in some cases, as I believe is happening in Northern Ireland, they become nearly pure criminal groups with a veneer of rhetoric. None are immune:

[The Red Brigades'] daily life was ruled by economics. Members of the organization spent most of their time raising money to carry out their violent attacks, to buy weapons, to rent new safe houses… The Red Brigades [often] sailed to Lebanon to pick up arms from the PLO. The weapons were them brought to Sardinia where other European groups, such as the IRA and ETA, came to collect their share of the cargo. For this service the Red Brigades received a fee. [To give an idea of the] money required by an armed organization to function, in the 1970s, the Red Brigades had a turnover of $8 to 10 million, equivalent to about $100 million today. This figure was equivalent to the turnover of a medium size Italian company. Generating such vast flow of money required constant attention and absorbed the bulk of the time of the full time members of the organization…

Napoleoni goes on to describe that 2003 market "has merged with the international illegal and criminal economy and together they have a turnover of $1.5 trillion dollars" allocated as:

  • $500 billions are capital flights, money which move from country to country undetected, unreported and illegally;
  • $500 billions is what is commonly known as the Gross Criminal Product, money generated primarily by criminal organizations;
  • $500 billions is the New Economy of Terror, money produced by terror organizations of which 1/3 is represented by legal businesses (which include charitable donations) and the rest comes from criminal activities, primarily drug trade and smugglings.

The bulk of the $1.5 trillion flows into Western economies, it gets recycled in the US and in Europe. It is a vital infusion of cash into these economies.

Tradition of simultaneously 'manning the trenches and the cash register'

As previously noted, "The CCP (Chinese Communist Party) can only maintain its "mandate from heaven" to govern by providing rising economic growth, nor can it maintain the PLA (People's Liberation Army) solely on the "imperial wheat" of government subsidy," thus the PLA was instructed to become largely self-sufficient.

From working notes in 2004:

Official position: Peoples' Liberation Army (PLA) relinquished all commercial investments other than "logistics" in 1999.  Highly visible, high-profile investments handed over.

 

Reality: PLA influence over the economy remains deep and widespread.  The 1999 deadline merely commenced the start of protracted negotiations on who gets what and how Beijing will compensate the military for the revenue lost by handing over its companies. [Includes current value of airlines, pharmaceutical firms, manufacturing and chemical plants, as well as their future revenue stream.]

 

PLA units used the divestiture to shift money-losing firms to local governments even as they kept the best for themselves, blocked audits that would reveal theft and corruption, moved assets into umbrella companies to hide ownership, and allowed departing military officers, their wives or relatives to take over "divested" firms.

 

By 2000 PLA still owned some 10,000 companies selling everything from toilet paper to telecommunications services [Per military analysts, diplomats and China watchers] vastly undervalued at $9.7 billion USD.

 

PLA has a long tradition of simultaneously manning the trenches and the cash register. [Army actions against the Japanese and the Nationalists before and after WW II relied on farming, factory work and other extracurricular activities to support guerrilla operations. Mao Tse-tung cited Ming and Qing dynasty precedents as justification.]

 

China lacks the financial resources to support the PLA solely on the "imperial wheat" of central government funding.

 

PLA's modernization efforts are posting even more aggressive financial demands, yet the Communist Party (CP) needs the PLA as the ultimate defender of its privileged position. Backlash over US-led NATO bombing of the Chinese Embassy in Belgrade [8 May 2000] reduced "pressure to close up shop" of extra-commercial activities.

 

Before 1978, the PLA's business focus was largely limited to production for its own use.  Deng's exhortation to the people to "get rich for the good of China" found fertile ground in the military.  The PLA used its tax-exempt status, warehouses, vehicles and border control to its advantage.  Resulting abuse of power undermined Communist Party credibility, embarrassed CP leadership, while private sector interests undermined military loyalty and left many soldiers with divided loyalties.  PLA greed during the 1997 Asian economic crisis pulled forward the timeline for military divestiture.  PLA was engaging in massive oil smuggling (almost bankrupting China's two state-run oil monopolies) using its border control, ships, warehouses, trucks, private gas pumps and storage tanks to operate the smuggling operation and arbitrage the price difference between dropping world oil prices and China's higher protected prices.  The CP was enraged, recognized the PLA as a corrupting force, and feared that the PLA could endanger CP legitimacy.]

 

July 30, 1998: Military officials in Beijing and analysts abroad believe it will be many years before there is more than "incremental" change in People's Liberation Army ownership of private businesses, the Wall Street Journal reports. Several PLA officials say that lucrative companies, many related to the acquisition and development of weapons systems and related technology, owned by the powerful Headquarters of the General Staff will be exempt from the new rules by the central government. Companies such as the five-star Palace Hotel in Beijing and China Poly Group, a weapons dealer and real estate firm, will keep their military ties.  The PLA is considered the world's biggest business empire. The WSJ cites the recent sale of a PLA-owned restaurant to a private entrepreneur. The new owner pays the PLA a $1,200 monthly fee to "rent" the restaurant's name. "The military stands behind everything we do," says an employee.

PROVENANCE: My notes are unclear on provenance. At the time, was reading Mulvenon and Yang's The People’s Army in the Information Age, notably Jencks' "COSTIND IS DEAD, LONG LIVE COSTIND! RESTRUCTURING CHINA'S DEFENSE SCIENTIFIC, TECHNICAL, AND INDUSTRIAL SECTOR"; Scobell's CHINESE ARMY BUILDING IN THE ERA OF JIANG ZEMIN; Mulvenon's Soldiers of Fortune; Mulvenon and Yang's The People's Liberation Army as Organization, Reference Volume v1.0, notably Finklestein's THE GENERAL STAFF DEPARTMENT OF THE CHINESE PEOPLE'S LIBERATION ARMY: ORGANIZATION, ROLES, & MISSIONS; Magnier's Chinese Military Still Embedded in the Economy; and French's China Moves Toward Another West: Central Asia. Apologies to any that were omitted.

F.B.I. Says the Military Had Bogus Computer Gear
By JOHN MARKOFF
New York Times
May 9, 2008

US, Canadian agencies seize counterfeit Cisco gear

Grant Gross

IDG

02.29.2008

 

FBI Criminal Investigation: Cisco Routers

Section Chief Raul Roldan

Supervisory Special Agent Inez Miyamoto

Intelligence Analyst Tini Leon

January 11, 2008

 

Managing the Risks of Counterfeiting in the Information Technology Industry

KPGM International

Electronics, Software & Services

2005

 

China Moves Toward Another West: Central Asia

By HOWARD W. FRENCH

New York Times

March 28, 2004

 

The New Economy of Terror
By Loretta Napoleoni, author of Modern Jihad: tracing the Dollars behind the Terror Networks
Sign of the Times (UK)

1 December 2003

 

The People's Liberation Army as Organization

Reference Volume v1.0

Ed: James C. Mulvenon, Andrew N. D. Yang

RAND

ISBN/EAN: 0-8330-3303-4

2002 

4. THE GENERAL STAFF DEPARTMENT OF THE CHINESE PEOPLE'S

LIBERATION ARMY: ORGANIZATION, ROLES, & MISSIONS, By David Finklestein

 

Soldiers of Fortune

by James C. Mulvenon

M.E. Sharpe

ISBN-10: 0765605805

November 2000

 

CHINESE ARMY BUILDING IN THE ERA OF JIANG ZEMIN

Andrew Scobell

Strategic Studies Institute, U.S. Army War College

ISBN 1-58487-030-3

August 2000

 

Chinese Military Still Embedded in the Economy

Mark Magnier

Los Angeles Times

January 9, 2000

 

The People’s Army in the Information Age

Ed: James Mulvenson and Richard H, Yang

RAND

CF-145-CAPP/AF

ISBN/EAN: 0-8330-2716-6

1999

5. “COSTIND IS DEAD, LONG LIVE COSTIND! RESTRUCTURING CHINA’S DEFENSE SCIENTIFIC, TECHNICAL, AND INDUSTRIAL SECTOR” by Harlan W. Jencks

 

Gordon Housworth



Cybersecurity Public  InfoT Public  Infrastructure Defense Public  Intellectual Property Theft Public  Risk Containment and Pricing Public  Strategic Risk Public  

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Foreign vulnerability inherent in US globalization of its commercial and defense supply chains

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The US and, and to a lesser degree, Europe have lost control of their defense and commercial industrial supply chains. Exporting capability rather than capacity, the US has increasingly retained only a top tier or integrator role while exporting its tier 2-tier n base. Worse, the US cannot realistically define discrete and net risk as the chains are too opaque for identification and there is decreasing ability to direct sourcing to less risky tiers.

The loss has not come without warning, especially in the seminal analyses of the mid-1980s to early 90s (much of which is cited here) and near-disaster supply chain bottlenecks that nearly sidelined front line equipment during Desert Storm (1990-91).

Having surveyed four decades of research on globalization impacts, we can state that there are virtually no metrics in open source. There are drivers and characteristics but there are no actionable metrics of sufficient robustness to pass the test of falsifiability. At a macro level we are secure that we and some others have the compass right, but actionable information about a specific chain condition and greatest risk at component at tier in the chain is fuzzy at best. Given our supply chain analytic experience, we can see the tracks of bland assumptions without the understanding of how supply networks actually work. Defense and commercial sides of the house share the same problem - insufficient granularity of analysis which if they get there they find that they do not have accurate and timely data. At this point the commercial side generally gives up. The defense side can't so spends much time in Rommel's Wolkenkuckucksheim (Cloud-Cuckoo-Land after Aristophanes). Striped of politeness, almost everyone is guessing although they shroud it in tech speak which pacifies the unknowing.

 

The US manufacturing loss is staggering in its sweep as it includes:

  • Technology (Research Testing Development and Evaluation - RTD&E)
  • Industrial base (tier base capability , knowledge gaining, performance curve and price/volume)
  • Volume (capacity)
  • Availability (conversely product unavailability, product as hostage, withheld or not surged in time of national need)
  • Supply chain (chain complexity masks risky sourcing and possible interdiction)
  • Forensics (undocumented/latent/hostile firmware and/or software additions)
  • Education (learning citadels clustered to engineering and production centers)

Having reviewed analyses of manufacturing globalization for both the defense and commercial sectors, this analyst is of the opinion that the risk to the US has become so great that it should study itself as a reasonable target of economic sanctions (also here), hence the inclusions of citations on that topic. (The Chinese have studied means of countering economic sanctions; can we do no less?)

 

Before globalization there was 'NATO-azation'

 

The issue of dealing with the effects of globalization on US commercial and defense industries has been with us for decades. The 1985 Strategic Materials: Technologies To Reduce U.S. Import Vulnerability, whose advisory panel an Air Force logistics colleague advised me "looks like a 'Who's Who' for the defense department in the 1990's.  Lot of them went on to very senior DoD positions," stated the problem and its complexity well:

Crafting a workable policy [regarding dependence on foreign sources, NATO allies included, for defense material and technology] will be a tricky job.

 

There are three basic policy choices:

  • demand that anything that goes into defense equipment be built in the U.S. from U. S.-sourced components, taking whatever measures are necessary to ensure that all the necessary industries are alive and well in the United States;
  • let the market dictate which industries will be healthy in the United States and look only for the best deals wherever they can be found worldwide; or
  • choose some industries that have to be located in the United States, take appropriate measures to ensure that, and let the rest go with the market.

The first and third require some sort of intervention in the international economy, either supporting the international competitiveness of U.S. companies or protecting, supporting, and subsidizing U.S. companies that cannot otherwise survive. Another approach is to design nothing into U.S. defense systems that cannot be domestically sourced. But this cuts off a great deal of modern technology, a Western strength. In making these choices, the United States will have to decide how dependent we can afford to be, and how much independence we are willing to pay for. If the United States demands self-sufficiency without taking measures to keep U.S. companies alive and competitive, the list of technologies available for defense systems is likely to decrease as time goes on.

 

It will be necessary to decide how to treat dependence on various nations. There are significant differences in being dependent on Canada (already defined as part of the North American industrial base), Britain, our other NATO allies, Mexico, Japan, Korea, etc... Other nations are much less tightly tied to the United States.

 

The high-technology economy is an international one and responds to international market forces. These forces are likely to continue to move industries offshore despite U.S. efforts to will (or legislate) them to stay. In the vast majority of cases, defense business is far too small to provide the necessary clout, particularly when faced with other nations that manipulate their civilian markets to keep their companies healthy. Competition comes from Japan, the smaller Asian nations - Korea, Taiwan, Singapore, etc - and Western Europe...

The US chose the second path by a combination of default and design augmented by partial regulation; Private industry sought performance and integration coupled with higher margin and lower costs. Our current globalization impasse is its direct descendent.

By 2000, the challenges facing the US Air Force were typical of an increasingly globalized and consolidated industrial base:

Between 1990 and 1998, a horizontal and vertical integration took place across all segments of the U.S. aerospace industry. [Driven by a dramatic decline in military aircraft procurement budgets as well as overall defense authorizations since the end of the Cold War,] The number of credible U.S. prime contractors for integrating fighters and bombers fell from seven to two; the number of U.S. missile manufacturers from fourteen to four; and the number of space launch vehicle producers from six to two. By the end of the 1990s, the European defense aerospace industry had also begun to experience a dramatic cross-border consolidation and restructuring. This growing consolidation of defense prime integrators and subsystem suppliers has resulted in increased numbers of strategic and product-specific alliances, international teaming and joint ventures, and cross-border mergers and acquisitions (M&As) among defense firms, together with heightened interest in foreign exports and foreign lower-tier suppliers.

