EXECUTIVE INTELLIGENCE SUMMARY – 02 December 16 🔒
[wcm_nonmember]In this EXSUM… (2956 words)
- SFMTA hit with ransomware
- Russia & China SITREPs
- Congress to prioritize increases in military readiness
- McCarthy: Expect Congress to be busy next year
- 2017: The year of big organized protests?
- Financial and economic mixed signals
- And more…
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Bottom Line Up Front: This week, sources reported to news outlets that the White House warned Donald Trump that North Korea was the most pressing national security matter. In the past 10 years, North Korea has tested five nuclear weapons with mixed success, four of those coming under Obama’s tenure as president. A sixth test can be expected in the near future. One of the risks is that, should the Kim regime launch a nuclear missile at South Korea, Japan, or the American West Coast, the US intelligence community may have trouble distinguishing between the launch of a rocket carrying a satellite and one carrying a nuclear warhead. Not willing to bear the risk, the US military could shoot down the rocket, which could cause a series of reprisals by North Korea. That’s how a war starts.
US allies and “global NATO” members Japan and South Korea continue to be very concerned about a sixth nuclear weapon test because they would be the likely targets of a nuclear attack. Last week I reported that the two nations, along with the US, signed an intelligence-sharing agreement to compare notes about North Korea’s intent and capabilities. That would certainly include any early warning indicators of an attack.
In addition to sharing intelligence, South Korea also sped up the process of deploying the Terminal High-Altitude Area Defense (THAAD) missile defense system, a US missile system. Japan is also considering the purchase of a THAAD missile defense system, and is likely in their best interest, even if China protests. Open source reporting on North Korea is feast and famine because so little news comes out on a regular basis, however, I’ll be watching how a Trump administration, anchored by former generals Flynn and Mattis, deals with North Korea. Right now, it appears to be the most likely military conflict under a Trump administration, and probably the most dangerous, too. Additionally, a failure of the Iran deal will probably make a conflict with Iran more likely, perhaps more likely than with North Korea, especially since General Mattis has been an Iran-hardliner since at least the 1983 Beirut barracks bombings.
Priority Intelligence Requirements:
PIR1: What are the current indicators of systems disruption that could lead to a SHTF event?
PIR2: What are the current indicators of an outbreak of global conflict?
PIR3: What are the current indicators of military, government, political, or social-related instability or violence that leads to widespread domestic conflict?
PIR4: What are the current indicators of economic, financial, or monetary instability that leads to civil unrest?
PIR1: What are the current indicators of systems disruption that could lead to a SHTF event?
San Francisco Metro Transit Authority hit hard with ransomware
News broke over the weekend that the San Francisco Metro Transit Authority had come under a ransomware attack when metro riders saw payment kiosks that read, “You Hacked. ALL Data Encrypted,” and contained an email address to contact (pictured below). Ransomware has made numerous appearances in the EXSUM because not only has it been so effective at making money, but also because it’s struck some higher profile targets (like hospitals and schools, even). If this case is similar to previous cases involving the same ransomware, the cost could be over $73,000 (or roughly 100 bitcoins). Earlier this year, the Herjavec Group reported that the annual cost of ransomware, which encrypts computers until a ransom is paid, could approach a billion dollars in the US. This is the highest profile US target in recent memory.
PIR2: What are the current indicators of an outbreak of global conflict?
The prospects of global conflict continue to revolve around the usual players: Russia, China, and the Middle East. The ways in which global conflict could cause or contribute to a SHTF scenario in America are myriad and they largely depend on which conflict is initiated. We’re certainly at risk of cyber attack in the event of conflict in any of the three regions. Systems disruption, like the price and availability of fuel, is also a top concern that could cause a SHTF event.
NATO-Russia Situation Report (SITREP)
For months, I’ve been talking about the most significant trend in Europe, with regard to this SITREP: arms acquisition and the deployment of strategic military assets to deal with Russia. With the rate that NATO nations are arming themselves, you’d think a war was around the corner. But the Great European Arms Race of 2016, I believe, is due to:
(1) NATO’s catching up to a Russia that’s been planning this moment in history for more than a decade;
(2) NATO’s realized that the United States can’t, and maybe won’t, be the sole defender of Europe; and
(3) NATO’s trying to prove to Moscow that Europe, even the smallest nations, won’t be an easy target for Russian incursions.
For the record, I do believe that Putin has aspirations outside the current Russian border, as we’ve seen with South Ossetia and Abkhazia in 2008 and Crimea in 2014. But before that, Putin has to drive a wedge through NATO members states, starting with the strategically vital Turkey. I’m interested to see how Putin uses a Trump administration to achieve those goals, and how Donald Trump treats NATO as he surrounds himself with cabinet members like retired, pro-NATO Marine General James Mattis.
