Strategic Intelligence Summary for 09 August 2018 – Forward Observer Shop

Strategic Intelligence Summary for 09 August 2018

Strategic Intelligence contains intelligence reporting on the state of global security and instability, geostrategic issues affecting the United States, pre-war indicators, and assessments on the current risk of war. This report is available each week for Intelligence subscribers.

In this Strategic Intelligence Summary: (3,035 words)

  • InFocus: Will China go ‘nuclear’ over trade?
  • Suspected Russian spy worked at U.S. embassy for decades
  • Morrell: Hit Putin where it hurts
  • Maduro assassination attempt highlights drone defense
  • Expansion of arms sales aimed an increasing U.S. influence
  • Defense personnel barred from personal electronic devices in ‘operational areas’
  • STRATCOM chief improving missile defense
  • Congress approves funding to protect missile defense against cyberattacks
  • Russian naval operations targeting the Atlantic
  • Georgia still on track for NATO ascension
  • China pushes back on U.S. arms exports to Asian
  • China’s test of hypersonic missile a success
  • U.S. Coast Guard to send ships to Indo-Pacific?
  • Middle East Strategic Alliance would be “Arab NATO”
  • Bolton: Trump is not “starry eyed” about denuclearization
  • And more…


In Focus: Last week, I dedicated a large portion of the report to what’s going on with the trade tariffs and China. I specifically pointed out that China was weaker than they were letting on, because they certainly have some exposed vulnerabilities. The Trump administration likely sees this weakness as a target to exploit, much like China has targeted U.S. economic interests for decades.

The U.S. has imposed tariffs on $34 billion worth of Chinese goods, and the Chinese have responded in kind. President Trump says he has tariffs on another $16 billion ready to be implemented on 23 August, and the Chinese have expressed their willingness to match that on the same day. But the Trump administration still has $456 billion of Chinese goods on which to impose tariffs, compared to China’s $90 billion in U.S. goods. In other words, because China exports more to the U.S. than they import, President Trump has the upper hand in the near term of the trade war and wants to force China to the negotiating table. President Trump has threatened to put tariffs on all $506 billion worth of Chinese goods coming into the U.S. market, which would harm China’s export-driven economy. “The trade war has made China more humble,” said one professor at a Chinese university in Beijing, noting that the trade war is starting to cause some domestic stress. But China has some powerful options to pursue, too, and the domestic stress on Chinese premier Xi Jinping — now Chinese ruler for life — may force him to take stronger countermeasures.

In an op-ed this week, the editorial board of China’s Global Times pointed out that U.S. economic advisor Larry Kudlow had previously warned that China might target U.S. companies in China directly. Specifically, Kudlow said, “There is a lot they can do to damage our companies in China.” Continuing that line of thinking, the editorial board points out that “The Chinese market is key to the survival of many big American companies and American farmers” and that “China is prepared for a protracted war”.

Take particular note of this section:

“Throughout history, the US arrogantly initiated many wars that eventually ended up hurting itself. Washington’s arrogance this time is up against a major power. When others believed that the US was just playing tricks with trade, the White House thought it could strike down China. But the US’ ability doesn’t match its ambition.

China has time to fight to the end. Time will prove that the US eventually makes a fool of itself.” [source]

Meanwhile, over at China’s People Daily — the official outlet for the Chinese Communist Party — one writer asks: “Why has the California-based company [Apple] enjoyed remarkable success in China, while some Chinese companies have experienced big losses amid a growing trade conflict”? The writer explains, as if to threaten, that the Chinese may target the largest corporation in the world: “China is by far the most important overseas market for the US-based Apple, leaving it exposed if Chinese people make it a target of anger and nationalist sentiment.” [source]

And that brings us full circle to something else I pointed out last week: the Obama administration did virtually nothing to curb trade imbalances with China because of incorrect thinking that China would democratize once it became wealthy, but also because large, left-leaning corporations like Starbucks and Apple wanted greater access to the Chinese market — a prospect Obama couldn’t shy away from during his low growth, “non-recovery” economic recovery.