From foreign source to dependency to vulnerability

As early as 1987, US Industrial Base Dependence/Vulnerability. Phase 2. Analysis, had defined three elements of foreign sourcing: (1) a foreign source is a source of supply, manufacture, or technology that is located outside the United States or Canada, (2) a foreign dependency refers to a source of supply for which there is no immediate available alternative in the United States or Canada, and (3) foreign vulnerability, related to foreign dependency. refers to a source of supply whose lack of availability jeopardizes national security by precluding the production, or significantly reducing the capability. of a critical weapon system. While the US has yet to suffer a sustained foreign supplier cutoff "either in peacetime or war," the military and economic balance has now shifted against the US, making it increasingly plausible that the PRC or Russian Federation could directly or indirectly influence 'just-in-time' availability:

One potential scenario simply posits disagreement by the foreign supplier with US policy... Problems such as strikes, political unrest, or natural disasters within the supplier's country are all plausible. Cutoffs might also be created by the supplying nation giving priority to ventures more profitable than DOD contracts, or giving priority to the supplier's home country needs over the United States, especially in times of crisis. Countries external to the supplying country could also create cutoffs - by threatening the supplier, by an overt blockade, or by war. One US study done prior to the end of the Cold War, reminded readers that Japan was within easy bombing distance of the Soviet Union, and thus the USSR could easily cut off critical components for US weapon systems... The USSR test fired two sea-launched ballistic missiles into the Sea of Japan at a time coinciding with Mikhail Gorbachev's April 1991 visit to Japan. Some analysts described the test firings as a "muscle flex" and a "political message for Tokyo." The message, however, has ramifications for the United States also - sources of certain critical supplies are vulnerable to hostility, a situation that creates a possible domino effect on US weapon systems.

Given the shift in manufacturing key component categories from Japan to China, were the US to incur the ops tempo of a second Desert Storm or OIF level endeavor not to Chinese favor, the issue of shortages would not be 'if' but rather 'how many and how soon.' (Nothing has to overt; polite expressions of regret coupled with 'work to rule' responses and the need to service current customers would attenuate/terminate supplies of many critical parts and assemblies needed to sustain the ops tempo.):

Despite the successes of US military weapon systems that used foreign high technology components during the Gulf War, there were moments of uncertainty as to whether the United States would be able to get requested "rush" orders filled for needed components on a timely basis. [On] "nearly thirty occasions, the Bush administration had to call upon foreign governments for help to get delivery of crucial parts for the war effort."... "foreign manufacturers often were reluctant to put the Pentagon's purchase orders ahead of their regular customers' without prompting from their governments, according to officials at embassies here and at the Commerce Department." Of special concern were Japanese suppliers... "The Japanese electronics companies - whose identities have not been publicly disclosed - reportedly said they could not curtail existing commercial contracts, such as orders from VCR, television, and automobile manufacturers, to meet the needs of the US forces in the Gulf." Experts on Japan [also] speculated that Japanese suppliers, in a society geared toward avoiding any military involvement beyond national borders in the post-World War II era, "may have been afraid of domestic political ramifications of favoring military over commercial customers." [An] interview with an unnamed Commerce Department official revealed that the US government "had to 'jump through the hoops' and that the department took the unusual step of asking Japanese government officials at the embassy in Washington for help in prodding Japanese suppliers."

Said of Japan in 1991, the following applies with greater intensity to China. As a calibration, consider a US air and naval intercession on behalf of Taiwan in the Formosa Strait. Leaving aside the likely effort by the Chinese to sink a US carrier battle group, thereby shocking the American populace, one can assume that the entire component supply chain would shut down. Whatever ops tempo the US envisioned would have to come from inventory or alternate supply. Lesser scenarios should have less chain disruption, but a degree of disruption remains high:

The potential for crisis, however, certainly existed and only a common political objective shared by top levels of the US and foreign governments averted more serious problems. The bond between most governments during the war was created by nearly-unanimous outrage over Iraq's aggression; such a bond was both unprecedented and delicate, thus it may be tough to duplicate in the future. Had there not been a common political objective or had the Japanese government, for instance, been more inclined to bow to domestic calls for avoiding contributions to the war effort (and there was considerable pressure within Japan for noninvolvement), it is quite likely the United States would have had to look for other sources to obtain necessary components. Without pre-planning for alternate supply sources, the probability of a favorable resolution would have decreased significantly.

Analogous to mercury accumulation in top tier marine predators, buyers of assemblies, modules and larger finished goods faced with chain opacity will incur rising risk of chain interruption and functional tampering. Without actionable information and the ability to affect chain substitutions, virtually all are now accepting risk by default. See: Confluence of thinking on Chinese outsourcing and supply chain risks from DSB and USCC. From an ICG note:

As we do quite a lot of supply chain analysis, we know why it so often fails, namely the OEM or top tier cannot get the data from their immediate tier who are loath to reveal their chains. Data is shielded, normalized, changed without notification, fictionalized either by surrogate data or simple commercial misrepresentation. Counterfeits add yet another layer on the problem set.

 

From electronic/electrical chain examples we have at hand, many are PRC at tier 2 to tier 5, others are Taiwanese ODMs which means PRC for almost all tiers save design, Japanese chains have PRC, Korean and Singaporean tiers. There are many cases where the OEM or top tier believe that a certain part comes in at tier x in its entirety, but the reality is that a goodly portion comes in PIA down to tier x+3. The PRC presence, either as source or influencer, is overwhelming.

 

Our commercial experience has repeatedly shown that the OEMs don't know what, from where, is in their chains. A common experience is that as the OEM or top tier develops the algorithms of granularity needed to be effective, the data becomes too difficult or costly to obtain. If the OEM demands an identified tier x validate volume and pricing as stated by the purchasing tier (tier x-1), the tier x will validate lest they run afoul of their purchasing tier.

 

As automotive OEMs are phasing out Full Service Suppliers (FSS) by their recognition that they were enduring margin without equivalent value, defense sector firms are enthusing over Performance Based Logistics (PBL) structures which are beginning to blind Defense Logistics Information Service (DLIS) as to what it in a chain and conceivably debase the value of a National Supply Number (NSN). (It should be remembered that DLIS rose from "the World War II era when each of the Military Services operated independently and maintained a separate supply system and procedures for cataloging their items of supply [in which] many items were given a different name by each of the services, making efficient use of available stock impossible.")  [As an aside, buying "Power by the Hour" (PBH) has its merits (also here) but it is disconcerting to see how contractors perceive its profitability.] [ICG note]

Inability to divorce supply chain access from mercantile efforts

Writing in 2004:

The PRC is preoccupied with the US given it current dominance in Asian and global affairs, and see it as the principal "international danger" able to "confront and complicate China's development and rising power and influence in Asian and world affairs." China is mindful that three nations that sought to overturn the prevailing international order of their day, Weimar Germany, Imperial Japan, and the Soviet Union, were punished by an allied coalition of established nations. While I've not see it in print, I cannot but note that the leader of the winning coalition in each case was the United States, a fact that I cannot imagine has been lost on the Chinese.

China is well into the process of creating a mercantile, rather than fungible, market for raw materials that is expressly grounded on the inability of the US or US allies to interdict it. (China's growing mercantile net is of keen interest to this author, but lest I be accused of China bashing, items of equal weight are a Russian kleptocracy class armed with the energy weapon and the implosion of the US Pre-K through 20+ education structure.) See:

Chinese mercantile highlights of interest to this author are:

  • Strategic plan creates mercantile structure that secures energy stocks, raw materials, and crops.
  • Cannot be interdicted by the US or its allies.
  • Delivers export markets for commercial and military production, redirects regional elites to study in China, and extracts diplomatic obedience.
  • Sends large groups of diplomatic and consular agents that meet counterparts at each level of the target country's bureaucracy.
  • Promotes infrastructure projects using Chinese firms, creating a camouflaged posting for People's Liberation Army (PLA) assets.
  • Veiled PLA works have common pattern: tidewater port presence offering partial or complete opaqueness connected by a strassendorf (street city) style of satellite towns connected by new roads to a processing plant at the primary extraction asset, e.g., coal, oil, minerals, timber, etc.

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).

While I freely admit this macro level view lacks granularity and has yet to be submitted to the test of falsifiability, I do not believe it can be removed from a discussion of sustained supply chain access.

 

A unitary threat exceeding combined prior Soviet and Japanese threats

Economic power is the foundation of military power. The most important single indicator is GDP. Like defense budgets, however, GDP provides only a limited picture of power. It says little about the composition of the economy, such as whether it is spearheaded by leading sectors or dominated by old and declining ones. Other important variables include human capital and technology. The best readily available measure of human capital is the average year of educational attainment. For technology, the best indicator is per-capita expenditure on research and development.

The US now faces a potential threat of chain disruption from the PRC greater than that presented by combined Soviet espionage efforts directed against the US technology base, military, dual-use and commercial, and Japanese commercial inroads against a wide range of commercial products, notably electrical and electronic systems, that were conceived in the US:

  • In the case of the Soviets, the US did not cede manufacturing and design efforts wholesale to the USSR; the Russians had to employ economic espionage (see also B.R. Inman's Senate statement) to get technology and equipment otherwise embargoed to them.
  • In the case of the Japanese, the US had an exceptionally strong commercial competitor periodically balanced by a pro-US government that recognized its privileged place under a US defense umbrella which allowed it to devote its GNP to commercial pursuits; when it was essential to US interests, Tokyo would intervene on our behalf. See Refining a China forecast. (It was an unwritten rule of the Nixon administration that the Japanese were to be allowed to dominate electronics markets in return for their unwavering support of US diplomatic initiatives.)

I submit that the PRC will continue to strengthen the independence its own strategic supply chains, a condition that the US/EU have aided by seconding wholesale the manufacture, now design, and in the offing, unique product standards, to the Chinese. A current example of this effort is the gaining of indigenous, as opposed to Taiwanese owned, semiconductor device fabrication capacity from wafer fab through deposition, removal, patterning, and properties modification.

As for the US/EU, the de facto 'sole sourcing' of much of the US and elements of the EU industrial base to China has already rendered its manufacturing base into Chinese hands at multiple tiers, many of which, as noted above, are opaque to the top tier, integrator and ultimate buyer. Similarly, the export of much of its design process for future products to China-based R&D hives have increased the potential for IP predation and the appearance of peer Chinese competitors before the US/EU products reach market.

 

Just as the Soviet Union pointedly pressed Japan over its commercial and military partnership with the US, so will China both direct its domestic suppliers to comply while pressing Taiwan, Japan and Singapore when any of those states significantly work against Chinese Interests.

 

We have already seen two examples of that pressure, one in Japan and the other in the US. Japan squelched what it described as a 'national security' IP theft from Denso, which is itself a repeat of the humiliation that Cisco received at the hands of Huawei and the PLA, i.e., suppress litigation or your commercial interests in China suffer. In each case, once matters became public, and in the case of Cisco went litigious, the Chinese were able to apply commercial pressure on Cisco and Toyota-Denso to relent or suffer immediate penalty. See two items: Prediction: the Cisco-Huawei IP debacle repeated itself with Denso, and likely for the same reasons and A tipping point in intellectual property protection?

 

I submit that both the US government and private industry would find it instructive to receive the equivalent of the Russia's gas embargo to the Ukraine who surprised all by continuing to tap their allotment, thereby plunging the EU into shortage. European energy sourcing directions shifted in the moment with reliable sourcing and self-sufficiency rising in relation to cost as prime issues.

 

I further submit that the US needs to adopt the Toyota/Denso model of retaining the capacity to design and manufacture a portion of the annual buy of everything that they purchase. Toyota/Denso is the only significant automotive OEM to retain that capacity which also gives Toyota leverage with its suppliers by its understanding the technological, design, manufacturing, component pricing and supply chain tier structure of what it procures.

 

This process was proposed, at least for the defense sector in the 1980s but was not acted upon. In the interval, the US, much like the other automotive OEMs has already surrendered much of its process technology in the form of joint ventures, outsourcings and tier manufacturing, leaving the Chinese only to target mathdata and key design efforts not sourced to the tier base.


Chicken Little's sky may be falling but it is does not fall uniformly


If at a macro level it is plausible that the US/EU are subject to systematic supply chain interruption/embargo by the PRC at the commercial and dual-use level, what is the status for defense items given the near misses of Desert Storm? How do we validate (falsifiability) and prioritize investigation in order to identify the most essential chain elements? Even the salient works of the 1980s-early 1990s were imprecise on granular means of analysis. DoD has been providing guidelines "for evaluating, on a case-by-case basis, the need for Government action to preserve industrial capabilities vital to national security" for some time. Witness the 1996 Assessing Defense Industrial Capabilities handbook. The problem was then, and appears to remain, one of data, rigorous trigger thresholds and chain transparency below the DoD vendor.

It is with some interest that DoD appears to believe that its key systems are intact. A three year 2006 National Research Council effort on Critical Technology Accessibility attempted to answer two questions:

  • What products/components/technologies currently being solely procured from foreign suppliers could significantly disrupt U.S. defense capabilities if access to them were denied (through conflict, embargo, treaty, etc.)?
  • What emerging technologies/products that, if the United States chooses not to pursue domestic production, could significantly disrupt U.S. defense war fighting capabilities if access to them were denied?

