Belarus forced an airliner transiting its airspace to land in Minsk in order to arrest a Belarusian citizen who was a passenger onboard. The citizen was Roman Protasevich, a prominent Belarusian journalist, who had chronicled the repression and corruption of Belarusian president Alexander Lukashenko’s regime.

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This is an important change that will almost certainly significantly increase uncertainty about the stability of the current global order.

For example, consider China, whose national security laws are very broadly defined, and which has extradition treaties with 59 other countries. Should China want to arrest a passenger (of whatever nationality) on a plane transiting the airspace of one of those countries, could it not ask that the plane be forced down to enable their arrest (and later extradition)? The key point is that the impact and precedent of Belarus’s actions potentially go far beyond the risk to passengers on planes transiting Russian or Chinese airspace.

What remains to be seen is whether other nations can impose sufficiently painful penalties on Belarus and Lukashenko that in the future other nations will hesitate to take such actions.

More broadly, an article in Foreign Affairs by Nate Schenkkan noted that, “Lukashenko’s methods were novel; state-sponsored hijackings are rare. But Pratasevich’s arrest represents just the most recent example of a trend toward transnational repression, as authoritarian regimes increasingly seek to apply the brutal tactics they use at home to exiles and members of diasporas elsewhere in the world” (“The Authoritarian Assault on Exiles”).

In another column on the incident, AEI’s Hal Brands asks, “Why do unaccountable rulers go to such lengths to grab a few annoying individuals, even when doing so puts their relations with democratic countries at risk? The brazenness of the strategy is, in fact, the point. Extraterritorial repression shows dissidents that they will never be safe, even in exile. It threatens the foreign support networks on which those challenging dictatorships often rely…

Lukashenko’s actions also “raise troubling omens for the future: Who says that authoritarian regimes will be content cracking down on dissent by their own citizens abroad? They won’t… The detention of Pratasevich is a small thing that highlights much bigger global changes” (“Belarus Hijacking Showed The Fraying Of America’s World”).

For a long time, the theory that the emergence of SARS-CoV-2 was the result of a leak from a lab doing “gain of function” studies on coronaviruses was dismissed many quarters because some of its strongest advocates were members of the Trump administration.
(e.g., see “The Groupthink That Produced the Lab Leak Failure Should Scare Liberals”, by Jonathan Chait and “The Lab-Leak Theory: Inside the Fight to Uncover COVID-19’s Origins”, by Katherine Eban).

Following the Biden administration ordering the US intelligence community to prepare a new analysis of it, and publication of analyses by respected science journalists that gave it more credence (e.g., “Origin of Covid – Follow the Clues’ by Nicholas Wade, which was covered in our May issue), the lab leak theory came roaring back to life in May.

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The initial reaction from Chinese journalists and “wolf warrior” diplomats was predictable, as they aggressively attacked the revived claims.

But then things got more interesting.

The BBC reported that in a speech to senior Communist Party officials, Xi Jinping said it was now “important to present an image of a "credible, loveable and respectable China”… "It is necessary to make friends, unite and win over the majority, and constantly expand the circle of friends [when it comes to] international public opinion," he was quoted as saying” (“Xi Jinping Calls for More Loveable Image for China in Bid to Make Friends”).

Why such a dramatic change? And why now?

Here are three hypotheses:

(1) China’s slow release of information about the seriousness of COVID-19 in the early months of 2020, and its later blocking of the WHO’s attempts to investigate the source of the virus has led to a strengthening of the de facto global alliance against the further expansion of China’s economic, military, and diplomatic power. China’s attempt to intimidate other nations through Wolf Warrior diplomacy has only made things worse.

(2) The external consequences of a conclusive finding that the virus escaped from a lab would likely be devastating, including demands for compensation and the filing of endless lawsuits seeking to attach overseas Chinese assets to obtain it (note that this has successfully been done in the case of some sovereign debt workouts).

(3) Most devastating of all would be the threat to Xi Jinping’s continued rule, and perhaps to the Chinese Communist Party itself.

All of these hypotheses must also be seen in the context of Xi’s calculations with respect to a possible Chinese attempt to forcibly take back Taiwan, for example through a prolonged blockade or sudden invasion.

The global resurgence of the lab leak hypothesis has very substantially raised the stakes for Xi Jinping should he attempt a move against Taiwan.

Xi must also wonder what secret intelligence the US and other allied nations have about the lab leak hypothesis that they have not – yet – released.

The critical uncertainty is whether these concerns will make Xi more or less cautious in the months ahead.

A number of other new analyses highlight why the global resurgence of the lab leak hypothesis is potentially so important given the increasingly close relationship between China and Russia and rising tensions over Taiwan.

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In “China and Russia’s Dangerous Convergence”, Andrea Kendall-Taylor and David Shullman observe that “On March 23, Chinese Foreign Minister Wang Yi and his Russian counterpart, Sergey Lavrov, sat down for an auspiciously timed meeting. The high-level talks came just a day after an unusually heated public exchange between senior U.S. and Chinese officials in Anchorage, Alaska, and in sharp contrast, the Chinese and Russian foreign ministers struck an amicable tone. Together, they rejected Western criticism of their human rights records and issued a joint statement offering an alternative vision for global governance.

“The meeting was noteworthy for more than its rhetoric, however.

“Within days of it, Russia began amassing troops along Ukraine’s border—the largest number since Moscow’s annexation of Crimea in 2014. Simultaneously, China began conducting highly publicized amphibious assault exercises and air incursions into Taiwan’s so-called air defense identification zone at the highest frequency in nearly 25 years.

“Chinese military moves have reignited concerns in Washington about the potential depth of Chinese- Russian coordination.

“For the United States, confronting these decidedly different adversaries will be a tall order, and the two countries will inevitably divide Washington’s attention, capabilities, and resources. The events of the last several weeks make clear that the administration of President Joe Biden will have difficulty managing Chinese behavior without addressing Moscow’s support for Beijing and that Washington must now calculate how its response to one adversary will shape the calculus of the other.

“The problems the two countries pose to Washington are distinct, but the convergence of their interests and the complementarity of their capabilities—military and otherwise—make their combined challenge to U.S. power greater than the sum of its parts.”

Writing in Foreign Affairs, Tufts Professor Michael Beckley lays out the case for why “America Is Not Ready for a War With China”.
In the same publication, Hoover and AEI scholar Oriana Skylar Mastro describes, “why Beijing might resort to force” to retake Taiwan.
She notes that while, “U.S. policymakers may hope that Beijing will balk at the potential costs of such aggression, there are many reasons to think it might not. Support for armed unification among the Chinese public and the military establishment is growing. Concern for international norms is subsiding. Many in Beijing also doubt that the United States has the military power to stop China from taking Taiwan—or their international clout to rally an effective coalition against China in the wake of Donald Trump’s presidency. Although a Chinese invasion of Taiwan may not be imminent, for the first time in three decades, it is time to take seriously the possibility that China could soon use force to end its almost century-long civil war.”

Back in the 1970s, I took a course taught by Henry Kissinger, shortly after he left government service. I’ve never forgotten his very pragmatic conception of what it takes for a nation to deter action by a potential adversary.

It basically comes down to the state of the nation’s power (military, diplomatic, economic, cultural), its political will to use it, and an adversary’s perception of those two factors.

Both China and the US are making those calculations today.

Two other new papers highlighted a critical point. As Elizabeth Economy notes, “Xi Jinping is in a race against time”, as “China’s society is fracturing in complex and challenging ways” (“China’s Inconvenient Truth”).

In “China: Rise or Demise?”, John Mueller writes that, “Rather than rising to anything that could be conceived to be “dominance,” China could decline into substantial economic stagnation.

“It faces many problems, including endemic (and perhaps intractable) corruption, environmental devastation, slowing growth, a rapidly aging population, enormous overproduction, increasing debt, and restive minorities in its west and in Hong Kong.

“At a time when it should be liberalizing its economy, Xi Jinping’s China increasingly restricts speech and privileges control by the antiquated and kleptocratic Communist Party over economic growth. And entrenched elites are well placed to block reform.”

See also, “China’s Potemkin Nation” by Milton Ezrati.

If Economy and Mueller are right in their prediction that, absent changes that currently seem impossible, China is headed for a substantial increase in domestic challenges, will this deter Xi from using military force in an attempt to take Taiwan, or provide an impetus to take such a risk sooner rather than later?

In terms of reference case/base rate data, history has many examples of leaders who used external aggression to deflect public attention from deteriorating domestic conditions. That said, we have no way of knowing how many leaders were deterred from external aggression because of deteriorating domestic condition, as it is impossible to measure something that didn’t happen.

New research from Pew highlighted partisan differences over the question of whether “Limiting the Power and Influence of China” should be a top US Foreign Policy Priority.

79% of Republicans and Independents who Lean Republican who get most of their information from conservative news outlets agreed. So did 55% of Republicans and Leaners who use a broader range of news outlets. Only 33% of Democrats and Leaners who get their news from liberal news outlets agreed with the statement, as did 42% those who use a broader range of news sources.

This poll raises a disturbing question as to whether Xi Jinping and the CCP might interpret its results as an indicator of a lack of US resolve should China attack Taiwan.

Coming close on the heals of the cyberattack on the Colonial Pipeline, a similar ransomware attack temporarily shut down operations of JBS, the world’s biggest meat processor, and in so doing threatened meat supplies in multiple countries.

The White House claimed that, as in the case of the Colonial Pipeline, the attack on JBS originated in Russia.

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In response, the US Department of Justice announced it would begin treating ransomware attacks as a form of terrorism, in line with growing demands from various analysts to take this step (e.g., see “Cyber Security as Counter-Terrorism: Seeking a Better Debate” by Handler et al, and “Deterring Attacks Against the Power Grid” by Narayanan et al from RAND).

The underlying logic is that ramsomware is a form of “cyber-coercion” that, as the Colonial and JBS attacks showed, can do significant damage to a nation state (e.g., see, “The Political Economy of Ransomware” by Jenny Jun).

In so far as treating ransomware as terrorism implies increased counterterror activities that go beyond the realm of law enforcement, this will likely lead to increased conflict between the US and Russia.

In response to tightening Western sanctions on Russia, Vladimir Putin promised a response that would be “asymmetric” and “tough.” It could be a coincidence that shortly thereafter reports emerged of attacks in Washington DC on members of the US intelligence community with the same type of directed energy weapon that has been implicated in previous attacks on US government employees in Cuba and other international locations.

Politico later ran a story titled, “Russian Spy Unit Suspected Of Directed-Energy Attacks On U.S. Personnel”.

And then came the ransomware attack on the Colonial Pipeline, which was at first blamed on DarkSide, a criminal hacking group believed to be based in Russia. That changed when DarkSide blamed the attack on unnamed “partners” who had used its hacking tools.

Clearly, Vladimir Putin seems to be making good on his threats. However, he is doing this at the same time that Russia’s relationship with China grows steadily closer.

This is creating an increasingly dangerous strategic challenge for the United States, and more broadly, NATO and Pacific allies like Japan, Australia, South Korea, and India.

“A Strategic Meltdown Over Ukraine Could Doom Taiwan” by Greg Lawson

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“Saber rattling once more is infecting the U.S.-Russia relationship with the Biden administration’s offer of “unwavering“ support for Ukraine against Russia. Several things need to be considered in order to avoid a grand strategic meltdown for the United States that includes losing out to China in Asia…

“If America is to confront Russia, it should be over something of existential importance. Tempting fate over Ukraine today seems highly risky with limited benefit for the United States and certainly is not of existential import…

“The United States, with Europe following along, has long sought to include Ukraine, a nation on Russia’s border, into NATO. This threat is behind a lot of the problems we have had with Russia during the post-Cold War era…

“Russia has long asserted that any effort for the West to bring Ukraine into its permanent orbit, through European Union or NATO membership, would be considered a major threat…

“By confronting Russia over Ukraine, we leave ourselves exposed to Chinese aggressions elsewhere. Getting bogged down in Europe would afford China an excellent opportunity to exploit our distraction. Already, many of our military leaders fear a Chinese invasion of Taiwan.

“Given China’s rise in the economically essential East Asia, its growing clout and constantly improving military, it is reasonable to conclude this is a more essential challenge for the United States than anything Russia is doing…

“This is all very dangerous and requires sober assessments by U.S. leaders. However, instead of sober assessments, we get President Joe Biden calling Putin a “killer“ and offering a possible blank check to Ukraine…

“Total strategic coherence is probably not attainable, but we should demand something better than the simplistic, moralistic, and ultimately naive thinking on display in Washington, DC right now. Our leaders risk sleepwalking into a grand strategic meltdown that they may not be able to fix.”

“What Deters, and Why”, by Mazarr et al from RAND

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“The challenge of deterring major conventional aggression is taking on renewed importance in an era of strategic competition. But the nature of that competition, which is primarily playing out below the threshold of major war (at least so far), has created a more immediate and persistent challenge for deterrence: the rise of gray zone aggression, as opposed to conventional interstate aggression.

“We define gray zone aggression as an integrated campaign to achieve political objectives while remaining below the threshold of outright warfare. Typically, such campaigns involve the gradual application of instruments of power to achieve incremental progress without triggering a decisive military response.

“To help establish how to deter gray zone aggression, we first identified its unique characteristics…

“Eight distinctive characteristics of gray zone activities are as follows:

1. Falls below the threshold for military response
2. Unfolds gradually
3. Is not attributable
4. Uses legal and political justifications
5. Threatens only secondary national interests
6. Has state sponsorship
7. Uses mostly nonmilitary tools
8. Exploits weaknesses and vulnerabilities in targeted countries and societies.

“In addition, we developed a framework for assessing the health of deterrence in the gray zone. Because many low-end (less-aggressive) gray zone activities cannot be deterred, we identified criteria for deterring high-end (more-aggressive) gray zone activities.

“Eight general categories of criteria for deterring high-end gray zone aggression are as follows:

1. Intensity of the aggressor’s motivations
2. Attribution of the aggressor’s role
3. Level of aggression
4. U.S. and partner alignment on unacceptable outcomes
5. U.S. and partner alignment on deterrent responses
6. U.S. and partner proportionate response capabilities
7. Regional and global support for deterrence
8. The aggressor’s expectation of meaningful responses.

Using the eight categories of criteria for deterring high-end gray zone aggression, we considered specific deterrence requirements that might apply to the three countries of focus in this analysis: China, Russia, and North Korea…

The three case studies outlined in the previous section point to the following implications for the U.S. Army:

• Maintaining a local presence and posture plays an important role in conveying likely responses to aggression, reaffirming their credibility. Having ground forces stationed in Japan, the Baltic states, and South Korea is a major signal of resolve that underscores the U.S. promise to respond to aggression at various points on the conflict spectrum.

• Clear statements of shared intent to respond to specific actions are critical. To the extent possible, the United States and its local partners should be as explicit as possible about the aggressive actions that will provoke a response.

• The leading edges of the U.S. response will be training, advising, and security assistance missions, as well as military sales missions. U.S. partners will be the first responders in all cases of gray zone aggression, and local exercises and partner engagements will be key to reinforcing these agreements and commitments. One or more of the Army security force assistance brigades could be specifically dedicated to gray zone partner assistance missions.

• Special forces capabilities can offer an important tailored policy option for gray zone contingencies. In cases where large-scale conventional force presence or even rotational operations may be infeasible for political or logistical reasons, the capabilities of special operations forces can provide an ongoing or intermittent capacity to signal U.S. engagement, enhance local partner capabilities, and build local awareness to improve gray zone responsiveness.

• Awareness is critical for response, magnifying the importance of intelligence, surveillance, and reconnaissance. Army intelligence, surveillance, and reconnaissance assets will be especially useful in detecting and anticipating potential gray zone aggression.

• The integration of multiple instruments of power is critical to deterrence in the gray zone. The Army would be well served to devote resources to liaison elements that would link its commands with the U.S. State Department, the National Security Council, and other government entities involved in gray zone deterrence. Building gray zone fusion centers inside Army regional commands could be another way to improve coordination.”

“The Emergence of Mafia-like Business Systems in China”, by Rithmire and Chen

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This paper is not only insightful about the nature of the “private sector” in China, but also provides new insight into important underlying sources of potential future instability in China.

The authors, “document the emergence of a particular kind of large, non-state business group that we argue is more akin to a mafia system than any standard definition of a firm...

“We argue that mafia-like business systems share organizational principles (plunder and obfuscation) and means of growth and survival (relations of mutual endangerment and manipulation of the financial system)…

“Mafia-like business systems are organized to plunder, or to facilitate resource capture and basic theft, mostly of social and public resources. Business groups in many places pursue the capture of rents, for example monopolies on licenses, pet projects, and favorable access to financial capital, but plunder is a step beyond rent-seeking because it involves theft…

“Secrecy and obfuscation underlie the organization of mafia-like business systems. As the above data show, many large systems have sprawling connections among firms and are tied to shareholders whose identities are obscured by design…

“Mutual endangerment is a pattern of relations [between business leaders and political elites] by which participants hold one another hostage with mutually incriminating information…

“These mafia-like business systems are not actual mafia—i.e. they do not threaten and use violence or challenge the state’s monopoly on the use of force—but the widespread extortion, clandestine activity, and use of political threats (of exposure) make them a close analogy…

“Mafia-like business systems arose in particular with the expansion of financial markets in China, as regulatory lacunae permitted and political relationships protected racketeering and extortion in equity markets and China’s banking system…

“As the Chinese financial system has expanded to include more non-state firms in both equity (stock exchanges) and debt markets (bank borrowings and corporate bonds), plunder has manifest in financial schemes that have shaken the stability of China’s economy and public trust in firms and markets. And as Chinese firms have gone global in the last decade or so, so have schemes of mafia-like system firms.