The People’s Daily usually toes the line of the Chinese Communist Party, so it begs the question if this is not a foreshadowing of a Chinese response of hurting U.S. companies. If China demands that U.S.-based multinational corporations operating in China share their profits — “the company needs to do more to share the economic cake with local Chinese people” — then China could indirectly target the U.S. stock market by lowering the profit margins and growth potential for U.S. companies like Apple, General Motors, KFC/Yum Brands, Adidas, Nike, Intel, Coca-Cola, and others.

As of today, the Shanghai CE Composite Index is down 15% for the year, compared to the U.S. S&P 500 which is up nearly 7 percent and nearing another all-time high. It’s one option that the White House has to be expecting. – S.C.

Priority Intelligence Requirements:

PIR1: What are the new indicators of disruptive events that could cause global or regional instability?

PIR2: What are the latest military and security developments exhibited by the U.S. and their peer and near-peer adversaries?

PIR3: What is the current situation report and risk of war in each of the four flashpoints? (NATO-Russia, Indo-Pacific, Middle East, North Korea)


PIR1: What are the new indicators of disruptive events that could cause global or regional instability?

Suspected Russian spy worked at U.S. embassy for decades

A Russian national hired by the U.S. Secret Service has been working at the U.S. Embassy in Moscow while secretly meeting with Russian intelligence officials for over a decade. After being suspected of the unauthorized meetings, the Russian national was referred for investigation; however, the Secret Service never followed up. The alleged spy had access to the Secret Service intranet. “She had access to the most damaging database, which is the US Secret Service official mail system. Part of her access was schedules of the president – current and past, vice-president and their spouses,” stated one source. [source] Analyst Comment: We’ve previously covered that former chairman of the House Permanent Select Committee on Intelligence Mike Rogers warned before his retirement that there were more spies in American than at any time. “There are more spies in the United States today from foreign nation states than at any time in our history — including the Cold War.  And they’re stealing everything. If it’s not bolted down, it’s gone.” This statement would presumably include U.S. facilities around the world, as well. “It’s massive, it’s huge. And the numbers are overwhelming.”

Morrell: Hit Putin where it hurts

In an opinion piece published this week, former deputy director and acting director at CIA Mike Morrell pointed out that, thus far, sanctions against Russian officials had little effect on Putin’s calculus to directly target the U.S. for information operations. He suggests, instead, that the Trump administration enact wide-ranging sanctions specifically designed to hurt the Russian economy. Morrell writes, “Make it clear to Putin that we would drop the sanctions when he stopped interfering in the democratic institutions of the United States and its allies, some of which are also under siege… Putin is afraid of one thing. He is afraid that one day the Russian middle class will finally rebel against his regime and rush into the streets demanding change.” [source] Analyst Comment: Last week, senior U.S. officials — the National Security Advisor, the Director of National Intelligence, the Director of the National Security Agency, the DHS Secretary, the FBI Director and others — gathered at the White House to brief the public about ongoing attempts by Russian actors to influence and possibly exploit the security of U.S. elections. We should be ready to acknowledge that, based on the analysis I’ve written out in this report over the past several months. To date, President Trump still seems to be committed to a blank slate approach with Vladimir Putin to let bygones be bygones and continue the Flynn-Kissinger strategy of developing Russia into a strategic ally to oppose the rise of China in the 21st century. Somehow, sanctions that harm the Russian middle class and ruin Trump’s Russian detente doesn’t seem to be what the President wants to order.

Maduro assassination attempt highlights drone defense

Last week, Venezuelan president Nicholas Maduro survived an alleged assassination attempt after two drones laden with explosives exploded overhead while Maduro was giving a speech. Those kinds of drone attacks are nothing new — we’ve seen them in Syria, Iraq, and Ukraine — but U.S. officials are concerned that there’s currently no reliable way to defend against domestic attacks. A George Washington University professor claims “There’s a huge heap of trouble in our future in the form of off-the-shelf drones, and we’re not taking it seriously enough.” Another professor predicts that we’ll see those attacks in the United States. [source]

Expansion of arms sales aimed an increasing U.S. influence

Officials from the Trump administration have lobbied Congress to streamline U.S. arms exports to traditional allies and strategic security partners in a bid to expand U.S. influence. U.S. arms exports have risen every year since 2002. From 2016 to 2017, arms exports grew by 20 year or over year. The Trump administration wants U.S. arms exports to favorably compare to Cold War numbers, to outpace Russian and Chinese exports. Perhaps more than anything, it’s a matter of encouraging the use of U.S. systems because interoperability means those countries are more likely to purchase complimentary equipment from the U.S. Summed up by a rhetorical question from an official from the Aerospace Industries Association, it’s a question of “Who’s going to make the rules for the next 50 years?” [source] Analyst Comment: And speaking of interoperability, Russia recently announced that its Tor E-2 air defense system is compatible with NATO’s standard air defense systems, as well — another sign that Russia wants to compete with Western defense industries currently supplying NATO. [source]


PIR2: What are the latest military and security developments exhibited by the U.S. and their peer and near-peer adversaries?