In which the NRC Committee:

looked for but did not find an existing, exhaustive database of foreign products/components being procured by the Department of Defense (DoD) and decided to not attempt to develop such a database on current foreign sourcing across the vast numbers of DoD systems. Nor did the committee assess, for each foreign component, the impact of denial on operational capability or try to understand the particular mitigation opportunities and consequences. Finally, it did not develop a collective assessment of the technological and industrial trajectories of emerging technologies that promise to be key to our nation's security. The size and scope of such an effort would have exceeded the time and resources available to the committee, and it became clear from the information provided to it and from its deliberations that this was not the right approach.

In the absence of data, the NRC committee:

did listen to government plans and perspectives, discussed the issues with recognized experts, and independently reviewed source material and past literature. In addition, the members of the committee arrived with substantial background, service, and expertise in these matters.

Without intending to flip, they guessed, or as you prefer, SWAGed. Without data, chain transparency, metrics and algorithmic analyses, how could they do better? We find Fortune Fifty firms in similar predicaments with their supply chains.

Despite these limitations, the NRC Committee was confident that:

Based on the information they received and their own knowledge, committee members were unable to identify any product or technology currently being exclusively procured from a foreign supplier that could significantly disrupt U.S. capabilities or operations should it suddenly become unavailable...

 

If the ]US] were to become strategically dependent on a foreign industrial base for items that are critical or for which the regeneration of a U.S. industrial base would take a long time, the risk would be unacceptable. The committee does not see any signs of that at this time, but the possibility should be taken into account when determining what the U.S. industrial base needs to be for defense purposes. The committee identified four areas of future technological and industrial advancement that warrant discussion: (1) information technology (IT) components; (2) IT services, which include many forms of the capability to manipulate, store, and exploit data and information; (3) nanotechnology; and (4) biotechnology. The committee also identified another area of concern, systems integration capabilities.

The 2006 NRC Committee text strongly echoed, and possibly accepted the findings of, a 2004 Study on Impact of Foreign Sourcing of Systems that "contacted a total of 806 prime contractors and first and second tier subcontractors in order to collect and evaluate information" for systems:

shaped by the recent experiences in Operations Enduring Freedom and Iraqi Freedom. Those operations were conducted largely as "come-as-you-are" conflicts with the combat platforms already deployed to our forces; and they consumed significant quantities of precision guided munitions. As a result, this study is focused on those items that were or would be in high demand and/or consumed during similar future operations.

In the absence of rigorous means and metrics coupled with our case work in supply chain analysis, we question the findings of that 2004 effort:

  • Foreign sources provide limited amounts of materiel for the identified programs.
  • Utilization of these foreign sources for these programs does not impact long-term readiness.
  • Utilization of these foreign sources does not impact the economic viability of the national technology and industrial base.
  • In most cases, domestic suppliers are available for the parts, components, and materials provided by the foreign sources.
  • The results of this study are consistent with recent related studies.

This voluntary survey went down to tier two, identifying a total of "73 first, second, and third tier foreign subcontractors" from Austria, Belgium, Finland, France, Germany, Israel, Italy, Japan, Malaysia, New Zealand, Netherlands, Russian Federation, Singapore, Spain, Sweden, Switzerland, Turkey, and the UK. (DoD has been habitually comforted by UK subs, after that NATO and friendlies.) This analyst is pleased that the questionnaire went to tier two, but the report seems to treat 'tier two' (from any country) as the edge of the world after which one needs to look no further.

Also the test characteristics seem vague, looking to the past ("Supply disruption is not likely since the current suppliers have demonstrated reliability in the past..."), rather than to the future. There was also a repeated implication that if the dollar amounts were small that the risk was low as opposed to cessation of component access regardless of cost. ("Collectively, foreign subcontracts represent about four percent of the total contract value and less than ten percent of the value of all subcontracts for these programs.")

 

The report did not reveal or imply any further granular analysis. Based upon our supply chain analysis, this analyst would want more rigorous analysis, look at lower tiers and other chain characteristics before issuing a similar pronouncement.

Returning to the 2006 NRC report, its recognition of the changing nature of the supply base harkens back to the good works of the 1980s:

The impact of component denial is not a static estimate. The risks entailed in depending on a foreign-produced component are embedded in the strategy of supply management and the diversity of the impacted operational system or force. The size and power of the globalized commercial marketplace are such that we must find a way to exploit the marketplace's value for our security. The risks and benefits of this exploitation are at least as much an issue of acquisition and logistics strategy as they are of estimating foreign intent. The viability of the future assured domestic supply of critical components for the DoD is dependent on the health of the U.S. industrial base in these sectors.

Its recommendations to Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)) and DIA are interesting, although some are unworkable while others are likely to be ineffective:

  1. [D]evelop a system for monitoring the risks of component unavailability within the procurement and operating elements of DoD... [ICG comment: Having not worked before, and with no better tools and metrics on offer, how will it work now?]
    • A self-certification approach by USD(AT&L) should direct the services and defense agencies to annually prepare a product and supply chain assurance report that identifies important vulnerabilities, potentially significant operational consequences, and recommended mitigation actions... [ICG comment: Self-certification rarely, if ever, works as bureaucracies are loathe to mark themselves deficient; even less likely without clear means and metrics.]
    • [A]nalyze these annual reports to identify DoD-wide vulnerabilities that might not be detected by the individual services and agencies and to warn of worrisome trends in the integrity of the supply chain, ensuring it is not compromised by foreign supply sources... [ICG comment: Unlikely to work as the certifications are suspect, and no metrics are proposed.]
    • [ICG comment: There are, however, some useful questions which could lead to metrics:
      • Where there is a lack of war reserves or stockpiles.
      • Where a weapon system is uniquely in the U.S. inventory and therefore cannot tap into worldwide depots.
      • Where developing an alternative source of supply requires significant lead times.
      • Where the DoD has developed sole-source, single-solution capabilities.
      • Where critical technologies have migrated offshore or been developed there in their entirety.

  2. [D]evelop a system for monitoring U.S. industrial health in strategically important global commercial market sectors that are critical to the availability of components for DoD... [ICG comment: Fine, but how and by what means and metrics?]
  3. [O]organize a systematic method of assessing the health of military systems integration in and for the DoD as well as that of potential coalition partners and adversaries... [ICG comment: Again, how and by what means and metrics?]

The foreign dependency analysis that this analyst would like to see is a Joint Logistics Commanders' 1986 report, A Study of the Effect of Foreign Dependency, summarized in GAO/NSIAD-90-48, that "reviewed 13 DOD weapon systems and found dependencies1 on foreign sources in 8 of them with severe problems in 6. According to the study, these dependencies could result in a total cut-off of the production of these items as early as 2 months into a war mobilization effort for a period lasting from 6 to 14 months.":

To obtain information regarding the lower subcontractor/vendor levels, for 12 of the 13 weapon systems reviewed, the project team performed a limited survey of the market structure supporting the systems. That is, for each of the 12 systems, program officials were asked to identify 5 subsystems and components at the next lower production tier meeting certain criteria2 and this identification continued through the lower production tiers down to the level of basic materials. For the other system, the Sparrow missile, a complete vertical tier analysis was done.3

 

1 A foreign dependency, as defined in this study, is an immediate, serious logistics support problem that affects the combat capability of the United States because of the unavailability of a foreign sourced item.

2 Each subsystem or component had to be (1) complex enough so that the program officials were unable to categorically state that it did not contain any foreign manufactured items and (2) critical enough to production, and complex enough to produce, so that its loss would pose serious problems in meeting production schedules

3 A vertical tier analysis identifies critical items acquired from foreign sources for an individual weapon system down through the tiers of suppliers and evaluates possible production constraints at each level.

Going forward, RAND's effort to assess industrial impacts identified a typology of "cross-border business relationships and activities" then, and still, prevalent in the defense aerospace industry:

  • Cross-border shipments of finished platforms, systems, or major subsystems
  • Licensed coproduction
  • Foreign Military Sales (FMS) coproduction
  • "Partnership" coproduction
  • Codevelopment

All five were supported primarily by "prime/subcontractor [by far and away the leader], marketing agreement, team, joint venture, and parent/subsidiary" structures while the latter three usually involved "relatively greater level of collaboration among participating firms."

 

RAND also segmented USAF objectives relevant to globalization into three categories (economic-technological, political-military and national security-viability) and identified program characteristics it said showed "the most promise for promoting the potential military-political and economic benefits of globalization." This analyst notes that those same characteristics also made it possible to individually and incrementally transfer the US technology base. Note that the primary driver is the defense firm not the government; all other drivers follow:

  • voluntarily structured and often initiated by defense firms rather than by governments on the basis of internal business calculations of market conditions and best business practices.
  • painstakingly structured to satisfy the existing U.S. arms export and technology security regulatory regime and CFIUS.
  • often focus on promoting existing products or modifications thereof, or on specific product market sectors.
  • frequently focus on subsystems, munitions, or discrete components or areas rather than on large, complex programs for the development of entire weapon system platforms.
  • designed to gain and expand active reciprocal market access through new programs.
  • often motivated by a desire to add to a company's product portfolio a highly competitive product in a market sector dominated by another firm or firms.
  • characterized by mutual perception of balanced and complementary bilateral market access opportunities and technology transfer.
  • most aggressive and innovative among these relationships depend on continued reform of the U.S. export control regime in order to achieve their full potential.

RAND’s defense globalization conclusions from 2001 have only accelerated (while they have exploded exponentially in the commercial sector):

  • Numerous innovative cross-border strategic market sector agreements initiated by U.S. and foreign companies are emerging.
  • U.S. aerospace firms are not significantly increasing their acquisition of wholly owned subsidiaries of foreign defense aerospace firms.
  • Teaming and joint ventures with non-UK and non-Europe-based firms are increasing.
  • U.S. industry collaboration with one country's firm increasingly means collaboration with many countries' firms.
  • Consolidated European and other foreign firms mean potentially more equal partners as well as stronger competitors.
  • European and other foreign firms seek U.S. market access but resent barriers.
  • European and other foreign firms view the acquisition of U.S. firms as the most effective means of penetrating the U.S. market.
  • Non-European foreign firms are forming strategic relationships with European and U.S. firms, potentially enhancing competition but complicating standardization and interoperability objectives.
  • European and other foreign industry consolidation present U.S. government and industry with unprecedented opportunities as well as risks.

Yet all of the above are drivers and characteristics which may yet yield metrics, but do not now offer the analyst an actionable means of identifying trigger thresholds.

 

Where are the metrics?

 

Metrics in open source have been difficult to obtain. An effort was made by King and Cameron in 1974 and updated in 1977. Their work was reprised, and remains online, in Appendix A of Strategic Materials: Technologies To Reduce U.S. Import Vulnerability.

 

A more intriguing effort, Conservation, Integration and Foreign Dependency: Prelude to a New Economic Security Strategywas done by David Leech, then at TASC, now Northrop Grumman, in 1993. His was the sole search result on "foreign vulnerability index." Leech proposed the use of Herfindahl-Hirschman Index normally used in anti-trust litigation to "measure the worldwide supply concentration of items, both overall for firms and with firm market shares grouped by country of origin." Along with risk factors it is one of the methods noted in INDUSTRIAL BASE: Assessing the Risk of DOD's Foreign Dependence, GAO/NSIAD-94-104.

 

This author found Leech's approach of sufficient interest to post a fair use excerpt of the GeoJournal piece, with footnotes, dealing with its Foreign Vulnerability Index (FVI). I believe it reasonable to say that Leech believes that:

  • The King and Cameron approach, as with many engineering approaches, will not pass the test of falsifiability.
  • Moran's 4/4/50 rule, which states that if four foreign firms or four nations control more than 50 percent of an international market, that market is considered "vulnerable" and should be monitored, might be a Herfindahl threshold value.

  • The essential problem of assessing the potential for 'concerted effort' in the anti-trust realm is analogous to the essential problem of assessing 'concerted effort' by nations and their industries to deny the US access to their products, services or technologies.
  • Vulnerability is a narrow consideration having to do with tightly defined markets for products and services.

It remains to be seen if Leech's approach falls victim to the problem we frequently see in supply chain analysis, namely that the complexity issue is so great that cost effective, perishable data is not available. I fear that may well be the case, hence the value of inserting a Design Basis Threat (DBT) analysis as we must have actionable values in a low data environment and be able to defend them. See:

Still, Leech is the strongest approach to metrics that this author has seen and deserves exploration anew.

 

Postscript: The Appendices (actually Vol. 2 issued in 1990) of the 1985 Strategic Materials analysis had a specific case study of the strategic value of the carbon fiber market, Case Study: The Advanced Composites Industry.

 

Leaping forward to the present, we see aviation/aerospace, industrial, sporting goods and automotive driving a robust market:

Over the last several decades, the global market for carbon fiber has grown about 12%. Industry experts expect this market to reach $0.9 billion by the year 2010 (around 50 million lbs), with the market for finished carbon fiber reinforced composites parts growing to $9.9 billion. The price of carbon fibers is expected to reach around $5/lb in 2008, a significant reduction in the $150/lb price in 1970 when the market was only around several million lbs.

 

Aerospace markets have led recent demand and are expected to grow at a 19% compounded annual growth rate (CAGR) through 2010. However, industrial applications are taking off, too, with a total combined CAGR of 14% through the end of the decade (this segment currently accounts for around 60% of the current demand). Sporting goods CAGR is estimated at 5% over the same time period, resulting in a total overall projected growth rate of a robust 13%. Wind energy could become the second largest market sector after aerospace by 2010. The following table summarizes some of these applications.