Understanding the particular moral economy that underlies mafia-like business systems and their interactions with the state challenges methodological foundations of research on China’s political economy and helps explain recent conflict between high-profile business people and the state…

“Mafia-like business systems are products of acrimonious relationships between business and the state, not friendly ones; certainly, political and business elites have found common cause in mutual enrichment through privileged access to public resources, but these elements of the private sector can indeed pose a significant threat to the regime’s stability in a number of ways, such as revealing compromising information, generating financial or economic instability, capital flight, defection, and migration.”

“Inflicting Surprise: Gaining Competitive Advantage in Great Power Conflicts” by Mark Cancian from CSIS

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This is a fascinating read. Cancian begins by identifying “seven themes that emerge from the literature and historical experience of surprise:

1. Intelligence and technology can create opportunities. Intelligence helps identify adversary vulnerabilities, and technology generates new systems that can produce unexpected effects.

2. Secrecy is vital. Although in peacetime democracies frequently leak military information with a political dimension, the historical experience shows that democracies can safeguard wartime operational secrets.

3. Deception is real. It does not need to fool an adversary completely, just induce enough uncertainty that an adversary’s actions are delayed or muted. It does require planning, effort, and secrecy.

4. Doing the unexpected or non-standard is often the most powerful generator of surprise. This is one mechanism that allows surprise to occur in the modern era when transparency from public media and enhanced reconnaissance capabilities make so much information known.

5. Generating surprise is often uncomfortable for the perpetrator. It often requires doing the unorthodox and changing customary practices. Hence, generating surprise clashes with the bureaucratic routines and norms of individuals and organizations. It is an aggressive and transgressive act.

6. Effects are temporary. Victims immediately begin to develop countermeasures. Attackers, therefore, need to maximize effects within a narrow window of opportunity. For example, new weapons should not have limited battlefield tests to see how they work. That sacrifices surprise…First-time use on the battlefield should be massive to maximize effect. Initial success needs to be exploited to achieve longer-lasting strategic results.

7. Successful surprise rarely wins wars alone. Many of the iconic examples of successful surprise— Germany’s attack on the Soviet Union in 1941, Japan’s attack on Pearl Harbor, the U.S. invasion of Iraq in 2003—ended in defeat. Thinking about “what comes next,” which often includes a diplomatic initiative, is vital to ultimate success. This requires the strategic self-discipline to compromise.

“However, “victory fever”—the belief that even more is achievable—and the desire for vengeance often lead to expanded objectives and overreach, which undermines diplomatic solutions.”

Cancian also identifies Chinese and Russian vulnerabilities that could be exploited through the use of surprise:

“Inflicting surprise does not occur in a vacuum but is a tool used against specific adversaries. In discussing potential great power conflicts, those adversaries would be China and Russia. Both have great strengths but also great vulnerabilities. These vulnerabilities provide opportunities for the United States…

For China, Cancian identifies political/economic vulnerabilities and areas of military/ diplomatic vulnerability:

“(1) The need for domestic stability to ensure legitimacy, (2) China’s Hancentric orientation, which serves to marginalizes minorities, (3) a social compact that trades political freedom for economic progress, (4) anti-corruption campaigns that produce disaffected elites,(5) a lack of allies because of threatening and abusive behavior, (6) a lack of recent combat experience in the People’s Liberation Army (PLA), (7) a weak maritime situation, (8) reliance on energy imports and sea lines of communication, (9) limited long-range capabilities to project force beyond the first island chain, (10) weaknesses in the enlisted personnel system, and (11) the centralization of decisionmaking.”

Cancian also identifies Russian vulnerabilities: “(1) the Russian people’s dissatisfaction with the regime, (2) weak governance stemming from cronyism, (3) economic dependence on fossil fuels, (4) instability on the periphery, (5) a lack of population east of the Urals, (6) weak alliances, (7) weak cyber defenses, and (8) narrow military modernization.”

The Taliban launched a major offensive in Afghanistan, as the first American troops began their withdrawal ahead of the Biden Administration’s 11 September deadline for completing the pullout.

If you are old enough, as I am, to remember the events of April 1975 – the fall of Saigon, the flight of Vietnamese “boat people”, and the angst and anger this triggered in the United States – you have a good idea of what may be coming to your video screens this autumn.

Critically, many people don’t remember this; a substantial uncertainty shock is therefore very likely.

One of the major petroleum products pipelines in the United States (the Colonial Pipeline system) was shot down by a ransomware attack.

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After the FBI identified the Eastern European cybercriminal group DarkSide as being behind the attack, the latter told the Financial Times that, “it was “apolitical” and attempted to deflect blame for the attack on to “partners” that had used its ransomware technology.”

This raise two critical issues: (1) Were the “partners” a nation state actor? And what are the implications if this is the case?

And (2) does this attack represent the “Mountbatten Moment” for ransomware and similar attacks on critical infrastructure?

After Lord Mountatten was killed by the IRA in 1979, UK government policy fundamentally changed, and thereafter took a much more “kinetic” (albeit covert) approach to the IRA and associated groups.

Could the Colonial Pipeline attack be a similar turning point?
How enthusiastic will criminal hackers be in the future if they know that by pushing the “execute” key, they could put a (literal) target on their back?

It is very likely that, despite the absence of press releases, we have crossed the Rubicon this week.

Russia is massing troops on the Ukrainian border, and uncertainty is high about whether another invasion is imminent.

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Seven years after Russia invaded the Crimea, Politico notes that “the same factors that led up to [Putin’s previous invasion of the Ukraine) are in place again, including domestic protests [in Russia], a struggling economy, and a desire for glory” (“Could Putin Launch Another Invasion?”).

The Financial Times observes that, “after eras of prosperity and patriotism, Russia’s president is now ramping up repression to hold on to power” (“The Brutal Third Act of Vladimir Putin”, by Henry Foy).

Critically, a 2016 RAND analysis wargamed a Russian invasion of the Baltic countries (Estonia, Lithuania, and Latvia), which could be a logical extension of or complement to a Russian invasion of the Ukraine. RAND’s conclusion was unambiguous: “As presently postured, NATO cannot successfully defend the territory of its most exposed members…

“Across multiple games using a wide range of expert participants in and out of uniform playing both sides, the longest it has taken Russian forces to reach the outskirts of the Estonian and/or Latvian capitals of Tallinn and Riga, respectively, is 60 hours.
“Such a rapid defeat would leave NATO with a limited number of options, all bad.”

Clearly, a simultaneous Russian attack on Ukraine and the Baltics and Chinese move on Taiwan (and perhaps an Iranian move in the Persian Gulf region) would confront the West with a very difficult choice between a devastating strategic defeat and all the risks that accompany escalation of a conflict on multiple fronts.

Unfortunately, the probability of such a scenario, while still very unlikely (5% - 20%), is increasing.

There is an increasing probability that next spring’s French Presidential election could be won by Marine Le Pen, leader of the right wing populist Rassemblement National party.

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In “French Politics: Macro Faces Test of Character as Le Pen’s Popularity Grows”, the Financial Times Victor Mallet notes that “The arguments among French politicians [about a possible Le Pen victory], have become so fevered that they have sometimes even displaced the deadly Covid-19 pandemic as a topic of debate. [They] suggest there is at least the possibility of a political shock in France akin to Brexit and Trump.

“’There are lots of ingredients that are the same,’ says Chloé Morin, an analyst at the Fondation Jean-Jaurès think-tank. ‘A rejection of elites. Feelings of injustice. The desire to take control of one’s country’s destiny’.”

“Climate, Violence, And Honduran Migration To The United States” by Bermeo and Leblang from Brookings

“Honduras is one of the poorest countries in the Western hemisphere. It has experienced one of the world’s highest homicide rates, with multiple forms of violence linked to drug trafficking groups and gangs. Over the last decade, the country has suffered from repeated droughts linked to climate change that have increased food insecurity, particularly for subsistence farmers in the Dry Corridor of Central America, where some areas have experienced seasonal crop loss greater than 70 percent.”

As predicted in many studies, this combination of climate shock and the breakdown of civil order has produced an exponential increase in emigration to the United States.

The authors find that
“apprehensions of family units from Honduras illegally arriving at the U.S. southern border grew between 2012 and 2019, from 513 to 188,368.”

China and Iran signed a 25-year cooperation agreement, further formalizing the increasingly close de-facto alliance that is emerging between China, Russia, and Iran.

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As Amin Saikal from the Australian Strategic Policy Institute notes, “The agreement is the culmination of growing economic, trade and military ties between the two countries since the advent of the Iranian Islamic regime following the revolutionary overthrow of the Shah’s pro-Western monarchy 41 years ago.

“Although the contents of the deal haven’t been fully disclosed, it will certainly involve massive Chinese investment in Iran’s infrastructural, industrial, economic and petrochemical sectors. It will also strengthen military, intelligence and counterterrorism cooperation, and links Iran substantially to China’s Belt and Road Initiative as an instrument of global influence…

“Underpinning this exponential elevation of relations is the two sides’ mutual interest in countering the US and its allies.

“Deeper and wider cooperation between China and Iran, especially when considered in the context of their close ties with Russia and the trio’s adversarial relations with the US, carries a strong potential for changing the regional strategic landscape.”

“China’s Domestic-Security Agencies are Undergoing A Massive Purge” in The Economist

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The timing of this is ominous. Why would an authoritarian leader decide to purge their domestic security and repression organizations? Very likely because said leader expects an increase in domestic opposition, say because of deteriorating economic conditions (and growing middle class frustration) and/or because of potential opposition to the leaders’ international moves, and the casualties and economic disruption they may trigger.

As the Economist notes, “For many members of China’s 3m-strong domestic-security forces, these must be worrying times. On February 27th the Communist Party declared the start of a long-expected purge of their ranks. It will involve, say officials, “turning the knife-blade inward” to gouge out those deemed corrupt or insufficiently loyal to the party and its leader, Xi Jinping. More than eight years into Mr Xi’s iron rule, the party appears to wonder whether a vital bulwark of its power is entirely trustworthy.”

“Did China Cross A New Red Line In Cyberspace?” by Montgomery and Logan in The Guardian

SUPRRISE

“Did China cause the blackouts in Mumbai last year? Nearly six months later, the answer is still unclear, but if recent reports that a Chinese cyber operation bears partial responsibility are accurate, Beijing just signalled a willingness to use its cyber power to target civilian lifeline infrastructure during a crisis. Even more worrying, the hackers used hard-to control cyberattack tools in a destructive manner against a nuclear-armed country, India.

“In a report last month, threat analysts at the cybersecurity firm Recorded Future detailed their discovery of China’s systematic penetration of India’s electricity infrastructure.

“Given the event’s concurrence with the border skirmishes in the disputed area of Galwan Valley, the Chinese hackers appear to have targeted nodes of India’s electric grid to demonstrate Beijing’s capabilities and to convince New Delhi that it should not oppose China’s claims over the area.

“Without analysis of the malware or confirmation from Indian officials, we will not know if malware was responsible for the Mumbai blackout, if the outage was caused by operator error while responding to the malware, or if the outage was some kind of combination of these.

“But the possibility that Chinese hackers planted malware in India’s grid that has no economic or espionage value suggests that Beijing had malicious intent, aiming either to coerce New Delhi by threatening the country’s critical infrastructure or to activate the malware and cripple India’s strategic capabilities.”

"The United States, China, and Taiwan: A Strategy to Prevent War", by Blackwill and Zelikow

“A Taiwan Crisis May Mark the End of the American Empire” by Niall Ferguson

“Cyberterrorism Tops List of 11 Potential Threats to US”, by Gallup

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Both of these are must-read documents.

Blackwill and Zelikow describe in detail the devastating economic and financial consequences of a war over Taiwan, and present four very detailed strategy options for either deterring or delaying it.

Niall Ferguson describes the potentially devastating foreign policy and defense consequences for the US, and the broader Western Alliance if it suffers a defeat in a war with China over Taiwan.

As Blackwill and Zelikow describe, a rational analysis would likely conclude that for Xi Jinping and the CCP, the foreign policy and defense benefits of defeating the US would not be worth the devastating economic and financial cost. Yet the same argument was made in the years before the First World War.

Thucydides said there are three causes of war: honor, fear, and national interest. The historian Donald Kagan has argued that honor is a far more common cause than national interest. And Xi Jinping's goal of the "Great Rejuvenation of China" is first and foremost about honor.

For investors to believe that the rational cost/benefit analysis of national interest described by Blackwill and Zelikow will deter war risks engaging in the "Mirror Imaging" (interpreting another nation's actions through your own frame of reference) which throughout history has been a repeated cause of intelligence and military surprises.

If and when a conflict between the US and China over Taiwan breaks out, the shock to markets and economies is likely to be severe. For example, according to Gallup’s most recent polling, just 30% of Americans regard “the conflict between China and Taiwan” as a critical threat to US vital interests.

“The 2020s Tri-Service Modernization Crunch”, by Eaglen and Coyne from AEI

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Developing strategy options is the easy part. Actually implementing them via new investments and changes to organizational capabilities is always much harder.

This exhaustive new analysis from AEI shows that this is just as true for militaries as it is for private sector companies.

As leading industry journal Defense One notes, “years of kicking the can on modernization are finally coming due for the Pentagon at a time when the Biden administration faces major pressures to draw down the defense budget, creating a nasty situation across all three of the military services.

“That’s the warning of a new report from Mackenzie Eaglen and Hallie Coyne of the American Enterprise Institute, who says the DoD had best prepare for the reality of the “Terrible ’20s” ahead.

“Unlike many think-tank reports, the authors say up front that they will not offer a list of programs to cut. Instead, the report goes deep on the history, current status and future plans for a myriad of Army, Navy, Marine and Air Force programs to provide an “unvarnished” view for the Biden administration about modernization challenges ahead, and how the military has ended up in its current predicament.

“Policymakers and uniformed leaders are sleepwalking into strategic insolvency. If no action is taken, something will break and do so spectacularly,” the authors write.

“There is no easy way out of this fiscal bind for the US military. Rather, now is the time for effective mitigation strategies, urgent worst-case scenario planning, hard choices, and political leadership.”

“Ransomware: A Perfect Storm”, by Sullivan and Muir from the Royal United Services Institute

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This paper highlights how ransomware attacks are having a growing negative impact on businesses and organisations across the globe, resulting in high levels of cost and disruption.

The authors, “explore the methods, impact and mitigation of ransomware attacks in detail. Case studies reveal the success and popularity of ‘double extortion’ ransomware attacks which include data theft.

“The research also describes the range of attack vectors and exposed attack surface available to ransomware operators and reveals how different criminal ransomware operators collaborate and learn from each other.

“In the context of a global pandemic, the paper shows how cyber criminals continue to exploit victims and cause disruption with impunity.”

The National Security Commission on Artificial Intelligence issued its final report

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In this critical new report, the commission begins by noting that, ‘“No comfortable historical reference captures the impact of artificial intelligence (AI) on national security. AI is not a single technology breakthrough, like a bat-wing stealth bomber. The race for AI supremacy is not like the space race to the moon. AI is not even comparable to a general-purpose technology like electricity.

“However, what Thomas Edison said of electricity encapsulates the AI future: “It is a field of fields … it holds the secrets which will reorganize the life of the world.” Edison’s astounding assessment came from humility. All that he discovered was “very little in comparison with the possibilities that appear.”

“The National Security Commission on Artificial Intelligence (NSCAI) humbly acknowledges how much remains to be discovered about AI and its future applications. Nevertheless, we know enough about AI today to begin with two convictions.

“First, the rapidly improving ability of computer systems to solve problems and to perform tasks that would otherwise require human intelligence—and in some instances exceed human performance—is world altering… AI is also the quintessential “dual-use” technology. The ability of a machine to perceive, evaluate, and act more quickly and accurately than a human represents a competitive advantage in any field—civilian or military. AI technologies will be a source of enormous power for the companies and countries that harness them…

“Second, AI is expanding the window of vulnerability the United States has already entered. For the first time since World War II, America’s technological predominance—the backbone of its economic and military power—is under threat.

“China possesses the might, talent, and ambition to surpass the United States as the world’s leader in AI in the next decade if current trends do not change.

“Simultaneously, AI is deepening the threat posed by cyber attacks and disinformation campaigns that Russia, China, and others are using to infiltrate our society, steal our data, and interfere in our democracy. The limited uses of AI-enabled attacks to date represent the tip of the iceberg.”