Defense personnel barred from personal electronic devices in ‘operational areas’

On Monday, the Pentagon announced a new defense-wide policy: no more use of personal communications devices while in “operational areas”. One official stated: “These geolocation capabilities can expose personal information, locations, routines and numbers of DoD personnel,” and can cause “unintended security consequences and increased risk to the joint force and mission.” [source] Analyst comment: U.S. defense and intelligence officials were embarrassed early this year after security researchers discovered that FitBit and other devices could be used to discover U.S. personnel operating in sensitive areas. This seems to be the long-awaited policy guidance to correct security vulnerabilities from personal cell phones and other electronic devices.

STRATCOM chief improving missile defense

During a speech at the Space and Missile Defense Symposium this week, U.S. Strategic Command (STRATCOM) chief Gen. Hyten expressed a need for the military to do more to improve missile defense against Chinese and Russian weapons. Specifically, Gen. Hyten wants more investment and technological advancement in early warning sensors. His missile defense strategy stresses early warning: “If you can see it early, you can kill it early. Driving that equation to the left has huge operational advantages because to actually shoot down a missile that somebody launched that comes back down on their head, do you think they are going to shoot another one? … Isn’t that the whole point?” [source]

Congress approves funding to protect missile defense against cyberattacks

Cyber attacks and electronic warfare against U.S. defense equipment and infrastructure is a major challenge for the Pentagon and possible scenarios involving the two have played major roles in military exercises. The Congress is now set to increase funding specifically aimed at increasing cybersecurity around U.S. missile defense systems. [source]


PIR3: What is the current situation report and risk of war in each of the four? (NATO-Russia, Indo-Pacific, Middle East, North Korea)


Significant Developments:

Russian naval operations targeting the Atlantic

Admiral John Richardson warned this week that, along with Chinese submarines in the Atlantic Ocean, Russian submarine operations are there increasingly. “We’re talking about more (activity) than we’ve seen in 25 years… Even five years ago, we wouldn’t have seen anything like this.” Previously, we reported that the U.S. Navy is again standing up its 2nd Fleet, whose Area of Responsibility is the Atlantic Ocean, to deal with Russian ships in the AOR. [source] This week, Russian warships passed through the English Channel, where they were shadowed by British Navy vessels, on their way to the Atlantic. Two ships from the Northern Fleet — a missile cruiser and an anti-submarine warfare ship — will be on “long-voyage missions” in the Atlantic Ocean this month. [source]


Georgia still on track for NATO ascension

During a press briefing this week, State Department spokeswoman Heather Nauert confirmed that the Republic of Georgia is still on track for NATO ascension. “NATO took a decision about that at the Bucharest summit, I believe it was, back in 2008 that Georgia will become a member of NATO. I know there’s certain things that have to be done. I don’t have any additional details on that, but my understanding is that is in train right now.” Analyst Comment: That agreement at the Bucharest summit occurred in April 2008. In August 2008, just four months later, Russia launched a surprise invasion of the South Ossetia and Abkhazia regions, where pro-Russian separatists sought independence from Georgia. Russian armed forces remain in these regions of Georgia today, and it remains a point of contention for both countries. In an interview with Kommersant this week, Russian prime minister Dmitry Medvedev called Georgia’s NATO ascension a “threat to peace”. Further, Medvedev stated, “There is an unresolved territorial conflict [in Georgia]… and would they bring such a country into the military alliance? Do they understand the possible implications? It could provoke a horrible conflict.” [source]



Significant Developments:

China pushes back on U.S. arms exports to Asian

Last week, I reported that Secretary of State Mike Pompeo was attending an annual Association of Southeast Asian Nations (ASEAN) summit. His mission was to discuss sanctions against North Korea and, euphemistically, “economic security” issues facing ASEAN, but also to strengthen support among Asian allies and partners against China. This week, Secretary Pompeo drew criticism from Chinese officials over the U.S. policy of increasing arms to its Asian allies. “Certain non-regional countries, mainly the United States, have been sending massive strategic weaponry into this region. I’m afraid that is the biggest force behind a push for militarization in this region,” China’s foreign minister said.

