28 JUL 17 – Executive Intelligence Summary – Forward Observer Shop

28 JUL 17 – Executive Intelligence Summary


[wcm_nonmember]In this EXSUM… (4157 words)

  • Hacking threat and warning issued for U.S. nuclear plants
  • Russia, China, Koreas, and Middle East SITREP
  • Defense in Brief
  • Left-wing militia group training for war with conservatives, Trump supporters
  • DHS study on coming AI revolution forecasts major unemployment
  • Is the Federal Reserve set to adopt the wrong policy?
  • And more…


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Bottom Line Up Front:

Priority Intelligence Requirements:

PIR1: What are the current indicators of systems disruption or instability that could lead to civil unrest or violence.

PIR2: What are the current indicators of an outbreak of global conflict?

PIR3: What are the current indicators of organized political violence?

PIR4: What are the current indicators of economic, financial, or monetary instability?

PIR1: What are the current indicators of systems disruption that could lead to instability, civil unrest, or violence?

Hacking threat and warning issued for U.S. nuclear plants

U.S. nuclear plants and other energy producers were put on high alert after cyber security analysts discovered that hackers were attempting to break into computer systems. While officials with the Department of Homeland Security said the hackers appeared to be targeting administrative networks and not operational networks, the department nonetheless issued an urgent amber alert, the second-highest for such threats. Wolf Creek Nuclear Operating Corporation, which operates a plant near Burlington, Kansas, was one of the targets. DHS said the hackers’ origins are not yet known but the department’s report noted it was an “advanced persistent threat” actor. [source]

(Analyst Comment: Advanced Persistent Threats, also referred to as APTs, are typically state-sponsored hacking groups. The Equation Group, which has suspected ties to NSA, has been linked to cyber attacks in Russia, China, and other places.  Russian APTs include FANCY BEAR and COZY BEAR, among others, which have been linked to cyber exploitation in the US.  This report outlines an APT trying to gain access to business and administrative networks at the Kansas plant, not the nuclear operations network itself which is not accessible via the internet.  Still, this sort of snooping likely indicates intelligence preparation of the battlefield by a nation-state adversary like Russia or China; and possibly pre-operational surveillance.  This surveillance phase is likely part of an on-going effort by Russia or China — perhaps Iran or North Korea — to map out US infrastructure, including key personnel.  One of the worst case scenarios would not come from unauthorized cyber access, but one of these nation-states intelligence organizations gaining entry to US critical infrastructure networks via extortion or collusion by an insider.  Manipulating key personnel into aiding a cyber attack poses perhaps a worst case scenario.  The lack of access — so far — for an insider-initiated attack is one reason why the US hasn’t seen a critical cyber attack — but I do believe that one of these will happen.  I wouldn’t classify this indicator as a sign of an imminent threat, however, we should remain aware that nation-states and their APTs are actively conducting surveillance and gathering intelligence against US targets.)

PIR2: What are the current indicators of an outbreak of global conflict?

The prospects of global conflict continue to revolve five geopolitical actors: Russia, China, North Korea, Iran, and the Middle East. In the event of war with any of these nations, consider domestic systems disruption a distinct possibility.


Russia is backing North Korea — here’s why

While Russia today is certainly not an economic powerhouse on the level of the United States — the U.S. possesses the world’s number one economy and Russia isn’t even in the top 10 — it is still better off than it was in the years after the Soviet Union disintegrated.

Putin’s principle goal these days it to make it appear as though Russia is still a great and influential power, which helps explain why Moscow is taking North Korea’s side in the deepening crisis there (see this week’s Korean Peninsula SITREP). [source] That not only helps explain Russia’s involvement in Syria, long a client state (and new host of a 50-year Russian base lease), but also in its effort to lead a global coalition against the United States’ attempts to coerce North Korea into surrendering its nuclear and missile programs. As the Trump administration positions itself for a potential first strike against Pyongyang’s nuclear facilities and conventional forces, Russia is attempting to play international peacemaker; arguing that it’s important to maintain good relations with both Koreas, in the interests of peace — even as North Korea, another one-time client state of the USSR — quickens its development of ICBMs. In May, Putin told a special South Korean envoy, Song Young-Gil, he would be willing to dispatch a Russian delegation to Korea in a bid to mediate a negotiated settlement between Pyongyang and Seoul, as a way to burnish Moscow’s diplomatic cred and status. It’s Putin’s attempt to prove that Russia is a better international power broker than the U.S. You can see that in the state-run media organs who openly mock and resent U.S. attempts to sanction the Kremlin. [source]