“China Targets Rare Earth Export Curbs to Hobble US Defence Industry”, by Yu and Sevastopulo in the Financial Times

“China is exploring limiting the export of rare earth minerals that are crucial for the manufacture of American F-35 fighter jets and other sophisticated weaponry, according to people involved in a government consultation.

“The Ministry of Industry and Information Technology last month proposed draft controls on the production and export of 17 rare earth minerals in China, which controls about 80 per cent of global supply.

“Industry executives said government officials had asked them how badly companies in the US and Europe, including defence contractors, would be affected if China restricted rare earth exports during a bilateral dispute…

“Beijing’s control of rare earths threatens to become a new source of friction with Washington but some warn any aggressive moves by China could backfire by prompting rivals to develop their own production capacity.”

In fact, this has already been happening, following China’s temporary ban on rare earth exports to Japan during the 2010 East China Sea crisis. For example, in 2013 the United States created the Industrial Base Analysis and Sustainment program to ensure adequate supplies of rare earth materials for defense needs. So it is uncertain how effective a Chinese ban on rare earths exports to the US would be.

See also: “Australia Has a Key Role to Play in Reducing China’s Rare Earth Dominance”, by Page and Coyne;

“America Will Only Win When China’s Regime Fails”, by Cooper and Brands

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“Washington has accepted the reality of competition [with China] without identifying a theory of victory…There is no lack of suggestions, but U.S. leaders have yet to articulate how this competition will lead to something other than unending tension and danger…

“Advocates of competitive coexistence believe the United States can eventually change the minds of Chinese leaders, convincing them not to seek regional preeminence and upset the U.S.-led international order in Asia and beyond. The hope is that if the United States demonstrates, over a period of years, that it can maintain a favorable balance of power in the Western Pacific, preserve its key economic and technological advantages, and rally overlapping state coalitions to uphold key rules and norms, then Beijing might adopt less bellicose (and self-defeating) policies…

“The goal, whether codified by a diplomatic settlement or simply arrived at implicitly, would be a more stable relationship where the danger of conflict is reduced, the United States’ key strategic interests are preserved, and areas of potential cooperation gradually expand…

“The biggest problem with this approach: It may not reflect the reality of the struggle in which the United States is engaged.

“Competitive coexistence holds that the rivalry between the United States and China is severe but not immutable. In other words, a powerful Communist Party-led China can eventually be reconciled to a world order where the United States, its allies and partners, and its democratic values remain predominant.

“Yet what if that belief is illusory because the rivalry is actually more fundamental? What if the Chinese Communist Party desires a more thoroughgoing revision of the international system, in part because it perceives a system led by a democratic superpower and premised on the superiority of democratic values as an existential threat to its own survival? …

“The Chinese Communist Party is governed by a fundamentally zero-sum mindset. This bodes ill for the prospect of a long-term strategic accommodation…

“In short, the United States needs to reckon with the possibility that acute Sino-American antagonism will persist so long as a powerful China is governed by the Chinese Communist Party.

“If this is the case, then it may be naive to think that even a long period of vigorous competition by the United States would bring about a mellowing of the Chinese Communist Party. Instead, rivalry could persist in a fairly intense form until the party loses its ability to prosecute it. This could come about due to either a decline in Chinese power or a fundamental change in the nature of the ruling regime. In this scenario, the United States’ theory of victory begins to look similar to that offered by containment during the Cold War…

“According to this regime-failure theory, what will ultimately end the Sino-American competition is the accumulated effect of the profound internal stresses China faces combined with consistent external resistance…

“It is difficult to say with certainty which theory of victory is analytically superior, but the balance of evidence supports the more pessimistic theory discussed here—that competition should be seen as a bridge to long-term changes in Chinese power or in the way China is governed. That’s a relatively dark view of where Sino-American competition may be heading. Yet if the rivalry is as fundamental as Chinese Communist Party leaders seem to think and if Chinese ambitions are as extensive as a growing number of Sinologists have documented, then that view may also be the most realistic.”

“The Globalization Of Refugee Flows”, by Devictor et al

“This paper analyzes the spatial distribution of refugees over 1987-2017 and establishes several stylized facts about refugees today compared with past decades. Refugees still predominantly reside in developing countries neighboring their country of origin. However, compared to past decades, refugees today (i) travel longer distances, (ii) are less likely to seek protection in a neighboring country, (iii) are less geographically concentrated, and (iv) are more likely to reside in a high-income OECD country.”

US Department of Defense, FY2020 Industrial Capabilities Report to Congress

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This new report paints a stunning picture of how much the use industrial manufacturing base has declined, and the dangers its weakness now poses to national security.

“America’s defense industrial base was once the wonder of the free world, constituting a so-called ‘military-industrial complex’ that, regardless of criticism, was the model for, and envy of, ever other country – and the mainstay of peace and freedom for two generations after World War II.

“Today, however, that base faces problems that necessitate continued and accelerated national focus over the coming decade, and that cannot be solved by assuming that advanced technologies like autonomous systems and artificial intelligence (AI) and 5G and quantum will wave those challenges away, and magically preserve American leadership.

“On the contrary, those advanced technologies themselves rely on a manufacturing complex whose capability and capacity will have to be trusted and secure to protect the Pentagon’s most vital supply chains. These include microelectronics, space, cyber, nuclear, and hypersonics, as well as the more conventional technologies that make up our legacy defense equipment.

“Unless the industrial and manufacturing base that develops and builds those goods modernizes and adjusts to the world’s new geopolitical and economic realities, America will face a growing and likely permanent national security deficit.”

“Robustness of The International Oil Trade Network Under Targeted Attacks to Economies”, by Wei, Xie, and Zhou from the East China University of Science and Technology, in Shanghai PRC

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The authors conclude that the international oil trading network has grown much more fragile since 2003, and is more easily disrupted by targeted attacks.

“Navigating the Deepening Russia-China Partnership” by Andrea Kendall-Taylor and David Shullman from the Center for a New American Security

“The most concerning — and least understood — aspect of the Russia-China partnership is the synergy their actions will generate. Analysts understand well the challenges that Russia and China each pose to the United States. But little thought has been given to how their actions will combine, amplifying the impact of both actors. As this report highlights, the impact of Russia- China alignment is likely to be far greater than the sum of its parts, putting U.S. interests at risk globally…

“Their cooperation accelerates their efforts to erode U.S. military advantages — a dynamic that is especially problematic for U.S. strategic competition with China in the Indo-Pacific.”

“Reskilling China”, by the McKinsey Global Institute

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“Three decades of Chinese educational reform have created a workforce oriented toward an industrial economy.
“Now the challenge is to transform China’s talent-development model to develop the skills needed in an innovative, digitized, postindustrial economy...

“Up to one-third of global occupational and skills transitions may occur in China. By 2030, up to 220 million Chinese workers, or 30 percent of the workforce, may need to transition between occupations due to automation.”

This represents an enormous challenge for China, considering the failure of many, if not most, largescale reskilling programs thus far attempted by developed Western countries.
It is very likely that China will also struggle to meet it, which is almost certain to increase domestic conflict and dissatisfaction with Xi Jinping and other government leaders.

“The World Turned Upside Down: America, China, and the Struggle for Global Leadership” by Clyde Prestowitz

Prestowitz has worked in or advised Republican administrations since Ronald Reagan’s presidency. This book overall is worth a read; however, it also contains what may go down in history as the pithiest summary of how “constructive engagement” with gave way to the new Cold War we’re facing today:

“American businesses are often thinking of what is best for their business [in China] in circumstances under which Beijing has them by the balls while they, by dint of their legally unlimited political donations to US politicians, have Washington by the balls.”

China passed a new law authorizing its Coast Guard to use force against ships operating in its claimed territorial waters.

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This increases the chances of an armed confrontation in the East or South China Sea.

As Ryan Martinson notes in “Gauging the Real Risks of China’s New Coast Guard Law”, “Many have focused on the law’s use-of-force provisions. In the past, the China Coast Guard has employed a wide range of coercive tactics to achieve Beijing’s strategic and operational objectives… However, to date it has avoided using armed force against foreigners…

“The new law signals that that could change. Article 47 authorises armed China Coast Guard personnel to forcibly board noncompliant foreign vessels ‘illegally’ engaged in economic activities in Chinese-claimed waters. Article 48 allows the use of shipborne weapons (that is, deck guns) incases where coastguard forces face attack by weapons and ‘other dangerous methods’ — which could mean anything.

“Even more ambiguous, Article 22 allows the coastguard to employ ‘all means necessary including the use of force’ to stop foreigners found infringing Chinese ‘sovereignty, sovereign rights and jurisdictional rights.’

“While disturbing, the use-of-force provisions are not the most worrisome elements in the new law. Rather, it is the ambiguous geographic scope of the law’s application: China’s ‘jurisdictional waters’. The draft law only vaguely defined the term (Article 74). In the final version, passed on 22 January, that content was removed, leaving no definition at all.

“However, a close reading of authoritative Chinese sources reveals that Beijing claims jurisdiction over 3 million square kilometres of maritime space, often called China’s ‘blue national territory’.

“This comprises the Bohai Gulf; a large section of the Yellow Sea; the East China Sea as fareast as the Okinawa Trough, including waters around the disputed Senkaku/Diaoyu Islands; and all the waters within the ‘nine-dash line’ in the South China Sea. By Beijing’s own reckoning, over half of this space is contested by other countries.”

Biden publicly warned China it will face “extreme competition from the United States”, and China warned Biden “not to meddle” in Hong Kong and Xinjiang.
Chinese warplanes ran a live simulated attack against the USS Theodore Roosevelt Carrier Task Group while it was operating near Taiwan.

Early signs indicate that the US-China conflict will continue to intensify under the Biden Administration.

The return of Alex Navalny to Russia after treatment in Germany for his attempted murder via novichok nerve agent poisoning, was followed by a show trial and his sentence to a jail term.

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In “Alexei Navalny is a real threat to Vladimir Putin”, the Financial Times’ Gideon Rachman noted that, “the fragility of the Russian regime is becoming clear… Through his bravery, determination and investigative flair, Mr. Navalny has galvanised the Russian opposition. He has survived an attempt to kill him and returned to Russia to face arrest, imprisonment and, possibly, death. His example inspired mass protests across the country over the weekend.

“Whether Mr. Navalny ultimately succeeds or fails, he now represents the most dangerous threat that Mr. Putin has faced in the two decades since he took power.”

Comparing the recent demonstrations against the Kremlin to those he has seen in the past, Rachman observes that, “this time feels different. The current protests have taken place in more than 100 cities across Russia — from Vladivostok on the Pacific coast to Irkutsk in Siberia and Kazan in Tatarstan.

“Experienced observers say that the level of violence used against protesters is increasing: the police have swung their batons with more abandon, and some demonstrators have fought back. In 2012, the opposition did not have a clear leader. Now it does.”

Writing in the FT (“Vladimir Putin’s Russia Is Destabilising Itself From Within”), Tatiana Stanovaya observes that, “The Navalny imbroglio is a microcosm of the problems that have enveloped the Kremlin in recent years. Since the 2014 annexation of Crimea and breakdown in relations with the west, Putin has been consumed by geopolitics while fobbing off governing to a group of faceless technocrats.

“Putin’s original success was rooted in his regime’s ability to deliver steady improvements in living standards while inspiring Russians with exploits on the world stage. Now the regime is ruling largely by scaring people and fostering the impression that Mother Russia is once again a besieged fortress”…

“The drama surrounding Navalny’s poisoning was the fuse, but the fire it lit is being fed by the public’s fatigue and frustration with the Putin regime and its inability to change. By refusing any dialogue with its opponents and the public, the regime all but guarantees that social tensions will morph into political protest. Either the regime must find the wisdom to be more flexible, or it will become an unambiguously repressive state. The latest events set Russia firmly on track to the latter destination.”

Tensions continued build along a number of European Union fault lines.

While initially a leader in the fight against COVID, the EU has fallen badly behind with vaccination, with fingers pointed at both national governments and EU bureaucrats in Brussels. Perhaps more galling is the fact that the post-Brexit UK vaccination program has emerged as a world leader.

There is increasing frustration with slow disbursements by the European Recovery (i.e. fiscal stimulus) Fund, with French Finance Minister Bruno Le Maire that latest to complain.

In contrast, former German Finance Minister Wolfgang Schauble (and president of the Bundestag) complained about the slow implementation of structural reforms in many nations that were a condition of receiving European Recovery Fund fiscal support.

In Italy, Prime Minister Giuseppe Conte resigned as recriminations increased over the government’s actions to address the pandemic and its economic consequences, including plans for economic reforms and how to spend money received from the European Recovery Fund. Conte was replaced by Mario Draghi, former head of the European Central Bank.

Finally, the EU signed a trade treaty with China that has come under rising criticism (e.g., see the Financial Times story, “The EU’s Quixotic Plan To Shame China Over Labour Rights: The idea that tougher demands by themselves will force substantive about turn from Beijing is fanciful”).

An economically and politically weakening EU is less able to effectively resist Russia’s potential actions in the Baltics and Eastern Europe. This is particularly dangerous as such actions will become more likely as domestic conditions deteriorate in Russian, and threaten Putin’s continued rule.

A weakening EU also raises the probability of an Italian sovereign debt crisis, which would be far worse than the one that occurred in Greece. If it happens, and Italian crisis will almost certainly threaten both the stability of many EU banks (which have bought Italian bonds), and the future of the Euro (which prevents Italy from devaluing its currency to stimulate exports). In the worst case, Italy could pursue its own version of Brexit.

The US announced detection of a widespread penetration of US government information systems, via a common network management software program purchased from a company called Solar Winds.

The Financial Times reported that, “US cyber officials warned that the massive espionage campaign unearthed this week posed a “grave risk” to the government, critical infrastructure and private sector.”

The FT also noted that, “The massive hack has shone a light on the vulnerability of US government agencies and many of the world’s biggest companies to cyber intrusions via the long tail of vendors they rely on for IT services. SolarWinds is one of hundreds of relatively unknown companies that provide software to governments and business for their networks.”

Later reports said that the Russian government was behind the hack.

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As Rob Knake noted in Foreign Affairs, one reason for the success of the attack was that, “The U.S. Failed to Execute Its Cyberstrategy — and Russia Pounced”.

Knakes went on to observe that, “for more than two decades, U.S. cyberstrategy has been predicated on the need for government and private enterprise to work together to counter threats. No federal agency has the ability to detect and deter all foreign adversaries in cyberspace, so the public and private sectors must cooperate.

“Yet the United States has never built the structures or capabilities needed to fully implement such a joint effort. Instead, every four to eight years, the president or Congress has assembled a different group of experts to hash out a new approach—as the Center for Strategic and International Studies’ Commission on Cybersecurity for the 44th President did in 2008, the White House Commission on Enhancing National Cybersecurity did in 2016, and the U.S. Cyberspace Solarium Commission did last year.”

“Each of these commissions had a broad mandate to rethink U.S. cyberstrategy, and each concluded the same thing: that a public-private partnership is the only viable approach. The commissions each recommended long lists of means for forging such a partnership, including by strengthening the mechanisms and procedures by which federal agencies collaborate and share information, both among themselves and with the private sector.

Unfortunately, most of these recommendations were either only partially implemented or ignored.”

China has taken a number of actions against domestic private sector companies and their leaders, apparently with the intention of making it clear to all that they are subservient to the Chinese Communist Party

As Nikkei Asia noted, “After years of bounding growth and shopping sprees for new assets, China’s biggest internet conglomerates extend into most sectors of the economy, from transportation to finance. But while they used to enjoy a free pass on regulatory issues, they are now under unprecedented scrutiny, and the state is asserting its dominance once again” (“China Rethinks the Jack Ma Model”).

The interesting question is why this is happening now.

One theory is that the CCP worries that by building large customer bases and amassing massive amounts of data on them, Chinese internet companies have acquired the power to sway public opinion (e.g., by using AI to customize the content and messages recommended and delivered to individual customers), which could be used to achieve political not just commercial goals

Another theory is the CCP’s increasing concern that China’s fast growing fintech sector could eventually cause serious instabilities in its already highly leveraged and fragile financial system.

“The Bill Is Coming Due for China’s Capitalist’ Experiment”, by Michael Hochberg and Leonard Hochberg

“The Chinese Communist Party (CCP) has re-awoken to a profound truth: Rich, secure capitalists are the natural enemies of authoritarian regimes. In a hybrid autocratic-capitalist model, capitalism is the means to generate wealth, but power is the end goal.

“Successful capitalists naturally begin to demand that their personal and property rights be protected from authoritarian fiat. Capital in the hands of entrepreneurs is a political resource; it poses a threat to the implementation of centralized plans.

“Realizing this, the CCP has begun to assert control over the private sector by installing Party officials inside private firms and having state-backed firms invest in private enterprises.
“In the absence of civil rights or an independent judiciary, “private” companies have no real independence from the government in China. Dissent and demands for civil rights are a threat to the regime and will be crushed…

“A number of Chinese state-backed companies, including some in strategically important industries, have begun to default on their debt obligations.

