Chinese Engagement in Africa

Drivers, Reactions, and Implications for U.S. Policy

by Larry Hanauer, Lyle Morris

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Research Questions 

• What are China's and African countries' respective goals, in both the political and economic spheres, for Chinese-African engagement, and how do they work to achieve these goals? 
• How have African governments and populations reacted to Chinese engagement, and how has China adjusted its policies to accommodate these often-hostile responses? 
• Are the United States and China are competing for influence, access, and resources in Africa? 
• What opportunities might exist for the China and the United States to cooperate in Africa in ways that advance their mutual interests, as well as those of their African partners? 

Abstract

Most analyses of Chinese engagement in Africa focus either on what China gets out of these partnerships or the impacts that China's aid and investment have had on African countries. This analysis approaches Sino-African relations as a vibrant, two-way dynamic in which both sides adjust to policy initiatives and popular perceptions emanating from the other. The authors focus on (1) Chinese and African objectives in the political and economic spheres and how they work to achieve them, (2) African perceptions of Chinese engagement, (3) how China has adjusted its policies to accommodate often-hostile African responses, and (4) whether the United States and China are competing for influence, access, and resources in Africa and how they might cooperate in the region.

Fallen Tiger, Shaken Dragon

MAR 14, 2014 2

Minxin Pei

Minxin Pei is Professor of Government at Claremont McKenna College and a non-resident senior fellow at the German Marshall Fund of the United States. 

CLAREMONT, CALIFORNIA – Less than 18 months after becoming General Secretary of the Chinese Communist Party, Xi Jinping is poised to cage the biggest political “tiger” – a corrupt top official – in the history of the People’s Republic. Although rumors of the imminent fall of former internal security chief Zhou Yongkang have been swirling for months, many observers remained unsure whether Xi would prosecute Zhou and thus break the party’s long-established unwritten rule of immunity for sitting or retired members of the Politburo Standing Committee.

But doubts about Zhou’s fate have now been dispelled by a recent flurry of uncensored news stories in the Chinese media that revealed shocking details of corruption involving Zhou’s family and former subordinates. One newspaper reported that the authorities recently searched the homes of Zhou’s two brothers. Though these stories have yet to implicate Zhou directly, it will be only a matter of time before the Chinese government officially charges him with corruption.

Whispered reports are even more lurid. Zhou is said to have plotted to murder his first wife, and there are rumors that at the height of last year’s scandal involving disgraced former Chongqing party boss Bo Xilai, he attempted to assassinate Xi in the leadership compound at Zhongnanhai.

Based on what the Chinese press has disclosed thus far, it is clear that the Zhou case will be the ugliest and most sensational scandal involving a senior party leader that the country has ever seen. It will make Bo, an ally of Zhou and a former Politburo member who was sentenced to life imprisonment for corruption, look like a petty thief.

Apparently, the Chinese government is meticulously building a case against Zhou by pursuing two critical leads. The first one targets his son, Zhou Bin, a businessman who has amassed a huge fortune through shady deals and possibly criminal activities.

With so many officials and private businessmen eager to curry favor with his father, Zhou Bin had no difficulty cashing in. His business activities include brokering sales of oil-field equipment to Iraq (causing huge losses for Chinese state-owned oil companies); construction of hydroelectric power stations in Sichuan (where his father was the provincial party boss from 1997 to 2002); providing information technology for 8,000 state-owned gas stations; and investments in real estate, oil exploration, and toll roads.

The most damaging revelation so far concerns Zhou Bin’s friendship with a billionaire mafia boss, Liu Han, who is now standing trial for organized crime and murder. Liu made his fortune with Zhou Bin’s help. In one case, the younger Zhou allegedly used his political connections to help Liu sell two hydroelectric power stations to a state-owned power company for a profit of ¥2.2 billion ($330 million).

The second lead centers on Zhou Yongkang’s former lieutenants. A tactic favored by Chinese anti-corruption investigators is to detain junior officials who have worked closely with their primary target. Typically, these minions are threatened with long prison sentences, or even the death penalty, unless they cooperate.

In this case, a dozen officials who worked for Zhou in the energy sector in Sichuan and in the Ministry of Public Security (where Zhou was Minister from 2003 to 2008) have been arrested. Most ominously for Zhou, the officials include two of his former executive assistants, who presumably have intimate knowledge of Zhou’s activities.

When the Chinese government formally announces Zhou’s arrest – probably after the conclusion of the annual session of the National People’s Congress in mid-March – the revelations of the rot within the Chinese party-state will stun even the most jaded observers. What Zhou, his family, and their cronies have done can be described only as insatiable looting and blatant gangsterism.

More important, the Zhou scandal will almost certainly implicate a record number of senior officials. As of now, one minister, two provincial vice governors, one vice minister, and several senior executives in state-owned oil companies have been detained. More officials are expected to fall in the coming year.

For Xi, ensnaring Zhou in his anti-corruption net will likely provide a boost in his popular standing. He can show a skeptical Chinese public that he has the political will to take down one of the country’s most powerful politicians. Moreover, vanquishing a once-untouchable politician will leave no doubt about Xi’s personal authority.

For the rest of the world, the unfolding Zhou scandal reconfirms a profoundly worrisome fact: the Middle Kingdom remains deeply corrupt. Caging a tiger will not destroy a vampire.

Read more at http://www.project-syndicate.org/commentary/minxin-pei-previews-the-political-fallout-from-china-s-imminent-arrest-of-former-top-official-zhou-yongkang#eXBj5VY1iEOhaClw.99

Southeast Asia’s Infrastructure Deficit

Many of the region’s economies are being held back by lagging infrastructure. 

