8 JUL 16 – Executive Intelligence Summary 🔒 – Forward Observer Shop

8 JUL 16 – Executive Intelligence Summary 🔒


[wcm_nonmember] In this EXSUM…

  • The potential for a wide scale cyber attack
  • Russian spy ship off the coast of Hawaii
  • Influential Chinese paper advises to prepare for confrontation with US
  • Dallas and the cultural insurgency
  • Update of the chances of a recession this year
  • And more…


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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? (Russia, China, Middle East)

PIR3: What are the current indicators of political-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?

PIR5: What are the current indicators of Islamic terrorism or the expansion of the Caliphate?


PIR1: What are the current indicators of systems disruption that could lead to a SHTF event?

The continuing cyber risk:

Computer network attack and exploitation remains the highest-risk for systems disruption.  We can gauge that risk through assessing vulnerability, likelihood, and impact.  US networks are very vulnerable, in part because security is a team-effort.  No one individual can prevent unauthorized access, and there are hundreds of thousands of employees with access to government and corporate computer networks who neither understand the threat nor share the security culture.  Unauthorized access could initiate while opening an email attachment containing a virus, inserting a USB drive from a previously-infected computer that auto-executes into the new network, or hackers gain access by exploiting bugs in software.  Each is a valid vector, of which many employees outside of cybersecurity are unaware.

That adds to an increasing likelihood of a large-scale cyber attack, especially when we consider the broad range of state-sponsored, criminal, and terrorist-affiliated cyber groups capable of launching an attack.  The impact of an attack depends on the target and its effects.  For most attacks, impact will be limited to local networks or perhaps to a regional scale.  But there are several areas that we know can be exploited to cause a severe impact: namely, the power grid.

Many cybersecurity experts say that a large-scale cyber attack against the US is not a matter of if, but of when.  The main reason is that the cybersecurity and computer network defense effort continues to be the “lowest core competency” across local, state, and federal government agencies.  Four years after recommendations following the first national cyber defense exercise, there’s still widespread confusion in government about the chain of command during a cyber attack.  In an effort to solidify the National Cyber Incident Response Plan, Congress passed a law in 2014 requiring the Obama administration to finalize that plan.  To date, it has not been finalized.

BOTTOM LINE: We should not have the expectation that the US Government or military will be able to defend against a sustained cyber attack effort from a determined adversary.  While we can’t predict what will be targeted, or when it will be targeted, Forward Observer assesses that power outages, loss of water services, and disruptions to the transportation of goods, services, and people are all potential outcomes of attacks on infrastructure targets.  Furthermore, if US military operations threaten the national sovereignty of either China or Russia, then we would be at an increased likelihood of a large-scale cyber attack.  (Additional developments on that likelihood can be found in the U.S./China section of PIR2.)




PIR2: What are the current indicators of an outbreak of global conflict? (Russia, China, Middle East)

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 prices and availability of fuel, is also a top concern that could cause a SHTF event.



Quote of the Month:  “When I was a young lieutenant in [Cold War] Germany, we had 300,000 troops and the mission was to deter Russia and reassure the allies.  Now I have 30,000 troops and the mission is to deter Russia and reassure the allies.” – Lt. Gen. Ben Hodges, commander of US Army Europe

After firing the commander of the Baltic Fleet for falsifying readiness reports, the Russian Defense Minister announced this week the transfer of new ships and weapons to shore up naval vulnerability in the region.  As a recap, this NATO/Russia conflict centers around the Baltic States of Estonia, Latvia, and Lithuania.  NATO forces are highly concerned because of Russia’s ability to quickly invade the Baltics, where there are substantial population of ethnic Russians.  It’s been estimated that Russia could be sitting in the capital cities of Estonia and Lativa in 60 hours.

We’ve seen the usual back and forth this week of US and Russian defense officials making accusations and counter-accusations about the purpose of the military build up in the region.  Both NATO and Russian military forces continue to hold drills and exercises to work out any operational or logistical issues in the event of hostilities.  Conditions are still stable and we have no reason to believe that conflict is imminent.

Secretary of State John Kerry reaffirmed US military support to both Ukraine and Georgia.  During the newly-opened NATO Summit in Warsaw, Poland, we expect for Georgia to stay on track to join NATO.  That’s problematic for US/NATO-Russian relations, and it’s going to be further soured if and when Montenegro also joins NATO.  A chief complaint of Russian president Vladimir Putin is the expansion of NATO.  Adding additional nations has its pros and cons.  NATO will, in theory, ensure the defense of smaller nations like Georgia and Montenegro against Russian influence or invasion, but it does come at the risk of increasing tensions with Russia.  Those tensions are going to further escalate Putin’s case that Russia is being encircled by NATO, and could quite possibly lead to war.