“Will international creditors be allowed to claim the assets? Will the equity holders— in many cases the CCP or regional and local governments in China — be wiped out?
“If these companies are bailed out by the government, will domestic and foreign debt-holders be treated equally? Or will foreign creditors find their assets wiped out, while these companies continue operating under nominally new ownership and perhaps a new corporate brand?

“It seems a safe bet that foreign debts will be repudiated, either explicitly or implicitly. What was previously commercial debt now has the risks that are typically associated with sovereign debt, which can be canceled by government fiat.

“In short, a wave of write-downs is coming for Western businesses invested in China.”

Crackdowns in Hong Kong continued, with 53 more democracy activists arrested. The BBC noted that, “the crackdown appeared to confirm the fears of many who warned about the reach of the law, with Amnesty International saying the arrests are "the starkest demonstration yet of how the national security law has been weaponised to punish anyone who dares to challenge the establishment".

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This is aggressive move against Hong Democracy activists surprised many observers. However, it is consistent with Xi Jinping’s past behavior, as we noted in our October 2020 feature analysis (“Will Xi Jinping Launch a Surprise Attack on Taiwan Before the 20th Party Congress of the CCP in November 2022? And What Happens if He Does?”).

Along with the crackdown on China’s fintech industry and the private sector more broadly, this new evidence is consistent with increasing domestic stresses within China, as well as the Beckley and Brands analysis noted below.

As Bethany Allen-Ebrahimian headlined her story on the arrests in Axios, “With Hong Kong arrests, China outlaws democracy itself.”

The Financial Times observed that, “The 53 were not rabble-rousers but moderates. They were detained for involvement in a primary run-off last year to determine which opposition figures would run in Legislative Council elections that were later postponed due to Covid-19. That this is now said to constitute “subversion” highlights the draconian nature of the national security law China imposed last year… The clampdown is further proof of the extent to which the confrontation between Beijing and the West is one of values. Xi Jinping’s China sees itself as engaged in an ideological struggle with what president Xi has called the “extremely malicious” ideas of liberalism and democracy” (“The Crushing Of Hong Kong’s Opposition”).

Among those arrested was John Clancy, a US resident and Hong Kong based attorney.

The BBC reported that, “Antony Blinken, President-elect Joe Biden's pick as next US Secretary of State, said the arrests were an "assault on those bravely advocating for universal rights… The Biden-Harris administration will stand with the people of Hong Kong and against Beijing's crackdown on democracy."

The Financial Times broke a story that China’s “Xinjiang [surveillance] data platform deems people suspicious by association”.

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This story provides further indicators of how far “Techno-Authoritarianism” and “the surveillance state” have advanced in China, and given rise to an Orwellian version of “cancel culture.”

“A big data platform helped Chinese authorities in Xinjiang to identify individuals deemed suspicious by association that facilitated mass detention of Muslims in the region, a leaked government document has shown.

“Over the past four years, more than 1m Uighurs, Kazakhs and other mostly Muslim peoples in the far western region have been detained in extrajudicial camps where they are subject to political “re-education.”

See also, “‘Because There Were Cameras, I Didn’t Ask Any Questions’ Chinese Government Documents Provide New Details on a Small Xinjiang Town’s Extensive System of Surveillance” by Darren Byler

“Competition With China Could Be Short and Sharp: The Risk of War Is Greatest in the Next Decade”, by Beckley and Brands

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This new analysis reaches similar conclusions to the analysis we presented in our October 2020 issue (“Will Xi Jinping Launch a Surprise Attack on Taiwan Before the 20th Party Congress of the CCP in November 2022? And What Happens if He Does?”).

“In foreign policy circles, it has become conventional wisdom that the United States and China are running a “superpower marathon” that may last a century. But the sharpest phase of that competition will be a decade long sprint. The Sino-American contest for supremacy won’t be settled anytime soon.

“Yet history and China’s recent trajectory suggest that the moment of maximum danger is just a few years away.

“China has entered a particularly perilous period as a rising power: it has gained the capability to disrupt the existing order, but its window to act may be narrowing.

“The balance of power has been shifting in Beijing’s favor in important areas of U.S.-Chinese competition, such as the Taiwan Strait and the struggle over global telecommunications networks. Yet China is also facing a pronounced economic slowdown and a growing international backlash.

“The good news for the United States is that over the long term, competition with China may prove more manageable than many pessimists believe. Americans may one day look back on China the way they now view the Soviet Union—as a dangerous rival whose evident strengths concealed stagnation and vulnerability.

“The bad news is that over the next five to ten years, the pace of Sino-American rivalry will be torrid, and the prospect of war frighteningly real, as Beijing becomes tempted to lunge for geopolitical gain.

“The United States still needs a long-term strategy for protracted competition. But first it needs a near-term strategy for navigating the danger zone.”

“The U.S. Navy’s Loss of Command of the Seas to China and How to Regain It”, by Joe Sestak

Sestak was a career Navy officer and later a member of the US House of Representatives.

“For the collective good of all nations, American command of the earth’s oceans has also provided the bedrock for a globalized economy where 80 percent of the volume and 70 percent of the value of all trade transits safely on the sea.

“But the U.S. Navy has now lost its assured command of the seas — for the first time in the post-World War II era — to China in the Western Pacific…

“China’s pace of war is the speed of light through cyberspace, leaving U.S. forces blind and deaf, while America’s is 30 knots, taking weeks to arrive at the fight. A fundamental shift in mindset needs to be made. The focus should no longer be on the number of hulls, but on a return to the plan for a capabilities-based, more forward force posture, primarily by commanding cyberspace in order to regain command of the seas.”

“US-China Relations: Shooting Down Of Mock ICBM Was Warning To Beijing”, South China Morning Post, 18Nov20

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The United States was sending a clear message to China on Tuesday when it shot down a mock intercontinental ballistic missile (ICBM) over the Pacific Ocean, military experts said.

“The SM-3 Block IIA interceptor test could be seen as a response to China launching two ‘aircraft carrier killer’ missiles into the South China Sea,” Beijing-based military expert Zhou Chenming said

“A Hard Look At Hard Power: Assessing The Defense Capabilities Of Key US Allies And Security Partners”, by Gary Schmitt, published by the US Army War College Press

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Due to constraints on the US defense budget, Schmitt writes that, “the strategic requirement for allies and partners is greater now than at any time since the end of the Cold War. This need, however, must be filled by allies and partners who can pull their weight militarily if the United States is going to be able to defend the American homeland, protect vital interests abroad, and maintain a favorable balance of power in critical regions of the world.”

The book’s overarching conclusion is that, “translating American and allied economic power into military preeminence and maintaining it globally has been difficult.” And that was before COVID arrived.

“Moving Beyond A2/AD”, by Chris Dougherty

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“Chinese and Russian military thinking about fighting the United States centers on…maintaining their advantage in a given theater for long enough to seize their objectives, then terminating the conflict on favorable terms. By exploiting temporal advantage (ETA) in this way, China and Russia can plausibly seize their objectives while avoiding a fight or, if necessary, by fighting at a distinct advantage in the correlation of forces” …

“Both China and Russia believe that the “initial period of war” likely determines the outcome, and therefore place a great deal of emphasis on preparatory, preemptive, or rapid actions to create a favorable correlation of forces in the combat theater. In competition (or confrontation, in their vernacular), they manipulate time, either by moving slowly or deniably to avoid provoking a response (e.g., Chinese island building in the South China Sea), or by moving quickly in areas where policies are unclear and potential responses are too slow or ineffectual (e.g., Russia’s seizure of Crimea)” …

“The central aspect of time, and how to manipulate it to their benefit, is critical to the Chinese and Russian ways of war. However, with some exceptions, it remains relatively underappreciated in U.S. discourse.

“Rather than thinking about countering specific systems or behaviors, the DoD should instead focus on a comprehensive set of actions to prevent China or Russia from gaining and exploiting a temporal advantage—or perceiving such an advantage—in which they could seize their objectives.”

The author focused on four examples of China and Russia’s use of time.

First, “information degradation and command (or cognitive) disruption (ID/CD) describes Chinese and Russian approaches toward gaining an advantage in the ability to gather, transmit, process, understand, and act on information in a timely and accurate manner. They achieve this goal largely by attacking critical systems in space, cyberspace, and the electromagnetic spectrum.”

Second, “should the United States and its allies and partners choose to intervene in a potential conflict, China and Russia would seek to slow their response by contesting theater access and maneuver (CTAM). This is perhaps the line of effort most closely aligned with traditional conceptions of A2/AD, with the critical difference that CTAM makes clear that access and maneuver are contested on a spectrum of risk, rather than denied.”

Third, “U.S. forces operating in Asia or Europe depend heavily on an enormous and vulnerable web of sustainment, logistics, and mobility assets to maintain their operational tempo and shift the correlation of forces to their advantage. Therefore, degrading sustainment, logistics, and mobility (DSLAM) is another critical aspect of Chinese and Russian ETA approaches.”

Fourth, “China and Russia need a means to impose boundaries on a conflict or terminate it before they lose their temporal overmatch. To do this, they will use strategic actions to deter, coerce, and terminate (SADCAT). Such actions can take a wide variety of forms, including attacks on critical infrastructure, commercial assets, and employment of nuclear weapons or other forms of strategic attack. All these actions are intended to prevent the United States and its allies and partners from using escalation or their waxing temporal advantage to reverse Chinese or Russian gains. ID/CD pries the window open, CTAM and DSLAM open it further and hold it open, and then SADCAT slams it shut when China and Russia perceive that their advantage is waning.”

“Behind Xi Jinping’s Steely Façade, a Leadership Crisis Is Smoldering in China”, by Sarah Cooper

“Even after years of intensifying authoritarian rule under Chinese Communist Party (CCP) chief Xi Jinping, the 18-year prison term handed down in late September to real estate mogul and social media commentator Ren Zhiqiang — a de facto life sentence for the 69- year-old man — came as a shock to many inside and outside China.

“Ren’s penalty was unusually harsh for a party insider with no political power or ambitions of his own, it fit a recent pattern in which the regime has lashed out with greater intensity against Xi’s perceived enemies within the ruling elite. The punitive actions and targets — particularly those in the party’s propaganda, education, and security systems — indicate that the party chief’s grip on power may not be as firm as it appears.”

China has launched a series of economic moves intended to put pressure on Australia, including tariffs on wine, restrictions on imports of barley, beef, and seafood, and refusal to allow ships bearing Australian coal to dock.

Reacting to these latest examples of China’s “Wolf Warrior” approach to diplomacy, the editorial board of the Financial Times noted “The worrying precedent in China’s quarrel with Australia.”

“The rapid deterioration in the relationship between Beijing and Canberra is much more than a bilateral affair. It demonstrates how a more assertive China is now seeking to intimidate nations that are a long way from its shores…The treatment of Australia sets a worrying precedent since China is making demands that would impinge upon the country’s domestic system — affecting basic liberties such as freedom of speech”…

China “has said further measures could be in the works, if Australia does not “correct its mistakes”.

The corrections that Beijing is demanding are not simply to do with foreign policy or trade. In a 14-point memo handed to the Australian media outlining China’s grievances, Beijing also pointed to what it regards as hostile media reporting — as well as Australian government financing for think-tanks that have produced work Beijing dislikes. Unable to tolerate free speech at home, Beijing now appears intent on controlling speech overseas as well.”

See also, “China sends a message with Australian crackdown: Pressure by Beijing offers a glimpse of the road map for a more illiberal order” by Richard McGregor in the FT.

“Continuous Purges: Xi’s Control of the Public Security Apparatus and the Changing Dynamics of CCP Elite Politics”, by Guoguang Wu

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“This essay identifies three waves of purges in the Ministry of Public Security under the Xi Jinping leadership, and then focuses on the third wave, which, corresponding to similar measures beyond the public security system, featured the cleansing of those who rose to prominence due to their support of Xi’s earlier anti-corruption campaign.

“Such a development whereby Xi turns his sword against his previous political allies indicates that continuous purges are becoming a new political dynamic in CCP elite politics. The essay finds that Xi’s prolonged tenure in power and the governance challenges he confronts are the two leading factors that have helped to shape China’s current proto- Maoist power struggles and elite politics. According to this line of reasoning, Xi’s ongoing efforts to control the public security apparatus indicates that CCP elite politics is becoming increasingly dominated by internal repression and coercive means.”

“Xi’s Aim To Double China’s Economy Is A Fantasy”, by Michael Pettis

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“Every country that followed the high-savings, investment-led growth model that China adopted in the early 1990s — such as Japan in the 1970s and 1980s, or Brazil in the decade before — has gone through three distinct stages.

“The first stage, characterised by heavy investment in badly-needed infrastructure, delivered many years of rapid but unbalanced growth. In that stage, debt grew in line with the economy because when debt mostly funds productive investment, gross domestic product grows faster than debt.

“In the second stage, as each country sought to rebalance demand away from investment, typically with little success, growth remained fairly high, although now driven increasingly by non-productive investment. When this happens, total debt in the economy must grow faster than GDP. So the debt burden rose.

“Finally in the third stage, the country either reached its debt capacity limits or a worried government took steps to prevent debt from rising further. Either way, the economy was forced finally to rebalance away from investment and towards consumption amid far slower, sometimes even negative, growth.

“China today is clearly in the second stage. Between 1980 and 2010, Chinese GDP doubled four times, but debt levels were low and rose slowly.

“However, between 2010 and 2020 when GDP doubled again, China did so by tripling its total debt burden to $43tn, so that it now stands, officially, at over 280 per cent of GDP.

“Assume conservatively that the relationship between debt and growth doesn’t change, and China’s debt-to-GDP ratio will have to rise to over 400 per cent by 2035 if it is to double GDP again. This is a level that would be unprecedented in history. Everywhere else, growth collapsed long before debts reached levels close to this.”

“China can in principle reduce its dependence on debt by shifting domestic demand from investment to consumption, as Beijing has long proposed. Yet this requires that the household income share of GDP rise from roughly 50 per cent today to at least 70 percent.

“Beijing has long wanted to do this but with limited success, despite a decade of trying.

“There is still little to suggest the party is willing to tackle the institutional implications of the large wealth transfer from local governments and elites to households this entails…as it will set off substantial and unpredictable political and social change.”

“The Wuhan Files: Leaked Documents Reveal China's Mishandling Of The Early Stages Of Covid-19”, by Nick Patton Walsh on CNN

“The Party That Failed: An Insider Breaks With Beijing”, by Cai Xia in Foreign Affairs

These are both further indicators of growing domestic dissatisfaction within China, whose impact the CCP seeks to constrain through greater use of technology enabled systems of surveillance and repression.

One of Iran’s top nuclear scientists was assassinated. Also, Donald Trump was reported to have asked the Pentagon for a briefing on options for air strikes against Iran’s nuclear facilities.

This is probably because Iran’s stockpile of enriched uranium is now reported to be 12 times the maximum allowed on the Iran nuclear accord from which the Trump administration withdrew the United States.

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In addition to whether there will be a joint Israeli/US attack on Iran’s nuclear facilities before the Trump administration leaves office, and how Iran will retaliate for the assassination, there are two more uncertainties.

The first is Iran’s willingness and ability to pursue the development of a nuclear weapon and delivery system. With a greater quantity of enriched uranium, this “time to breakout” has been reduced – pessimistic estimates have reduced it to as short a three months (when breakout is defined as having produced 25kg of weapons grade uranium, enough for one bomb).

A more realistic definition of breakout would include constructing and testing a warhead and delivery system, and then constructing a number of deliverable weapons. However, the first test would almost certainly trigger aggressive retaliation by Israel, for which a nuclear-armed Iran is an existential threat that they have repeatedly said they will not tolerate.

The second uncertainty is how Iran will respond to the incoming Biden administration’s expressed desire to rejoin the Iran nuclear accord, which would logically lead to lifting or relaxation of the crushing sanctions the Trump administration has imposed on the country.

In “What will Xi’s China Do Next?” the Financial Times’ James Kynge reviews "The Emperor’s New Road "by Jonathan E Hillman — a book about how China is projecting its power across the world.

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China’s Belt and Road Initiative is often portrayed as a foreign policy success story. This is not the whole story.

“The title refers to China’s Belt and Road Initiative (BRI), a programme launched in 2013 to build roads, railways, bridges, ports, networks of power cables and other forms of infrastructure costing in excess of $1tn in more than 100 countries. The aim of this grand endeavour is to boost China’s international influence and win overseas markets for Chinese companies…

“It becomes clear that the wheels are falling off the BRI. Corruption is rife. Fiascos are piling up. A China so vaunted for planning its own extraordinary development is revealed as largely unable to pull off the same feat abroad…

“Overall, the book points up a central, unresolved paradox of China in the world. While Chinese companies are now at the forefront of global technology and its construction giants lead the world, its governance models have progressed little since the Ming dynasty. BRI projects are conceived in secrecy, bankrolled mostly by big state banks and subjected to little or no social, environmental or financial scrutiny by the people of recipient countries…

“Hillman’s book highlights a glaring reality: China has yet to find a way to project its influence beyond its borders in a way that enhances its national prestige. For all its grand ambition, the BRI so far has succeeded in demonstrating to the world that its governance model does not travel.”