(AC: There’s more here than just talk. For instance, when China cut off energy supplies to North Korea recently, Russia stepped into the void, since positioning itself as Pyongyang’s more reliable international ally. Russia has also invested in North Korea’s technology base and infrastructure.  Because of Putin’s desire to burnish his country’s great power status, expect Moscow’s ties to Pyongyang to grow, which will further complicate an already complicated situation on the world’s most heavily armed and defended peninsula.)


South China Sea SITREP:

China has warned Vietnam it will intervene militarily over oil drilling

The Chinese government made it clear to Hanoi that it will resort to military force if need be in an effort to halt Vietnamese commercial oil drilling in Block 136-03 in the South China Sea. One report noted that “China had threatened to attack Vietnamese bases in the Spratly Islands if the drilling did not stop.”

The warning was taken seriously by the Vietnamese government, which ordered a subsidiary of Spain’s Repsol to halt drilling and get out of the area. China earlier similarly threatened the Philippine government with military force over the same thing — oil drilling, and this despite the fact that both regions appear to be within each country’s exclusive economic zone (EEC). This escalation of Chinese military aggressiveness could have implications beyond just the obvious.

Vietnam earlier this year signed an oil exploration contract with ExxonMobil, an American company, to develop the Blue Whale project.  Were China to threaten this company, that would force the Trump administration’s hand to respond. Beyond that, any attack by China on either Vietnam or the Philippines — or any other regional power — would likely cause ASEAN nations to choose sides: Accommodate an aggressive China (which will only lead to more aggression) or seek outside alliances (with India and the U.S., primarily) as a counterbalance.  (AC: SECSTATE Tillerson was CEO of Exxon for 10 years prior to joining the Trump administration.  During Tillerson’s confirmation hearings, and since then, he’s struck a hard line on Chinese expansion in the South China Sea.  Now we see that Exxon was near the end of signing Vietnam’s largest oil exploration contract, and Tillerson’s assertiveness, perhaps aggression, was a signal to China not to interfere in Vietnamese oil projects in the region.)

Either way, China’s threat to use military force against a regional power over oil not only provides insight into the importance Beijing puts on energy security, but also it further heightens tensions in the South China Sea region and makes resolving problems more difficult. [source]

China’s increased assertiveness is drawing additional Western attention, however, including former global naval power Great Britain. The UK’s defense secretary announced this week that London will send a single warship to the South China Sea for the express purpose of conducting “freedom of navigation” voyages. “We hope to send a warship to the region next year. We have not finalized exactly where that deployment will take place but we won’t be constrained by China from sailing through the South China Sea,” said Michael Fallon, in a move that will no doubt rankle China — which wants to see less of a Western presence in the region, not more. Britain flew warplanes through the region last fall.

Bottom line: China is serious about exerting more control — control Beijing believes it rightly has to exert — over the South China Sea and is paying no attention at all to rival claims of economic exclusion or to international court rulings against its outsized territorial claims. This virtually guarantees some sort of standoff or confrontation with Western powers, particularly the U.S., which under Trump’s pledge to build a 355-ship active Navy (even if it means activating and refurbishing moth-balled warships — source) would likely be more of a presence than now.


Korean Peninsula SITREP:

China may be preparing for war in North Korea

Since last year China has been steadily bolstering its defenses along its 880-mile border, as well as reorienting forces close to the border in anticipation of a crisis in the area that could follow a U.S. preemptive military strike against Pyongyang’s conventional and unconventional forces. Not surprisingly, China’s stepped up preparations coincide with President Donald Trump’s repeated, and frequent, warnings that time is running out on the North Korean regime to give up its nuclear weapons and missile programs, or possibly face military consequences, all while keeping up the pressure on Beijing to do more to try to reign in Pyongyang as its primary trading partner and lifeline. [source]

South Korean news agency Chosun reported in April that China had moved close to 150,000 troops to its border region, according to a Google Translate of this source. Specifically, the translation said: “As the United States announced its independent North Korean behavior and moved the United States Navy’s nuclear-powered [USS Carl Vinson] (CVN-70) carrier class to Singapore, the Chinese army has deployed about 150,000 troops in two groups to prepare for unforeseen circumstances,” the report said.  This outlines the prospect of taking “military options”, such as preemptive attacks on North Korea, just as the United States has launched an air raid on Syria.”  China has denied that it has moved thousands of extra troops to its border.