March 17, 2014 

Almost two thousand years ago, the most powerful empire in Western history was in danger. The domain of Emperor Publius Aelius Hadrianus Augustus, more commonly known by the name Hadrian, was falling apart at the fringes. His predecessor, Trajan, had expanded Rome far beyond its “natural limits” along the banks of the Euphrates, and the specter of war loomed both within the Empire and outside its borders. For Hadrian, that dark warning of mortality he had received upon coronation, Memento mori, or “remember that you will die,” seemed to be coming true.

However, as most anyone can tell you, neither Hadrian nor his Empire vanished. Instead, Rome grew stronger, and more stable, a consequence modern historians attribute, at least partially, to Hadrian’s prolific construction of roads. It might seem odd, but in the annals of history, the various battles that consolidated the empire have been forgotten, the names of most of its leaders have drifted out of memory, but the roads are still remembered, forever memorialized by the volumes of men like Dionysius of Halicarnassus, who wrote that “[t]he extraordinary greatness of the Roman Empire manifests itself above all in three things: the aqueducts, the paved roads, and the construction of drains.”

Two millennia later, in our century, the wisdom of Hadrian, and the merits of roads (and other, more modern, forms of infrastructure), still resonate. This can be seen especially in the Asia-Pacific region, the nations of which possess a stark dichotomy of transportation networks, and an even starker dyad of economic success and failure. The correlation of these two variables certainly underscore the positive impact infrastructure can have on national development today.

The nation that has seems to have taken Hadrian’s lessons most to heart is the People’s Republic of China. Since the days of Deng Xiaoping and China’s first five-year plan under the banner of Gaige Kaifang (Reforms and Openness), and even more so in recent years, China has witnessed an immense boom in the construction of highways, railways, ports and mass transit systems. The reason? Just like Hadrian thousands of years ago, Beijing’s leaders realize the importance of such infrastructure to China’s long-term goals. As one National Development and Reform Commission bureaucrat stated in a report before the Communist Party’s Congress, “transport plays an extremely important role in China’s socio-economic development.”

The Three Faces of President Obama

http://www.nytimes.com/2014/03/16/opinion/sunday/friedman-the-three-faces-of-president-obama.html?ref=opinion

MARCH 15, 2014 

Pro-Russian protesters rallied recently in Simferopol, Ukraine, in the Crimea region. The divisions in Ukraine make it complicated for the West to get involved.CreditSergey Ponomarev for The New York Times

BARACK OBAMA is surely the first president to be accused of acting in foreign policy like Pollyanna, John Wayne and Henry Kissinger in the same month.

Ever since Russian President Vladimir Putin’s land grab in Crimea, conservatives have denounced President Obama as a man who doesn’t appreciate what a merciless, Hobbesian world this really is. He’s a Pollyanna — always looking for people’s good side. Meanwhile, liberals have been hammering Obama for what they say is his trigger-happy drone habit, having ordered the targeted killing by air of hundreds of individuals; he’s John Wayne, seeking vigilante justice against those who have harmed, or might be planning to harm, the United States. And, just to round things out, Obama has been accused by critics on the left and right of being a Kissingerian hyperrealist who is content to watch the Syrian regime crush its people, because, as tragic as that is, American interests there are minimal.

It can’t be easy being Pollyanna, John Wayne and Henry Kissinger all at once. So who is Obama — really — on foreign policy? I’d say less Pollyanna than his critics claim, more John Wayne and Henry Kissinger than he’d admit, but still undefined when it comes to the greatest leadership challenges in foreign policy — which go beyond Crimea but lurk just over the horizon.

Everyone in the UK should be thanking George Soros

http://www.telegraph.co.uk/finance/comment/jeremy-warner/10699079/Everyone-in-the-UK-should-be-thanking-George-Soros.html

George Soros keeping us out of the euro was worth the $1bn he made shorting the pound during the ERM crisis

By Jeremy Warner

14 Mar 2014

George Soros has been in London this week to promote his latest book, The Tragedy of the European Union Photo: Reuters

George Soros is best known in Britain not as the magnanimous philanthropist he now is, but as the “man who broke the Bank of England”, an episode in which he still seems to take some pride, judging by remarks he made in London this week.

No, he wasn’t boasting of his reputed $1bn profit from shorting the pound at the height of the European Exchange Rate Mechanism (ERM) crisis, but what he considers to be Britain’s almost uniquely well-placed position in Europe as both within the European Union but outside the eurozone.

This happy disposition – if that’s what it is – would, I suspect, have come about whether or not Mr Soros had virtually exhausted the Bank of England of its foreign exchange reserves in pursuit of his speculative attack, but no doubt he did play some part.

These days, Mr Soros commands much respect, even adulation, in some parts of Eastern Europe for his philanthropic work in promoting the democratic virtues of open societies.

But it was not always thus. To his obvious discomfort, Mr Soros was treated with utter contempt by the then UK Chancellor, Kenneth Clarke, in a debate at the World Economic Forum in Davos shortly after the ERM debacle. Mr Clarke could not disguise his disgust. He virtually refused to acknowledge that Mr Soros was even on the same platform, while at the same time managing to dismiss all he said as complete tosh.

This was understandable given what had happened, but not particularly clever. It’s often forgotten that, even after forced withdrawal, Mr Clarke wanted to take Britain back into the ERM as a precursor to joining the euro, even though this would have meant again imposing inappropriately high interest rates.