The CCP giveth, and the CCP taketh away…

In “Beijing And Wall Street Deepen Ties Despite Geopolitical Rivalry”, the Financial Times describes how China is increasingly allowing large US financial services firms to enter its financial markets. For the players involved, if perhaps not for US foreign policy, it seems a good deal. More profits from China for the companies, and more powerful advocates for the CCP in the halls of power in the US.

However, some of those same firms lost out on enormous fees last month when at the last minute Chinese regulators forced Ant Financial to pull what would have been the largest initial public offering in history, with an estimated value of $37 billion. The official reason given was regulators growing concern with the threat to financial stability posed by Ant’s growing book of unsecured loans to small Chinese borrowers (banks require more collateral). The unofficial reason was Xi Jinping’s anger at an October 24th speech by Jack Ma, Ant’s (and Alibaba’s) founder, in which he criticized China’s financial system.

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The Ma episode has broader, and potentially much more important implications.

As Bloomberg New Economy observed, “The treatment [Ma] received illustrates not just the perils of appearing to cross Beijing, speaking one’s mind and challenging orthodoxy. It raises questions about the future of innovation at a critical moment, one where China is counting on internal dynamism rather than external demand to drive its economy. More broadly, it touches upon China’s place in the world. Can it ever compete with the West in the realm of “soft power,” which is so necessary to global influence?”

Speaking on a Hoover Institution webinar, Elizabeth Economy noted how the actions taken against Ma could increase Xi Jinping’s vulnerability, by increasing frustration with his leadership among China’s entrepreneurial middle class.

RAND’s Michael Mazaar makes a similar point in a new paper, “The Essence of Strategic Competition with China”.

“There remains a question of precisely what sort of challenge China poses—and, by extension, the true essence of the emerging competition. This article argues for one answer to that question: At its core, the United States and China are competing to shape the foundational global system—the essential ideas, habits, and expectations that govern international politics. It is ultimately a competition of norms, narratives, and legitimacy; a contest to have predominant influence over the reigning global paradigm.”

Mazaar “contends that, despite its massive investments in propaganda tools and economic statecraft, China remains starkly ill-equipped to win such a competition—but the United States could, through self-imposed mistakes, lose it.”

“China’s Growth Outlook: Is High-Income Status in Reach?” by Matthew Higgins of the Federal Reserve Bank of New York

This new analysis highlights the fundamental challenge facing the Chinese Communist Party, and the logic that underlies Xi Jinping’s relentless emphasis on increasing the rate of innovation in China.

“Decades of rapid economic growth have propelled China out of poverty and into middle-income status. Now the country faces a new challenge: escaping the so-called “middle-income trap.”

“The results [of this analysis] are stark: Given an aging population and diminishing returns to capital, China can only achieve high-income status in the coming decades by sustaining productivity growth at the top end of the range attained by its Pacific Rim neighbors.

“Productivity gains on that scale would likely require extensive institutional development, including a marked reduction in state direction of the economy.”

“Chinese Companies Waiting Twice As Long For Payments As In 2015”, by Sun Yu in the Financial Times

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The Chinese economy may be weaker than official data portray.

“Official data show it took an average of 54 days for Chinese private manufacturers to get paid in the first three quarters of this year. That is up from 45 days in 2019 and 27 days five years ago.

“The delay in debt collection has taken a toll on China’s post-virus economic recovery as private companies, an important employer, trimmed their growth plans for fear of late payments… The growing difficulty in collecting funds has prompted many businesses to cut back despite an influx of orders.”

Two new articles highlighted India’s growing role in the evolving alliance to contain China.

“New Delhi quietly dispatched a frontline warship on an unusual voyage to the South China Sea…New Delhi is shedding its reticence to unleash India’s maritime power and strengthen it security partnerships as it seeks to counter what is considers Chinese aggressions on its land border (“India Takes Its Tussle With China to the High Seas”, Financial Times).

“US And India Sign Defence Agreement To Counter China”, Financial Times. The two countries agreed to “share sensitive military intelligence that will eventually enable the US and Indian militaries to co-operate more closely on the ground.”

“The deal will include sharing geospatial data, giving New Delhi access to US maps and satellite data, as well as topographical, nautical and aeronautical information. This will improve the accuracy of Indian weapons, such as missiles and drones.”

The election of Joe Biden raised questions about the future direction of American foreign policy.

Speaking at a Financial Times webinar, Ann Marie Slaughter, former Director of Policy Planning at the US Department of State under Barak Obama said she believes that Biden’s foreign policy will be “driven by three Ds” –

(1) Domestic renewal, including the tighter integration of industrial and foreign policy;
(2) Democracy, including the formation of a “League of Democracies” to confront China”, and
(3) Deterrence, focused on China, which will also include military modernization.

During the campaign, other articles described the key plans of a more progressive foreign policy, including:

(A) Closer integration between domestic economic and foreign policy;
(B) Opposition to authoritarian capitalism regimes; support for traditional US alliances;
(C) Identification of climate change as the nation’s top national security priority; and
(D) a high degree of skepticism about the use of military force, which logically leads to a reduction in defense spending to fund domestic priorities.

See also, “The Emergence of Progressive Foreign Policy”, by Ganesh Sitaraman, “The Real Progressive-Centrist Divide on Foreign Policy” by Thomas Wright, and “Why America First is Here to Stay” by Michael Lind.

“Why American Strategy Fails”, by Winnefeld, Morell, and Allison

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The authors publicly confront a central issue that policymakers have for years discussed in private: the “growing imbalance among four classic variables of grand strategy: ends, ways, means, and the security landscape. Left unrecognized and unaddressed, gaps between U.S. ambitions and the U.S. ability to fulfill them will generate increasingly unacceptable strategic risks.”

They claim that, “the current loss of equilibrium that characterizes US foreign policy is driven by two of the four variables. First, changes over the last two decades in the global landscape, including major shifts between the relative power of the United States and its major competitors, present an immense challenge.

“Second, American voters are signaling their desire for more attention and resources to be used for domestic issues…

“Correcting this imbalance is easy to say, but hard to do. The policy community resists setting priorities, mostly reacts to ongoing events, and uses the term ‘vital’ promiscuously…
The solution the authors propose is a “new kind of national security strategy” that is “short and succinct, not all things to all people. It needs to lay out an understanding of ends through the lens of a list of generic, prioritized security interests, as well as guidance on using the list to both resource and employ national power.”

The authors propose that the interests of the United States fall into a hierarchy of five tiers.

At the top is “survival of the country as a free democracy.”
This is followed by:

“Prevention of catastrophic attacks on the country and its citizens.”
“Protection of the global ‘operating system’ [international order] and a US leadership role within it.”

“The security and support of US allies and partners.”

“The protection and, where possible, the extension of universal values.”

Critically (as anyone who has attempted to turn around large organizations can attest), the authors caution that “changing ways may be even more difficult than adjusting ends…in large systems, internal and external investments in the status quo make it hard to break out existing practices.”

The alternative, however, is “to risk advancing unsustainable, or outdated, tactics in service of muddled priorities – with the result that the United States will struggle more and more.”

“The Escalation Inversion and Other Oddities of Situational Cyber Stability”, by Jason Healey, Robert Jervis

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This excellent analysis shows that we have likely underestimated the potential for the use of cyber weapons to lead to rapid escalation in any great power conflict.

“Are cyber capabilities escalatory? The pessimists, in whose camp we normally reside, observe a two-decade trend of increasing cyber aggression acting like a ratchet, not a pendulum…The optimists have equally compelling arguments — including the contention that so far, none of these admittedly worrying cyber attacks has ever warranted an armed attack with kinetic weapons in response…

“This paper examines this debate. Much of the dispute about the escalatory potential of cyber capabilities comes down to scope conditions. The question is not “whether” cyber capabilities are stabilizing or destabilizing. Rather, the issue is which outcome is more likely under certain geopolitical circumstances…

“During periods of relative peace and stability — that is, since the end of the Cold War in 1991 — several characteristics drive cyber capabilities to act as a pressure-release valve. Cyber capabilities open up stabilizing, non-lethal options for decision-makers, which are less threatening than traditional weapons with kinetic effects.

“During periods of acute crisis, however, cyber capabilities have other destabilizing characteristics. In these situations, there are greater opportunities for provocation, misperception, mistake, and miscalculation. Dangerous positive feedback loops can amplify cyber conflict so that it takes on a life of its own with diminishing room for strategic choices by policymakers.”

A new analysis from Gallup finds that the world has grown much less accepting of migrants.

Willingness to accept immigrants dropped in South American countries that “have experienced large inflows of Venezuelans fleeing the humanitarian crisis in their country”. There were also substantial drops in “countries where migration continues to be a polarizing subject, including European countries such as Belgium and Switzerland, where right-wing, anti-immigration parties continued to gain ground between 2016 and 2019” …
“The countries that were the least accepting of migrants in 2019 include several EU member states, such as Hungary, Croatia, Latvia and Slovakia.”

Canada was the nation most accepting of migrants.

This if further evidence of the potential for significant future conflict, particularly in Europe, if climate change, COVID, war, and/or state failure substantially increase migrant flows out of the Middle East and North Africa.

“It Will Take More Than A Biden Victory To Solve NATO’s Strategic Malaise” by Sara Moller.

“For an alliance that has long prided itself on its commonality of purpose and interests, the truth is that NATO is in danger of losing both…

"If and when the Biden team embarks on its grand European tour, it seems virtually certain that, beyond the expressions of gratitude for America’s “return” that will surely follow them wherever they go, the delegation can expect to be met with a lengthy list of items requiring their immediate attention.

“Moreover, appeals for Washington’s assistance are likely to differ from capital to capital, with each NATO ally arguing that their particular issue or concern represents the most pressing challenge and therefore requires the most attention and resources.

"In Warsaw and the capitals of the Baltic states, the US delegation will hear that, despite a new U.S. rotational troop deployments, a revanchist Russia necessitates additional NATO (but especially U.S.) military commitments along the Eastern flank of the alliance.

“In Rome, Athens, and Madrid, U.S. policymakers will learn that the Mediterranean countries represent the ‘soft underbelly’ of NATO and that the alliance must do more to project stability along its southern arc of instability.

“In Ankara, the message will be one of anger directed at what the Erdogan government perceives as NATO’s collective failure to support Turkish actions in Syria and elsewhere. In Paris, the message for the U.S. delegation will be that the alliance must strengthen its counter-terrorism efforts in the Middle East and North Africa, while in Berlin the focus will be on reforming NATO’s nuclear posture and salvaging expiring arms-control agreements.

“Meanwhile, securing the Arctic and halting the effects of climate change will be at the top of the agenda in Copenhagen and Oslo.

“In short, wherever the Biden presidential delegation goes, it will be met with requests that Washington —and with it, the NATO alliance — prioritize everything, thereby fulfilling the old adage that, “When everything is a priority, nothing is a priority.”

If Biden wins the presidency, his team will very quickly have to manage both rising tensions with China and many unresolved issues in relations with Europe, at a time when the US economy, society, and political system will almost certainly all be under great stress.

A number of new stories and analyses highlighted a range of new developments in China.

“Pollution Exacerbates China’s Water Scarcity and Its Regional Inequality”, by Ma et al: “inadequate water quality exacerbates China’s water scarcity, which is unevenly distributed across the country. North China often suffers water scarcity throughout the year, whereas South China, despite sufficient quantities, experiences seasonal water scarcity due to inadequate quality.
“Over half of the population are affected by water scarcity, pointing to an urgent need for improving freshwater quantity and quality management to cope with water scarcity.”

The Australian Strategic Policy Institute reported that, “Credible data on the extent of Xinjiang’s post-2017 detention system is scarce. But researchers at ASPI’s International Cyber Policy Centre have now located, mapped and analysed 380 suspected detention facilities in Xinjiang, making it the most comprehensive data on Xinjiang’s detention system in the world.

“This new database highlights ‘re-education’ camps, detention centres, and prisons which have been newly built or expanded since 2017, and we believe it covers most such detention facilities.

“The findings of this research contradicts Chinese officials’ claims that all “re-education camp” detainees had ‘graduated’ in December 2019. It presents satellite imagery evidence that shows newly constructed detention facilities, along with growth in several existing facilities that has occurred across 2019 and 2020.

“The second key piece of research on our new website is a project investigating the rate of cultural destruction in Xinjiang. This research estimates that 35% of mosques have been demolished; and a further 30% have been damaged in some way, usually by the removal of Islamic or Arabic architectural features such as domes, minarets or gatehouses. We estimate approximately 16,000 mosques have been damaged or totally destroyed throughout Xinjiang (65% of the total). The majority of demolished sites remain as empty lots.”

The Financial Times reported that "Senior Chinese Communist party officials have been sending an ominous message to private sector entrepreneurs in recent weeks.

“In a series of policy announcements and meetings, they have emphasised that private companies have an important role to play in “United Front work” — a euphemism for efforts aimed at ensuring that non-party organisations and entities support the party’s top policy objectives as well as its iron grip on power…

“China’s private sector still accounts for 50 per cent of government tax revenues, 60 percent of economic output and employs 80 per cent of all urban workers. This is despite years of systemic discrimination, such as limited access to bank loans compared with their state-owned peers.

“Under the new guidelines, party committees that previously wielded little power at private companies are supposed to play a role in personnel appointments and other important decisions” (“Chinese Communist Party Asserts Greater Control Over Private Enterprise”).

Xi Jinping faces a growing number of short and long-term domestic challenges. The CCP’s response has been further increases in repression and attempts to exert more state and party control.

It is often said that authoritarian regimes are more brittle than many outside observers realize, and thus their collapse can occur much more quickly than one would expect.

With respect to China, a critical uncertainty is the balance between the rate at which domestic problems and pressures are accumulating, and the rate at which the CCPs ability to control these pressures (e.g., through surveillance and social control technologies and direct repression) is improving.

The Pentagon released its annual report on “Military and Security Developments Involving the People’s Republic of China.” It is a sobering read.

“DoD’s 2000 report assessed that the PLA was slowly and unevenly adapting to the trends in modern warfare. The PLA’s force structure and capabilities focused largely on waging large-scale land warfare along China’s borders. The PLA’s ground, air, and naval forces were sizable but mostly obsolete. Its conventional missiles were generally of short range and modest accuracy.

“The PLA’s emergent cyber capabilities were rudimentary; its use of information technology was well behind the curve; and its nominal space capabilities were based on outdated technologies for the day.

“Further, China’s defense industry struggled to produce high-quality systems. Even if the PRC could produce or acquire modern weapons, the PLA lacked the joint organizations and training needed to field them effectively. The report assessed that the PLA’s organizational obstacles were severe enough that if left unaddressed they would inhibit the PLA’s maturation into a world-class military force…

“Two decades later, the PLA’s objective is to become a “world-class” military by the end of 2049—a goal first announced by General Secretary Xi Jinping in 2017.

“Although the CCP [Chinese Communist Party] has not defined what a “world-class” military means, within the context of the PRC’s national strategy it is likely that Beijing will seek to develop a military by mid-century that is equal to—or in some cases superior to—the U.S. military, or that of any other great power that the PRC views as a threat.

“As this year’s report details, the PRC has marshaled the resources, technology, and political will over the past two decades to strengthen and modernize the PLA in nearly every respect.”

“As this report shows, the CCP desires the PLA to become a practical instrument of its statecraft with an active role in advancing the PRC’s foreign policy, particularly with respect to the PRC’s increasingly global interests and its aims to revise aspects of the international order…

“Given the continuity in the PRC’s strategic objectives, the past 20 years offer a harbinger for the future course of the PRC’s national strategy and military aspirations.

“Certainly, many factors will determine how this course unfolds. What is certain is that the CCP has a strategic end state that it is working towards, which if achieved and its accompanying military modernization left unaddressed, will have serious implications for U.S. national interests and the security of the international rules-based order.”

“Is China Beating the US to AI Supremacy?” by Graham Allison and Eric Schmidt

“We begin with four key points. First, most Americans believe that U.S. leadership in advanced technologies is so entrenched that it is unassailable.

Likewise, many in the American national security community insist that in the AI arena China can never be more than a “near-peer competitor.” Both are wrong. In fact, China stands today as a full-spectrum peer competitor of the United States in commercial and national security applications of AI…

“Second, China’s zeal to master AI goes far beyond its recognition that this suite of technologies promises to be the biggest driver of economic advances in the next quarter century. For the Party, AI is mission critical.

“The command of 1.4 billion citizens by a Party-controlled authoritarian government is a herculean challenge. Since the fall of the Soviet Union, Americans have been confident that authoritarian governments are doomed to fail—eventually. But AI offers a realistic possibility of upending this proposition. AI could give the Party not just an escape hatch from the “end of history,” but a claim to advance a model of governance—a national operating system—superior to today’s dysfunctional democracies…

“Third, while we share the general enthusiasm about AI’s potential to make huge improvements in human wellbeing, the development of machines with intelligence vastly superior to humans will pose special, perhaps even unique risks. In 1946, Albert Einstein warned, “the unleashed power of the atom has changed everything save our modes of thinking, and thus we drift towards unparalleled catastrophe.”