China’s test of hypersonic missile a success

According to Chinese media, its military has successfully tested a hypersonic missile at speeds of up to Mach 6 — far faster that U.S. air defense weapons can counter. Named the Xingkong-2 (Starry Sky-2), the missile is capable of carrying nuclear warheads and currently poses a threat for which the U.S. has no defense. [source]

U.S. Coast Guard to send ships to Indo-Pacific?

After a request for forces from the Navy, the U.S. Coast Guard may be sending ships to the Indo-Pacific and Africa soon. “We’re in discussion with Adm. [Phil] Davidson and the Indo-Pacific command. There’s a request for forces, and I think you will see some Coast Guard presence in that part of the world,” said the Coast Guard commandant. “The Coast Guard could, I think, bring some unique capabilities in building partner capacity… That’s the INDO-PACOM commander’s ultimate decision on utilization of the Coast Guard capability that I think you’re likely to see in there in the coming calendar year.” [source] Analyst Comment: The U.S. Navy remains stretched from high operational tempos and the effects of sequestration. Navy commanders have expressed that they just don’t have the resources to meet current mission requirements, so it makes sense that the Coast Guard steps into a mentor, training, and security partnership role, and possibly even an anti-piracy mission in the Indo-Pacific and off the coast of Africa.


Middle East:

Significant Developments:

Middle East Strategic Alliance would be “Arab NATO”

Officials from the Trump administration want to create the Middle East Strategic Alliance with security partners like Saudi Arabia, Jordan, and the United Arab Emirates, among others. In October, the Gulf Cooperation Council meets in Washington, where President Trump has plans to enlist U.S. allies and security partners. One spokesman from the national security advisor’s office says the alliance “will serve as a bulwark against Iranian aggression, terrorism, extremism, and will bring stability to the Middle East.” [source] Analyst Comment: This has John Bolton’s fingerprints on it. In 2017, before being named national security advisor, John Bolton gave a speech in which he committed to regime in Iran “before the end of 2019”. [source] Whenever we discuss regime change in Iran, I always go back to former national security advisor Mike Flynn’s book Field of Fight, in which he outlines Iran as the major destablizing force in the Middle East. Flynn also intimates that partnering with Russia to combat Iran and roll back global Islamic jihad is a winning strategy — one to which President Trump still seems wedded.

One additional thought here: Some have referred to the MESA proposition as the “second NATO,” but there’s already a second NATO. It’s referred as “global NATO” by Sen. John McCain, among others, and includes U.S. allies committed to, in theory, fighting to defend and maintain the current international order outside of Europe. Japan, Australia, New Zealand, Israel, and South Korea are unofficial members of this unofficial club.


North Korea:

Significant Developments:

Bolton: Trump is not “starry eyed” about denuclearization

Last weekend, national security advisor John Bolton defended President Trump, explaining that he’s under no illusion about the dim prospect of North Korean denuclearization. “There’s nobody in this administration starry-eyed about the prospects of North Korea actually denuclearizing. The president is giving Kim Jong Un a master class in how to hold a door open for somebody, and if the North Koreans can’t figure out how to walk through it, even the president’s fiercest critics will not be able to say it’s because he didn’t open it wide enough.” Bolton also said that the president will have to publicly characterize Kim Jong-un’s efforts as insincere unless some verifiable conditions are met. [source] Analyst Comment: New reports out this week raise the prospect of a second meeting between President Trump and Kim Jong-un, according to a North Korean source claiming familiarity with the issue. [source] If Kim wants greater recognition and more time in the limelight, his return of remains of U.S. troops who died during the Korean War is a good start, as long as those remains are of Americans and not animals (which has happened before). I’m hopeful that the U.S. and North Korea can avoid war. Right now, we’re seeing a lot of carrots from President Trump. If the stick is brought out again, it could likely be worse than a few “fire and fury” tweets like we saw last year.



– S.C.

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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