Post-Imperial Blues

Robert A. Manning, James Clad

March 11, 2014 -- As Syria burns, Iran negotiations drag on and Ukraine melts down, the absence of decisive US action just about anywhere is causing great heartburn to the strategic mindset that brought you Iraq, Libya and other nation-building successes. 

US and EU helplessness in the face of Russian intervention in the Ukraine has turned that into an ulcer.

Two recent laments come to mind. The first comes from the AEI’s Michael Rubin who, in an Outlook piece in the Washington Post, warns about the dangers of negotiating with bad guys. The other comes from ubiquitous Harvard know-it-all Niall Ferguson, who ponders Obama’s failure to lead in the Wall Street Journal.

Both men seize on Obama’s inconsistency and inconstancy, implying—though neither comes out and says it—that muscularity by the Great White Father can solve the problem. Implicit also is the converse: restraint equals weakness. Both combine to offer an amazing case of historical amnesia, willful ignorance or nostalgia passing for strategy. A synopsis of this mindset is: when you have a hammer, every problem looks like a nail.

To be sure, Obama’s foreign policy offers a target-rich environment. Befuddled by the Arab Awakening, the current administration has taken successive positions on Egypt—all to little effect. And when the president of the United States says Assad “must go,” but has no idea how to achieve this (and later does nothing when Assad crosses the chemical-weapons red line)—well, it does not inspire confidence. And in regard to Ukraine, one might wonder what decisive steps did George W. Bush took when Moscow flexed its military muscle in similar way Georgia.

Beware of Bad Guys

Rubin warns about “dancing with the devil”—the title of his new book—and uses the demonizing term “rogue regimes” to describe a clutch of nefarious actors. He makes useful points about how countries like North Korea or Iran can use negotiations as a delaying tactic or to extract concessions. And he is not entirely wrong to see negotiations as a jobs issue for US diplomats, who sometimes may want to talk for the sake of talking: Think of all the greenhouse gas emissions which have been generated during successive UN climate talks with sparse results.

But underneath this lies a strange idea—that we are so exceptionally wonderful that just talking to the United States is a high honor and privilege. The idea, so prevalent in the George W. Bush administration we served, is that diplomacy is not just a tool to achieve policy objectives but a reward that can legitimize bad guys. Almost never does this approach lead to problem solving.

The Three Faces of President Obama

MARCH 15, 2014 

Thomas L. Friedman

Pro-Russian protesters rallied recently in Simferopol, Ukraine, in the Crimea region. The divisions in Ukraine make it complicated for the West to get involved.

BARACK OBAMA is surely the first president to be accused of acting in foreign policy like Pollyanna, John Wayne and Henry Kissinger in the same month.

Ever since Russian President Vladimir Putin’s land grab in Crimea, conservatives have denounced President Obama as a man who doesn’t appreciate what a merciless, Hobbesian world this really is. He’s a Pollyanna — always looking for people’s good side. Meanwhile, liberals have been hammering Obama for what they say is his trigger-happy drone habit, having ordered the targeted killing by air of hundreds of individuals; he’s John Wayne, seeking vigilante justice against those who have harmed, or might be planning to harm, the United States. And, just to round things out, Obama has been accused by critics on the left and right of being a Kissingerian hyperrealist who is content to watch the Syrian regime crush its people, because, as tragic as that is, American interests there are minimal.

It can’t be easy being Pollyanna, John Wayne and Henry Kissinger all at once. So who is Obama — really — on foreign policy? I’d say less Pollyanna than his critics claim, more John Wayne and Henry Kissinger than he’d admit, but still undefined when it comes to the greatest leadership challenges in foreign policy — which go beyond Crimea but lurk just over the horizon.

If Obama has been a reluctant warrior in Crimea, it’s because it’s long been part of Russia and home to a Russian naval base, with many of its people sympathetic to Russia. Obama was right to deploy the limited sanctions we have in response to Putin’s seizure of Crimea and try to coolly use diplomacy to prevent a wider war over Ukraine — because other forces are at play on Putin. Do not underestimate how much of a fool Putin will make of himself in Crimea this weekend — in front of the whole world — and how much this will blow back on Russia, whose currency and stock markets are getting hammered as a result of Vladimir’s Crimean adventure.

The Russian Navy 'Rebalances' to the Mediterranean

Published on U.S. Naval Institute (http://www.usni.org)

The Russian Navy 'Rebalances' to the Mediterranean

Proceedings Magazine - December 2013 Vol. 139/12/1,330 [4]

By Captain Thomas R. Fedyszyn, U.S. Navy (Retired)

As NATO and the United States deprioritize a former strategic center of gravity, Russia eagerly moves in to fill the void.

Amidst the flurry of diplomatic and political activity accompanying the Syrian crisis, the Russian Navy made a series of pronouncements, declaring on consecutive days that at least four warships, a spy ship, and a repair ship located at Tartus, Syria, would join other units of Russia’s new permanent Mediterranean Task Force. While these sorties were of little strategic significance, alert naval strategists may have noticed their “back-to-the-future” quality. As the U.S. military “rebalances” to the Asia-Pacific theater, the Russian Navy is pivoting back into the same European waters it became very familiar with during the Cold War. Russia apparently is deploying, and intends to continue to deploy, its navy into the vacuum created by the United States’ absence in the Mediterranean Sea. America should respond by adding various ships—an afloat forward-staging base (AFSB) and several littoral combat ships (LCS)—to the guided-missile destroyers (DDGs) we plan to home-port in the European theater in 2014 and 2015.