“We believe the same could be said of AI. Henry Kissinger has identified these risks in what we call “Kissinger’s Specter.” In his words, AI threatens an unpredictable revolution in our consciousness and our thinking, and an “inevitable evolution in our understanding of truth and reality”…

“Fourth, China’s advantages in size, data collection and national determination have allowed it over the past decade to close the gap with American leaders of this industry.”

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“We have been collaborating over the past year in an effort to understand the national security implications of China’s great leap forward in artificial intelligence… Our purpose in this essay is to sound an alarm over China’s rapid progress and the current prospect of it overtaking the United States in applying AI in the decade ahead…

“Is AI a race China is destined to win? ... It is our best judgment that on the current trajectory, while the United States will maintain a narrow lead over the next five years, China will then catch up and pass us quickly thereafter.”

“Wormhole Escalation in the New Nuclear Age”, by Rebecca Hersman.

“Today’s global pandemic crisis offers a glimpse into how a toxic mix of disinformation, conspiracy theories, and digital technology can complicate effective crisis management, fuel competition and rivalry, shift blame, and sow mistrust…

“Advanced technology is also blurring the threshold between conventional and strategic conflict, including the increasing commingling of nuclear and conventional payloads on non-ballistic missile delivery systems such as hypersonic vehicles, long-range cruise missiles, or extended-range torpedoes, as well as ever more effective missile defenses.

“Similarly, conventional and strategic warning and surveillance assets and advanced command-and-control capabilities continue to be integrated in ways that potentially undermine escalatory firebreaks by creating new counterforce or precision strategic-strike opportunities and enhancing the potential efficacy of missile defenses.

“These developments may bolster incentives to move first and fast in a high-end conventional fight. As traditional firebreaks between conventional and nuclear warning and delivery systems erode and the strategic effects of cyber and space operations multiply, the ability to manage and maintain strategic stability grows

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“Unlike traditional concepts of escalation, which suggest linear and somewhat predictable patterns from low-level crisis to all-out nuclear war, escalatory pathways in this new era of strategic competition will be less predictable.

“Indeed, increasingly sophisticated sub-conventional tactics such as disinformation and weaponized social media, the blurring of nuclear-conventional firebreaks, and the continuing diffusion of global power to regional nuclear states are adding new challenges and additional complexity to crisis management even as an increasingly competitive and contested security environment fuels greater coercive risk-taking among nuclear-armed states, in particular, the United States, Russia, and China” …

“This new era of strategic competition will require renewed thinking about the tools and concepts of deterrence and escalation — adapting older ideas and developing new ones.”

China has begun to implement its new National Security Law in Hong Kong, arresting top media and pro-democracy political leaders, as well as protesting students.

Axios also reported that, “On July 31, Hong Kong authorities issued arrest warrants for six activists based abroad, including a U.S. citizen, for “incitement to secession and collusion with foreign forces." Axios further noted that, “Article 38 in the national security law states the law applies to everyone, everywhere. The indictment in late July of U.S. citizen Samuel Chu, who resides in the U.S., for "collusion with foreign forces" — in other words, Chu's own government — heralds the opening of a dark chapter both for Hong Kong and the world.”

Finally, China also appeared to further escalate its use of “hostage diplomacy” by arresting popular Australian anchorwoman Cheng Lei on national security grounds (it already holds a number of Canadians, who were arrested following Canada’s detention of Huawei’s CFO at the request of the United States).

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China’s increasingly aggressive behavior in multiple areas, from its treatment of the Uighurs to the Indian Border to Hong Kong to Taiwan, as well as its increasing use of “hostage diplomacy” could indicate that the nation’s domestic stability is more fragile than many observers believe, thus necessitating actions that generate public unity by focusing attention on external threats to China.

Alternatively, Xi Jinping may perceive that COVID, the likelihood of a US constitutional crisis after the November election, and the current balance of military forces versus the US and its allies have created a set of circumstances in which China can and should move aggressively to achieve its medium term goals.

This would be consistent with Xi’s previous pattern of taking surprising, risky actions that are intended to produce decisive results.

The greatest risk here is a move to seize control of Taiwan, which would almost certainly trigger a kinetic conflict with the United States. The weight of evidence suggests that the probability of this occurring before the end of June 2021 has significantly increased. Our forecast probability today is 25%.

“Xi Jinping Is Reinventing State Capitalism. Don’t Underestimate It”. The Economist, 13Aug20

“The next phase of Chinese state capitalism is under way—call it Xinomics. Since he took power in 2012 Mr Xi’s political goal has been to tighten the party’s grip and crush dissent at home and abroad. His economic agenda is designed to increase order and resilience against threats. For good reason. Public and private debt has soared since 2008 to almost 300% of gdp. Business is bifurcated between stodgy state firms and a Wild West private sector that is innovative but faces predatory officials and murky rules. As protectionism spreads, Chinese firms risk being locked out of markets and denied access to Western technology.

“Xinomics has three elements. First, tight control over the economic cycle and the debt machine. The days of supersized fiscal and lending binges are over…

“The second strand is a more efficient administrative state, whose rules apply uniformly across the economy. Even as Mr Xi has used party-imposed law to sow fear in Hong Kong, he has constructed a commercial legal system in the mainland that is far more responsive to businesses. Bankruptcies and patent lawsuits, once rare, have risen fivefold since he took office in 2012…More predictable rules should allow markets to work more smoothly, boosting the economy’s productivity…

“The final element is to blur the boundary between state and private firms. State-run companies are being compelled to boost their financial returns and draw in private investors. Meanwhile the state is exerting strategic control over private firms through party cells within them…

“Instead of indiscriminate industrial policy, such as the “Made in China 2025” campaign launched in 2015, Mr Xi is shifting to a sharp focus on supply-chain choke-points where China is either vulnerable to foreign coercion or where it can exert influence abroad. That means building up self-sufficiency in key technologies, including semiconductors and batteries…

“The real test, however, will come over time. China hopes that its new techno-centric form of central planning can sustain innovation, but history suggests that diffuse decisionmaking, open borders and free speech are the magic ingredients.”

Continued strengthening of the Chinese economy would expand its role in the world, while also providing greater resources for investment in AI technology and the nation’s military.

However, as the analyst Michael Pettis has stressed for years, this outcome is far from inevitable.

He recently laid out his argument in commentary for the Financial Times (“The Problems with China’s ‘Dual Circulation’ Economic Model”).

To date, China’s economic growth has been driven by investment (both public and private) and exports. As a percent of GDP, private consumption has remained very low, increasing by just 2% between 2007 and 2019.

An enormous amount of investment has been financed by an ever-growing amount of debt. Moreover, the marginal productivity of this new investment has been declining over time, which has made servicing it increasingly difficult. Moreover, a substantial amount of this investment has been in residential real estate. Again, with stagnant incomes, servicing the growing mountain of property debt has become more difficult as price appreciation has slowed.

As Rogoff and Yang note in their new paper on “Peak China Housing”, “even before the Covid-19 shock, a decades-long housing boom had given rise to severe price misalignments and regional supply-demand mismatches, making an adjustment both necessary and inevitable.”

Pettis argues that the only long-term solution is reorienting the Chinese economy towards higher incomes and private consumption. However, this will “require an economic, social and political transformation that is likely to be much greater than Beijing — and most Chinese and foreign economists, for that matter — seem to realise…

“For Chinese consumption to be broadly in line with that of other developing countries, ordinary households must recover at least 10-15 percentage points of GDP at the expense of businesses [especially export oriented companies], the wealthy, or the government. This means rebalancing involves a massive shift of wealth — and with it, political power — to ordinary people. This will not be easy.”

“Beijing’s Strategic Ends: Harmony through Hierarchy and the End of Choice”, by George Bartle

“China’s foreign policy is best understood through a neo-tributary framework that takes into account four core imperial concepts that continue to shape the Chinese Communist Party’s worldview:

(1) Chinese exceptionalism as motive;

(2) Trade and diplomacy as means;

(3) Cultural assimilation as political strategy;

(4) Image building as legitimacy defense.”

“Beijing has long pursued a belief in Chinese exceptionalism, which has recently morphed into a more ethnocentric exceptionalism tied to Han Chinese identity…

“Although China now recognizes the importance of trade for its national development and foreign heads of state no longer physically kowtow before Chinese rulers, the link between trade and diplomacy is still an important component of Beijing’s worldview. Much of China’s post-Mao era foreign policy initiatives, such as Good Neighbor, Going Out, and the Belt and Road Initiative are clear examples of how trade and investment remain a unidirectional endeavor—flowing out of China rather than into it from foreigners…

In Imperial China, “court rituals, Chinese language, and associated cultural assimilation were the means through which Beijing exercised its power and influence…
“Rituals of respect also play an important role in trade and diplomacy, and continue to shape how the People’s Republic of China conducts international relations… Like Confucian rituals of deference to the emperor, the Chinese Communist Party’s attempt to shape modern diplomatic ritual through the inclusion of slogans in joint statements or UN documents is an attempt to force smaller powers to make deferential and ritualistic statements of conformity with the People’s Republic of China in exchange for what are viewed as economic and political gifts…

“Beijing’s attempts to co-opt modern-day rituals are not limited to perfunctory statements. For China, gaining influence over culture through ceremony and ritual is key to maximizing power. By making concepts, objects, and values sacred, Beijing takes them out of the political, and therefore debatable realm, and into an untouchable realm more akin to religion than international relations. Like mantras and prayers, the ritualistic repetition of slogans and physical acts of deference eventually have the effect of shifting perceptions and realities over time…

“The lynchpin in China’s ability to create a neo-tributary system is its ability to maintain and project its image as a benevolent hegemon that seeks to preserve social and political harmony through peaceful hierarchy. In this sense, China’s image has historically gone hand in hand with more traditional elements of national power in legitimizing its position atop the East Asian order. This also helps explain the often-visceral reaction Beijing has to criticism…

“Critically for Beijing, undermining China’s international image could eventually threaten the leadership’s domestic power. If foreign countries counter Beijing’s assertions that China’s rise under the Chinese Communist Party is benign and will contribute to social harmony and economic prosperity, it also undermines the same foundations the Chinese Communist Party uses to assert its control within China.”

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Written by a US Foreign Service Officer (in the spirit of George Kennan’s famous 1947 “Mr. X” article on “The Sources of Soviet Conduct”), this analysis is a very useful antidote to our natural tendency to analyze China using frameworks grounded in the conduct of western nations.

“How Iran’s Oil Infrastructure Gambit Could Imperil The Strait Of Hormuz”, by Ewers and Tabatabai

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“For decades, Iran has threatened repeatedly to obstruct naval traffic and disrupt the global energy market in the Strait of Hormuz. These threats had rung hollow for the most part — until now…

“On June 25, Iran’s President Hassan Rouhani announced a possible game-changer — that by March 2021, his country would upgrade its energy infrastructure to bypass entirely the Strait of Hormuz when it exports its oil. These upgrades would include a new pipeline and port facilities in the southern coast bordering the Gulf of Oman.

“And the recently announced comprehensive between Iran and China, a 25-year agreement that would cover energy, infrastructure, and military cooperation among other things, appears to stipulate the development of parts of this plan with support from Beijing.

“The deal also provides for the development of a new port that would rest comfortably in Chinese control.

“Rouhani’s ambitious new plan would allow Iran to close the Strait of Hormuz without losing its ability to export oil and forfeiting corresponding revenues…

“Through this action, which seems to have been missed by many in the United States, Iran may be signaling its calculus is changing.”

“China’s Grand Strategy”, by Scobell et al from RAND

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“To explore what extended competition between the United States and China might entail through the year 2050, this report focuses on identifying and characterizing China’s grand strategy, analyzing its component national strategies (diplomacy, economics, science and technology [S&T], and military affairs), and assessing how successful China might be at implementing these over the next three decades.

“Foundational prerequisites for successful implementation of China’s grand strategy are deft routine management of the political system and effective maintenance of social stability.

“China’s grand strategy is best labeled “national rejuvenation,” and its central goals are to produce a China that is well governed, socially stable, economically prosperous, technologically advanced, and militarily powerful by 2050.

“China’s Communist Party rulers are pursuing a set of extremely ambitious long-term national strategies in pursuit of the overarching goals of their grand strategy…

The report includes four scenarios for what China might look like in 2050:

“1. Triumphant China, in which Beijing is remarkably successful in realizing its grand strategy

2. Ascendant China, in which Beijing is successful in achieving many, but not all, of the goals of its grand strategy

3. Stagnant China, in which Beijing has failed to achieve its long-term goals

4. Imploding China, in which Beijing is besieged by a multitude of problems that threaten the existence of the communist regime.”

The authors conclude the scenarios #2 and #3 are the most likely.

“China is Done Biding Its Time”, by Campbell and Rapp-Hooper

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“Over the course of the novel coronavirus crisis, analysts have watched relations between the United States and China spiral to a historic nadir, with scant hope of recovery. There are many reasons for the slide, but Beijing, in a striking departure from its own diplomatic track record, has been taking a much harder line than usual on the international stage—so much so, that even the most seasoned observers are wondering whether China’s foreign policy has fundamentally changed”…

“As COVID-19 has ravaged the globe, Chinese President Xi Jinping has appeared to defy many of his country’s long-held foreign policy principles all at once… It has tightened its grip over Hong Kong, ratcheted up tensions in the South China Sea, unleashed a diplomatic pressure campaign against Australia, used fatal force in a border dispute with India, and grown more vocal in its criticism of Western liberal democracies…

“It is too early to tell with certainty, but China— imbued with crisis-stoked nationalism, confident in its continued rise, and willing to court far more risk than in the past—may well be in the middle of a foreign policy rethink that will reverberate around the world.”

“People Win Wars: The PLA Enlisted Force and Other Related Matters”, by Clay and Blasko

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The authors review recent initiatives to modernize China’s People’s Liberation Army, and conclude that its conscripted enlisted force remains a weak link.

The latest PEW Research poll finds that a record high 73% of Americans have an unfavorable opinion of China (68% of Democrats, and 83% of Republicans), up from just 29% in 2006. 77% of Americans have no confidence in Xi Jinping to do the right thing in world affairs. 73% (78% of Democrats and 70% of Republicans) say the United States should promote human rights in China, even if it harms bilateral economic relations.

It is very unlikely that US policy towards China will change very much if Biden is elected president, both because of widespread agreement across party lines and because Xi Jinping seems unlikely to change his approach if Biden is elected.

See also, “Would Biden’s foreign policy really be much different from Trump’s?”, by Danielle Pletka from AEI

“The Quad is Poised to Become Openly Anti-China Soon”, by Derek Grossman from RAND

“One of the most heavily scrutinized aspects of the Donald Trump administration's Indo-Pacific Strategy is the role played by the Quadrilateral Security Dialogue, or “Quad,” comprised of Australia, India, Japan, and the United States.

“Since the Quad's resurrection from a decade-long hiatus in November 2017, the group has met five times and has emphasized maintaining the liberal rules-based international order, which China seeks to undermine or overturn…

“What has been striking about the Quad thus far, however, is that it has resisted openly identifying China as the primary target it seeks to rein in.

“This is not a trivial issue as the first iteration of the Quad, in 2007, fell apart largely because Australia and to some extent India got cold feet over how much to push China without impacting other dimensions of their bilateral relationships with Beijing.

“Thus, if the Quad is to be sustained this time around, it will likely have to come to grips with a forward-leaning approach to opposing Chinese activities throughout the region. Just one defection to a softer line on China could easily spell doom for the Quad all over again. At least for now, this go around appears to be different. For the first time in the Quad's history, the stars are aligning for a harder line on China, and the implications going forward could be significant.”

“Drone-Era Warfare Shows the Operational Limits of Air Defense Systems”, by Parachini and Wilson from RAND

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“In recent weeks, drones supplied by Turkey in support of the internationally recognized Government of National Accord have reportedly destroyed the Russian Pantsir short-range air defense systems (SHORADS) that the opposition Libyan National Army (LNA) used to protect their forces.

“The inability of the LNA to protect their forces has turned the tide of the conflict and is a reminder of how difficult effective air defense is in an era of comparatively inexpensive armed drones and precision guided low-flying cruise missiles…

“The repeated success of forces using drones and low-flying missiles to destroy or suppress multiple air defense systems on the battlefield is a cautionary note about the effectiveness of these systems against modern air threats. In both Libya and Syria, lower cost offensive drones and low-flying missiles have bedeviled more expensive, complex, and difficult to operate air defense systems.”

“Will COVID-19 Inhibit Iran’s Ability to Suppress Protests?” by Golkar and Aarabi

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“Until now, the regime’s coercive apparatus has had both the capacity and the willingness of its members to successfully suppress anti-regime unrest, as in November 2019, when 1,500 civilians were killed by Iran’s security forces, according to Reuters. But has COVID-19 changed this balance? To what extent has the coronavirus affected the ability of the regime’s coercive apparatus to suppress future protests?...

“Iran has had one of the highest fatality rates from COVID-19 and poorer working-class Iranians have been by far the worst hit, as even regime officials admit. This has potentially dangerous political ramifications.

