Strategic Intelligence Summary for 28 February 2019

Strategic Intelligence

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.

ADMIN NOTE: We’re introducing two more regions to PIR3 for the foreseeable future: India-Pakistan and Venezuela. The potential for conflict remains in these regions, and either conflict could have regional consequences.


In this Strategic Intelligence Summary…

  • InFocus: China’s debt-driven financial meltdown?
  • India strikes terrorist target inside Pakistan, sparking nuclear war fears
  • Concerns about Chinese missiles forcing U.S. Navy to reduce carrier fleet?
  • Russia set to beef up Baltic Fleet with armor, missile defense
  • U.S. Navy buying four ‘Orca’ autonomous subs to use for multiple missions
  • Cybersecurity firm claims Russian hackers are the fastest
  • Iranian ‘suitcase’ GPS kits can dramatically improve accuracy of Hezbollah rockets
  • Flashpoint SITREPs (NATO-Russia, Indo-Pacific, Middle East, North Korea, India-Pakistan, Venezuela)

InFocus: By China’s high debt levels, including trillions in off-the-books debt in their shadow banking industry, are no secret. I recently reported that Chinese corporations began developing problems with corporate bond defaults in 2017, with a total of 35. That pace increased in 2018 to 119 corporate bond defaults, and continues to be a problem in 2019.

This week, a provincial Chinese financial institution missed an $11 million payment on a $300 million bond. The provincial government is likely to step in and make the payment to investors because it’s a state-backed entity. But this represents another data point in a huge trend of Chinese corporations missing their debt payments.

Speaking this week, China analyst Gordon G. Chang said, “Right now, the Chinese economy is troubled… You’re now going to start to see state- and provincial-related entities go belly-up.”

There’s a belief that, regardless of what happens, the Chinese government will step in and pay back investors for these losses. This month, Chinese investors, having lost money in a private corporation that went under, tried to meet with state representatives to be covered for their losses. The government did not pay them back. And that’s worrying not only for Chinese investors, but also for regional trading partners and the global economy. A major Chinese financial crisis is likely to bring the world down with it.

“Everyone has been conditioned to think that the state will make everyone whole… Now you have entities that are not particularly related to the state and [the government is] not paying back [on lost investments]… Everything can fall apart, because it’s all hinged upon the confidence that everyone’s going to get paid back. And when they’re not, then things can just collapse in a moment,” Chang said.

So far, the Chinese Central Bank has printed money to alleviate its financial and economic problems. Since the Chinese economy continues to slump (factory export orders are now the lowest since 2011), the Chinese are printing more money to flush the economy with cash, which also covers debt defaults for state-owned entities. It doesn’t appear, however, that the government is willing to repay bad investments in failing private corporations. This may come to be China’s debt-driven financial meltdown, similar to what happened in the U.S. in 2008.


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?

India strikes terrorist target inside Pakistan, sparking nuclear war fears

After a suicide bombing in India that killed 40 troops, Indian warplanes struck a Jaish-e-Mohammed (JeM) training camp, killing as many as 300 fighters. The Indian strike occurred about 31 miles from the Kashmiri frontier, in the deepest penetration inside Pakistani territory since the two nuclear-armed countries fought the last of their three conflicts in 1971. Top Pakistani military and civilian officials vowed to respond against “Indian aggression” at a time and place of the government’s choosing, sparking fears that a nuclear exchange could occur if either country launches a full-scale invasion of the other. [SOURCE] (Analyst Comment: Additional information can be found under PIR3.)

Concerns about Chinese missiles forcing U.S. Navy to reduce carrier fleet?