Cold War Chessboard

The new U.S. strategy, commonly labeled the Defense Strategic Guidance , characterizes the world’s regions as follows: Asia-Pacific will be the new strategic center of gravity; the Middle East will continue to be in turmoil and unstable; Africa and Latin America will become low-cost and small-footprint theaters; and Europe, our principal partner, will become the theater from which we will rebalance since it has become a producer rather than a consumer of security. 1 Accepting the realist’s vision of power politics, we are the stage managers of the Russians’ move to the Mediterranean, as our departure from the area triggered their arrival.

Past generations of American sailors viewed their Med deployments as opportunities to be central players in the naval portion of the Cold War with the Soviet Union. Although a small, confined space, the Mediterranean attracted large numbers of advanced warships from both sides. There was always one U.S. carrier battle group, sometimes two, operating in this enclosed area. Indeed, the United States even had plans to do a reverse-pivot, redeploying three American carrier battle groups from the Pacific to the European theater should NATO war plans be executed. No group was without its Soviet “tattletale,” which reported all the carrier’s movements to Soviet fleet headquarters and was poised and positioned to launch cruise missiles. Similarly, NATO antisubmarine-warfare forces—air, surface, and subsurface—watched every movement of Russian subs operating near Europe.

Ukraine in Crisis

Author: Robert McMahon, Editor

Updated: March 16, 2014

Introduction

Why is Ukraine in crisis?

What are Russia's concerns?

What is the role of the European Union?

What is the status of Crimea?

Do Russian moves in Ukraine violate international law?

What are U.S. and European policy options in Ukraine?

Additional Resources

Introduction 

Ukraine's most prolonged and deadly crisis since its post-Soviet independence began as a protest against the government dropping plans to forge closer trade ties with the European Union and has since spurred a global standoff between Russia and Western powers. The crisis stems from more than twenty years of weak governance, a lopsided economy dominated by oligarchs, heavy reliance on Russia, and sharp differences between Ukraine's linguistically, religiously, and ethnically distinct eastern and western halves. After the ouster of President Viktor Yanukovich in Feburary 2014, Russian moves to take control of the Crimean peninsula signaled Moscow's intent to expand its sphere of influence, strengthened by a March 16 referendum in which residents voted to split from Ukraine and join Russia. Russia's intervention marks a serious challenge to established principles of world ordersuch as sovereignty and nonintervention, and raises concerns by asserting the primacy of nationality over citizenship. 

Why is Ukraine in crisis? 

The country of forty-five million people has struggled with its identity since it gained independence with the dissolution of the Soviet Union in 1991. Ukraine has failed to resolve its internal divisions and build strong political institutions, hampering its ability to implement economic reforms, overcome corruption, and lessen the sway of powerful oligarchs. In the decade following its independence, successive presidents allowed oligarchs to gain increasing control over the economy while repression against political opponents intensified. By 2010, Ukraine's fifty richest people controlled nearly half of the country's gross domestic product (GDP), writes Andrew Wilson in the CFR book Pathways to Freedom. 

A uniformed man, believed to be a Russian serviceman, stands guard near a Ukrainian military base in the village of Perevalnoye, outside Simferopol, on March 6, 2014. (Photo: Vasily Fedosenko/Courtesy Reuters 

A reformist tide briefly crested in 2004 when the Orange Revolution, set off by a rigged presidential election, brought Viktor Yushchenko to the presidency. Yet infighting among elites hampered reforms, and severe economic troubles resurged with the global economic crisis of 2008. The revolution also masked the divide between European-oriented western and central Ukraine and Russian-oriented southern and eastern Ukraine. 

Who Controls the Internet Address Book? ICANN, NTIA and IANA

By Paul Rosenzweig

Saturday, March 15, 2014

It is almost axiomatic in Washington, that the bureaucracy buries news of which it is not proud with a release late in the day on a Friday afternoon. Though it is a bit harsh to say so, one suspects that theDepartment of Commerce felt that way about its announcement yesterday that the United States would relinquish part of its controlling role in managing the Internet Domain Name System (DNS). In effect, the last remaining legal vestige of American control of the network will vanish next year. Our stewardship of the network will transition to an international non-profit that may, or may not, have the capabilities required. That’s a big deal. To understand why requires a bit of explanation.

The DNS is, in effect, the address book of the internet. Someone, in the end, has to decide that “microsoft.com” means the big computer software company in Washington. And someone has to decide that in addition to dot-com addresses we will now start recognizing dot.bank and dot.xxx and dot.home as valid global top level domains (gTLDs). We call this role the Internet Assigned Numbers Authority (IANA)—that is the right and responsibility to assign names among the domains.

Historically, since the original architecture of the network was developed in the United States, that responsibility was originally given to American institutions—indeed, initially, it was the US government itself. Since the 1990s however, the US government has offloaded much of that responsibility to a third party—it has contracted out the IANA function to a non-profit group, the Internet Corporation for Assigned Names and Numbers (ICANN). 

ICANN is an American non-profit corporation with headquarters in Southern California. It was, to summarize and simplify, created for the purpose of being able to contract to run the IANA function. And so for roughly the last 25 years ICANN has entered into a contract with the National Telecommunications and Information Administration (NTIA), a component of the Department of Commerce, to manage the IANA function.