“Iran’s 1979 Islamic Revolution promised to defend this social group, which makes up the regime’s core constituency — what it calls the mustazefin (“downtrodden class”). Perhaps more importantly, most members of the IRGC and the Basij (and their families) are from this demographic. Many of them will have lost family and friends to the virus. On top of this, the economic impact of the coronavirus is set to hurt the mustazefin class the most…

“COVID-19 presents a set of unique challenges for the Islamic Republic. The virus grew in the context of political dissent, economic turmoil, and social unrest, and will only add fuel to the fire of Iranian grievances. There is every reason to believe that there will be more unrest in Iran in the near future; expressions of dissent are already starting to surface, especially on social media.

“Until now, the regime has been dependent on its security apparatus’ capacity and appetite to neutralize threats to its survival. However, this can change. Iran’s security forces have not been immune from the consequences of the virus, and this could have implications for the regime’s ability to suppress future unrest.”

The European Union continued to struggle to implement a collective response to the economic shock caused by COVID-19.

On the positive side, “Germany’s finance minister has said the stand-off between the country’s highest court and the European Central Bank is about to be resolved “without drama” (“Berlin and ECB signal end to legal impasse over bond-buying”, Financial Times 22Jun20).

On the other hand, the so-called “frugal four” (Sweden, Denmark, Austria, and the Netherlands) continued to oppose current plans for the EU’s proposed 750 billion Euro economic stimulus package. Key issues include the extent to which funds will be provided in the form of loans versus grants, and whether they will be linked to significant policy changes in some of the countries receiving them (especially those in southern Europe).

Reports have emerged that a unit of Russian intelligence, most likely the GRU (military intelligence) has been paying bounties to the Taliban for killing American troops.

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This will almost certainly increase US public hostility towards Russia. The Biden campaign has already moved to exploit the Trump administration’s strangely muted response to this news.

A number of new analyses appeared this month that highlighted underlying trends that are weakening Vladimir Putin’s hold on power.

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In “Russia cannot afford another 15 years at war with the west”, the FT’s Philip Stephens observes that, “On one level, the present Sino-Russian axis makes perfect sense. Both nations reject the American-designed postwar global order and repudiate the notion of a rules-based system rooted in western values. Both favour a Westphalian order in which the strong carve outs spheres of influence.

“For Mr Xi the gains speak for themselves. Moscow offers secure supplies of oil and gas to sustain the growth of the Chinese economy. The relationship provides strategic reassurance as Beijing confronts the US in pursuit of maritime hegemony in the western Pacific.
“Looking ahead, depopulated swaths of Russian Siberia offer an opportunity for economic expansion. Mr Putin’s forays in Ukraine and the Middle East are a bonus, distracting US attention from Chinese expansionism in east Asia.

“The advantages for Russia of such an unequal partnership are not so obvious…China’s influence building in eastern and central Europe would raise fears of strategic encirclement.”

In The American Interest, former Ambassador Andrew Wood published a long analysis of a critical question: “Can Putin Retain Control?” After detailing multiple building stresses within an increasingly fragile system (e.g., from weak economy and COVID-19, and the dissipating legitimacy of many elites), Wood concludes that, “there has been a political shift this year in Russia. It now looks improbable that Putin can securely reassert his full control and maintain it beyond 2024, or perhaps even to the end of his present term.

“He has drifted into the position of a leader who has nowhere to lead, heading a country that senses a need for some as yet undefined changes in its governance and destiny. Refixing the present structure in place with supposedly new and stronger authoritarian glue will not work for long.”

Amidst a flood of news stories about the impact of China’s new security law on Hong Kong, a number of potentially explosive analyses of the origin of the SARS-CoV-2 coronavirus have received far too little attention.

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We previously reviewed the evidence that the virus escaped from a lab in Wuhan (see the Evidence File in our April 2020 issue). These analyses conclude that the evidence supports the conclusion that it was deliberately created, either as part of a “gain of function” study, or as part of a biowar program.

Gain of function studies explore how genetic changes could substantially increase the transmissibility and severity of a virus. They also attempt to estimate the probability that a given gain of function could result from either genetic mutation or recombination (e.g., see the CDC’s Influenza Risk Assessment website).

Among academics studying influenza viruses, gain of function studies (e.g., for the H5N1 and H7N9 strains) have long be a subject of much controversy, because of the underlying risks involved. The two most important of these are (1) accidental lab release, and (2) publication of results that would provide a roadmap for weaponizing influenza or a similar virus. In the case of the pandemic SARS-Cov-2 coronavirus, these concerns seem to have been right on target.

In “A Candidate Vaccine for Covid-19 (SARS-CoV-2) Developed from Analysis of its General Method of Action for Infectivity”, Sorensen et al highlight unique features of the virus’s spike protein that enable it to bind to a wide range of human tissues. Based on this paper, Richard Dearlove, former head of the UK’s MI-6 intelligence agency, told the Telegraph that he believed that key elements of the virus had been “inserted” (“Coronavirus began 'as an accident' in Chinese lab, says former MI6 boss”, Telegraph, 3Jun20)

In an interview with the Norwegian news site Minerva.no, Sorensen (who is one of Norway’s leading virologists) explicitly stated his research team’s conclusion that, “has certain properties which would not evolve naturally” (“The most logical explanation is that it comes from a laboratory”, Minerva, 2Jul20).

Having written about influenza for many years, the most persuasive evidence and argument I have yet seen was published on weebly.com, titled, “Scientific evidence and logic behind the claim that the Wuhan coronavirus is man-made”. The author is anonymous, but clearly has experience with gain of function studies, given the detail presented in her/his analysis.

The author also references two previously obscure scientific papers that could easily have provided a roadmap for weaponizing a coronavirus: “A SARS-like cluster of circulating bat coronaviruses shows potential for human emergence” (published in Nature Medicine in 2015), and “Furin cleavage of the SARS coronavirus spike glycoprotein enhances cell–cell fusion but does not affect virion entry” (published in Virology in 2006).

Critically, the author demonstrates the weakness of the evidence that China has so far presented to support its claim that SARS-CoV-2 arose from natural mutation or recombination, and not deliberate human activity.
If these analyses are correct, they would explain why China has continued to block international investigation of the origins of the pandemic coronavirus.

And if they are true, then these authors analyses at minimum point to grossly negligent control of the risks related to gain of function studies, if not something much worse that has severe implications for China’s relationship with the rest of the world.

“China EMP Threat: The People’s Republic of China Military Doctrine, Plans, and Capabilities for Electromagnetic Pulse (EMP) Attack”, by Dr. Peter Pry, Executive Director of the EMP Task Force on National and Homeland Security

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“China has long known about nuclear high-altitude electromagnetic pulse (HEMP) and invested in protecting military forces and critical infrastructures from HEMP and other nuclear weapon effects during the Cold War, and continuing today. China has HEMP simulators and defensive and offensive programs that are almost certainly more robust than any in the United States. China's military doctrine regards nuclear HEMP attack as an extension of information or cyber warfare, and deserving highest priority as the most likely kind of future warfare.

“Chinese military writings are replete with references to making HEMP attacks against the United States as a means of prevailing in war. The foremost People's Liberation Army textbook on information warfare, Shen Weiguang's World War, the Third World War—Total Information Warfare, explicitly calls upon China to be prepared to exploit HEMP offensively—and to defend against it…

“China is on the verge of deploying or has already deployed hypersonic weapons that could potentially be armed with nuclear or non-nuclear EMP warheads, greatly increasing the threat of surprise attack against U.S. forces in the Pacific and against the United States.”

“How to Prevent a War in Asia: The Erosion of American Deterrence Raises the Risk of Chinese Miscalculation”, by Michele Flournoy

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Flournoy, is a key adviser to the Biden campaign. She writes that, “the resurgence of U.S.-Chinese competition poses a host of challenges for policymakers—related to trade and economics technology global influence and more but none is more consequential than reducing the risk of war. Unfortunately, thanks to today’s uniquely dangerous mix of growing Chinese assertiveness and military strength and eroding U.S. deterrence, that risk is higher than it has been for decades, and it is growing”…

“Neither Washington nor Beijing seeks a military conflict with the other. Chinese President Xi Jinping and U.S. President Donald Trump both undoubtedly understand that a war would be disastrous. Yet the United States and China could all too easily stumble into conflict, sparked by a Chinese miscalculation of the United States’ willingness or capability to respond to provocations in disputed areas such as the South China Sea or to outright aggression against Taiwan or another U.S. security partner in the region.

“For the past two decades, the People’s Liberation Army (PLA) has been growing in size, capability, and confidence.

“China is also emerging as a serious competitor in a number of technological areas that will ultimately determine military advantage. At the same time, the credibility of U.S. deterrence has been declining.”

China claimed that its new national security law applies globally.

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Article 38 covers a number of broad and vaguely defined offenses, including promoting “secession, subversion against the central Chinese government, terrorism, and colluding with foreign forces”, which are punishable by up to life in prison. In addition to covering everyone in Hong Kong (regardless of nationality) it also applies anyone who commits these offenses against Hong Kong anywhere in the world.

To cite an example: A tweet or blog post condemning China’s actions by a German citizen living in Paris could conceivably lead to their arrest if they ever travelled to Hong Kong or mainland China. China might also attempt to apply it via the authorities in any country with which it (or Hong Kong) has an extradition treaty.

In effect, in an attempt to limit global speech, China is now asserting its extraterritorial jurisdiction over every person on the planet (see, “If You’re Reading This, Beijing Says Its New Hong Kong Security Law Applies to You”, by Naomi Xu Elegant in Fortune, and “Hong Kong’s New Security Law: A First Look” by Donald Clarke).

Other key China developments included emerging reports of forced sterilization of Uighur women in Xinjiang; a border clash between Indian and Chinese forces that involved multiple casualties, announcement of US sanctions against Chinese officials involved in the detention of more than one million Uighurs in Xinjiang, and Australia came under cyberattack from a “national actor” that was widely presumed to be China.

The border clash will accelerate the formation of stronger ties between India, the United States, and Australia in a de facto alliance to contain Chinese ambitions in the region.

News and actions related to the repression of Uighurs (with all its historical echoes) will further harden attitudes towards China.

Four recent articles raised important points about China.

In “The Political Logic of China’s Strategic Mistakes”, Minxin Pei observes that, “Some of the Chinese government’s recent policies seem to make little practical sense, with its decision to impose a national-security law on Hong Kong being a prime example…

“It is tempting to see China’s major policy miscalculations as a consequence of over-concentration of power in the hands of President Xi Jinping: strongman rule inhibits internal debate and makes poor decisions more likely. This argument is not necessarily wrong, but it omits a more important reason for the Chinese government’s self-destructive policies: the mindset of the Communist Party of China (CPC)” …

“Even when the CPC knows that it will incur serious penalties for its actions, it has seldom flinched from taking measures – such as the crackdown on Hong Kong – deemed essential to maintaining its hold on power…

“Unfortunately for the CPC, therefore, it now has to contend with a far more determined adversary. Worse still, America’s willingness to absorb enormous short-term economic pain to gain a long-term strategic edge over China indicates that greed has lost its primacy. In particular, the US strategy of “decoupling” – severing the dense web of Sino-American economic ties – has caught China totally by surprise, because no CPC leader ever imagined that the US government would be willing to write off the Chinese market in pursuit of broader geopolitical objectives.

“For the first time since the end of the Cultural Revolution, the CPC faces a genuine existential threat, mainly because its mindset has led it to commit a series of calamitous strategic errors. And its latest intervention in Hong Kong suggests that it has no intention of changing course.”

In “America and China Are Entering the Dark Forest”, Niall Ferguson observes that those who seek to blame the deterioration in China’s relations with the US and other nations on Donald Trump overlook a central point: The growing conflict began when Xi Jinping took power in 2012, four years before Trump’s election.

In his influential New York magazine column, Andrew Sullivan declared that “China is a Genocidal Menace”, noting that, “There is no doubt at this point that communist China is a genocidal state. The regime is determined to coerce, kill, reeducate, and segregate its Uighur Muslim population, and to pursue eugenicist policies to winnow their ability to sustain themselves…
“It’s time we treated China as the rogue dictatorship it is. When a totalitarian nation is enacting genocide, has a dictator for life, is showing itself to be a health menace to humankind, has crushed an island of democracy it pledged to protect, and is militarily acting out against its neighbors, we cannot continue as normal.”

Finally, Australian analyst Salvatore Babones published an article titled, “China’s Superpower Dreams are Running Out of Money”, due to a combination of interacting factors, including a shrinking labor force, continuing large income inequalities, and rising trade barriers.

The danger this raises is that, if Xi Jinping and China’s leaders conclude that they are unlikely to escape the “middle income trap”, then they may be tempted to take more risks than in the past to maximize their gains before their structurally weakening economy constrains their ambitions. For example, this raises the probability that China will act unilaterally and aggressively to gain control of Taiwan if they believe they are reaching the point of their maximum relative advantage.

On May 27th, China’s National People’s Congress passed a national security law that will drastically curtail civil liberties in Hong Kong

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China has unilaterally abrogated the 1984 Sino-British Joint Declaration, and ended the “one country, two systems” approach that has prevailed in Hong Kong since the UK handed over its former colony to China in July 1997.

This indicates that China is now less concerned with damaging its international reputation when perceived risks to its internal stability are involved. Whether this creates greater doubts about Xi’s leadership among other CCP factions, and whether that could lead to a removal of Xi remains to be seen. While the former seems very likely the latter seems equally unlikely.

This latest development also very likely indicates that China is more willing to take aggressive action towards Taiwan, even as the citizens of the latter now see the emptiness of any future promise of “one country, two systems” for their island.

“The Chip Wars of the 21st Century”, by Steve Blank, and “Could Donald Trump’s War Against Huawei Trigger a Real War With China?” by Graham Allison
See also, “The US Must Increase Chip Production to Survive the Tech Cold War” by Richard Waters in the Financial Times

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Blank’s paper provides ample evidence to support his thesis: “Controlling advanced chip manufacturing in the 21st century may well prove to be like controlling the oil supply in the 20th. The country that controls this manufacturing can throttle the military and economic power of others.”

He goes on to warn that, “The United States recently did this to China by limiting Huawei’s ability to outsource its in-house chip designs for manufacture by Taiwan Semiconductor Manufacturing Company (TSMC), a Taiwanese chip foundry. China may respond and escalate via one of its many agile strategic options short of war, perhaps succeeding in coercing the foundry to stop making chips for American companies. If negotiations fail, China might take drastic measures, turning the tables on the United States.”

In his paper, Allison elaborates on this threat.

“The centerpiece of the Trump administration’s “tech war” with China is the campaign to prevent its national champion Huawei from becoming the dominant supplier of 5G systems to the world. The Administration’s objective, as a former Trump NSC staffer described it, is to “kill Huawei.” And China has heard that message.

“As Huawei’s legendary CEO Ren Zhengfei told its leadership in February, “the company has entered a state of war.” After months of diplomatic efforts to dissuade other nations from buying their 5G infrastructure from Huawei, the administration delivered what one official called a ‘death blow.’

“On May 15, the Commerce Department banned all sales of advanced semiconductors from American suppliers to Huawei. It also prohibited all sales of equipment to design and produce advanced semiconductors by foreign companies that use U.S. technology or intellectual property.

“In the five months between now and the election, could the U.S. attempt to enforce that ban become a twenty-first-century equivalent of the oil embargo the United States imposed on
Japan in August 1941?” …

Allison goes on to make a point we have frequently made ourselves over the years: “The thought that the United States and China could find themselves in a real, hot, bloody war will strike many readers as inconceivable. But we should remember that when we say something is inconceivable, this is not a claim about what is possible in the world, but rather about what our minds can conceive.

“In the summer of 1941, the possibility that a nation less than one-quarter the size of the United States would launch a bolt from the blue against the most powerful nation in the world was beyond Washington’s imagination.”

Allison asks us to “imagine further that Huawei’s Chairman really believes what he said after the ban was announced that this forces Huawei “to seek survival.” If President Xi Jinping concludes that this is a matter of life and death for his champion advanced technology company that is the poster child for his signature program promising Chinese technological leadership by 2025 and 2030, then what options does China have?”

“The leading producer of advanced semiconductors for Huawei is the Taiwanese company TSMC. Its factories that supply Huawei and other leading Chinese technology companies are located ninety miles off the shore of the Chinese mainland” …

“While previous Chinese leaders had followed a strategy that envisioned the magnetic pull of its rapidly-growing economy drawing Taiwan into the motherland, Xi Jinping’s government has concluded that this approach failed. As Xi’s Party-led autocracy has tightened controls against political opposition or criticism, Taiwanese, like Hong Kong residents, have become increasingly resistant to the prospect of being ruled by Beijing.

“In the twists and turns of this story, observers of the recent National People’s Congress in Beijing will have noticed that Premier Li Keqiang’s speech dropped the term “peaceful” from Beijing’s standard call for the reunification of Taiwan. One of China’s senior military leaders, Gen. Li Zuocheng, gave a rousing speech to the Congress assuring them that “If the possibility for peaceful reunification is lost, then the People’s armed forces will, with the whole of the nation, including the people of Taiwan, take all necessary steps to resolutely smash any separatist plots or actions”…

“If Chinese forces seized TSMC factories and laboratories, then would this solve Huawei’s and other Chinese technologies leader’s advanced semiconductor problems?