In this thriving environment, the last principal US producer of Acrylonitrile (AN or ACN), the precursor to Polyacrylonitrile (PAN) (See carbon fiber value chain) which is the basis for all aerospace/high end carbon fiber, has passed into foreign hands.

 

Apocryphal stories to the contrary, frogs are smart enough to jump from water whose temperature is elevating; in this skill of self-preservation, frogs are smarter than governments, corporations and self-interested political elites who will stay in the water until it is too late. Once again, low cost has proven not to be low risk.

 

Bibliography Note: While the following list of citations is not exhaustive, I submit that they reasonably constitute a four decade record on globalization and are a good jump point for further investigation.

 

Crafting A Contractor PBL Organization

By John Kotlanger & Ron Giuntini

Performance Based Logistics

29 April, 2008

 

PRC still expanding sub fleet: analysts

THREAT: Many security experts say that China's main objective in upgrading its submarine fleet is the ability to delay or deter US intervention on behalf of Taiwan

NY TIMES NEWS SERVICE, BEIJING

Taipei Times

Tuesday, Feb 26, 2008

 

Strategic Materials

Final Report, Spring 2007 Industry Study

The Industrial College of the Armed Forces, NDU

2007

 

'Power by the Hour': Can Paying Only for Performance Redefine How Products Are Sold and Serviced?

Sang-Hyun Kim, Morris A. Cohen, and Serguei Netessine

Wharton School, University of Pennsylvania

Knowledge@Wharton

February 21, 2007

 

Critical Technology Accessibility

Committee on Critical Technology Accessibility, National Research Council

National Academies Press

2006

Appendix C - Previous Reports on Globalization and the U.S. Military Industrial Base

 

PERP Program - Acrylonitrile

New Report Alert

Nexant

November 2006

 

Letter from China: Is it a 'peaceful rise'? U.S. shouldn't bet on it

Howard W. French

IHT

APRIL 20, 2006

 

Russia and Ukraine Reach Compromise on Natural Gas

By ANDREW E. KRAMER

New York Times

January 5, 2006

 

Measuring National Power

Gregory F. Treverton, Seth G. Jones

Intelligence Policy Center (IPC), RAND National Security Research Division (NSRD)

ISBN: 0-8330-3798-6

2005

 

Measuring vulnerability to U.S. foreign economic sanctions: focused sanctions reduce costs to business.

Askari, Hossein; Forrer, John; Hachem, Tarek; Yang, Jiawen

Business Economics

VOL 40; NUMB 2, pages 41-55

April/1/2005

MIRROR

 

Sanctions Assessment Handbook

Humanitarian Information Centre (HIC)

UN Office for the Coordination of Humanitarian Affairs

2004 last update

 

VALUE CHAIN OF CARBON FIBERS: Issues associated with production, conversion, and supply of PAN carbon fibers into high volume applications.

Presented by: Martin Kokoshka

Grafil Inc.

March 2004

 

Study on Impact of Foreign Sourcing of Systems

Office of the Deputy Under Secretary of Defense for Industrial Policy

January 2004

 

Speed Kills: Supply Chain Lessons from the War in Iraq

by Diane K. Morales and Steve Geary

Harvard Business Review

November 2003

OPEN SOURCE MIRROR

 

Positioning Your Company for Defense Department Work

Helping Remanufacturer's of Service Parts Capture A Highly Profitable New Source of Revenue Through Performance Based Logistics (PBL)

John Kotlanger

November 2, 2003

 

Background Paper of the Millennium Project Task Force on Science, Technology and Innovation

Smita Srinivas et al

United Nations Development Programme (UNDP)

April 18, 2003

 

Going global: U.S. government policy and the defense aerospace industry

Mark A. Lorell, Julia Lowell, Richard M. Moore
RAND MR-1537

ISBN 0-8330-3193-7

2002

 

Certain Issues on China Countering Future Economic Sanctions

By Jiang Luming

The (Chinese) National Defense University

Military Economics Study, November 2001

 

Was America hunting for a new killer submarine?

Global Intelligence Update/Asia Times

April 6, 2001

 

Measuring National Power in the Postindustrial Age

By: Ashley J. Tellis, Janice Bially, Christopher Layne, Melissa McPherson

RAND

MR-1110-A

2000

 

Analyst's Handbook - Measuring National Power in the Postindustrial Age

By: Ashley J. Tellis, Janice Bially, Christopher Layne, Melissa McPherson, Jerry M. Sollinger

RAND

MR-1110/1-A

ISBN/EAN: 0-8330-2803-0

2000

 

Interpreting China's Grand Strategy: Past, Present, and Future

By: Michael D. Swaine, Ashley J. Tellis

RAND

MR-1121

2000

 

How Long Do Economic Sanctions Last? Examining the Sanctioning Process through Duration

Sean M. Bolks, Dina Al-Sowayel

Political Research Quarterly, Vol. 53, No. 2, pp. 241-265

DOI: 10.1177/106591290005300202

2000

ABSTRACT

PDF

 

Task Force on Globalization and Security

Defense Science Board

December 1999

 

The Impact of Economic Sanctions on Health and Well-being

by Richard Garfield

Relief and Rehabilitation Network (RRN)

Overseas Development Institute

RRN Network Paper 31

ISBN: 0-85003-435-3

November 1999

 

Overview and Analysis of the Economic Impact of U.S. Sanctions With Respect to India and Pakistan

James Stamps, Project Leader

U.S. International Trade Commission

Investigation No. 332-406

Publication 3236 September 1999

 

Assessing Defense Industrial Capabilities

DoD Handbook 5000.60-H

Under Secretary of Defense for Acquisition and Technology

April 1996

 

INDUSTRIAL BASE: Assessing the Risk of DOD's Foreign Dependence

Report to the Chairman, Subcommittee on Defense Technology, Acquisition, and Industrial Base, Committee on Armed Services, U.S. Senate

GAO/NSIAD-94-104

April 1994

 

Conservation, Integration and Foreign Dependency: Prelude to a New Economic Security Strategy

David P. Leech

The Analytic Sciences Corporation (TASC)

GeoJournal

Volume 31, Number 2, October, 1993

pp. 193-206

Abstract and order info

FAIR USE excerpt of its Foreign Vulnerability Index (FVI)

 

US Procurement of Weapon Components from Foreign Sources: Policy Implications

Guy J. Fritchman

Major, US Air Force

USAF Research Associate

Program in Arms Control, Disarmament, and International Security

January 1993 (written during spring 1991)

 

Building Future Security: Strategies for Restructuring the Defense Technology and Industrial Base

Office of Technology Assessment

OTA-ISC-530

NTIS order #PB92-208156

June 1992

 

A CALL TO LIFT ECONOMIC SANCTIONS AGAINST IRAQ

Henry B. Gonzalez, (TX-20)

(House of Representatives - June 24, 1991)

[Page: H4929]

 

Industrial Base: Significance of DOD's Foreign Dependence

Report to the Chairman, Subcommittee on Technology and National Security, Joint Economic Committee, U.S. Congress

House of Representatives

GAO/NSIAD-91-93

January 1991

 

The Globalization of America's Defense Industries: Managing the Threat of Foreign Dependence

Theodore H. Moran

International Security, Vol. 15, No. 1, pp. 57-99

Summer 1990

 

Technology and Competitiveness: The New Policy Frontier

B.R. Inman and Daniel F. Burton, Jr.

Foreign Affairs

Spring 1990

 

Holding the Edge: Maintaining the Defense Technology Base - Vol. II, Appendices

OTA-ISC-432

NTIS order #PB90-253345
January 1990

 

Industrial Strength Defense: A Disquisition on Manufacturing, Surge and War

Martin C. Libicki

National Defense University

ADA228966

1990

 

Arsenal of Democracy in the Face of Change: Economic Policy for Industrial Mobilization in the 1990s

D. J. Bjornstad, ORNL Principal Investigator, et al
OAK RIDGE NATIONAL LABORATORY
ORNL/TM-11271
December 1989

 

Industrial Base: Adequacy of Official Information on the U.S. Defense Industrial Base

Report to the Chairman, Subcommittee on Legislation and National Security, Committee on Government Operations, House of Representatives

GAO/NSIAD-90-48

November 1989

 

Holding the Edge: Maintaining the Defense Technology Base

Office of Technology Assessment

NTIS order #PB89-196604
April 1989

 

US Industrial Base Dependence/Vulnerability. Phase 2. Analysis,

Martin Libicki,; Jack Nunn, Bill Taylor

Mobilization Concepts Development Center

National Defense University

ADA189330

NOV 1987

 

US Industrial Base Dependence/Vulnerability. Phase 1. Survey of Literature,

Roderick L. Vawter

Mobilization Concepts Development Center

National Defense University

ADB118637

DEC 1986

 

A Study of the Effect of Foreign Dependency

The Joint Logistics Commanders

Department of Defense,

(Contact No. F33600-85-C-0293), March 1986

Item is often cited, but no direct citation appears.

Brief summary of its foreign dependency analysis contained in: Industrial Base: Adequacy of Official Information on the U.S. Defense Industrial Base

 

Strategic Materials: Technologies To Reduce U.S. Import Vulnerability

Office of Technology Assessment, OTA-ITE-248

NTIS order #PB86-115367

May 1985

Appendix A - Review of Previous Lists and Methods of Selection

Strategic Materials: Technologies to Reduce U.S. Import Vulnerability

Appendix E - Case Study: The Advanced Composites Industry

 

Scientific Communication and National Security

Panel on Scientific Communication and National Security, National Academy of Sciences, National Academy of Engineering, Institute of Medicine

National Academies Press

ISBN-10: 0-309-03332-2

1982

 

Appendix H: Statement of Admiral B.R. Inman for the May 11, 1982, Senate Governmental Affairs Subcommittee on Investigations Hearing on Technology Transfer (140-142)

 

Materials Vulnerability of the United States - An Update

Alwyn H. King

Strategic Studies Institute, U.S. Army War College

April 1977

Via NTIS

Order info

 

Materials and the New Dimensions of Conflict

Alwyn H. King and John R. Cameron

Strategic Studies Institute, U.S. Army War College

December 1974

Via NTIS

Order info

 

Gordon Housworth



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Hoax spam helps mask the many Battle Cruisers, Death Rays and intergalactic plagues that can get you

  #

Chain letter hoax spam has dangers all their own as they radiate outward absorbing bandwidth without merit and distracting unwary recipients from good practice. Depending upon their content and construction, they are either noise or spurious signals (sprignals) masking genuine threats.

I received the fifth forwarding of just such a histrionic spam sent to me by a Mac user who had not done enough research to learn that the worm in the forwarded note was a Win32 payload targeting Microsoft PCs.

Replying to all in order to try to calm matters and prevent further forwarding I wrote:

Whoa now, lets not get carried away

I feel like Tommy Lee Jones as Agent K in Men in Black when his new partner, Will Smith's Agent J, is unhinging about an incipient alien threat to destroy the Earth in the next thirty minutes:

Agent K: We do not discharge our weapons in view of the public!

Agent J: We ain't got time for this cover-up bullshit! Have you forgotten? There's an alien battle cruiser--

Agent K: There's always an alien battle cruiser or a Korilian death ray or an intergalactic plague about to wipe out life on this planet. The only way people get on with their happy lives is they do... not... know about it!

The threat you are describing - which does not affect Macs - is one of the Warezov variants. They left that out of your scare memo.

Warezov is only one of a few hundred major worms and trojans now circulating, i.e., just one of the many Battle Cruisers, Death Rays and intergalactic plagues that can get you.

If you have robust AV tools, religiously keep them up to date, assiduously avoid opening almost any attachment, and don't go to the dark web where things lurk for which no detection signature has been created, you stand a reasonable chance on non-infection. Add to that, make frequent backups. That's all you get today. No guarantees.

Yes, Warezov is a nasty bit of work, but it has been in the wild for some time. Dwelling on Warezov draws attention away from newer, more interesting attacks like Mocmex which is capable of extremely nasty work but seems to be circulating now as proof of function for a much more potent future attack. Its initial distribution pattern is new however: digital photo frames. Once you return your jump drive back to the mother ship, you're infected, a nice midtech approach off the usual infection path. Mocmex is also a W32 product so Mac users are not affected. I worry more about items such as Disk Wizard (more here), another Win32 attack.

Spotting hoaxes on the fly

While human nature will doubtless continue to propagate hoaxes which share many characteristics with rumors, it is worth the effort to educate. My primary litmus tests for hoaxes is its "too good to be true, too perfect, too pat" property in which you are given both rationale and urgency to act. It is something that people want to be true, and when it is not, they embellish it before sending it on.

Another test is how many comments of that caliber appear in the same fervent message. (Repeated urgency is another test.) One among many sentences in this spam that failed the sniff test was:

Subsequently you will LOSE EVERYTHING IN YOUR PC, And the person who sent it to you will gain access to your name, e-mail and password.

Googling that phrase almost immediately led to an initial 2002 write-up by Symantec titled the Life is beautiful Hoax by George Koris describing a hoax about a supposed virus masquerading as a PowerPoint document. Koris' summary was "Please ignore any messages regarding this hoax and do not pass on messages. Passing on messages about the hoax only serves to further propagate it." And still it lives.

By 2006, the Mail Server Report email with a valid payload in a .zip file began circulating claiming that "a worm was detected in an email you sent. You are asked to use the attached file to install updates that will eliminate the virus it has supposedly detected." The attack payload was a Warezov variant.