The contract was last let out for bid in 2011, and is due to expire in 2015. (I should add that “let out for bid” is a bit of a misnomer, since the way that the request for proposal was written only one entity, ICANN, could possibly have won the contract.) Boiled down to its simplest form, the announcement yesterday was a statement by NTIA that it was not going to enter into another contract—that, instead, it would let ICANN have the responsibility of running the IANA function on its own. The only condition that NTIA set for the transition was that ICANN develop an internal mechanism for oversight and win the trust of crucial stakeholders around the world.

There is one further piece to the puzzle that one needs to understand about the architecture of the administration of the DNS system and the IANA function. Though ICANN manages the IANA function under contract to NTIA, it does not actually do the work of implementing changes to the DNS when they are made. That technical work is managed under a cooperative agreement between the NTIA and Verisign, the American company that also manages the dot-com domain (under a separate arrangement with ICANN). Verisign maintains the root zone (that is the core list of the gTLD domains and their operators), for free as a service to the internet and the world. So, today, when ICANN decides to make a change in the DNS system, the ultimate responsibility for implementing that change lies with Verisign. (Full disclosure: I have done consulting work for Verisign—though not with respect to its root zone maintenance function.)

Crimea Through a Game-Theory Lens

MARCH 15, 2014 

Economic View

By TYLER COWEN

In 1997, soldiers prepared to destroy a missile housed at a former Soviet base in Ukraine. After the Soviet Union’s breakup, Ukraine gave up its portion of the old Soviet nuclear arsenal.CreditAssociated Press

A Russian occupation of Crimea raises the specter of the Cold War, in which the nuclear stalemate between the United States and the Soviet Union devolved into regional disputes around the world.

While military and political frictions made the biggest headlines, the Cold War couldn’t be well understood without using economic theory — specifically, game theory, which analyzes the strategic logic of threats, credibility and conflict.

NUCLEAR DETERRENCE From the standpoint of game theory as developed by Thomas C. Schelling, a 2005 Nobel laureate in economic science, the conflict can be seen as a case study in nuclear deterrence. That’s because, after the Soviet Union split into many pieces in the 1990s, a newly independent Ukraine gave up its portion of the old Soviet nuclear arsenal. In part, it did so in exchange for a memorandum supporting its territorial integrity, signed by both Russiaand the United States.

Eliminating its nuclear weapons may have seemed a good deal for Ukraine at the time, and it can be argued that the world became a safer place. Yet if Ukraine were a nuclear power today, it would surely have a far greater ability to deter Russian military action.

The Economic Impact of Cyber Crime and Cyber Espionage

March 17, 2014

The Economic Impact Of Cybercrime And Cyber Espionage

Michael Sentonas

Security Solutions Magazine

Extracting value from the computers of unsuspecting companies and government agencies is a big business for criminals, and the scope of the loss to the victim ranges from reputational damage, loss of customer trust, financial penalties, cost of remediation and repair, to greater competition arising from the stolen information.

Over the last 12 months, there has been a change in the complexity and sophistication of advanced malware threats affecting business and government operations. One particularly sinister example recently identified in 600,000 samples carries a ‘wiper module’, designed to steal information and wipe the computer and its network – a devastating event for any business or government. While the victims are busy rebuilding their systems, they are distracted from investigating the security breach and identifying the stolen information.

In Australia, the top four types of data lost include customer personal information, network and online application passwords, financial data such as customer credit card details, and budgets and supplier information – all of which are of interest to cyber-criminals and are merely the first sign of loss to the organisation. (McAfee’s State of Privacy Awareness in Australian Organisations, April 2013)

Attempting to measure the true cost of cyber-crime needs to consider many facets, not just the direct dollar losses sustained by victims, and it is this greater impact that is investigated in this article.

The Components Of Malicious Cyber Activity

In determining the components of malicious cyber activity, we start by asking what we should count in estimating losses from cybercrime and cyber espionage. We can break malicious cyber activity into six parts: 

• the loss of intellectual property and business confidential information 
• cybercrime, which costs the world hundreds of millions of dollars every year 
• the loss of sensitive business information 
• opportunity costs, including service and employment disruptions, and reduced trust for online activities 
• the additional cost of securing networks, insurance, and recovery from cyber attacks 
• reputational damage to the hacked company. 

Crime Pays, But How Well?

Cyber crimes against the customer of banks and other financial institutions probably cost many hundreds of millions of dollars every year. Cyber theft of intellectual property and business-confidential information probably costs developed economies billions of dollars—how many billions is an open question. These losses could just be the cost of doing business or they could be a major new risk for companies and nations as these illicit acquisitions damage global economic competitiveness and undermine technological advantage.

Following STUXNET Cyber Attack, Iran Emerging As a Major Player in Cyber War Capabilities

March 17, 2014

Cyber-war: In deed and desire, Iran emerging as a major power

Mark Clayton

Christian Science Monitor

As high-level international talks in Vienna over Iran’s nuclear program edged closer to a deal last fall, something curious happened – massive cyber-attacks that had hammered Wall Street bank websites repeatedly for about a year slowed to a near stop.

While banking industry officials were relieved, others wondered why those Iran-linked “distributed denial of service” attacks that had so regularly flooded bank websites with bogus Internet traffic were shut off like a faucet. One likely reason, say US experts on cyber-conflict: to reduce friction, at least temporarily, at the Vienna nuclear talks.

Yet, even as the “distributed denial of service” attacks abated for apparently diplomatic reasons, overall Iranian cyber-spying on US military and energy corporation networks has surged, these experts say.

Iran was fingered last fall, for instance, for infiltrating the US Navy Marine Corps Intranet. It then took the Navy nearly four months to root out the Iranian hackers infesting its largest unclassified computer network, the Wall Street Journal reported in February.

