27 JAN 17 – Executive Intelligence Summary

EXECUTIVE INTELLIGENCE SUMMARY – 27 January 2017 🔒

[wcm_nonmember]In this EXSUM… (3229 words)

• Trump still lacks cybersecurity plan, but shaping up
• Russia & China SITREPs
• Trump administration confirms desire to work with Russian military
• US STRATCOM: Know that we’re prepared for war
• McChrystal: Get ready to trade your liberty for security
• Inflation trends are another signal the Fed will raise interest rates
• Economic/financial outlook
• And more…

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Bottom Line Up Front:

Priority Intelligence Requirements:

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

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 domestic unrest or conflict?

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

PIR1: What are the current indicators of systems disruption that could lead to a civil unrest or domestic emergency?

Trump still lacks cybersecurity plan, but shaping up

After the past eight years of abysmal failure to shore up a feasible cybersecurity strategy to combat cyber exploitation of all kinds, the Obama administration handed a stack of tattered policies to President Trump.  On the campaign trail, Trump promised a review of US critical infrastructure and cyber vulnerabilities in the first 90 days of his administration; a review which would include input from primarily the Defense Department and Intelligence Community.  Trump left DHS conspicuously absent from those announcements, the top cybersecurity positions are still unfilled there, and it’s unclear if Trump will even fill those positions at all.

But General John Kelly, during confirmation hearings to assume the role of DHS Secretary, promised to “get deep into” the problem of cybersecurity.  So between the Trump cabinet working to right the past wrongs of cyber policy and the creation of a new cybersecurity subcommittee in the Senate Armed Service committee, Congress and the Trump administration are poised to pick up the ball and run.  But just how far they take that ball largely depends on the people that comprise American organizations.  For the US, cybersecurity is not so much a technological problem as it is a human problem.  Consider that many of these hacks involved phishing attacks in which a user is tricked into giving up a password.  Humanity has been showered with maxims like, “To live is to err”and “To err is human,” and they hold absolute truths.  Despite focus on the miles of coding and technology involved, human behavior is at the forefront of cybersecurity, especially where it concerns private corporations made of people who run utilities and other critical infrastructure.  Modifying the behavior of humans who run industrial control and SCADA systems is not a technological problem, so by far the largest challenge for the Trump administration is a cultural one.  And it’s also an organizational problem because inefficiencies stack up, reaction times becomes slower, reporting from private entities about cyber exploitation becomes muted or underestimated, and that detracts from overall national security.  General Kelly has his work cut out for him, and our national cybersecurity policies are something I’ll be tracking long into the future.

DHS discontinues open source infrastructure report

As of 18 January 2017, DHS has discontinued their Daily Open Source Infrastructure Report, from which we drew information included in this PIR.  We’ll retain the ability to monitor threats to critical infrastructure reported in open source, however, this news is a significant loss for the American public.

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 SITREP

This week, British Prime Minister Theresa May met with President Trump, the first world leader to do so after the Inauguration.  The two were scheduled to hold talks on a number of issues, including the West’s policy on Russia.  On Thursday, PM May said, “When it comes to Russia, as so often it is wise to turn to the example of President Reagan who – during negotiations with his opposite number Mikhail Gorbachev – used to abide by the adage ‘trust but verify’.  With President Putin, my advice is to ‘engage but beware’.”  I previously wrote that a relationship with Vladimir Putin represents a high risk venture because of Putin’s goals to undermine Western power and influence, dismantle NATO, and carve back parts of the Soviet Union for the Russian Empire — not to mention the Russian military buildup in the Arctic and its navy’s plans to pose a challenge to US dominance in the Pacific.  May cautioned that war with Russia is not inevitable, but the opposing geopolitical strategies of NATO and Russia do risk conflict.

While Trump is cooling on war rhetoric with Russia, our European allies are engaging in the regional arms race in lock step with Russia in preparation for war.  The US military defense posture in Europe is nearing a war footing as well, and Trump will be forced to make a decision on whether to pursue a high-risk friendship with Russia or continue the strategy of being Europe’s backstop.  On the current trajectory, Trump will have to choose and he’ll likely alter history.  (09 JAN 17)

Meanwhile, Putin has continued to meet goodwill with reciprocation, and there’s a good possibility that Trump and Putin will meet this year.  (They are apparently scheduled to speak by phone on Friday, 27 JAN.)  But that hasn’t stopped the Russian military from continuing to expand and make preparations for a potential war.  For instance, the Russian army will introduce the Ratnik-2 ‘future soldier’ systems to 50,000 troops this year.  That system “comprises around 40 protective and life support elements and allows a soldier to get continuously updated information about situation in the combat area. In addition, the Ratnik includes a self-contained heater, a backpack, an individual water filter, a gas mask and a medical kit.”