Some of the increased Chinese military activity includes 24-hour surveillance of the lengthy frontier to include the use of drones, as well as bunkers to protect troops from nuclear and chemical weapons. Also, China has been urgently recruiting Korean interpreters and sending them to border areas in anticipation that any U.S. military action would necessitate mass exodus of North Korean refugees into China, something Beijing does not want but is obviously expecting [source].

This comes after China warned North Korea, also in April, via a government news source that Beijing “has a bottom line that it will protect at all costs, that is, the security and stability of northeast China. …If the bottom line is touched, China will employ all means available including the military means to strike back.” That would include China’s own preemptive strike on North Korea’s nuclear facilities. [source]

Experts who have commented on the recent military upgrades, force structure changes and deployment of troops are certain China is gearing up for a crisis in North Korea — including an economic collapse, nuclear contamination, and outright military conflict. And while several analysts continue to believe that a U.S. military strike on North Korea is unlikely, the Chinese are not taking that position, clearly.

China’s biggest worry today is the same as it’s been for decades: That any collapse of North Korea would result in waves of refugees pouring in. But also, Beijing fears that it could also bring American military forces and their South Korean allies close to its border, thus creating a unified, democratic, and anti-China Korea.

One retired Chinese officer, Maj. Gen. Wang Haiyun, a former military attache to Moscow, now with a think tank argued that Beijing ought to “draw a red line” for the U.S. before any preemptive attack without prior Chinese permission. He added that China should also be prepared to send forces across the Yalu River into North Korea to secure nuclear facilities, interdict refugees before they reached the Chinese border, and establish a clear line of demarcation that the U.S. would be told not to cross.

While the U.S. would certainly move to ensure South Korea’s safety, it’s not at all likely that the Pentagon wants to push American and South Korean forces all the way to China’s border, or that the Trump administration would approve that strategy.

(AC: While China’s military may not yet be as fully prepared for a North Korea operation as it hoped to be despite undertaking several reforms in recent years, Chinese leaders would likely attempt to ensure that whatever happens with North Korea the end result is a plus for Beijing’s regional aspirations and does not assist the U.S. or deepen Washington’s influence. Clearly, Chinese leaders are now concerned with more than just dealing with North Korean refugees. Issues that may determine the timeline for future action by the U.S. include how long it takes, diplomatically, for the Trump administration to win approval from all concerned parties, namely China and South Korea; and how much of a threat to U.S. national security the White House and the president’s team judges North Korea to be. That will be sooner rather than later; the Defense Intelligence Agency just released an assessment claiming North Korea will be able to field a nuclear-capable ICBM by next year, and South Korean intelligence agrees.)

Middle East SITREP:

U.S. may have to deal with Iran sooner rather than later

There is no shortage of critics regarding the Obama administration’s nuclear deal with Iran, and more than a few of them are now working for his successor. In recent days the State Department, led by Trump appointee Secretary of State Rex Tillerson, announced that despite the fact that the president previously certified that Iran was in compliance with the agreement, Foggy Bottom “remains deeply concerned about Iran’s malign activities across the Middle East which undermine regional stability and prosperity.”  (AC: In fact, Iran has not complied with the agreement.  Under the JPCOA, Iran was barred from having more than 130 metric tons of heavy water — which is used to cool nuclear reactors — yet routinely violated that limit.  To solve the Iranian violation, the Obama administration in 2016 moved to purchase the extra heavy water from Iran in a bid to keep them compliant.  The fact of the matter is that Iran has not owned up to its part of the deal.)

Rumors and reports continue to state that Iran is cheating on its agreement to largely halt nuclear weapons development. Those reports make sense given that Iran’s one true hedge against a preemptive attack either by Israel or the U.S. is possession of a functional nuclear deterrent. That alone will probably force the Trump administration’s hands sooner rather than later, just as it likely will in North Korea.