This litany of Iranian activity is evidence, say experts, that after years as a cyber also-ran, Iran is morphing swiftly into a major threat in the rapidly evolving era of cyber-conflict.

That shift is causing a growing recognition – from the halls of the US intelligence community to the cyber-security firms protecting corporate America – that Iran has vaulted into the ranks of the world’s top-10 offensive cyber-powers.

“Iran represents a qualitatively different cyber-actor,” says Ilan Berman, vice president of the American Foreign Policy Council, a Washington think tank. “They’re not stealing our intellectual property en masse like China, or using cyber-space as a black market like the Russians do. But what Iran does use cyber for, including elevating its retaliatory capabilities abroad, makes it a serious threat.”

INTENT TO DO DAMAGE

While Iran is still not a true “cyber-superpower” on a par with the US, China, andRussia, it is the intensity, variety, and destructiveness of Iran-linked cyber-incursions over the past five years that led to its reappraisal.

“Until recently, the US intelligence community thought about America’s serious cyber-adversaries mainly as a duopoly – Russia and China,” says a cyber-expert who asked not to be named in order to preserve ties with federal agencies. “The Vienna process is causing Iran to rein in its cyber-activities, at least temporarily. Iran’s capabilities may be rudimentary in many ways, yet what it lacks in sophistication it more than makes up for in intent” to do damage.

Iran was suspected, for instance, to have been the hand behind a computer virus that wrecked 30,000 Saudi Aramco computers in 2012. A similar attack hit RasGas, a Qatari energy company, that same year.

Why Russia Won't Launch a Full-Scale Cyberattack in Ukraine

Written by

DJ PANGBURN

@djpangburn March 15, 2014 // 

Back in the 6th century BC, Chinese military general Sun Tzu laid the foundations for information warfare, a broad, holistic aspect of conflict that would later grow to include propaganda and cyberwarfare. "Engage people with what they expect; it is what they are able to discern and confirms their projections," wrote Sun Tzu. "It settles them into predictable patterns of response, occupying their minds while you wait for the extraordinary moment—that which they cannot anticipate."

Fifteen centuries later, security expert Keir Giles made reference to this Sun Tzu quote in discussing his recent ArsTechnica op-ed about Russia's information warfare tactics in Ukraine and Crimea. Giles hoped the editorial would help people understand what Russia has been up to on the cyber front, centering on the argument that even though Russia hasn't yet staged "high-profile, public" cyber attacks in the Ukraine, the region is in the midst of an information war as much as a military occupation.

"If it's the Russian view we are talking about, then it would be fairer to say that cyberwarfare is just one technical facilitator of information warfare," Giles told me. "It is the information itself that is important, and cyber capabilities are just the technical ability to manipulate it. Information warfare is a vastly more holistic concept than cyberwarfare."

Giles noted that the Russians are, amongst other things, planting false information. "On March 1 Russian media reported that Dmitry Yarosh, the leader of Ukraine's Right Sector group and a particular target for Russian criticism, had made an appeal through social media to Islamist insurgent leader Doku Umarov," wrote Giles. "Yarosh wanted Umarov to support Ukraine by attacking Russia. Yarosh claims this is not the case and that the appeal was planted after his account was hacked."

When I asked him about the other ways Russia is using false information, Giles said to just look at any Russian news bulletin, and pointed to a US State Department fact sheet titled President Putin's Fiction: 10 False Claims About Ukraine. Computer and network security researcher Marcus Ranum, who has written and spoken extensively on information and cyberwarfare, calls Russia's tactics something else: "battlefield intelligence plus net-centric warfare." A mouthful, to be sure, but instrumental in making sense of Russia's cyber-based intentions in Ukraine.

If Russia launched a full-scale, public cyber attack against Ukraine, it would be politically messy, and might trigger military retaliation.

"'Net-centric warfare' is a catchall for 'cleverly using computers in a battlefield environment,' i.e., getting drone video down to troops in the field, using cell phone detectors to locate IEDs, etc.," said Ranum. "It's really 'IT applied to the military' in a general sense. The issue is that it's often conflated with 'cyberwar' or 'information operations' for budgetary reasons.

Ranum calls net-centric warfare the "cloud computing of military IT"—it can be whatever people want it to be. The only necessary ingredients are computers, data, and above all, a budget. However, Ranum doesn't consider it a great innovation. "In reality, this stuff is all just battlefield intelligence," said Ranum. "It's just a faster point along the progression from messenger to carrier pigeon to telegraph to observation balloon to satellite."

Subtle, net-centric information warfare instead of an all-out cyber attack (like Stuxnet) might actually be Russia's tactical approach in Ukraine. If Russia launched a full-scale, public cyber attack against Ukraine, it would be politically messy, and might trigger military retaliation. Ranum believes that this is something Putin wants to avoid. "It's the issue of retaliation that makes the 'big frame' cyberwar less likely and closer to impossible," he noted. "In order to do this stuff, you need the political top-cover to survive the fallout that would inevitably result."

For the moment, Putin's Russia seems content just gathering intelligence in low-intensity cyber attacks. "Putin is (rightly) trying to avoid having the situation go military," said Ranum. "He learned a lesson in Georgia: When you have zero-length supply lines and overwhelming power, there is no need to act quickly or precipitously."