This week, the US approved a plan to sell the military’s most advanced air-launched cruise missile to Poland, a US ally and Russian adversary. If the deal goes through, the Polish Air Force should receive 70 of the Joint Air-to-Surface Standoff Missiles, which have a range of 500 nautical miles and were built to penetrate “next generation” air defenses, like those employed by Russia. This sale is directly related to a potential conflict with Russia, and continues the trend of NATO and other European allies acquiring more advanced weaponry. According to a statement released by manufacturer Lockheed Martin, “Poland will use the enhanced capability as a deterrent to regional threats and to strengthen its homeland defense. These weapon and capabilities upgrades will allow Poland to strengthen its air-to-ground strike capabilities and increase its contribution to future NATO operations.” NATO member Finland (to combat Russia) and “global NATO” member Australia (to combat China) are also due to receive the missile variants.
Meanwhile, US Marines are involved in a joint US-Finland training exercise in the Finnish tundra, as 300 Marines will be rotated into Finland for a year starting in January 2017. (Here’s a pretty good video of that military exercise.)
Moving on to Russia, Vladimir Putin said this week that, “During my recent telephone conversation with Mr. Donald Trump, our opinions coincided that the current, unsatisfactory state of Russia-US relations, undoubtedly must be straightened out. As I already have said, our country is prepared to go down our part of that road.” Whether or not US-Russia relations will actually improve is debatable, especially as Putin still determined to destroy NATO and manipulate European elections, and his national goals conflict with the US commitment to Europe. Trump recently named retired Marine General James Mattis as Defense Secretary, who could influence Trump to take a harder line against Russia. World War III, pitting the US against Russia, doesn’t seem quite as likely under a Trump administration, but I don’t think we’re out of the woods yet.
South China Sea SITREP
At a US naval conference in February, a US admiral first proposed sending US Coast Guard (USCG) ships to the East and South China Sea region to help maintain freedom of navigation. This week, the head of the Coast Guard again floated that idea that under this new role, USCG naval forces could aid US-aligned (global NATO) countries like Vietnam with maintaining peace in the region. With a Trump administration that’s expected to be more assertive with China than has the Obama administration, I expect that even a very limited USCG presence to train maritime law enforcement will ruffle Chinese feathers.
** Congress to prioritize increases in military readiness
Congress has agreed to a 2017 plan to cut the defense budget for weapons acquisition, and transfer those funds to increase the size of the military and improve all-around readiness. The US military continues to be plagued by readiness problems, highlighted by the US Army’s 30% combat readiness among its brigade combat teams (BCT; only 11 of 32 active BCTs are “combat ready,” meaning at least 90% combat strength). Last year, Army Chief of Staff General Ray Odierno (for whom I wrote a daily EXSUM in Iraq, 2008-2009) said that the Army should ideally be at 70% readiness. Trump isn’t in office yet and Congress is already setting up the next several years of deficit spending to beef up the military. Cuts to military end strength typically take at least three years to rebuild, but it will send an intended message to Russia, China, and other nations. The bill, if passed and signed into law, will pave the way to grow the Army to 476,000; the Marine Corps to 185,000; Air Force to 321,000; and Navy to 323,900.
US Army facing operational capability gaps in EMS dominance
In a panel last week, a US Army Strategic Command general officer warned that the Army is facing challenges in electromagnetic spectrum (EMS) battle management, modeling and simulation, and training. Referring to a scenario for a future conflict against a near-peer adversary like Russia or China, Brig. Gen. Sauley said, “Too often, our simulations of the electromagnetic operational environment are crude approximations of what we think would happen… Worst-case scenario, this could lead us to both overestimate our abilities and underestimate our vulnerabilities.”
BG Sauley was also critical about how the Army trains and tests electronic warfare (EW) units, saying that exercises intended to test EW capabilities in simulated battle too often don’t test well enough. “When was the last time we failed in a training scenario because one, we gave the red forces [Army units playing the role of adversary in these exercises] the equipment needed to replicate a high-end comprehensive threat, and then two, we removed the training handcuffs off them and allowed them to not only contest the blue forces across the spectrum but for the entire vulnerability period? We don’t fail enough in some of our training events to learn from our mistakes and to learn what capability gaps we truly have.”
This is problematic from a warfighting perspective because control over the EMS against a high-tech adversary like Russia or China is vital to winning a conflict. If the US military doesn’t control the EMS, then it loses its advantages in command, control, communications, computers, and intelligence, a group of critical systems referred to as C4I. Since at least last year, the Joint Chiefs of Staff have been warning that a future conflict is going to be more costly in terms of money and the lives of US service members. Training to fight irregular foes like the Taliban and al-Qaeda for the past 15 years have caused the military’s conventional skills to atrophy. The idea of having to fight a near-peer adversary like Russia or China likely keeps some general officers up at night.
PIR3: What are the current indicators of military, government, political, or social-related instability or violence that leads to widespread domestic conflict?