Finally, the US Navy confirmed the presence of a Russian general intelligence spy ship off the coast of Hawaii, no doubt observing the RIMPAC naval exercise.  This was a common occurrence during the Cold War, so the presence of this ship likely means that Russia will increase its signals intelligence collection in the Hawaii/Guam region, and possibly further along the Pacific coast.



On Tuesday, 12 July, the UN is widely expected to rule against China, in favor of the Philippines over territorial disputes in the South China Sea.  At the heart of the matter are China’s artificial islands, now military outposts in the Spratly Islands and Scarborough Shoals.  China has never bought into the concept of the UN’s ability to arbitrate China’s territorial boundaries.  And you may remember that Japan, a long time Chinese adversary, heads that ruling body of the UN, which has been all the more reason for China to reject any UN ruling over its territory.  China remains consistently defiant ahead of next Tuesday, which begs the question: if China ignores the UN, whose responsibility is it to enforce the ruling?

It’s a great question and it underscores the UN fiat — the ruling is essentially unenforceable by anyone other than the US, at least militarily.  No other nation has the power to push China off its islands, and even that’s a matter up for debate.  I’d be very surprised if Obama was willing to pursue a military option in order to resolve this conflict.  What we’re seeing here is the equivalent of the 16 UN resolutions against Saddam Hussein, which resulted in absolutely no action until the US began its bombing campaign.

The US and its Asian partners can’t trust China to maintain the freedom of navigation necessary in the region to sustain the $5.3 trillion of international trade that transits through the area.  The US presence there ensures that China doesn’t bully neighboring nations, while China considers the US presence a threat to national sovereignty.

Meanwhile, an influential Chinese paper which often reflects the feelings of the Communist Party published an editorial calling for China to prepare for a ‘military confrontation’ over the US presence there.  The editorial included, in part, the following messages:

The US will probably project more military power to the West Pacific in a bid to press China militarily and politically.

China should speed up building its military capabilities of strategic deterrence. Even though China cannot keep up with the US militarily in the short-term, it should be able to let the US pay a cost it cannot stand if it intervenes in the South China Sea dispute by force.

Given that war is not a favorable outcome for the US or China, we should probably expect a continuation of the status quo for now: China keeps its islands and continues to build up a military presence there, while diplomatic avenues are pursued by the US and the rest of the Southeast Asian countries.  This is a national security priority for China, which wants to protect its access to commercial fishing and trade routes in the region… But more than that, they want to ensure that the US doesn’t gain an unchallenged strategic advantage.  As long as China doesn’t interfere with international trade routes, we can likely expect them to continue their military build up in the area.

But in the off-chance that conflict were to occur, there are some significant factors to consider.  For one, gauging the outcome of this conflict is difficult because we don’t know how seriously the Obama administration will pursue this policy to war.  The outcome is also difficult to assess because the US objectives of the conflict are unknown: would the US seek to clear Chinese military presence from the Spratly Islands and Scarborough Shoals area, and how far would the Chinese navy be pursued into the South China Sea?  With moderate confidence, however, I believe that the US Navy could clear China’s artificial islands in a war that the US is determined to win.  With high confidence, we should expect China to retaliate in a way that causes a severe amount of political, economic and military pain, as a matter of Chinese national honor.  That most likely means cyber attacks against the US.  Because of the asymmetric capabilities of the Chinese military, US intervention assuredly comes at a steep price.


North Korea

This week, Congress enacted sanctions against North Korean leader Kim Jong-Un and other top officials, freezing financial accounts in the purview of the US Treasury.  The Foreign Ministry reacted with a statement claiming that the US had declared war on North Korea.  US Secretary of State said the sanctions on individuals were for human rights abuses.

In other news, North Korean leaders were also upset over plans to deploy a US Terminal High Altitude Area Defense (THAAD) system in South Korea.  North Korean missile range is likely far enough to hit cities on the West Coast.  The THAAD missile system, which is the next generation from the Patriot missile system, is a solid improvement and should be able to protect the US from any possible missle-launched nuclear or EMP attack against the US.  Both China and Russia objected to the plans.


PIR3: What are the current indicators of military, government, political, or social-related instability or violence that leads to widespread domestic conflict?