Ranum also pointed to a cyberwar dynamic that doesn't seem to get a lot of play, at least not in the media. Which is that while the military might want the power grid taken down (Stuxnet-style), cyber spies will counter that this will put their intelligence-gathering efforts at risk. Applying this to the Russia vs. Ukraine standoff, one quickly realizes that Putin can only go so far with Russian cyber warfare. It's far better to operate in the shadows—a principle that applies both to traditional spycraft and cyber attacks. Big and bold isn't necessarily efficient or effective.

Giles believes that Russia's "brute force" DDoS attacks against Estonia and Georgia are no longer necessary. Current cyber tools allow states to do other things, such as deploy the intelligence-gathering virus Snake; which, according to Giles, is popping up in Ukraine and elsewhere. Publicly bold cyber attacks would, as Giles suggests, also risk "alienating or inconviencing the Russian-friendly populations in Eastern Ukraine." 

Ranum, on the other hand, comes to quite another conclusion about the recent history of Russia's cyber warfare tactics. "The cyber attacks against Estonia really accomplished nothing," Ranum said. "They were annoying and made the Estonian government look a bit less competent for a short while. But, so what?" (As Giles noted in the op-ed, the first attack "definitively linked" to the Russian-Ukraine conflict came on March 1, a day after Russian ground forced occupied Crimea.) 

So, while Giles might be correct in suggesting Putin learned that subtle cyber attacks could be more effective than brute force (DDoS) attacks in an information warfare campaign, Ranum understands that cyber attacks only get states so far. "Sure, there may be hacking taking place, but who cares," added Ranum. "When you've got loads of guys with guns running around, military ships blockading missile boats in their ports, etc, the computer-based activity is going to have to have some amazingly powerful leverage (almost inconceivably powerful) to be able to affect the end situation in the slightest little bit."

In other words, as with traditional intelligence-gathering and information warfare, conflicts aren't going to be resolved on computer networks via full-scale hacks. Even if it becomes a full-scale shooting war, the Russia-Ukraine resolution will ultimately be diplomatic. Of course, hacked intelligence and cyber-based false information will factor into diplomacy, but it won't be the whole story. In that respect, not much has changed since Sun Tzu's time. Information warfare, and its branch of cyber attacks, is but one aspect of a conflict or war. Sun Tzu knew it, and Putin knows it. It's one tool in a much bigger foreign affairs arsenal. 

http://motherboard.vice.com/read/why-russia-wont-launch-a-full-scale-cyberattack-in-ukraine

** Gen. Keith Alexander: We Will Miss You

By Michael Chertoff

Saturday, March 15, 2014 at 6:45 PM

Throughout American history occasional strategic thinkers have transformed the way we think about new domains of warfare and security. Alfred Thayer Mahan conceived of the geostrategic role of sea power in a way that deeply influenced ideas about the role and importance of naval capabilities. General Billy Mitchell predicted the revolutionary effects of air power on 20th century warfare.

As he steps down from office, General Keith Alexander is chiefly known in public as the man unfortunate enough to have headed NSA in era of Edward Snowden. But years from now, students of cyber warfare and cyber security will look upon Gen. Alexander, who has also served as the first head of Cyber Command, as a figure whose influence in the domain of cyberspace was similar to those named above.

Gen. Alexander became head of NSA in 2005. The moment was pivotal for American security strategy. The nation was embroiled in conflicts in Afghanistan and Iraq. The threat of terrorist attacks against the US were high—indeed, the next year we foiled a plot to explode multiple airliners flying from the UK to North America. But less obviously, there was increased threat in cyber attacks, including the theft of intellectual property. Responsibility for deploying our signals intelligence and for fashioning a response to cyber threats fell onto Gen. Alexander’s plate.

When the story of the war against terror is written with historical perspective, the role of NSA under Gen. Alexander will figure prominently. But at the same time, he focused on the more complex but equally fraught question of protecting our cyber-based infrastructure.

When I was a relatively new Secretary of Homeland Security, General Alexander and the then-Director of National Intelligence, Admiral Michael McConnell, invited me to NSA to get tutored in the new domain of cyber security. What emerged was the recognition that in an increasingly networked world, in which industrial control systems and physical infrastructure are linked to the internet, a cyber-based attack could have physical and economic effects on our society every bit as devastating as the effects of the attacks of 9/11.

As I worked with General Alexander over the next several years I increased my admiration for his calm but forceful advocacy of the strategic importance of cyber as a security domain. He was a critical figure in fashioning and advocating for the Comprehensive National Cyber Security Initiative, designed to take a comprehensive approach to securing our networks. That initiative was ultimately adopted by both President Bush and President Obama. As important, he was a tireless advocate for cyber command as a military establishment that could defend our country in cyberspace, as on land, sea and air. That institution was inaugurated under President Obama and Secretary Bob Gates.

I’ve worked with General Alexander since I left office, to the close of his unprecedented nine-year tenure as head of NSA. He has not only stood up Cyber Command and directed NSA, but he has tirelessly advocated for the private sector to assume its responsibility for protecting the infrastructure that connects to the internet.

In no small measure, he has been critical in keeping this country safe.

General Alexander will soon leave, and he will leave a profound legacy. While dealing with Edward Snowden’s perfidious acts has undoubtedly occupied much of the last few months of his term, in the long view, his contribution is much more significant. He has articulated and implemented a road map for addressing what is likely to be the strategic challenge of the next several decades: How we protect our increasingly networked world in a way that preserves our freedom and way of life.