In addition, Iran is continuing to develop its domestic weapons production base, announcing just this week that it will send to full production a new air defense missile. Iran has made such announcements before as a propaganda tool, but the country does field the Russian-made S-300 system, which is formidable. [source] And Israeli Prime Minister Benjamin Netanyahu says Iran is attempting to fill the gap in Syria and beyond left by ISIS. “Iran is creating a strong front with Hezbollah, and they have precise missiles. We are dealing with the new security threats facing Israel, and paying attention to every threat Israel faces,” the prime minister told a local media source. [source]

Now, the U.S. Congress has voted to place new sanctions on Iran — as well as Russia and North Korea — and that is liable to provoke at least some response from Tehran, though it’s not likely the shooting will start anytime soon. Rather, Iran is more likely to step up harassment of U.S. naval and military assets in the Persian Gulf, while adding more resources and combatants in Syria and Iraq, as well as beefing up Hezbollah, which likes to harass Israel.

Speaking of Hezbollah, which is operating fairly freely in Lebanon, the group has said it will “surprise Israel” in the next war — a tacit admission that there will be “a next war.” A former Israeli defense minister, Moshe Ya’alon, said that Iran calls the shots in Lebanon as it is, and if the Iranian supreme leader wants war there, it will happen — and if it does, Israel will likely destroy all that remains of Lebanon’s infrastructure. As for Syria, where Hezbollah fighters are engaged, Israel has established “red lines.”

And since the U.S. happens to be in the neighborhood — in Iraq and Syria — American forces are in a good position to both lend direct and indirect assistance to Tel Aviv, while serving in a blocking role against Iran.

Defense in brief

Pentagon stepping up its information warfare capabilities

In testimony before the Senate Armed Services Committee last week, Air Force Gen. Paul Selva, vice chairman of the Joint Chiefs of Staff, said the Pentagon was ramping up efforts to carry out and counter information warfare, to include the use of cyber warfare and influence operations. He said the Defense Department “must continue to improve its ability to exploit cyberspace as a pathway for information operations to affect adversary perceptions, decisions, and actions in support of strategic ends.” He added that one focus would be to counter and defeat propaganda put out by adversaries. His testimony comes after Russian information warfare was, some say, used fairly successfully during the 2016 election. Meanwhile, he said, China has also been using information warfare to downplay or ignore Beijing’s efforts to assert control over strategic trade routes and waterways like the South China Sea. “As our fluency continues to mature, we are refining new operational and organizational constructs and advanced tools to outpace competitors,” he said, without elaborating. [source]

Are killer drones from Africa bound for the U.S.?

President Trump’s pick to oversee the Pentagon’s special operations and low-intensity conflicts says the day is coming when ‘terror drones’ could find their way to U.S. shores from, of all places, Africa. “In about five years,” said Owen West, in testimony before the Senate during confirmation hearings, “drones will be able to be launched from Africa which can reach our shores because they’ll have permanent power by the sun.” Advances in drone technology will achieve three objectives: Longer-lasting batteries and solar-powered craft; more commercial applicability and viability; and more autonomy from humans. In other words, drones will become more efficient, more affordable, and be able to travel farther. The most pessimistic forecast is that terrorist organizations will use them to deliver explosive — or chemical, or biological — payloads, to the U.S. and throughout the West. Last year ISIS became the first non-state entity to arm a commercial drone; its fighters have used them to decent effect against advancing Iraqi and U.S. forces in the battle to retake Mosul. [source]

Rhetoric between India, China over disputed piece of real estate heating up

Most of the world doesn’t know that two nuclear-armed great powers are engaged in heated rhetoric over a small piece of earth both claim as their own — a contested region high in the Himalayas, where Chinese and Indian troops are facing off. Chinese officials warned India this week that it must pull back its forces or risk escalation. “China’s determination to resolve and safeguard national security and sovereignty is unshakeable,” Defense Ministry spokesman Col. Wu Qian said. “Here, I wish to remind India, do not push your luck and cling to any fantasies. The 90-year history of the PLA has proved but one thing: that our military means to secure our country’s sovereignty and territorial integrity has strengthened and our determination has never wavered. It is easier to shake a mountain than to shake the PLA.” India wants both sides to withdraw their forces, but it doesn’t look like Beijing’s prepared to do that after Chinese troops began expanding southward the road from Yadong in Tibet, claiming the turf for its own. The countries share a 2,174-mile border and fought a brief, bloody border war in 1962. [source]