By March 2008 a warning began circulating that erroneously linked the 'Mail Server Report' worm with elements of the 'Life is Beautiful' virus hoax and claimed that the resulting amalgam "HAS BEEN CONFIRMED BY SNOPES." The primary element that Snopes was confirming was the amalgamated texts, but that will suffice for the gullible.

The 'confirmation' bona fides in the forwarded item I received now carried two 'certifications,' one ostensibly from Snopes and the second from Truth or Fiction. (This is another hoax characteristic: paste-on embellishments.). One wishes forwarders along the line had done similar research.

Hoaxes are not harmless

I do not consider these hoaxes harmless. I surmise, but do not have proof at hand, that many of the credulous that forward this spam class, thinking that they are doing good, do greater harm by ignoring their update cycle (if they update at all) of their PC software, peripherals and second tier applications in addition to their operating system, mail system and web browser.

As a first step, Hoax-Slayer has this comment regarding hoaxes that I recommend to all:

Before forwarding a virus warning email, it is always a good idea to check that the information in the message is valid. Virus hoaxes are quite common, and like this one, they tend to circulate for years after they are first launched. In other cases, virus warnings that may have been originally true circulate long after the described virus has ceased to be a significant threat. Virus hoaxes and outdated warnings are no help to anybody. All they do is waste time, cause confusion and needlessly clutter inboxes. Such problems mean that forwarding warning emails may not be the best way to help battle viruses and other computer security threats.

The credulous that forward hoaxes or misplaced warnings consume reader mindset and network bandwidth. Worse, they reduce recipients' ability to pay attention to things that are serious, that will likely cause damage. They become part of the signals, sprignals and noise in the communications environment. From The value of counter-deception and early sprignal detection in political elections:

Roberta Wohlstetter pioneered intelligence warning systems by applying Claude Shannon's telecommunication concept of signals and noise and his design of information systems to send and receive signals amid noise. Wohlstetter's Pearl Harbor concluded that the problem was "too much noise" rather than a lack of data, i.e., it was analysis that failed: "We failed to anticipate Pearl Harbor not for want of the relevant materials, but because of a plethora of irrelevant ones."

Contributing causes were invalid assumptions, faulty appraisal and dissemination of intelligence, and inadequate security measures. Behind these was a lack of war-mindedness at this Pacific base halfway around the world from areas where momentous events were happening. Adm. Husband E. Kimmel, the Pacific Fleet commander, admits to it: "We did not know that in the Atlantic a state of undeclared war existed (Admiral Kimmel's Story, p. 2, New York 1955). The War and Navy departments also shared in responsibility for the disaster, not only by withholding intelligence but by assigning low priorities to critical equipment for ships and units in the Hawaiian area.

Pierre Wack drives home this need of awareness of one's greater surroundings in his discourse on scenarios, what he calls the "gentle art of reperceiving."

In times of rapid change, [companies] effectiveness and speed in identifying and transforming information of strategic significance into strategic initiatives differ just as much [as their skill in turning research into product]. Today, however, such a capacity is critical. Unless companies are careful, novel information outside the span of managerial expectations may not penetrate the core of decision makers' minds, where possible futures are rehearsed and judgment exercised.

As Roberta Wohlstetter points out, "To discriminate significant sounds against this background of noise, one has to be listening for something or for one of several things. One needs not only an ear but a variety of hypotheses that guide observation". Indeed, the Japanese commander of the Pearl Harbor attack, Mitsuo Fuchida, surprised at having achieved surprise, asked, "Had these Americans never heard of Port Arthur?" (the event preceding the Russo-Japanese War of 1904 -- and famous in Japan -- when the Japanese navy destroyed the Russian Pacific fleet at anchor in Port Arthur in a surprise attack).

Barton Whaley used the model in his analysis of Soviet attempts to predict an impending German attack, Operation BARBAROSSA. Whaley's first analysis cited 12 cases of strategic surprise to which William Harris believed that "the Russian warning intelligence challenge in 1941 was to differentiate genuine "signals" of impending invasion from "spurious signals" from deception planners (defensive military preparations and deployments, non-hostile intent, etc.) within the context of other information "noise."" As a "minimum of 8 or 9 of these 12 warning challenges involves deliberate "signals" designed to lull or defeat warning systems," Harris suggested that Whaley "utilize a tripartite model: signals, spurious signals (sprignals), and noise."*

Hoaxes can either be noise or sprignals. Neither is useful in addressing the payload signals.

Chinese hackers would like to introduce you to Disk Wizard and the Mechanical Dog
Published by Heike
The Dark Visitor
March 27, 2008

Virus from China the gift that keeps on giving
Deborah Gage
San Francisco Chronicle
February 15, 2008

Mail Server Report
Example: [Collected via e-mail, 2006]
by Barbara and David P. Mikkelson
Snopes

Life is beautiful Hoax
Discovered: January 15, 2002
TECHNICAL DETAILS
Writeup By: George Koris
Symantec
Updated: February 13, 2007 11:59:14 AM

Men In Black Script - Dialogue Transcript
Transcript that was painstakingly transcribed using the screenplay and/or viewings of Men In Black

Men In Black
by Ed Solomon
IMSDb

Gordon Housworth



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Active and passive telemetry attacks against medical implantable devices

  #

Attacking medical implantable devices, cardiac or otherwise, is long overdue for examination as this device class contains:

Wirelessly reprogrammable implantable medical devices (IMDs) such as pacemakers, implantable cardioverter defibrillators (ICDs), neurostimulators, and implantable drug pumps use embedded computers and radios to monitor chronic disorders and treat patients with automatic therapies.

If the device can be interrogated, adjusted or reprogrammed - as most can be, it can be actively attacked. If you are limited to passive scanning in which the device offers a serial number or patient information, you can know where its wearer is and possibly gain some insight to the stress and physical condition of the wearer; Is the target running, for example?

While the University of Washington computer researchers have not laid out a stepwise attack profile per se, they defined passive and active attacks recognizable to any signals intelligence (SIGINT) practitioner. Furthermore, the countermeasures they put forward are susceptible to spoofing techniques and  counter-countermeasures:

Since health care is a very sensitive and personal subject for many people, we explicitly choose to deviate from standard practice in the academic security research community and do not describe specific scenarios in which an attacker might compromise the privacy or health of a victim. We also do not discuss the potential impact on patients if an adversary were to carry out an attack in vivo. Rather, when discussing attacks we focus solely on the technical properties of those attacks. In addition, in each case where we identify a vulnerability, we propose a solution or technical direction to mitigate it...

Successful passive and active attacks

Notwithstanding the above, the researchers' successful attack vectors would be recognized by a physician:

Passive attacks:

  • Trigger ICD identification (disclosing ICD presence and details about the device)
  • Disclose cardiac data (by detecting ICD telemetry transmissions)

Active attacks:

  • Change patient name stored on the ICD (which a consulting physician might prescribe inappropriate treatment)
  • Reset the ICD clock (changing session timestamps, invoking new programming sessions)
  • Change therapies (the ICD’s responses to cardiac events)
  • Turn off therapies (ICD nonresponsive to threatening cardiac conditions)
  • Induce fibrillation (by invoking surgical implant test modes) even after shutting down all ICD automatic therapies
  • Denial of service attack (battery depletion by forced continuous wireless transmission)

The researchers achieved these results against Implantable Cardioverter Defibrillators (ICDs) with only three classes of adversaries:

An adversary with a commercial ICD programmer, i.e., an external device commercially produced and marketed for use with ICDs. At least for the programmers with which we have experimented, there are no technological mechanisms in place to ensure that programmers can be operated only by authorized personnel.

A passive adversary who eavesdrops on communications between the ICD and a commercial programmer. This adversary can record RF messages output by ICDs and programmers. This adversary might use standard or custombuilt equipment, including oscilloscopes, software radios, amplifiers, and directional antennas.

An active adversary who extends the passive adversary with the ability to generate arbitrary RF traffic, not necessarily conforming to the expected modulation schemes or FCC regulations. This attacker may interfere with legitimate transactions or create spurious ones by, e.g., spoofing a commercial programmer.

For the purposes of this research we assume that ICDs are honest and that they attempt to follow the protocols as specified; we do not experiment with adversarial actions that employ (possibly fake) ICDs to compromise or otherwise adversely affect the operation of commercial programmers.

The authors did not attempt to pursue "attack vectors against IMDs, such as insecure software updates or buffer overflow vulnerabilities," but given that virtually all hardware/software combination appears prone to such flaws, attacks against implantable devices should be possible. They note that use of cryptographic keys will have to balance security with the medical threat of an unavailable key hindering emergency treatment. Encryption mechanisms can also cause excessive power consumption as well as be prone to "spurious wake-ups or a cryptographic authentication process" that intentionally drains power.

The authors three zero-power defense postures strike this analyst as running out of ammunition during a firefight, e.g., if the target is already under attack harvesting induced RF energy to audibly alert the patient of a security event has little merit. As they approach the subject as investigators rather than as SIGINT analysts they do not address spoofing and counter-countermeasures. While proposing a key protocol, the authors then understandably steer around the thorny issue of key management for any encryption strategy.

Operational issues unaddressed

Effective attack range is an issue for the moment, but the same attack profiles used to capture RFID data in passports and credit/ID cards (waiting by the door or portal, walking through a crowd, etc.) are more immediately applicable. (Also here)

Attacking implant devices has the potential of a useful denial weapon to frighten away those who have such devices implanted. (One already sees signs that warn patients that potentially damaging RF signals are likely to be broadcast.) Without warning, it makes an interesting area attack weapon, especially in the vicinity of a hospital.

If an implant wearer is taken prisoner whereby your captors are close at hand with any technology they wish, he or she falls prey to an exquisite torture instrument that leaves no external physical effects.

Misleading, even dangerous press comments

It was startling to read a New York Times reporter out of his depth with this erroneous comment:

The report, to published at www.secure-medicine.org, makes clear that the hundreds of thousands of people in this country with implanted defibrillators or pacemakers to regulate their damaged hearts they include Vice President Dick Cheney have no need yet to fear hackers. The experiment required more than $30,000 worth of lab equipment and a sustained effort by a team of specialists from the University of Washington and the University of Massachusetts to interpret the data gathered from the implant’s signals. And the device the researchers tested, a combination defibrillator and pacemaker called the Maximo, was placed within two inches of the test gear.

I read the report and it says no such thing. To a reader with a military signals intelligence (SIGINT) background, the effort to determine phase modulation (differential binary phase shift keying (DBPSK)) and symbol rate (pulse repitition frequency (PRF)) was trivial. An "eavesdropper" (passive intercept unit) was built using the "Universal Software Radio Peripheral (USRP) in concert with the open source GNU Radio libraries." As the authors note, "Even without knowledge of the semantics of the packet format, these data are easily extractable":

The personal data transmitted in cleartext include the patient’s name, date of birth, medical ID number, and patient history. Equally easy to find are the name and phone number of the treating physician, the dates of ICD and lead implantation (which may differ), the model, and the serial number of the ICD and leads. This list is not exhaustive; we observed other items of personally identifying data being transmitted in cleartext. [And] for the fields we manipulated via reprogramming attempts, these fields are sent in the clear from the programmer to the ICD.

The IEEE paper is quite accessible despite its technical content. Reading through the neutral technical verbiage, I got the reverse impression from that carried in the Times. I felt that the researchers were surprised at the ease of their chosen attack vectors. Furthermore:

  • Equipment can be stolen (the researchers provide a shopping list to any researcher that tinkers with hardware).
  • The effort to analyze has been achieved with the report; others have only to cobble together a crude attack platform.
  • A high value target such as VPOTUS Cheney would be worth the effort.
  • Anti-terrorist efforts would tend to be looking for explosives instead of the tools for an RF attack.

The takeaway should be that this is a long overdue exploit vector which should be considered more seriously.

A Heart Device Is Found Vulnerable to Hacker Attacks
By BARNABY J. FEDER
New York Times
March 12, 2008

Researchers find implantable cardiac defibrillators may expose patients to security and privacy risks; potential solutions suggested
University of Washington press release

March 11, 2008

Pacemakers and Implantable Cardiac Defibrillators: Software Radio Attacks and Zero-Power Defenses
Tadayoshi Kohno, Kevin Fu, William H. Maisel, Daniel Halperin, Thomas S. Heydt-Benjamin, Benjamin Ransford, Shane S. Clark, Benessa Defend, and Will Morgan
University of Washington and University of Massachusetts Amherst
Research paper reviewed and accepted for presentation at the 2008 IEEE Symposium on Security and Privacy
March 2008

RFID passports with improper shielding triggers bomb in simulation
Posted by George Ou @ 12:17 am
August 9th, 2006

Gordon Housworth



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Asymmetrical air force opportunities in interstate and intrastate conflict

  #

This asymmetrical air force series rose from a recognition of the operational similarities between the Air Tigers of the Liberation Tigers of Tamil Eelam (LTTE) against the Sri Lankan government and the Biafra Babies of the secessionist Biafran Air Force against the Nigerian government, forty years earlier. Apart from the "convergent evolution" of their operational profiles, there were also important differences in sourcing aircraft, pilots, ordnance and maintenance, not to mention understanding the value of going offensive against a superior power in an audacious, headline-grabbing manner.

The exercise to optimize the best characteristics of these asymmetrical attackers while reducing the retaliatory effect of the superior power leads quickly to Unmanned Aerial Vehicles (UAVs) operating in place of, or along side, manned aircraft.