The Pentagon wants to eliminate the Nimitz-class USS Harry S Truman some 20 years earlier than planned amid growing concern that U.S. Navy super carriers won’t be able to defend against new and next-generation missiles fielded by China. Currently, there are 11 carriers in the fleet. The Truman is scheduled for an overhaul and refueling of its nuclear reactor in 2024, but retiring it instead is expected to save the Navy tens of billions in costs to upgrade and operate the carrier over the course of its previously anticipated lifetime. According to former Deputy Defense Secretary Robert Work, cutting the Truman early was part of the deal to fund the Navy’s purchase of two new carriers. The move is sure to spark anger and consternation in Congress among defenders of an 11-carrier fleet, but in reality, discussions about the survivability of U.S. super carriers in a future high-end war have been taking place among some think tanks and experts for at least the past few years. [SOURCE]

Russia set to beef up Baltic Fleet with armor, missile defense

The Russian military is upgrading its defensive — and perhaps offensive — capabilities in the Western Military District, which borders Europe. The upgrade includes the addition of a tank regiment and a coastal missile defense battalion, raising the percentage of fielded “modern weaponry” to 54 percent. Specifically, the additional units appear to be headed for the Baltic Sea Fleet later this year. Defense Minister Sergei Shoigu also announced the formation of a mobile reserve missile air defense regiment which will also be added to the Western Military District this year. He told Russian media that the additional air defense capabilities for the Baltic Sea region will be improved by 40 percent. New garrisons will also be built for just-formed 3rd and 144th Motor Rifle Divisions. [SOURCE


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

U.S. Navy buying four ‘Orca’ autonomous subs to use for multiple missions

The Navy is set to purchase four Orca Extra Large Unmanned Undersea Vehicles (XLUUVs), which will be used for several different missions. The autonomous vessels are 51 feet in length, are powered by a diesel-electric system, can be launched from a pier, and travel 6,500 nautical miles underwater. Missions will include mine countermeasures along with anti-submarine, anti-surface, electronic warfare, and other strike missions. Interestingly, the Navy is considering equipping the large drone subs with Mk46 or Mk48 torpedoes for use against enemy submarines or surface vessels. Inexpensive, the subs could also be used for missions considered too dangerous for manned undersea vessels. [SOURCE]

Cybersecurity firm claims Russian hackers are the fastest

Cybersecurity firm CrowdStrike, the company that examined the Democratic National Committee’s email servers and concluded that Russian hackers were responsible, says that Moscow’s cyber-operators are the fastest when it comes to gaining access to targeted systems. In its new annual threat report, the cyber firm “introduced a new metric of hacker sophistication: ‘breakout’ speed.” That’s the measure of time it takes a hacker to first breach a system and then expand it by continuing to access restricted systems. After analyzing 30,000 attempted cyberattacks last year, Crowdstrike concluded that Russian hackers “far and away” were the fastest, averaging just under 19 minutes. [SOURCE]

Iranian ‘suitcase’ GPS kits can dramatically improve accuracy of Hezbollah rockets

Israeli military officials say Iran has developed technology capable of turning “thousands” of unguided Hezbollah rockets based in Lebanon and Syria into much more accurate weapons for use in any future conflict with Israel. According to the IDF, Tehran is producing suitcase-sized Global Positioning System “kits” and moving them into Syria. The kits can be fitted onto unguided rockets, thus transforming them into precision weapons. IDF officials said Iran is changing tactics after years of losing men and material to Israeli airstrikes. They add that tracking the GPS kits is much more difficult than tracking Iranian rockets moved into Syria because the kits are often flown in on civilian airliners directly to the airport in Beirut. IDF officials acknowledge that Hezbollah has a stockpile of between 100,000-150,000 rockets in Lebanon. It’s believed that Iran seeks to upgrade some 14,000 long-range Zelzal-2 rockets inside the country first.  [SOURCE] (Analyst Comment: Improving the precision of its rockets and missiles has long been a priority for Iran. Both Israel and Iranian, and Iranian proxies, continue to prepare for their next conflict.)