Dallas & the Cultural Insurgency

We stayed up last night following developments in the Dallas killing and wounding of 11 police officers.  It’s a tragic situation, but before the suspect(s) were identified, there were already calls for additional violence, especially on social media.  Race relations is a touchy subject, but I’m going to call it as I see it.  The number of Twitter accounts calling for more violence against police was astounding; most of those accounts belong to black Americans consumed in the inner city, street culture.  Tweets celebrating the deaths of the Dallas police officers stretched from coast to coast.  That leads me to believe that ongoing sentiment is certain to result in additional attacks on law enforcement.  Like any kind of terrorism, we’ve not seen the last of it.

Alex Jones of Infowars, among others, declared it as the start of a US race war, as the New York Post front page announced ‘Civil War’.  Nearly every time a police officer is murdered, we hear of the ‘war on police’.  After Dallas, I think it’s safe to say that we’ve entered ‘war on police’ territory, especially if it encourages more attacks.  And even as we see more attacks, we’ve been looking at an insurgency all along.

Last year, I wrote about the current “cultural insurgency”, which is not new.  The violent riots of the late 60s that grew out of the Civil Rights Movement have morphed into a 21st century model, fueled by “economic inequality” and shootings of black teenagers, and enabled by cell phones and social media.  Riots in Ferguson, Baltimore, Anaheim, Oakland, New York, and other cases of civil unrest occur when participants feel that their voices aren’t heard.  Certainly there are opportunists, but this type of sociopolitical violence typically occurs as a last resort.

Regardless of how we feel about law enforcement or inner city riots, there’s a critical gap between civil society and the riot society that’s not being bridged.  The riot society has been unable to achieve their objectives, which is the arrest and conviction of police officers involved in shootings.  If the government is unable to solve their issues — either legitimate or illegitimate issues — then their last alternative is violence.  We’re moving in that same direction within the Constitutionalist/Liberty movement as government is continually unable to right its wrongs.

Let’s investigate some requirements for an armed insurgent movement.  When we’re identifying precursors to an insurgency or political violence, we’re looking for three things:

  • Shared ethnic, religious, cultural, or ideological persecution
  • Popular support for the  cause
  • Perceived or actual poor governance (i.e., inability to solve problems)

Once one or more of those requirements are met, we should begin looking for active organization.  Black Lives Matter and the other various pro-black causes are certainly the beginning of that organization.  This is what we’d call a politicized social base.  The next step in determining whether or not an insurgency will come to fruition is identifying whether or not a politicized social base is preparing for violent opposition.

To varying degrees, we’ve hit all but one of those check marks.  The remaining indicator is active preparation for violent opposition.  I think there’s enough evidence right now to say that we’re in a very limited conflict, and it’s likely to escalate with additional high-profile events, and as problems go unsolved and needs unmet.

Going into the future, the more political power (i.e., power “within the system”) this politicized social base wields, the less reason they have to resort to violence.  The more respected leaders call for calm and civility, the less potential there is for more violence.  As far as indicators go, we’re looking for a decrease in perceived power or authority; i.e., a decrease in political and community power and influence, and representation in society.  As Obama prepares to leave office and is replaced with a white man or woman who is not perceived as willing to solve their problems, then we could move further into the low-intensity insurgency territory.  We certainly expect Obama to become more directly involved once he leaves office.   It’s a situation that we’ll continue to monitor.


PIR4: What are the current indicators of economic, financial, or monetary instability that leads to civil unrest?

Goldman Sachs cutting jobs, costs

After cutting about 10% of its trading staff this spring, Goldman Sachs asked employees this week to cut back on costs, including travel costs.  Shedding some light on these two events, in an interview earlier this year, Goldman Sachs Chief Financial Officer stated: “I would just say we’re shareholders and we’re doing things that you would expect shareholders to do.”  That likely means focusing on profitability ahead of turbulent times in the market.  Analysts at the firm say that the US stock market could see a five to ten percent drop this year, but should end the year flat.


Analysts on chance of recession

Adding to the increasing number of analysts warning of a future recession, Deutsche Bank weighed in this week saying that the chance of recession in the next 12 months is sixty percent.  Previously analysts and Citibank and JP Morgan both warned of a significant likelihood of a recession.  Famed investor and billionaire Jim Rogers previously warned of a 100% chance of recession in the next year.


PIR5: What are the current indicators of Islamic terrorism or the expansion of the Caliphate?

Following the terrorist attack in Istanbul, Turkey, CIA Director Brennan warned that similar large scale attacks could happen in the US and Europe.


RIMPAC: Rim of the Pacific Exercise

NATO: North Atlantic Treaty Organization

THAAD: Terminal High Altitude Area Defense


Mike Shelby is a former military intelligence NCO and contract intelligence analyst. He spent three years in Iraq and Afghanistan and is now the intelligence and warfare researcher at Forward Observer.

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