This first note describes the intrastate conflict environment of the LTTE/Sri Lankan Air Force (SLAF), still ongoing, and Biafran Air Force/Nigerian Air Force (BAF/NAF), 1967-1970. Such intrastate conflict environments create both a demand for asymmetrical air assets and offer certain operational advantages to an asymmetrical player.

This is not to say that an asymmetrical air force could not operate in certain parts of the US. It is quite conceivable for more than one group, say, in south Los Angeles to launch a UAV fleet, execute an attack and even recover aircraft before dispersing. Another case of when, not if. The curiosity is in the payload of that attack.

While I do not believe that al Qaeda has to be the first to launch a UAV assault on US soil, their critical patch focus on the cockpit is instructive to any asymmetric attacker. Writing in 2004:

Our analysis showed that from Mohammed Atta's arrival into the US, the goal was access and control of a flight deck, first with light twin-engine aircraft converted to 'crop dusters,' and only when that approached failed, did Atta and the group shift to commandeering flight decks of commercial aircraft. We have seen that argument extended to freight and cargo aircraft and we have since made the argument that flight deck control can be remote as in UAVs (Unmanned Aerial Vehicles) here and here.

This series should include:

  • Asymmetrical air force opportunities in interstate and intrastate conflict, part I
  • Asymmetrical air force symmetries: Biafra Babies and Air Tigers, part II
  • Asymmetrical air force intersection with Unmanned Aerial Vehicle (UAV) and drone warfare, part III

Author note on standalone value: This segment can stand alone as an overview of the political and economic drivers of ethnic strife, or intrastate communitarian strife. Works cited in the bibliography of this note capture the flowering of critical reevaluation occurring in the late 1990s and early 2000s as to the causes of what had previously been written off with a shrug as 'The natives are restless.' 'Restless natives' are an impossible answer if the analyst is attempting to predict actions on the ground as part of what is known as Indicators and Warning (I&W). These works offer context for constructing a valid event timeline for pattern analysis. This analyst still sees too many journalists operating without this underpinning a decade on. All items cited here are now publicly accessible or mirrored to make them accessible. (Some items remain behind subscription walls or limited distributions and are not mentioned here.)

Drivers and indicators for ethnic strife and civil war

The work of Thomas Szayna, Paul Collier, Anke Hoeffler, and Michael Ross were central to my understanding of the drivers shaping "intrastate communitarian strife" (or "ethnic strife") and civil wars. Their hands are at work is this note and I remain indebted to works such as (and more in the bibliography below):

The post-colonial nation-state

The very nature of state sovereignty in Africa and other post-colonial regions is increasingly at odds with the nation-state of North America and Europe. There is speculation that we are witnessing the end of the state project launched in Berlin with the Congress of 1884-1885, a system that owed its origin to disputes rising over the Congo River basin. It is as if Africa is returning to the 1880s, and the age of the chartered companies, marking out their enclaves in an otherwise disorderly environment.

It is a mistake to apply Western assumptions about the nature of state security in areas such as Africa because the concerns for state survival are subordinated to the personal security and well being of the incumbent leadership. Rulers create a "shadow state," a parallel political authority, where personal ties and controls replace failing institutions. Furthermore, the court system and legal apparatus are appropriated to serve these requirements. The state ceases to be the provider of physical or social security.

These shadow power networks, underpinned by political and economic privilege, are potent enough to frustrate interventions by the international financial and donor community designed to undermine this informal sector and strengthen the structures of the nation-state. This is the environment in which military activities and interventions of state, regional and private security forces must be considered.

Current diplomatic and security arrangements are state-centered and predicated upon states being the primary actors in international affairs. This is just not so in Africa, where regional alliances are formed between private actors or leaders who expropriate the framework of the state to their own ends and in their own private interest. In such environments, the United Nations (UN) and Western states find themselves on soft ground, having to deal with individuals both as the source of power and wealth, and as the origin of ambiguous signals in a rapidly changing environment.

Criminalization of the state by the ruling elite affects both the productive sectors of the economy and the sovereign functions of the state, e.g., maintenance of customs barriers, concession of territories or harbor enclaves to foreign entrepreneurs, internal security and national defense, and peacekeeping. "Informal and illicit trade, financial fraud, systematic evasion of rules and international agreements" become the norm by which many Africans states cope. The conflict zones of Africa are stages where rivals seek to control scarce resources and the manipulation of business links, licit and illicit, to the benefit of entrepreneurs. On the back of these resource wars, vast profits are made in the transportation of items from guns to food.

While the lapse of bipolar confrontation was thought to improve the chances of post-colonial states by reducing the political and military incentives for outside powers to intervene on the continent, the opposite is the case. These states can no longer rely on outside assistance to end local wars that are no threat to vital foreign interests. Outside powers have less influence on the conduct, termination and outcome of these local conflicts. Driven by their remoteness and insignificance from world centers, Africa's local rivalries and antagonisms are given freer rein.

Neither precolonial states nor colonial administrations felt the need to justify their existence in terms of meeting the needs of security and welfare of individuals or to have some concern for individual liberty. This heritage of inattention to the security and welfare of its citizenry has been passed on to almost all post-colonial states.

Characteristics of these states need to be understood as different and needing risk management, rather than being bad and requiring flight:

  • Economic sovereignty diluted by transnational economic and financial actors able to shift operations almost at will, answerable to no one nation's political masters.
  • Kinship and allegiance remaining rooted in the local communities without a parallel at the national level.
  • Challenge to the state by regional groupings, often seeking to evade or ignore the state's claims to authority.
  • Growing intrastate conflicts of seeming racial, religious or ethnic origin.
  • Ethnic and racial cleansing combined with religious extremism, intolerance or pure criminality.
  • Increasing numbers of civilians becoming involved in violence for no obvious political reason.
  • External non-state actors have stepped into the void left by the international community, either as proxies or independent agents, able by virtue of their wealth and expertise to influence events to their local and often short-term advantage. International firms operating in marginal areas are increasingly providing enough of the apparatus usually supplied by the state in order to carry out their businesses in relative safety. (Shell Oil in the Nigerian Delta is an example.) Concerns focus more on competition among their rivals and co-opting whatever parts of the state's political apparatus remain viable.

Changing security environment in postcolonial and developing world

Security and security management can no longer be seen only in military terms. Various other threats such as crime, poverty, resource scarcity and disease must also be included as virtually any socio-economic ill may spill over into conflict, especially in areas like Africa where social and democratic development have been stunted. This has significantly impacted the kinds of threat environments that face potential adversaries.

Using Africa as a model for underdeveloped regions, some key characteristics of the emerging threat environment are:

  1. Conflicts are increasingly intrastate in nature, i.e., one internal faction against another -- although potential for spillover remains high.
  2. Conflicts are becoming increasingly unconventional in nature, as they are fought more often in developing countries with limited conventional forces.
  3. Rules of engagement are increasingly vague and diffused, often being tailor-made to suit specific operational requirements.
  4. Warfighting patterns are becoming nonlinear as parties advantage themselves with the greater availability of sophisticated weaponry on the world's arms market irrespective of the opponent's capabilities.
  5. Early warning is becoming increasingly difficult to obtain, especially among less technologically developed opponents (due to the unconventional nature of doctrines involved in combat, and the non-traditional triggers which often initiate conflict).
  6. Increasing pressure is being exerted on developed countries to become more aggressively involved in peace support operations.

Intrastate wars are increasingly assuming gray area characteristics, finding their origins in areas such as conflicts over scarce resources, ethnic and religious conflict, transnational crime (with links to terrorism and insurgency), migration and illegal immigration, border disputes, famine and state collapse. The instability and fluidity of the situation makes for a very hostile environment. Such conflicts manifest themselves primarily under the banner of low intensity conflict (LIC).

This analyst sees the following characteristics carrying through the next decade and perhaps longer:

  1. Conflict on the continent will remain endemic, a fact of "everyday" life, as the nature of Africa's problems are too systemic to disappear overnight.
  2. While many of Africa's interstate conflicts have been minor in size due to the lack of forces and sophisticated equipment, the effect on the affected populations has been, and will remain, devastating.
  3. The potential for spillover may rise along with the increasing interdependency between states due to an improved communications infrastructure, travel opportunities and economic ties. It will be difficult to contain conflicts in a region where artificial borders cut across ethnic, religious and ideological unities.
  4. Local military force compositions will reflect an increasingly confusing and difficult-to-predict mixture of old and new equipment as each passing year makes the previous year's weaponry increasingly affordable on the second-hand market. It is around this fusion of modern and older equipment that doctrines and tactics will become increasingly more difficult to predict.
  5. Developed nations will continue to target the developing world, Africa included, as an arms market despite the latter's relative inability to pay for those arms.
  6. "Grey area" groups will increasingly tailor their tactics to suit specific operational and technological requirements.
  7. Conflicts are especially likely to occur in the Central African basin along with parts of West Africa and Southern Africa.
  8. Developed nations will play an increasingly higher role in peace support initiatives and so will have to prepare for contingencies in this area.

"Intrastate communitarian strife" - or "ethnic strife"

This risk analysis has drawn extensively on the implications of "ethnic strife," more properly called intrastate communitarian strife, on African states. Intrastate conflict has been by far the dominant form of strife in the world in the 1990s. Only seven of the 108 world's armed conflicts in the 1989 -- 1998 period were interstate wars. Most of the remaining intrastate conflicts had a communitarian aspect. Szayna noted that there "will be more Somalias, Rwandas, Haitis and Burundis in the future."

While most interstate wars end in a negotiated settlement, the majority of intrastate conflicts end with the extermination, expulsion, or complete surrender of one side. Civil wars with a communitarian or ethnic dimension are especially difficult to negotiate and the most likely to result in protracted strife, and closely mapping to the African experience, often go on for years and sometimes decades. Szayna and Tellis note that the reason is straightforward:

"To end intrastate strife the warring sides must lay down arms and respect an agreement usually in the absence of a legitimate government and under conditions in which the agreement is generally unenforceable. In conditions of communitarian strife, where issues of identity are intertwined in the conflict (since ethnic bonds are psychologically similar to kinship bonds and involve perceptions of identity), it is especially difficult for the two sides to go on coexisting in the same state. Put differently, there are only two main pathways for the regulation of ethnic conflict:

  1. Eliminating the differences (genocide, forced transfer of population, partition/secession, and integration/assimilation);
  2. Managing the differences (hegemonic control, arbitration by third party, federalization, and power-sharing)."

Because the trust that would allow for management of differences is absent once conflict starts, it is understandable that elimination of the differences becomes the preferred choice and that many ethnic and communitarian conflicts end up in prolonged and bloody strife, sometimes mixed in with attempts at genocide and complete elimination of the other side:

"Because of the unenforcibility of an internal agreement to end intrastate conflict, third-party intervention is usually required to guarantee the agreement and, even then, the intervening forces easily may become caught up in the continuing struggle between the belligerents. But without an intervention, the simmering intrastate strife may well spawn an international crisis, either in the form of a humanitarian disaster or because a neighboring state becomes drawn into the internal strife and, as a result, creates a regional conflict and the potential for an interstate war."

Communal differences by themselves do not provoke conflict. The most widely discussed explanations of ethnic conflict are incomplete and, at worst, simply wrong. Ethnic conflict in not "primitive, atavistic, and irrational." It is not directly caused by inter-group differences, "ancient hatreds" and centuries-old feuds, the stress of modern life, or ethnic passions "uncorked by the end of the Cold War."

Individuals are goal-oriented and adaptive, and will attempt to reach their goals by what they see as the easiest and least costly or most efficient means. (Rationality does not have to be a universally agreed-upon mindset.) Ethnic action requires mobilization and direction. The popular image of a disadvantaged group rebelling spontaneously against state tyranny is a "romantic image not borne out in reality." There are many examples of severe group deprivation and repression that do not lead to rebellion, because the group is not mobilized for political action. Without mobilization, ethnically centered perceptions of injustice may exist but do not have larger political significance.

"Ethnic strife" has three stages:

  • First, a pattern of exclusion or dominance in the three areas of political, social and economic control. If one group dominates any or all of the three areas and other ethnic groups are systematically excluded, then the possibility exists of their resorting to violence to gain access, even though conflict is not yet imminent.
  • Second, group mobilization, where mobilization is for the purpose of capturing power and not necessarily for redressing past injustices. Leaders become "identity entrepreneurs" that exploit the ethnic card to gain access to the specific arena from which they are excluded, and are as essential as the resources at the disposal of the group and their capacity for organization.
  • Third, the addition of the element of strategic bargaining in which each side uses the tools available to it to bargain for the political space. The state has the weapons of finance, accommodation, and the ability and willingness to use force. The mobilizing group has the weapons of leadership strength, popular support, and available resources.

While prevention is the preferred course of action so that long-term strife does not escalate to major regional problems, it is often not initiated in time even though the costs of dealing with an ongoing conflict and its reconstruction are uniformly far greater than the small costs in prevention. Even when the drift towards intrastate strife is clear, it may not be possible to assemble the resources required to head off the conflict. In the absence of a direct threat, it is difficult for international or multinational organizations to expend substantial resources to deflect what might be a "phantom threat." Responses are therefore too often reactive and late.

Conflict diamonds - or "blood diamonds," market forces and civil war

Collier and Hoeffler found that conflicts occur when rebels respond rationally to market opportunities, much as entrepreneurs and investors do. Civil wars that are so often blamed on chaotic, irrational ethnic, religious and communal feuds now have a unifying thread:

"Rebels need to meet a payroll without actually producing anything, so they need to prey on an economic activity that won't collapse under the weight of the predation... Natural resources is a good one. The same characteristics that make a commodity readily taxable -- that it's rooted to a spot, it can't move -- makes it readily lootable, too."