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, India-Pakistan, Venezuela)

NATO-Russia:

Gen. John Hyten, the head of U.S. Strategic Command, told the Senate Armed Services Committee this week that he’s concerned about new Russian strategic weapons that are being developed in contravention of the New START Treaty. That treaty is set to expire in 2021, unless it’s renewed. Specifically, Hyten said while he believes he can defend the nation today and the next STRATCOM commander will as well, a future commander may have more difficulty in doing so thanks to ongoing Russian strategic arms development. The Russian military, he said, is working on new nuclear-armed, nuclear-powered unmanned undersea vehicles, an ICBM, and a nuclear-armed hypersonic missile; all of which the Kremlin wants to exclude from existing arms agreements. Hyten said he supports renewing New START, but not necessarily if Moscow continues to develop new strategic weapons it doesn’t want included in a future agreement. Hyten’s point seems to be he is all for diplomatic solutions but not if the U.S. will be hampered by them, as it appears we would be.

Indo-Pacific:

Taiwanese President Tsai Ing-wen decided to announce her reelection campaign for 2020 during an interview with CNN earlier this month rather than a rally in the capital of Taipei or in a speech streamed to her citizens. The thinking is that Tsai wanted to go on an American network to send a signal to the Trump administration which she may believe is warming to her Democratic Progressive Party’s slow-motion movement towards a formal declaration of independence from China. The interview and Tsai’s reelection bid comes as the Trump administration takes a tougher stance against Chinese aggression and expansionism in the South China Sea and beyond than did the Bush and Obama administrations. Still, the Taiwanese are divided over whether to move further away from China or closer to it, which means closer U.S. ties could be seen as a help or a hindrance. Tsai has made no bones about wanting an independent Taiwan, but Chinese President Xi Jinping has similarly made it clear he seeks unification one way or the other. If Tsai loses next January and a more pro-Beijing leader comes to power, that will no doubt complicate the Trump administration’s efforts to isolate China. But if she wins, which is not assured at this point, it could pull the U.S. and China closer to conflict since Washington is treaty-bound to defend democratic Taiwan.

Middle East:

In a joint statement, Syria and Russia are pushing the United States to withdraw completely from the war-torn country, claiming that American “military units are on Syrian territory illegally.” The statement comes after the Trump administration announced last week that the president has decided to leave 400 troops in the region — 200 near the Iraqi border in support of U.S. forces there and another 200 near the Turkish border as part of a multinational force of mostly NATO troops to serve as observers. Syria and Russia want American forces to permit refugees held at the Rukban refugee camp to be evacuated by Syrian and Russian forces. The camp is located inside a “deconfliction zone” that was established by U.S. forces, but Damascus (and by default, Russia) claims that American troops are harboring rebels there. President Trump had decided to remove all U.S. forces from Syria earlier this year but was convinced by the Pentagon, members of Congress and his national security team to keep at least some troops there in support of ongoing operations. Somewhere between 800-1,500 NATO and local forces remain in Syria. Russia and Syria want all of those troops gone but the U.S. knows that Iran and Hezbollah are active in the region and pose a significant threat to Israel and to regional stability. That’s likely why the president has decided to keep a contingent of U.S. troops there.

North Korea:

Last week, the Trump administration reported they won’t be lifting sanctions until the North Korean nuclear threat is “substantially reduced,” which left open the possibility that the White House would accept something less than full denuclearization. “The American people should know we have the toughest economic sanctions that have ever been placed on North Korea and we won’t release that pressure until such time as we’re confident we’ve substantially reduced that risk,” Secretary Pompeo told an American media outlet last week. Pompeo said progress has been made with North Korea and that the administration’s objective remains full denuclearization.

Update: President Trump left Hanoi Thursday without signing any new agreements with North Korean leader Kim Jong-un, largely because Kim would not agree to “substantially reduce” his nuclear capability without the U.S. agreeing to eliminate all existing economic sanctions. The administration sounded optimistic, though, noting that the rapport between both countries is improving and that there was at least some progress on making inroads into denuclearization, sanctions-lifting, and formally ending the Korean war (which will take input from South Korea and China as well). We will have more on what the summit means in the long-term relationship between both countries next week.

India-Pakistan:

Historic rivals India and Pakistan are once again on the brink of all-out war, which would be their fourth one in total and the first since 1971. Both countries have fought pitched battles over the Kashmir region for over three decades, with Pakistan administering roughly half of it and India the other half. Kashmir lies in between the two countries.

