Daily SITREP: Chinese “Gate-Crashers” Espionage Threat to U.S. Bases (Wed, 06 September 23) – Forward Observer

Daily SITREP: Chinese “Gate-Crashers” Espionage Threat to U.S. Bases (Wed, 06 September 23)


Good morning. Here’s your Daily SITREP for Wednesday, 06 September 2023.


  • READ TIME: 5 Minutes, 41 Seconds
  • Inside the Beltway
    • (1) Blame Game Strategies Take Shape Signaling Shutdown
    • (2) Biden Polling Among Minority Voters in the Dumps
  • Domestic INTSUM
    • (3) U.S. Banks Stash $3.3 Trillion in Cash, Prepare for Recession
    • (4) Waller: Economic Data Gives Federal Reserve the Greenlight to Raise Rates
    • (5) Chinese “Gate-Crashers” Espionage Threat to U.S. Bases
  • Global SITREP
    • (6) Saudi Arabia and Russia Extend Oil Supply Cuts Through 2023
    • (7) Burkina Faso Could Open Door to Russian, Chinese Protection
    • (8) China Continues to Skirt U.S. Tech Restrictions
    • (9) U.S. Says North Korea Will Pay for Supporting Russia; Pyongyang Says “Probably Not”


  • (1) BLAME GAME STRATEGIES TAKE SHAPE SIGNALING SHUTDOWN: Democrats in the Senate are working on a messaging campaign to blame House Republicans for a possible government shutdown on 01 October, framing House Freedom Caucus demands for a Continuing Resolution (CR) as “hostage taking.”
    • Rep. Bob Good (R-VA) said the Republican majority should pass all 12 appropriations bills and put the ball in the Senate Democrats’ court, previewing a messaging campaign by the House Freedom Caucus.
    • Why It Matters: With less than two weeks with both chambers of Congress in legislative session before the 01 October deadline, both Senate Democrats and House Freedom Caucus members are digging in their heels. The two factions forming messaging strategies on the shutdown suggests they expect the deadline to pass without a CR, and now the fight is over who will take the political blame. – R.C.
  • (2) BIDEN POLLING AMONG MINORITY VOTERS IN THE DUMPS: According to New York Times/Siena College polls, nonwhite voter support of President Biden has dropped from 70% to 53% since the 2020 election, and the drop spans every demographic and racial category.
    • Polling shows that nonwhite voters over 45 support President Biden by ten points more than nonwhite voters under 45.
    • Why It Matters: Some pundits and Republican primary candidate surrogates are saying a polling drop among nonwhite, especially black, voters for Biden and slight polling bumps for Trump could mean a racial voting realignment is happening. This is unlikely since, for example, black votes are cast through local and state political machines led by local and state political elites like Rep. Jim Clyburn (D-SC) and are largely directed through social institutions. This is more likely a sign of voter depression among nonwhite Democrat voters in 2024. – R.C. 


  • (3) U.S. BANKS STASH $3.3 TRILLION IN CASH, PREPARE FOR RECESSION: U.S. banks are holding $3.3 trillion in cash – nearly double the pre-COVID amount – to prepare for a slowing economy, more deposit outflows, and tighter liquidity rules that will impact mid-sized lenders.
    • Higher cash levels are a “logical response to a slowing economy,” especially as customers withdraw deposits to get higher returns on their savings, according to David Fanger, Senior Vice President at Moody’s rating agency.  
    • Cash levels at small and mid-sized lenders are up 12% compared to the start of 2023, and cash levels at the top 25 U.S. banks are up 3%.
    • Why It Matters: Regional banks are lending less to businesses to reduce risks and strengthen their balance sheets. Investment bank analysts expect this trend will continue through 2023, which means layoffs and business closures as small companies struggle with financing challenges. – H.B.
  • (4) WALLER: ECONOMIC DATA GIVES FEDERAL RESERVE THE GREENLIGHT TO RAISE RATES: Federal Reserve Governor Christopher Waller said on Tuesday that the latest economic data gives the Fed cover to raise rates again, if necessary, at its 19-20 September meeting.
    • Whether interest rates rise again “depends on the data. I mean, we have to wait and see if this inflation trend is continuing,” said Waller.   
    • The core Personal Consumption Expenditures price (PCE) index – the Fed’s favorite inflation measure – rose from 4.1% in June to 4.2% in July, and the August Consumer Price Index (CPI) data will be released before the Fed’s September meeting.
    • Why It Matters: Financial markets and some investment bank analysts don’t expect another interest rate hike in September. If the Federal Reserve does raise the Fed funds rate – the rate of overnight, interbank lending – then variable rates on credit cards and other short-term lending will also increase, putting more pressure on businesses and consumers. – H.B.
  • (5) CHINESE “GATE-CRASHERS” ESPIONAGE THREAT TO U.S. BASES: Biden officials said Chinese nationals gained access to military bases and sensitive sites over 100 times since 2019, often posing as tourists and even using specialized diving equipment.
    • House Intelligence Committee member Rep. Jason Crow (D-CO) said intrusions could be “falling through the cracks” since trespassing is prosecuted at the local and state level.
    • Why It Matters: Physical reconnaissance is only one part of Chinese targeting of U.S. military facilities, working hand-in-hand with cyberattacks and intrusions against critical infrastructure that feeds power and water into military bases at home and abroad. The Biden administration has not released an update on a frantic search for malicious Chinese code infecting critical infrastructure it began in July. At this point, U.S. military bases are likely compromised in the event of a conflict with China. – R.C.