Three economic factors were found to shape civil wars:

  • Countries dependent on the export of primary, or unprocessed, commodities such as minerals or coffee are more prone to civil wars. A country where such exports account for 28 percent of GDP has four times the risk of civil war as a country with no such exports.
  • Countries that are divided between just a few ethnic groups are much more likely to have civil wars than ethically diverse countries because the economic costs of pushing a highly diverse nation into conflict are so much greater.
  • Once a civil war has ended the chance that war will resume "goes up by a factor of six if there is a large and relatively wealthy population of natives living outside the country." This Diaspora has the money to fund rebel actions, World Bank says, "so the rebels sustain themselves by selling vengeance to diasporas during the 'lean' years of peace," when looting of resources isn't possible.

The new economics of civil wars starts with the premise that conflicts within countries begin if the incentive for a rebellion outweighs the costs of mounting one, i.e., that the "opportunity cost" outweighs other more familiar factors such as the intensity of ethnic differences or support for differing political ideologies. The World Bank authors say that it is "greed and not grievance that lies at the root of many violent conflicts within nations."

"Blood diamonds" becomes a special case of this resource-based means of civil war. To the degree that any primary extraction process can be sequestered by a powerful minority, the opportunity for conflict, extortion, and interruption rises. Coupling this concept with the fact that most wars today occur within nations rather than between them, the risk analysis of investing firms should be reevaluated.

Endnote: Readers now have an underpinning of conditions that lead to sustained asymmetrical responses. These same conditions permit the gathering, smuggling and hiding of operational assets, and the subsequent deployment of those assets against the established power. The characteristics that led two of those engagements taking to the air will be examined. As the cost of aerial responses plummet, more asymmetrical players will deploy air forces in various forms.

Part II: Asymmetrical air force symmetries: Biafra Babies and Air Tigers, part II

Global Pattern Formation and Ethnic/Cultural Violence
May Lim, Richard Metzler, Yaneer Bar-Yam
Science
Vol 317, no. 5844, pp. 1540-1544
14 September, 2007

Supporting Online Material for: Global Pattern Formation and Ethnic/Cultural Violence
May Lim, Richard Metzler, Yaneer Bar-Yam
Supplement contains:

  • Methods
  • Reports of Ethnic Violence in the Former Yugoslavia and India
  • References
  • Bibliography on Ethnic and Cultural Conflict

Neo-Classical Counterinsurgency?
Frank G. Hoffman
Parameters
Summer 2007, pp. 71-87

Sri Lanka: Rebels with an air force
Commentary by Animesh Roul
ISN Security Watch
02/05/07

Expecting The Unexpected
Terror Tactics Take A New Turn
Aviation Today/Air Safety Week
Monday, April 2, 2007

Air Tigers' Maiden Attack
Motives and Implications
N Manoharan
Senior Fellow, IPCS
Institute of Peace and Conflict Studies
IPCS ISSUE BRIEF
NO 45
APRIL 2007

Ethnic polarization and the duration of civil wars
Jose G. Montalvo, Marta Reynal-Querol
Policy, Research working paper WPS 4192
Post-Conflict Transitions working paper No. 6
World Bank Development Research Group
April 1, 2007

Subversion and Insurgency
William Rosenau
RAND COUNTERINSURGENCY STUDY, PAPER 2
ISBN 978-0-8330-4123-4
Prepared for the Office of the Secretary of Defense
2007

EVOLUTION OF INDIA'S COUNTER-TERRORISM CAPABILITIES
by B.Raman
IntelliBriefs
( PRESENTATION MADE BY THE WRITER AT A CONFERENCE ON INTERNATIONAL HOMELAND SECURITY ORGANISED BY THE ROYAL UNITED SERVICES INSTITUTE (RUSI) FOR DEFENCE AND SECURITY STUDIES, LONDON, ON MAY 10,2006)
May 11, 2006

On ''Other War''
Lessons from Five Decades of RAND Counterinsurgency Research
By: Austin Long
RAND Counterinsurgency
ISBN 978-0-8330-3926-2
2006

Terrorism and Civil Aviation Security: Problems and Trends
Jangir Arasly
THE QUARTERLY JOURNAL
Spring 2005

Primary Commodities Exports and Civil War
James D. Fearon
Department of Political Science, Stanford University
Forthcoming in Journal of Conflict Resolution
October 25, 2004

Primary Commodity Exports and Civil War
James D. Fearon
Journal of Conflict Resolution, Vol. 49, No. 4, 483-507 (2005)
DOI: 10.1177/0022002705277544

Evidence and Analysis: The Role of Natural Resources in Fuelling and Funding Conflict in Africa
Hester Le Roux
COMMISSION FOR AFRICA
London, September 2004

Measuring the Economic Costs of Internal Armed Conflict - A Review of Empirical Estimates
Göran Lindgren
Department of Peace and Conflict Research, Uppsala University, Sweden
Paper for the conference Making Peace Work in Helsinki 4-5 June arranged by The United Nations University -
World Institute for Development Economics Research (WIDER)
June 2004

Greed and grievance in civil war
Paul Collier and Anke Hoeffler
Oxford Economic Papers Advance Access originally published online on August 20, 2004
Oxford Economic Papers 2004 56(4):563-595; doi:10.1093/oep/gpf064
Oxford University Press
2004

HTML

Breaking the conflict trap: civil war and development policy, Volume 1
Collier, Paul; Elliott, V. L.; Hegre, Havard; Hoeffler, Anke; Reynal-Querol, Marta; Sambanis, Nicholas
World Bank policy research report 26121
ISBN0-8213-5481-7
June 31, 2003
SINGLE FILE PDF (large)

GO HERE for individual segments

Natural Resources and Civil War: An Overview with Some Policy Options
Prof. Michael Ross
UCLA Department of Political Science
December 13, 2002
Draft report prepared for conference on "The Governance of Natural Resources Revenues," sponsored by the World Bank and the Agence Francaise de Developpement, Paris, December 9-10, 2002.

On the Incidence of Civil War in Africa
Paul Collier and Anke Hoeffler
Journal of Conflict Resolution, Vol. 46, No. 1, pp. 13-28
DOI: 10.1177/0022002702046001002
2002
MIRROR

The New Partnership for Africa's Development: last chance for Africa?
Richard Cornwell
African Security Analysis Programme
Institute for Security Studies, Pretoria
AFRICANUS
Journal of Development Studies
Vol 32 No 1 ISSN 0304-615X
2002

Implications of ethnic diversity
Paul Collier
The World Bank
Working Paper 28127
December 17, 2001
Originally (?): Economic Policy, Vol 16, Issue 32, April, 2001, pp: 127-166

On the Duration of Civil War
Paul Collier, Anke Hoeffler and Mans Soderbom
POLICY RESEARCH WORKING PAPER WPS 2681
World Bank Development Research Group
September 30, 2001

The GIobal Reach of Tamil Militancy: Sri Lanka's Security Predicament
P. K. Rao
Strategic Affairs
No. 0025/ Issue: August 1, 2001

Conflict Diamonds
Louis Goreux
Consultant, Africa Region, The World Bank
Africa Region Working Paper Series No. 13
World Bank
March 2001

Identifying Potential Ethnic Conflict: Application of a Process Model
By: Thomas S. Szayna
RAND
ISBN/EAN: 0-8330-2842-1
2000

World Bank Blames Diamonds and Drugs for Many Wars
By JOSEPH KAHN
New York Times
Published: June 16, 2000

ECONOMIC CAUSES OF CIVIL CONFLICT AND THEIR IMPLICATIONS FOR POLICY
Paul Collier, Director, Development Research Group
World Bank
June 15, 2000

Market Forces Add Ammunition to Civil Wars --- Research Suggests Rebels Have 'Greed' as Motive; Primary Exports Count
By G. Pascal Zachary
Wall Street Journal (Eastern edition)
Jun 12, 2000. pg. A.21
MIRROR

Greed and grievance in civil war, Volume 1
Paul Collier, Anke Hoeffler
Policy, Research working paper WPS 2355
World Bank Development Research Group
May 31, 2000

Greed & Grievance: Economic Agendas in Civil Wars
By Mats R. Berdal, David Malone
International Peace Academy
ISBN 1555878687
2000
Cited page

ECONOMIC GOVERNANCE: GUIDELINES FOR EFFECTIVE FINANCIAL MANAGEMENT
Department of Economic and Social Affairs
Division for Public Economics and Public Administration
ST/ESA/PAD/SER.E/9
United Nations
2000

On the Economic Consequences of Civil War
Paul Collier
Oxford Economic Papers Vol 51, No 1, pp. 168-183
DOI:10.1093/oep/51.1.168
Oxford Universty Press
January 1999
SUBSCRIPTION

FREE MIRROR

The Changing Nature of Warfare: Implications for Africa
Ian van Vuuren
Deputy Director, Strategic Management Systems
Defence Secretariat, South Africa
Published in African Security Review Vol 7, No. 1, 1998

Anticipating Ethnic Conflict
By: Ashley J. Tellis, Thomas S. Szayna, James A. Winnefeld
RAND MR-853-A
ISBN/EAN: 0-8330-2495-7
1997

Gordon Housworth



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Semi-autonomous "killer robots" are already within reach of asymmetrical attackers

  #

As part of my work revolves about inverting toys, technical gadgets, and industrial "found objects" into asymmetrical weapons, I was attracted to Noel Sharkey's presentation at RUSI's The Ethics of Autonomous Military Systems as well as his earlier efforts in venues such as Robot Wars and Techno Games. I have come to see Sharkey inhabiting the intersection of engineering, the application of engineering and ethics of application:

Most robots currently in combat are extensions of human fighters who control the application of lethal force. When a semi-autonomous MQ-1 Predator self-navigated above a car full of al-Qaida suspects in 2002, the decision to vaporise them with Hellfire missiles was made by pilots 7,000 miles away. Predators and the more deadly Reaper robot attack planes have flown many missions since then with inevitable civilian deaths, yet working with remote-controlled or semi-autonomous machines carries only the same ethical responsibilities as a traditional air strike.

But fully autonomous robots that make their own decisions about lethality are high on the US military agenda. The US National Research Council advises "aggressively exploiting the considerable warfighting benefits offered by autonomous vehicles". They are cheap to manufacture, require less personnel and, according to the navy, perform better in complex missions. One battlefield soldier could start a large-scale robot attack in the air and on the ground.

One should never underestimate the lift of a headline grabbing title; A brief Reuters item called, Killer robots pose latest militant threat, have recently ricocheted Sharkey's concerns around the web:

[Sharkey] believed falling costs would soon make robots a realistic option for extremist groups. Several countries and companies are developing the technology for robot weapons, with the U.S. Department of Defense leading the way...

"How long is it going to be before the terrorists get in on the act? With the current prices of robot construction falling dramatically and the availability of ready-made components for the amateur market, it wouldn't require a lot of skill to make autonomous robot weapons." Sharkey said a small GPS-guided drone with autopilot could be made for about 250 pounds ($490).

Writing to Sharkey:

I support your contention and submit that it will happen sooner that the high street press assumes and, if previous al Qaeda operational practices are any guide, robots will come in swarms to both confuse and overwhelm defenders and maximize target damage. [email]

I cited a trio of short weblog items I wrote in April 2004 in pursuit of Commercial-Off-The-Shelf (COTS) fleet of attack and surveillance UAVs (Unmanned Aerial Vehicles):

Price, performance and accessibility have only accelerated since. Subsequent to my articles, the Israeli IDF was astonished when Hezbollah launched a reconnaissance UAV over Israeli territory, recovering it without incident. Despite Israeli drone and UAV flights over Lebanon, Israel had not been paying attention to asymmetrical UAV development - publicly stated in many cases to rise from commercial radio-controlled (R/C) model aircraft versions. They should not have been surprised; Hezbollah is a resourceful adversary.

Constructing, in some instances assembling, a semi-autonomous "killer robot" is all too easy. Remember this effort to construct a COTS fleet of attack and surveillance UAVs was early 2004:

I am not an R/C pilot so I could start clean as would any other reasonably technically inclined individual. My ground rules were:

  • Could pay cash for everything
  • Could buy everything in-country and so not have to bring items across a border
  • Could buy all items in a population-dense environment not immediately likely to be surveilled
  • Could obtain PC-based simulators in order to covertly learn how to pilot either fixed wing or rotary wing aircraft, i.e., before I tried to fly a physical device
  • All essential components were either genuinely plug and play or already available in kitted form
  • Could obtain functional schematics and instructions for all installs/add-ons
  • Ability to install GPS autopilots with ground pilot override
  • Ability to install real-time video cameras and their RF links
  • Ability to install digital camera triggering
  • Ability to carry payloads (and either release, spray, or otherwise distribute the payload)
  • Option for stealth/noise abatement
  • Ability to do it at modest cost in comparison to anything a military unit would field and, labor costs aside, be within al Qaeda's frugal pocket book

I found that as early as 2004, "it is feasible for a diligent and reasonably agile individual or small group to create a COTS hunter-killer and surveillance R/C model fleet, a poor man's Predator":

Ability to assemble an R/C craft that could launch conventionally, switch over to GPS autopilot, fly a course either to a target or a race track round trip and allow it to again be taken over by another user for terminal homing or landing... Many PC simulators [are available] for a variety of fixed wing and rotary wing R/C models.