McCarthy: Expect Congress to be busy next year
Starting on 03 January 2017, we should expect Congress to get busy reversing laws and regulations imposed by the Obama administration, which could have negative effects on domestic social and political stability. In a statement released this week, House Majority Leader Kevin McCarthy said, “I have scheduled the House to be in session for more days and for longer weeks, especially during President-elect Trump’s first 100 days in office.” Specifically, McCarthy said he’s “increased the average number of days we will be in session by the equivalent of more than three legislative weeks – particularly during the first part of the year.”
‘Disruption Tuesday’ brings nationwide protests
Fast-food workers and other low-wage earners organized ‘Disruption Tuesday’ (29 November) in which activists in an alleged 340 cities walked away from their jobs to protest low minimum wages. The “Fight for $15” organization is pushing for $15 minimum wage laws across the country, however, Disruption Tuesday seemed to be limited mainly to large urban areas like Chicago, Los Angeles, Boston, and New York City. Hundreds of protestors across the nation were arrested during the protests.
Veterans head to Standing Rock protests
A group of US military veterans began arriving at Standing Rock Indian Reservation to join protestors against the Dakota Access Pipeline. Veterans for Standing Rock, an organization of some 2,000 veterans, is expected to join the protests this weekend. For the past few months, protestors and law enforcement officials have engaged in sometimes violent skirmishes, and the veterans hope to act as ‘human shields’ to discourage riot and protest countermeasures like flashbangs and tear gas being deployed. Despite a recent evacuation order, the protestors say they’re “not going anywhere.” So far, the North Dakota Emergency Commission has approved $17 million in funds to cover the costs of law enforcement in the area.
** 2017: The year of big organized protests?
“There are millions of Americans just waiting to be put to work. And there’s a hell of a lot of work to be done.” Thus begins an opinion piece in progressive journal, The Nation. The article describes how the Bernie Sanders campaign utilized “distributed organizing” as an alternative to the staff posts and line-and-block charts that apparently riddle most leftists organizations today. While putting a myriad of volunteers into positions of power, hence the distributed nature, the authors write, “What we learned over the course of the primary was that people are just waiting to be asked to do something big to win something big.” They continue to a place that I think will probably describe 2017:
Now that Trump is headed for the White House, there are millions of people looking for somewhere to channel their energies. They are ready to fight back as members of a determined opposition, and to help build up a new alternative to the failed neoliberal consensus that paved the way to Clinton’s defeat.”
Although widespread protests and political resistance to Trump’s policies will foment some instability, my main concern remains leftist political violence worse than what we saw during the campaign and directly after the election. I absolutely believe that the revolutionary elements of Marxist and communist groups could conduct low-level terror attacks.
PIR4: What are the current indicators of economic, financial, or monetary instability that leads to civil unrest?
Financial and economic mixed signals
For the past few weeks, I’ve been looking at the “Trump bump,” which includes optimism about the economy and a stock market hitting new highs. As soon as Trump announced his plans to increase government spending, invest a trillion dollars into rebuilding US infrastructure, and cut regulation and taxes, a sense of economic euphoria took over. It’s as if the underlying negative fundamentals never existed, nor do they continue to exist… but they do. The real test of the Trump bump is what happens during the market’s next correction and subsequent fall out.
The European banking crisis is still on the horizon after the Royal Bank of Scotland and Barclays failed financial stress tests, both entering a “soft fail” after simulated rounds of a UK housing market collapse, and then a Chinese recession. Now saddled with $28 trillion in total debt, China is teetering in recession territory, and the Bank of England is warning that HSBC and Standard Chartered are most at risk to fail should China default on its debts. Both a Chinese recession and European banking crisis, regardless of which happens first, could start the next leg of the global financial crisis.
There’s quite a bit of optimism on the financial and economic pages I read, but I still question how long it’s going to last. The reality is that we’re still in pretty rough shape. Later this month, we’re publishing a report on the state of US debt and the likely outcomes (should be out on Monday, 12 December). Much of that report is based on a series of reports from the Congressional Budget Office, which describe some upcoming financial risks. In short, the US national debt will reduce the government’s ability to save money due to increased interest costs (which will further eat into the national budget), reduce government’s ability to respond to emergencies and natural disasters, and makes a financial crisis much more likely. Unless very drastic, and quite impossible, measures are taken to reduce government spending, I still believe that the Federal Reserve will print money to meet the increased budget demands, which carries with it a host of domestic problems.
So the reality is that a Trump administration may delay financial reckoning at the risk of making it worse. The past 16 years under Bush and Obama have utterly destroyed the prospect of a peaceful and prosperous future for America, at least for the foreseeable future. My concern remains, in the long-term, that government’s inability to finance its massive commitments, both foreign and domestic, will lead to a financial crisis, and it’s likely to be the worst we’ve ever seen.
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