Trump giving CIA more decentralized authority

Just as he has for the U.S. military, President Trump has given CIA Director Mike Pompeo authority to run day-to-day operations, as well as more latitude to allocate resources to priority operations. In an interview with a Washington news source, Pompeo said Trump is quick to accommodate the agency and its mission. “The president has, I think in every case it’s fair to say we’ve come and said, ‘Here’s the mission. Here’s the authorities we have today. Here’s what we think the gap is; here’s how we think we mitigate risk if you provide us those authorities.’ And every time he’s said, ‘Go do it.’” Pompeo added that Trump’s attitude has reinvigorated the agency. [source]

PIR3: What are the current indicators of organized political violence?

Left-wing militia group training for war with conservatives, Trump supporters

Last year’s presidential campaign marked a new high in political violence not seen in recent campaigns, as both candidates inspired passionate responses among their base. Since then, the political violence has only escalated, and it appears to be coming primarily from Left-wing individuals and groups, as evidenced by the recent attack against Republican lawmakers practicing for an annual congressional softball game, an attack that critically wounded House Majority Whip Steve Scalise of Louisiana. The election of President Trump has spurred the formation of Left-leaning militia groups as well, most notably an organization calling itself the Redneck Revolt. According to their web site, they have at least 30 verified chapters around the country and also support the formation of local chapters of an offshoot, calling the John Brown Gun Club. Some members of these groups have shown up armed at recent Trump-themed political rallies. The group also publishes .pdf files of “urban guerrilla” warfare and others focusing on “sabotage,” “kidnapping,” “executions” and “terrorism.” [source]

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

DHS study on coming AI revolution forecasts major unemployment

The Department of Homeland Security released a lengthy study on the projected impact of Artificial Intelligence” (AI) on society and mostly found that it would hugely benefit society. But there are a number of issues that government should get out in front of, and one of them is the expected “mass job displacement.” Other concerns include threats to privacy, safety, and ethical issues, but the one expected side effect that would most impact national stability is AI’s negative impact on employment. Already tech giants like Google and Microsoft are heavily involved in the development of AI, which DHS judges are likely to have “positive effects for business and society.” Overall DHS judges the development of AI to become a positive influence on society, but if it hinders rather than helps employment overall, that won’t be good for society. Those jobs lost will have to be replaced by something. [source]

Says one analyst: “We are going to see ships sailing across the ocean with nobody on it, just cargo — like driverless cars. These things keep coming up and I think they make people worry about everything, including even stocks. You don’t know how all this automation is going to play out for various kinds of companies. This is what, I imagine, is on people’s minds all the time now.” [source]


Is the Federal Reserve set to adopt the wrong policy?

Federal Reserve chairwoman Janet Yellen is rumored to be considering new interest rate hikes because she believes the U.S. economy is strong enough to withstand them. On the surface that seems true: Gross Domestic Product grew 2.6 percent in the second quarter [source] and the stock market has climbed 19 percent since President Trump’s inauguration [source]. But other economists don’t see inflationary pressures but rather deflation, noting that oil prices are falling as is demand; unemployment is down to 4.3 percent — which should portend a labor shortage and, thus, a demand for higher pay, but labor force participation keeps falling; demographics favor saving over spending; large retailers like Walmart and Amazon are quashing prices, not raising them, and so forth. Even some high-priced sectors like college tuition and health care are tempering. Still, Yellen is said to be pushing for rate hikes believing that inflation is right around the corner. But one market analyst known for accuracy, Bill Gross, says market risk levels today are higher than any time since just before the 2008 panic. The markets, however, are growing because investors interpret the Fed’s rate hikes as a signal the economy is getting stronger. Someone has to be wrong, and Gross thinks it’s the Fed, projecting that either stocks or bonds are set for a crash in the coming weeks. [source]


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.

1 Comment

  1. Sam,
    Thank you for the excellent intelligence reporting. Each week you are doing a much better job of reporting the data and analyzing the threats.
    God Bless

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