Michael Chertoff has served as Secretary of Homeland Security, as a Judge on the U.S. Court of Appeals for the Third Circuit, and as Assistant Attorney General for the Criminal Division. He is Chairman and Co-Founder of the Chertoff Group.

http://www.lawfareblog.com/2014/03/gen-keith-alexander-we-will-miss-you/

Despite NSA’s Denials, Greenwald Says NSA Does Use Fake Facebook Page to Infect Foreign Computers With Malware

March 15, 2014

Compare the NSA’s Facebook Malware Denial to its Own Secret Documents

Glenn Greenwald

The Intercept

March 15, 2014

A top-secret NSA presentation reveals how the agency used Facebook to hack into targeted computers for surveillance.

On Wednesday, Glenn Greenwald and I revealed new details about the National Security Agency’s efforts to radically expand its ability to hack into computers and networks across the world. The story has received a lot of attention, and one detail in particular has sparked controversy: specifically, that the NSA secretly pretended to be a fake Facebook server in order to covertly infect targets withmalware “implants” used for surveillance.

This revelation apparently infuriated Facebook founder Mark Zuckerberg so much that he got on the phone to President Barack Obama to complain about it. “I’ve been so confused and frustrated by the repeated reports of the behavior of the US government,” Zuckerberg wrote in a blog post Thursday. “When our engineers work tirelessly to improve security, we imagine we’re protecting you against criminals, not our own government.”

That wasn’t all. Wired ran a piece saying that the NSA’s widespread use of its malware tools “acts as implicit permission to others, both nation-state and criminal.” Slate noted that the NSA’s hacking platform appears to be “becoming a bit more like the un-targeted dragnets everyone has been so upset about.” Meanwhile, Ars Technica wrote that the surveillance technology we exposed “poses a risk to the entire Internet.”

The Army Force Cuts: 3 Truths, 4 Fallacies

By SYDNEY J. FREEDBERG JR. on February 24, 2014

WASHINGTON: There are three things you need to know about the administration’s new budget plan and what it means for the Army. Most importantly, the fact the Army will be its smallest since before World War II is not one of them.

In the dystopian mirror universe that is Washington under sequestration, being cut by 40,000 to 50,000 soldiers is actually a win for the Army. Everyone I’ve talked to inside and outside of the Army knew the service would go below 490,000 regular active-duty troops, the previous plan. The only question was how low. Sec. Hagel’s Strategic Choices and Management Review studied a 380,000-soldier option and many sources speculated about 420,000, while Army Chief of Staff Ray Odierno entrenched himself at the 450,000 line. Hagel’s plan to reduce the Army to “440,000 to 450,000″ looks pretty good for Gen. Odierno…

….but those numbers aren’t real. They won’t even be voted on in Congress this year. That’s because the Army will only get down from its wartime peak to 490,000 — again, the previously planned level — by the end of fiscal year 2015. Further reductions, to whatever level, would have to come in future budgets. And those notoriously hazy “out years” are even more unreal than usual, because Hagel’s 440,000-450,000 figure presumes that Congress will somehow toss the automatic budget cuts called sequestration, which December’s budget deal merely delayed. If sequestration’s 10-year, half-trillion cut to defense spending stays in place, Hagel acknowledged, the Army would have to come down further, to 420,000….

… and that means this war is far from over. “The cuts usually come in threes,” Maj. Gen. Bill Hix of the Training and Doctrine Command (TRADOC) said this morning. What he didn’t say out loud is that going down to 490,000 was the first slice; down to 440-450,000 is second; 420,000 or lower would be the third.

(Hagel also said he’d bring the Army National Guard down by about 20,000 soldiers —less than 40,000 the active-duty leadership had wanted but more than the 5,000 Guard leaders proposed — let alone the zero demanded by the powerful National Guard Association of the US).

Hix was speaking on a Brookings Institution panel on the tri-service concept of “strategic landpower,” a case for future relevance in which the Army has much more at stake than its partners, the enthusiastic Special Operations Command and the ambivalent Marine Corps. It’s telling that the panel’s moderator, Michael O’Hanlon, spoke almost in passing about how we need more data on the Army National Guard’s contributions relative to the active duty force’s in Afghanistan and Iraq, “not so much for the current round of cuts, but maybe for the next round, or the round thereafter if there is such a thing.” It’s telling that such a savvy scholar assumes there’ll be at least one more slice off the Army’s apple.

Cover: Improving the U.S. Military's Understanding of Unstable Environments Vulnerable to Violent Extremist GroupsRead Online Improving the U.S. Military's Understanding of Unstable Environments Vulnerable to Violent Extremist Groups

by David E. Thaler, Ryan Andrew Brown, Gabriella C. Gonzalez, Blake W. Mobley, Parisa Roshan

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Research Questions 

• Which social science approaches can be used to aid understanding of environments in which violent extremist groups exist? 
• How can analysts use social science to understand these environments and assess the susceptibility of states to violent extremist groups? 

Abstract

Over the previous decade, operations associated with irregular warfare have placed large demands on U.S. ground forces and have led to development of new Army and Joint doctrine. This report helps analysts identify and assess key factors that create and perpetuate environments susceptible to insurgency, terrorism, and other extremist violence and instability to inform military decisions on allocation of analytic and security assistance resources. The report focuses in particular on sources of understanding about these environments from the fields of sociology and cultural anthropology. RAND researchers surveyed existing sociological and anthropological theories and schools of thought and identified 12 key factors that give rise to and sustain unstable environments. The research found a relatively high degree of consensus among experts regarding the salience of these factors. The factors are interrelated and mutually dependent in complex ways. The report proposes a series of qualitative and quantitative metrics for each of the 12 factors and uses them in an analytic construct for assessing countries and regions based on their susceptibility to unstable environments.