The day after India responded to the 14 February suicide attack, Pakistan reportedly downed a pair of Indian air force fighters the following day, with India claiming it, too, had shot down a Pakistani jet. At least one IAF pilot has been detained, and alleged wreckage from his plane was broadcast on Pakistani media and social media.

Should the fighting escalate, India has a distinct advantage over the smaller Pakistani army, air force, and navy.  Indian forces outnumber Pakistani forces in tanks, artillery pieces, troops, fighter planes, and warships. The one equalizer, however, is that both nations have approximately 150 nuclear warheads.

As American writer and geopolitical analyst Eric Margolis noted, a nuclear exchange between India and Pakistan would be regionally devastating but also would have global consequences:

Outnumbered and outgunned six to one by India, Pakistan has developed a potent arsenal of nuclear weapons that can be delivered by aircraft, short and medium-ranged missiles and artillery. Pakistan says it will riposte almost immediately with tactical nuclear weapons to a major Indian attack. Both sides’ nuclear forces are on a hair-trigger alert, greatly increasing the risks of an accidental nuclear exchange.

Rand Corp estimated a decade ago that an Indo-Pak nuclear exchange would kill two million immediately and 100 million in ensuing weeks. India’s and Pakistan’s major water sources would be contaminated. Clouds of radioactive dust would blow around the globe.


As the U.S., China, Russia, and other powers urge restraint, it should be noted that the historic animosity between India and Pakistan runs very deep, which helps explain how both could so quickly resort to military force. 
We will be keeping an eye on this budding conflict zone and provide subscribers with timely updates as the situation develops.

Venezuela:

We’re also watching another potential conflict zone — this one in our own hemisphere: The situation in Venezuela, which is fluid. As you may know, the Trump administration, European nations, and most Latin American countries have all come out against President Nicolas Maduro and in support of his rival, interim president Juan Guaido. Despite a lack of international support and the fact that he’s been losing support at home as well, Maduro is continuing to cling to power.

During a meeting Wednesday in Bogota, Colombia, Vice President Mike Pence and Guaido agreed on a strategy to ratchet up pressure on Maduro which will include additional sanctions against Caracas as well as $56 million in aid to neighboring countries that are dealing with waves of Venezuelans trying to escape the economic deprivation.

“We hope for a peaceful transition to democracy but President Trump has made it clear: all options are on the table,” Pence told reporters while reiterating President Trump’s “100 percent” support for Guaido. As Guaido and Pence strategized at a meeting of the Lima Group, which is comprised of Latin American countries and Canada, the recognized leader of Venezuela said that “indulging” Maduro further “would be a threat to all of America.”

Colombian President Ivan Duque made a pitch for “more powerful and effective” pressure against Maduro, but the Lima Group stopped short of enduring the use of force to oust him. These developments come after Secretary of State Mike Pompeo hinted earlier this week the U.S. may consider using military force to topple Maduro. During an appearance Sunday on an American cable news network, Pompeo said the Trump administration was leaving “every option” on the table to ensure that Maduro does not remain in power much longer. “We’re very hopeful that in the days and weeks and months ahead the Maduro regime will understand that the Venezuelan people have made its days numbered,” he said.

Pompeo spoke as an international attempt to deliver aid to the country was thwarted by Maduro loyalists, resulting in at least four deaths and hundreds more wounded and injured.

Russia, meanwhile, is claiming that the U.S. is preparing to invade Venezuela. Specifically, according to a British news report, Russian Security Council secretary Nikolai Patrushev claimed that American forces are massing on Venezuela’s border in neighboring Colombia. Russia has aligned with Maduro. “The transfer of American special forces to Puerto Rico, the landing of US forces in Colombia and other facts clearly indicate that the Pentagon is reinforcing the grouping of troops in the region in order to overthrow the lawfully elected incumbent president Maduro,” Patrushev was quoted as saying.

// END REPORT

OSINT Analyst-1 mines open sources, and produces timely and relevant intelligence reporting.

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