Nose video cameras that could superimpose imagery over a heads-up cockpit display based on telemetry sent back from the bird. If the ground pilot was properly trained, it was possible to fly something onto the target just like the big boys...

Smoke systems intended for demonstration flying are intriguing as a dispersal mechanism for other agents. Certain smoke pumps use one TX-RX channel to toggle on/off...

If the intent is to surveil or deliver/spray a payload, then an R/C aircraft can be launched, perform its mission, and subsequently be recovered -- if for no other reason than to forestall discovery of the means of an attack or that an attack had occurred. The cost of the systems is low enough and simple enough that it could be produced in a quantity that would satisfy the redundancy needs of groups like al Qaeda.

These small UAVs can have enormous consequences beyond delivery of conventional explosives. Our research into the feasibility of producing asymmetrical small volume, "off scope" organophosphates (nerve agents), i.e., agent production using easily purchased materials and not the more rarified "Australia Group" components, showed that production was not limited to sovereign state actors. See:

Some of our findings: If you are going to make and use an organophosphate product in less than a year, standard stainless steel components will suffice before corrosion degrades the system, inadvertently venting product. Toxic byproducts of production can be exhausted directly into a sealed running water stream, sending it off for the sewer system to absorb. Use of microreactors and microfactory components vastly lower production risks while improving weaponization and delivery.

An article is forthcoming on criteria for an asymmetrical air force that would be within the means of a number of entities, criminal and terrorist.

'Robot arms race' underway, expert warns
Tom Simonite
NewScientist.com news service
12:10 27 February 2008

The Ethics of Autonomous Military Systems
Royal United Services Institute for Defence and Security Studies
27 February, 2008

Killer robots pose latest militant threat-expert
Reuters
Tue Feb 26, 2008 7:00pm EST

Robot wars are a reality
Armies want to give the power of life and death to machines without reason or conscience
Noel Sharkey
The Guardian
August 18, 2007

Hezbollah sends drone over Israel
AFP/ABC (Australian Broadcasting Corporation)
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Gordon Housworth



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Supply chain blowback of cocaine production hopping the Andes to Argentina and Uruguay

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In attempting to study the unintended blowback of forcing cocaine production to move from Andean states to Argentina and Uruguay, it is not new news that:

  1. Cocaine production shifted to Argentina and Uruguay because of an ill-thought-out restriction of precursor chemicals entering Bolivia which drove starved cocaine production east where the precursors were cheap and easily available - and actually improved shipping costs to Europe.
  2. Byproducts of cocaine production had long ago ravaged the poor of Bolivia who could not afford the higher order product, cocaine.
  3. The byproducts of this migrated production has been ravaging the poor of Argentina and Uruguay for five years.

The news value of this note is occasioned more by the intersection of the:

  1. Vacuum of coverage these events had heretofore merited in our high street press (especially the US press).
  2. Sudden surge of coverage by mirroring a single article in the New York Times on Paco (PAsta de COcaina), the paste base cocaine (PBC) at the low end of the addict hierarchy.
  3. Continued failure to monitor those whom I have come to call the committed collectors who have long been covering the shift in production and the effects of Paco for any who cared to look.

Barrionuevo's piece in the 23 February Times ricocheted around the web, carried by the phrase "Devouring Lives," offering readers their introduction to Paco and now aging changes wrought in the cocaine supply chain. (A quick search of the Times indicates that Barrionuevo had not previously written on issues of the drug trade under its masthead.):

[Mothers of addicted youths] have become the only bulwark [against] the irrepressible spread of paco, a highly addictive, smokable cocaine residue that has destroyed thousands of lives in Argentina and caused a cycle of drug-induced street violence never seen before in this country.

The scourge underscores a significant shift in both Argentina and its larger neighbor, Brazil, which in just a few years have become sizable cocaine consumers. Brazil now ranks as the second largest consumer of cocaine in the world after the United States, the State Department says.

The surge in drug use [in the Southern Cone has seen the region] become the dumping ground for cheaper, lower-quality cocaine. In the five years since residents first began noticing the crude yellowish crystals being smoked [in the Buenos Aires neighborhood of Ciudad Oculta], paco has become the dominant drug that dealers are peddling.

Al Jazeera's Teresa Bo had beaten the Times two weeks earlier with a video of paco consumption while the BBC had covered the topic in August 2007, noting that paco consumption rates were rising at an estimated at 200% to 500% per annum. Inter Press Service (IPS) had done a good piece much earlier, in September 2006, but the best coverage was largely "off scope."

In Value from the fringe: "committed" collectors and investigators, I spoke of the value of a good time sequence, a properly described set of events as a means of pattern detection:

As a good sequence requires significant research to make it viable, or for that matter any effort or cause not tracked by the shifting "lens of the news" of the major trade and popular press, I have learned to look to the "committed," i.e., those who have a passion to search out and document what would be obscure or tedious work for the rest of us.

Based in Amsterdam, the Transnational Institute (TNI) is one of those committed collectors, "an international network of activist-scholars committed to critical analyses of the global problems of today and tomorrow" in alternative development approaches (read at odds with the IMF/World Bank), drugs, environment, water and militarism.

TNI had two excellent pieces. The first, Paco Under Scrutiny: The cocaine base paste market in Argentina, Uruguay and Brazil, drew upon three works:

The second was Coca yes, cocaine, no?, also in 2006. An earlier Corruption, Drug Trafficking and the Armed Forces, speaks to the infrastructure corruption that plagues so much of the Americas. (Their Losing Ground: Drug Control and War in Afghanistan will not make US readers any happier with our performance in Afghanistan.)

Paco Under Scrutiny (2006) taught that the definition of 'base paste' or paco had changed over a decade:

The first refers to the substance that results from mixing and heating cocaine hydrochloride with sodium bicarbonate, which is then smoked. In other countries, this mixture is called 'crack', and its use is widespread.

The second refers to the paste extracted from the maceration of coca leaves, which only through subsequent processing with chemical substances can be converted into cocaine hydrochloride; this is also known as 'base cocaine', and it can be smoked, but not injected or inhaled, as it is not soluble.

Finally, PBC is defined as the residue from the manufacturing of cocaine hydrochloride. This final stage of processing may leave a residue that is sold as paco. [Interviews] mentioned a change that may have occurred in recent years. [About] 10 years ago cocaine hydrochloride mixed with bicarbonate - crack - was consumed, but now almost everyone says that PBC is the residue from the preparation of cocaine hydrochloride, or paco...

Even with this agreement "about the harm done by the substance and its inferior quality in comparison to cocaine hydrochloride," there are variants of PBC:

First, there is [the] cocaine base paste (PBC), also known as cocaine sulphate [that] is the first consumable extract or by-product of the process of manufacturing and refining cocaine hydrochloride. PBC is therefore a substance produced in a primary phase of extraction and refining of coca leaves, a process that eventually ends with the production of cocaine hydrochloride.

Dry PBC - known in Colombia as bazuco, in Bolivia as pitillo, in Peru as kete, in Ecuador as baserolo, and in Chile as mono - contains 50 to 85 percent cocaine sulphate, along with other alkaloids and methanol, benzoic acid and kerosene. PBC is smoked by mixing it with tobacco. Consumption of [this] PBC appeared in Colombia and Peru in the 1970s, later spreading to Bolivia, Ecuador and Chile.

Second, washed 'base paste' or 'cocaine base' is the result of the next step in the cocaine refining process, with the addition of potassium permanganate and acid, which cleanses the base paste of kerosene and other impurities... [Third, a still more inferior product is the residue of the washed 'base paste' which can be smoked as paco.]

TNI readers learned the cause and effect between a transforming cocaine trafficking in Argentina, Uruguay and southern Brazil and the startling increase in paco consumption:

"PBC doesn't arrive because of poverty ... it comes because there are laboratories, because there wouldn't be base paste if there weren't laboratories. So what actually arrived was the laboratory. Once the laboratory arrived, it found a market for the residue from the processing. ... In other words, if there weren't laboratories here, there wouldn't be paco. ... The laboratory doesn't come to sell paco; it comes to refine cocaine."

[There] appears to have been a geographic rearrangement of the cultivation-production-export circuit, which may have had a decisive impact on the presence of PBC in the [Southern Cone]. If cocaine is being produced in Argentina or Uruguay, it is possible that there is much more PBC, and in any case much more of the residue from its preparation, which is what some interviewees - both users and experts - identify as paco (in Argentina). Paco may be a smaller business than the large-scale cocaine trade, and in Argentina its sale usually occurs near areas where laboratories are located...

TNI readers learned the changes occurring in the cocaine supply chain from Andean states to the Plata:

PBC use began in coca-producing countries like Colombia, Peru and Bolivia more than two decades before it appeared in Argentina and Uruguay. The appearance of PBC in these two countries is apparently linked to a general transformation in the production, trade and trafficking of cocaine hydrochloride.

While cocaine hydrochloride, mainly from Bolivia, used to enter Argentina across the northwestern border to reach the Atlantic seaports, where it was shipped out, what now comes across the border is cocaine base, which is then processed into cocaine hydrochloride in clandestine laboratories in Argentina. The availability and lower price of chemical precursors necessary for producing cocaine hydrochloride in Argentina are favourable to this option. This could explain both why the number of cocaine laboratories found in Argentina has increased in the past three years, and how this has helped turn Argentina from a cocaine transit country to a place where the last stage of manufacturing occurs...

In Argentina in recent years, there have been raids on dozens of laboratories where [sniffed or injected] cocaine hydrochloride was apparently manufactured. Argentina and Brazil have a chemical industry capable of producing the inputs necessary for manufacturing drugs. During the first half of 2006 alone, Argentine authorities seized as much cocaine as they had confiscated in the entire previous year. For agencies responsible for controlling the problem, this is an indication that the trafficking organisations' modus operandi is no longer exclusive to the Andean and Amazon region, where manufacturing of the final product traditionally was done...

The important changes that have taken place in Latin America in the manufacturing of cocaine hydrochloride may be related to the implementation of the 1988 U.N. convention on control of chemical precursors. Control of precursors in cocaine-producing countries may have spurred a shift of this final phase of production to countries such as Argentina and, later, Uruguay, which offer better conditions for chemical processing and export by air and sea.

PBC thus appeared in Argentina and Uruguay, and a base paste consumer market emerged. PBC mainly enters Uruguay by land from Argentina and, to a lesser extent, Brazil. According to data from some informants in Uruguay, the most plausible route is probably the following: the PBC leaves Bolivia, is processed and divided up in northern Argentina or provinces near Buenos Aires, and from Buenos Aires the packets are distributed to Uruguay. The paste is transported from Argentina to Uruguay by 'mules' [transporting] batches of 60 to 100 capsules in the stomach (ingested) or 300 attached to their bodies... Subsequent police operations, however, have found large laboratories, leading to the assumption that there is parallel transportation of larger quantities of PBC for processing.

Paco Under Scrutiny and its kin have much more to offer. Recommended.

The admonition of this note is to pay attention to the committed collectors in your region of interest as they will very likely yield a Reuters-like continuum of contextual and actionable information that will measurably lead the high street press reporting.

Cheap Cocaine Floods Argentina, Devouring Lives
By ALEXEI BARRIONUEVO
New York Times
February 23, 2008

HIV and AIDS in Latin America
by Graham Pembrey
AVERT
Last updated February 18, 2008

Argentina's new drug epidemic - 13 Feb 08
Argentina's Deadly Drug
Teresa Bo
AlJazeera English
Added YouTube: February 13, 2008

Drugs scourge takes hold in Argentina
By Daniel Schweimler
BBC News, Buenos Aires
Last Updated: Wednesday, 29 August 2007, 11:20 GMT 12:20 UK

Losing Ground: Drug Control and War in Afghanistan
By Martin Jelsma, Tom Kramer, Cristian Rivier
Drugs & Conflict Debate Papers Nr. 15
Transnational Institute
ISBN ISSN 1871-3408
December 2006

Argentine Slums Mired in New Drug Problem
Kelly Hearn
The World & I Online
November 2006

'Paco' Under Scrutiny
The cocaine base paste market in the Southern Cone
BY Equipo Intercambios, Giorgina Garibotto et al., Tom Blickman
Drugs & Conflict Debate Papers Nr. 14
Transnational Institute
ISBN ISSN 1871-3408
October 2006

PDF: Paco Under Scrutiny: The cocaine base paste market in Argentina, Uruguay and Brazil

'Pasta Base' Destructive but Not Invincible
Marcela Valente
Inter Press Service
12 September 2006

Coca yes, cocaine, no?
Legal options for the coca leaf
BY Pien Metaal, Martin Jelsma, Mario Argandoña, Ricardo Soberón, Anthony Henman, Ximena Echeverría
TRANSLATION BY Amira Armenta, Barbara Fraser
Drugs & Conflict Debate Papers Nr. 13
Transnational Institute
ISBN ISSN 1871-3408
20 pp.
May 2006

17P-A-HIT COCAINE TO FLOOD BRITAIN
by JUSTIN PENROSE
Sunday Mirror
Mar 19, 2006

Argentina uncovers drug runways
By Daniel Schweimler
BBC News
Last Updated: Sunday, 19 February 2006, 23:26 GMT

Corruption, Drug Trafficking and the Armed Forces
An Approximation for Latin America
Ricardo Soberón Garrido
Crime in Uniform: Corruption and Impunity in Latin America
TNI/Acción Andina/Cedib, December 1997

Gordon Housworth



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