Russian troops will need those heaters as the Russian Ministry of Defense (MoD) recently announced plans to build over 100 facilities on existing military bases in the Arctic by the end of 2017.  The MoD also announced that it would be upgrading existing firing ranges in its Western Military District, which borders Europe.  And the last significant news to come out this week is that Putin encouraged the Russian defense industry to develop robotic weapons systems, and also ordered his defense chiefs to ensure that “the level of the provision of the Army and the Navy with modern armaments and military hardware should be no less than 70% by 2020.”  For all its recent advancements, much of the Russian military still uses outdated or obsolete equipment, at least by Western standards.  Rebuilding and modernizing a hollow Russian military has been one of Putin’s chief objectives during his tenure, and that’s no where more apparent than in his development of a force in the Arctic capable of challenging a US presence there.

China SITREP

On Tuesday, the Global Times reported that the Chinese military has deployed a Dongfeng-41 intercontinental ballistic missile (ICBM) system, which is capable of targeting the US mainland.

Some media claimed that the Chinese military intentionally revealed the Dongfeng-41 and connected it with the inauguration of US President Donald Trump. They think this is Beijing’s response to Trump’s provocative remarks on China.  …  It is logical that Beijing attaches particular importance to the Dongfeng-41 as a strategic deterrence tool.

This follows weeks of campaign promises from President Trump to get tough on China.  Rex Tillerson, nominee for Secretary of State, said two weeks ago in Senate testimony that the US must prevent China from militarizing illegally-occupied islands in the South China Sea, and should also block Chinese access to those islands.  The Chinese Communist Party will take this at face value, which means they will see this as just short of a declaration of war.

The Global Times, which often acts as a mouthpiece for the Chinese Communist Party, went on to say that US leaders have not given enough respect to China.

The US has not paid enough respect to China’s military. Senior US officials of the Asia-Pacific command frequently show their intention to flex their muscles with arrogance. The Trump team also took a flippant attitude toward China’s core interests after Trump’s election win. Enhancing communication and mutual understanding is not enough. China must procure a level of strategic military strength that will force the US to respect it.

It’s not known when exactly China deployed the DF-41, however, the ICBM is allegedly located in China’s Heilongjiang Province, near the Russian border.  On Thursday, an official spokesman for the Chinese military denied claims that a DF-41 had been deployed, saying that the photographs were just internet rumors.  Given the warnings in the Global Times, it would be prudent to say that if the DF-41 can be confirmed, that it’s likely aimed at American targets to deter US military action against China in the South China Sea.  A nuclear exchange is not imminent, and a nuclear war is not likely in the near-term, however, the war of words between US and Chinese leaders is escalating.

Another flare up occurred last week when President Trump implied that his administration may break with the One China policy, which says China and Taiwan are one country.  The China Daily recently wrote that, “If Trump is determined to use this gambit [breaking with the One China policy] in taking office, a period of fierce, damaging interactions will be unavoidable, as Beijing will have no choice but to take off the gloves.”  The Global Times ran another editorial that included, “The Chinese mainland will be prompted to speed up Taiwan reunification and mercilessly combat those who advocate Taiwan’s independence.”

This all is very troubling for a couple reasons.  The first is that if Trump is using Taiwan as part of his negotiations on trade and South China Sea policy, then he does run the risk of a failed negotiation that could lead to a trade war or worse.  The second reason is that if the Trump administration is truly serious about Taiwanese independence, then we certainly risk a military conflict with China.  This could cause China to move very quickly to invade Taiwan, which would happen in a matter of days.  A blitzkrieg across the Taiwan Strait will likely to be so fast that the US military is unable to prevent it. This week, the Chief of Naval Operations admitted, as has been previously reported, that the Navy is currently “stressed” to meet its fundamental global objectives; so substantial questions remain as to just how quickly the US Navy could prosecute a naval war in the South China Sea.  There is also a very real possibility that this conflict includes widespread cyber attacks against the US, and they may not be limited to just military targets.  Any attempt to violate Chinese national sovereignty, to include Taiwan and the South China Sea, is a solid red line.  Therefore, the likelihood of systems disruption to US critical infrastructure is high.

Trump administration confirms desire to work with Russian military

For months, Trump and his officials have promoted the idea that Russia is a natural ally in the fight against Islamic terror.  This week, White House Press Secretary Sean Spicer said that military cooperation with Russia could be possible.  “I think if there’s a way that we can combat ISIS with any country, whether it’s Russia or anyone else, and we have a shared national interest in that, sure, we’ll take it.”  But first Congress would have to remove a provision in the National Defense Authorization Act (NDAA) that prohibits most forms of military cooperation with Russia.  That amendment to the NDAA was put into place in 2013 after Russia’s annexation of Crimea, and Congress is likely to remain in staunch opposition of cart blanche military cooperation.  Because of its openness, the Trump administration runs the risk of being tied in knots should Russia continue their military activities in Ukraine, which could invite further sanctions being approved by Congress.