  • (6) SAUDI ARABIA AND RUSSIA EXTEND OIL SUPPLY CUTS THROUGH 2023: Saudi Arabia and Russia will extend their combined, voluntary oil output cuts of 1.3 million barrels per day until the end of December.
    • Saudi Arabia and Russia will review their decisions each month to consider additional cuts or to increase production depending on market conditions, according to the Saudi Energy Ministry and Russian Deputy Prime Minister.  
    • Oil prices rose above $90 a barrel yesterday for the first time since November 2022.
    • Why It Matters: As of June 2023, the latest available data, 5.5% of U.S. oil imports come from Saudi Arabia. Only Canada and Mexico send more oil to the United States. As we warned earlier this year, we continue to believe the global supply of oil will fall faster than demand despite a coming recession, which will keep prices elevated. – H.B.
  • (7) BURKINA FASO COULD OPEN DOOR TO RUSSIAN, CHINESE PROTECTION: Military forces from the West African nation of Burkina Faso were attacked by Islamic extremists Monday, resulting in over 50 security forces and government militia personnel killed in action.
    • The attack on Monday was one of the largest attacks since a military faction seized power in a coup last September.
    • Western governments and human rights groups have accused the security forces of killing civilians believed to be associated with the jihadis since military coups forced Western military forces to leave the country in January 2022.
    • Why It Matters: Burkina Faso, as well as neighboring Mali and Niger, are facing serious threats to their security from Al Qaeda and ISIS-linked groups following years of ineffective Western counterterrorism operations. Despite those governments breaking with the West, Islamic militants continue to increase their influence and gain territory in West Africa. Burkina Faso, as well as Mali and Niger, could resort to inviting Chinese or Russian forces to quell the increase in Islamic extremist violence, opening a door to greater Eastern Alliance influence. – M.M.
  • (8) CHINA CONTINUES TO SKIRT U.S. TECH RESTRICTIONS: China plans to launch a state-backed investment fund to raise $40 billion for its semiconductor sector as the country redoubles efforts to match the U.S. and other rivals.
    • Leading the effort is the China Integrated Circuit Industry Investment Fund, also known as the Big Fund.
    • The main area of investment will be equipment for chip manufacturing.
    • Why It Matters: China is working around the U.S.-led restrictions regime on semiconductor technology transfer. The restrictions have been the focal point for U.S. diplomatic efforts over the past year. Expect China to circumvent chip restrictions successfully, advance its military upgrade program, and move ahead in semiconductor manufacturing to feed the global market. – M.M.
  • (9) U.S. SAYS NORTH KOREA WILL PAY FOR SUPPORTING RUSSIA; PYONGYANG SAYS “PROBABLY NOT”: U.S. national security adviser Jake Sullivan told reporters at the White House that providing weapons to Russia “is not going to reflect well on North Korea and they will pay a price for this in the international community.
    • Pyongyang is already under heavy sanctions for its nuclear weapons and ballistic missile programs.
    • Russian and North Korean leaders have recently pledged to increase their cooperation on trade and arms supplies.
    • Why It Matters: Pyongyang has no incentive to comply with U.S. demands regarding arms supplies to Russia. North Korea will likely increase its already substantive arms supplies to Russia following talks between Russian President Vladimir Putin and North Korean dictator Kim Jong Un. The increased illicit trade in arms and war materials between North Korea and Russia could prove to be of significant benefit to both countries and bullet-proof from Western diplomatic efforts to stop it. – M.M.


M.S. indicates analyst commentary from Mike Shelby

M.M. indicates analyst commentary from Max Morton

J.V.  indicates analyst commentary from Jared Vaughn

R.C. indicates analyst commentary from Robert Cook

H.B. indicates analyst commentary from Harrison Burge

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