US STRATCOM: Know that we’re prepared for war

The Australian government recently announced plans to develop a Critical Infrastructure Centre tasked with protecting against sabotage and other potential attacks.  Specifically, the center will publish national security risk assessments and identify vulnerable segments of critical infrastructure.  Last year, two China-affiliated companies made bids to purchase Ausgrid, the nation’s largest electrical grid infrastructure company, both of which were rejected on the grounds of national security.  This comes at a time when China is enacting stricter currency controls and money is finding virtually any reason it can to leave China.  Infrastructure companies, mines, and other real estate have been primary targets for Chinese investors trying to get as much money out of the country as possible.  Knowing that a conflict with China could be on the horizon, this move by Australia is aimed at preventing Chinese exploitation against the Aussie homeland in case a war breaks out, and it’s another indicator that government leaders are already making preparations.

PIR3: What are the indicators of military, government, political, or social-related instability or violence that could lead to domestic unrest or conflict?

McChrystal: Get ready to trade your liberty for security

In a December interview with Prism, retired US Army General Stanley McChrystal spoke frankly about the future of liberty and security in the US.  “We have never faced this challenge before. Technology has created the problem because it empowers individuals to do unprecedentedly destructive things. On the other hand technology empowers society to track and monitor people as never before. We are beginning an era in which our ability to leverage technology to track people and control populations is going to create a lot of tension; I think we are going to see a lot more population control measures. We are going to have to give up a lot more of our precious civil rights than most of us imagine because we want security. In other countries that haven’t had the freedom that we have, they may not notice as much, but we are entering a period where we will have to make those choices. And the choices are likely to go in the way of surrendering civil rights for security.”

McChrystal, who previously led Joint Special Operations Command, is no stranger to making comments against civil liberties in the US.  For instance, last year he lent his support to domestic gun control measures in efforts to stop veteran suicide and inner city violence. But McChrystal does bring up a very good point that the future administration policies aren’t likely to be married to the idea of total privacy for its citizens.  For the past fifteen years since the USA PATRIOT Act, we’ve seen continued attacks on the privacy of US citizens and a slippery slope begin to form, so I think it’s significant that McChrystal describes a dystopian future where violations of civil rights are justified by threats to national security.

#BLM launches ‘unsafety check’ app

The Black Lives Matter movement launched a smartphone app called “Unsafety Check” which allows users to report feeling unsafe.  According to the app’s website, “Being Black in America is a national emergency. Black people are being attacked and murdered while doing day-to-day activities.”  That’s a very unfair, implied characterization of violence against blacks, as Department of Justice statistics show that 94 percent of black homicides come at the hands of other blacks.  But that doesn’t stop Black Lives Matter from pushing a narrative; one which creates resentment, fosters hostility towards whites, and encourages violent behavior to combat an inaccurate perception.

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

Inflation trends are another signal the Fed will raise interest rates

For the first time since the survey was first published in 2011, the Atlanta Business Inflation Expectations Survey has ticked above two percent for three consecutive quarters.  And long-term inflation expectations are at 2.8 percent, which signals that the Federal Reserve is likely to raise interest rates this year.  Additionally, the Consumer Price Index (CPI) — the tool used by the US Government to calculate cost of living — has steadily ticked upward from 1.6 percent in October to 2.1 percent in December.  As inflation rises — however those numbers are calculated by different organizations — the Federal Reserve is increasingly likely to raise interest rates to keep inflation steady at two percent.  In December, the Federal Reserve raised interest rates a quarter point, but those rates had stayed at zero percent for the past seven years, which has encouraged spending due to the low cost of borrowing money.  But as interest rates rise, money becomes more expensive to borrow, and so there’s a risk that decreases in consumer and corporate spending cause economic contraction, which could lead to a recession.

Economic/financial outlook

By far, the greatest short-term risk to the US economic and financial system is a trade war with China, followed by another global financial crisis.  I’ve reported that China has some substantial economic problems that are pointing to weakness, and they include large bubbles and massive debts which could result in the Chinese version of the 2008 recession experienced here in the States.  And despite several solid indicators exhibited last year that point to a recession — and remember that we are overdue — it’s very unlikely that we’re going to see one begin in the first half of 2017.  Now, I do add one caveat, that unforeseen events like a trade war or Chinese recession or European banking crisis or North Korean conflict could affect that timeline.  These are short-term threats, and right now it doesn’t look like a market correction — which is also overdue — would cause the US to spin into a recession.  Furthermore, the Business Cycle Index does not show a recession occurring for at least another 11 weeks.  But this comes as S&P Global reports that six states — Alaska, Louisiana, New Mexico, North Dakota, Oklahoma and Wyoming — are now entering a recession, entirely due to the decrease in energy prices.

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