“While views differ, having consulted with a number of those at leading U.S. and UK companies in this industry, my best judgment is that this could buy China critical time—one to two years— to advance its own initiatives. Of course, industry leaders like Qualcomm and ARM are continuously improving their designs and their manufacturing processes. But since Huawei and a number of other Chinese firms have been hard at work in developing indigenous capabilities, even if they should be a year behind, given their other advantages in 5G, this could still allow Chin to sustain its leadership in this critical new technology”…

“The critical question is whether such a scenario is possible. And the answer to that question is most certainly yes. Those who find this too fanciful should review carefully what President Xi’s Party-led autocracy has done in the past several weeks in Hong Kong…

“In sum: the remainder of 2020 could pose as severe a test for the United States and China as the final five months of 1941 did for the United States and Japan.”

See also: “A New Global Crisis is Looming in East Asia”, by Gideon Rachman in the Financial Times.

“Chinese Debates on the Military Utility of Artificial Intelligence” by Michael Dahm
See also, “Mosaic Warfare” by Clark et al from the Center for Strategic and Budgetary Assessment, on the emergence of “decision centric warfare”

“The Chinese military has been opaque about its AI strategy and intentions. Undoubtedly, Chinese military officials understand they must compete with the United States by adapting quickly to changes in warfare brought about by AI and autonomous systems. An examination of the ongoing debate within the ranks of China’s People’s Liberation Army (PLA) about the transformation of warfare by AI — what they call “intelligentized warfare” — reveals that this new form of warfare is an extension of existing Chinese strategy and operational concepts…

“The PLA’s overarching strategy for defeating the U.S. military, or any foreign adversary, is to dominate in a system-of-systems confrontation. This method of war fighting focuses on creating disruption or paralysis across an enemy system-of-systems versus emphasizing the attrition of forces.

“First, the PLA will attempt to crash the adversary’s information networks using kinetic and non-kinetic means. The Chinese military believes that information is the critical element that binds and enables a larger military system-of-systems.

“Second, the PLA intends to eliminate individual elements of a now-disaggregated enemy force with long-range precision fires.

This Chinese military doctrine has been described as “systems confrontation,” but that short-hand does not accurately capture the potential for a cascade of compounding effects within a complex system-of-systems and the resulting paralyzing outcomes. AI may provide a critical means to that end…

“American assessments of military AI o en focus on the second step — coordinated lethal attacks using autonomous systems against opposing forces. Drones and other autonomous systems are certainly under development in the PLA. However, the Chinese focus is currently on developing AI technology, methods, and tactics to precisely target key elements within an enemy’s system of-systems.

“The objective is to paralyze the adversary, and goes well beyond merely “throwing sand in the gears” of the enemy joint force. If successful, the large-scale attrition of forces may not even be necessary.

“The use of AI in a system-of-systems confrontation conforms with and enables existing Chinese military doctrine on informationized warfare. The PLA believes that the center of gravity in modern military operations has shifted from concentrations of forces to information systems-of-systems — everything from target detection to communication to information processing to command of action.

“Modern military information systems-of-systems are vast, complex, and in the future will likely be managed by AI. Therefore, it follows that they can only be analyzed in real-time and attacked using AI.
“The PLA’s objective is to use AI algorithms, machine learning, human-machine teaming, and autonomous systems collaboratively to paralyze its adversaries.

“The ultimate goal for the Chinese military appears to be cognitive advantage — the ability to adapt one’s system-of-systems faster than one’s adversary…

“Chinese military authors are fond of invoking the U.S.-originated OODA loop (observe, orient, decide, act). These Chinese authors observe that decision-making is the bottleneck in the OODA loop [a point made in 2006 by US authors Eric DeLange and Mike Morris in underappreciated Naval War College paper, “Decision-Centric Warfare: Reading Between the Lines of Network-Centric Warfare”].

“Future autonomous systems, they say, will compete for cognitive advantage and thus decision advantage enabling faster cycling of military action to dominate an adversary in “parallel operations” drawing from the U.S.-originated parallel warfare concept.

“Israel-Iran Attacks: Cyber Winter is Coming” by Srivastava et al in the Financial Times

The article describes a cyber attack on an Israeli municipal water system, alleged to have come from Iran. An unnamed Israeli official “was quoted as saying that the attack had created a precedent for tit-for-tat cyber attacks on civilian infrastructure that both countries have so far avoided — and may still be keen to avoid.”

“The Future of Warfare in 2030”, an excellent and very thought-provoking new series of reports from RAND

SURPRISE

The first of these reports begins with point near and dear to our hearts as forecasters: “The U.S. track record for predicting the future of warfare is notoriously poor. Robert Gates, U.S. Secretary of Defense from 2006 to 2011, famously quipped, “when it comes to predicting the nature and location of our next military engagements, since Vietnam, our record has been perfect. We have never once gotten it right, from the Mayaguez to Grenada, Panama, Somalia, the Balkans, Haiti, Kuwait, Iraq, and more—we had no idea a year before any of these missions that we would be so engaged” …

“And yet, for better or worse, the U.S. military is deeply invested in the forecasting business because the services need to start building today what will be needed one or even two decades from now. Thus, the question becomes how to predict the future of warfare correctly.”

This new series of reports “starts by exploring why the U.S. military so often fails to the predict the future correctly and finds that failed predictions cannot be chalked up simply to stupidity of individual leaders, ignorance of technology, or failure to identify trends. Rather, the failures stem from not thinking comprehensively about the factors that shape conflict and how these variables interact with one another” [another point near and dear to The Index Investor].

The RAND authors propose a methodology to address this problem by “first identifying the key three dozen or so geopolitical, economic, environmental, geographic, military, legal, and informational trends that will shape the future of warfare from now until 2030 and then aggregating them to paint a holistic picture of which countries the United States will fight with and against, where these conflicts will occur, what they might look like, how the United States will wage them, and when and why the United States might go to war in the first place” [great minds think alike…].

The RAND study concludes that. “the United States will confront a series of deepening strategic dilemmas when confronting warfare from now through 2030. U.S. adversaries—China, Russia, Iran, North Korea, and terrorist groups—likely will remain constant, but U.S. allies are liable to change as Europe becomes increasingly fragmented and inward-looking and as Asia reacts to the rise of China.

“The locations where the United States is most likely to fight will not match where conflicts could be most dangerous to U.S. interests.

“The joint force will face at least four diverse types of conflict, each requiring a somewhat different suite of capabilities, just as it confronts diminishing quantitative and qualitative military advantages.

“Above all, perhaps, the United States of 2030 could progressively lose the capacity to dictate strategic outcomes and to shape when and why the wars of the future occur.

“Ultimately, as the future of warfare places more demands on U.S. forces and pulls limited U.S. resources in opposite directions, the United States will face a grand strategic choice: It can break with the internationalist foreign policy that it has pursued since at least the end of the Cold War and become dramatically more selective about where, when, and why it commits forces.

“Alternatively, it can double down on its commitments, knowing full well that doing so will come with significantly greater cost—in treasure and perhaps in blood.”

In Russian, Vladimir Putin confronted both the failure of the oil price war he had triggered, and rapid growth of COVID19 cases, after he had bragged about Russia’s success in controlling the outbreak

SURPRISE

Despite production cuts agreed by Open and other oil producing nations, storage is still quite full, and the extent of demand destruction (and its duration) remain highly uncertain. Hence downward pressure on prices continues. A sharp and prolonged decline in revenue from oil sales will put pressure on Russia’s budget, just as growth in COVID19 cases is putting downward pressure on other sources of aggregate demand in its economy, and increasing the need for much more government spending.

The ability of Russia’s healthcare system to respond to COVID19 is also highly questionable, which could, in addition to a rapidly weakening economy, further raise public frustration with Putin’s performance. COVID19 infections have exponentially grown since April 18th, when Putin assured Russians that “the situation is under full control.”

This is also almost certainly why the Kremlin has, uncharacteristically, delegated authority for responding to COVID19 to Russia’s cash strapped governors.

Whether what many expect will very likely be a poor and economically damaging response will trigger a sharp rise in popular discontent and intensified competition between various factions of the security services and oligarchs to succeed Putin remains to be seen. At this point, it seems unlikely. But a rapid worsening of the crisis could quickly change that.

COVID19 has accentuated existing divisions in Europe. It has raised the probability of a “no deal” Brexit, after which the UK will trade with the EU on the basis of World Trade Organization terms.

It has also widened the split between financially conservative northern nations who, because of the alleged fiscal profligacy of southern European countries, continue to resist “mutualization” of the debt that needs to be issued to fund the governments’ fiscal response to the pandemic.

COVID19 has also weakened the reaction of western European nations to the weakening of democracy in eastern members of the European Union, including Hungary and Poland.

SURPRISE

This development in particular has highlighted the continuing tension between the rights and powers of nation states and the rights and powers of the European Union in Brussels.
“German Court Ruling Casts Doubt on European Monetary Policy”, the Financial Times, 5May20.
“Germany’s constitutional court has threatened to block fresh purchases of German bonds through the European Central Bank’s flagship stimulus programme [launched in 2015], potentially weakening the bloc’s monetary policy response to the coronavirus crisis.

“The court on Tuesday ordered the German government and parliament to ensure the ECB carried out a “proportionality assessment” of its vast purchases of government debt to ensure their “economic and fiscal policy effects” did not outweigh its policy objectives [i.e., was a proportionate response to financial problems, and did not constitute monetization on member states’ fiscal deficits], and threatened to block new bond-buying unless the ECB did so within three months [buy August].

“In recent weeks the central bank has vastly expanded its quantitative easing programme of bond-buying to mitigate the economic consequences of coronavirus. It has bought more than €2.2tn of public sector debt since launching quantitative easing in 2014 in an attempt to halt a slide in inflation.

“The bond-buying programme has long been controversial in Germany, where critics argue the central bank has exceeded its mandate by illegally financing governments and exposing taxpayers to potential losses.”

In a subsequent article, the FT’s Martin Sandbu noted that, “The court did not, ‘for now’, deem quantitative easing illegal. Instead it set off three grenades under the European legal order.
“First, by dismissing the European Court of Justice’s legal reasoning as inadequate, it took upon itself the role of interpreting this area of EU law [this sets a dangerous precedent, as treaties state that only the ECJ can decide whether an EU body has broken EU law].

“Second, it posited an interpretation that turns EU Treaty provisions on their head, and flies in the face of the legal text and its political understanding — including in Germany.
“Third, it gave German institutions three months’ notice: if by then the ECB has not complied with the court’s new doctrine, the Bundesbank and other German entities are banned from participating in the quantitative easing programme.”

Respected German commentator Wofgang Munchau had a different take: “In the end, the German constitutional court has done us a favour. Its ruling last week highlighted the toxic idea that the eurozone can forever rely for its survival on its central bankers, and their enthusiasm in pushing EU laws to the limits. Or maybe beyond…

“The ruling only allows the Germans to take part in the asset purchase programme for another three months unless they find a way to comply. Theoretically, the ECB could proceed without Germany. But I would strongly advise against it because that could precipitate a eurozone break-up…

“The smartest response to this ruling would be for the EU to address the problems of the eurozone head on: lack of convergence between north and south, debt sustainability and, most important right now, the issuance of mutualised debt to finance a recovery fund.

“The German constitutional court cannot stop the European Commission from raising €1tn in debt in the form of a perpetual bond. But it is important this debt is guaranteed by the EU rather than member states, because other national courts might raise their head.

“Arguments over the future of the euro are only just starting. To win them, supporters of political and monetary integration must let go of the ECB as their comfort blanket, and the idea that it can always do whatever it takes. That battle was lost last week.” (“The European Central Bank is deluding itself over German court ruling”, Financial Times).

“A scaling theory of armed conflict avalanches”, by Lee et al

SUPRRISE

The authors observe that, historically, “the unpredictability of armed conflict is cited in the classic texts on warfare, Sun-Tzu's The Art of War, Lanchester's Aircraft in Warfare, and Von Clausewitz's Vom Kriege.”

They also observe that, “armed conflict data display scaling and universal dynamics in both social and physical properties like fatalities and geographic extent…Despite seeming chaos in the midst of a single conflict, the ensemble of many conflicts displays multiple mathematical regularities including Richardson's law, the scale-free distribution of fatalities in interstate warfare.

"Yet how Richardson's law and other scaling patterns relate to one another remains unknown; a framework unifying these and other conflict aspects could facilitate prediction or reveal hidden and spurious cause of surprising outcomes.”

The authors proceed to show, by studying the Armed Conflict Location & Event Data (ACLED) Project, that multiple quantitative regularities can be unified in in a simple scaling framework. They note that, these “regularities are evocative of scaling laws that emerge in other disordered, driven physical systems, [such as] animal societies with long temporal correlations in conflict dynamics, elections, cities, and other social systems.”

“Military Applications of Artificial Intelligence”, by Morgan et al from RAND

“The research in this report was conducted in 2017 and 2018. The report was delivered to the sponsor in October 2018 and was approved for public distribution in March 2020”…

The authors survey the kinds of technologies broadly classified as AI, consider their potential benefits in military applications, and assess the ethical, operational, and strategic risks that these technologies entail…

“Operational risks arise from questions about the reliability, fragility, and security of AI systems.
“Strategic risks include the possibility that AI will increase the likelihood of war, escalate ongoing conflicts, and proliferate to malicious actors…

They conclude that, “potential adversaries are increasingly integrating AI into a range of military applications in pursuit of warfighting advantages.”

“Defense Budget Implications of the COVID-19 Pandemic”, by Egel et al from RAND

“The COVID-19 pandemic is already taking a dramatic toll on the U.S. economy as businesses are shuttered, interstate commerce is restricted, and both domestic and global supply chains are disrupted. We anticipate that this could have significant medium-term implications for the defense budget and that there will be a need for the U.S. Department of Defense (DoD) to find efficiencies that are of at least the same magnitude as the recent sequestration…

“In addition, the $2 trillion relief bill will expand total U.S. debt by nearly 10%, which was already $23.4 trillion at the onset of the crisis, putting defense and other government expenditures under increased pressure…

“This is a daunting prospect, but what does it imply for defense spending, which totaled $676 billion in the federal fiscal year 2019? To begin with, some simple math can frame the scale of the concern for defense planners. If one assumes that the defense budget as a portion of GDP is held fixed at its current level — 3.2% — the macro estimates above would result in available resources for the DoD that are $350 to $600 billion lower than current plans over the next 10 years.

"As a comparison, total cuts to the DoD under the Budget Control Act of 2011, which was enacted as part of the Congressional response to the ballooning deficit resulting from the Great Recession and the resulting economic stimulus packages, were somewhere closer to $500 billion over ten years…In this simple view, the potential losses to DoD from COVID-19 would be roughly comparable to a second sequestration. And while the Great Recession was unprecedented in modern U.S. history, most indicators suggest that the economic fallout from COVID-19 will be worse.”

As COVID19 has progressed, China’s relations with the United States and other western nations (e.g., Australia) have worsened, and it has been increasing its incursions of Taiwanese and Japanese airspace, and arresting democracy activists in Hong Kong

These are all further indicators that the world has entered a Second Cold War between China (loosely allied with Russia), and the United States (which, under Donald Trump, now has weaker relationships with allied nations than it did during the First Cold War). For an extended discussion of what this implies for the future, see this month’s feature article.

As the COVID19 pandemic spread and dramatically reduced demand, Saudi Arabia and Russia launched an oil price war

In the short term, the immediate casualties will likely be highly leveraged US shale oil producers whose breakeven economics depends on prices of $50/barrel or more (causing bankruptcies and some reduction in output), Canadian oil sands producers (reduced output, but bankruptcies among their suppliers), and smaller OPEC countries (whose already unstable governments will be further weakened – very likely, in some cases, to the point of collapse -- by a sharp fall in oil revenues and the arrival of COVID19).

“Alternative Worldviews Understanding Potential Trajectories of Great-Power Ideological Competition”, by Watts et al from RAND

SURPRISE
“This report seeks answers to the following questions:

"(1) To what extent have China and Russia formulated alternative ideologies or worldviews that challenge today’s international order? Because such alternatives have not yet been articulated, what factors might drive the emergence of a cohesive, alternative ideology?

"(2) How do these rivals currently pursue ideological competition with the United States, and how might they do so in the future?

"(3) Under what conditions are China and Russia likely to persuade audiences around the world of the advantages of alternatives to the current international order?” …

“Ideologies can be understood as a coherent set of ideas about politics or social organization that combines beliefs about norms (e.g., a belief that a given set of policies is morally superior or culturally appropriate) and causality (e.g., a belief that a given set of policies will yield superior outcomes)…

"Ideologies offer coherent, normatively grounded solutions to social problems, they are potent sources of political action.” …

“China seeks to secure what it perceives as its rightful place in the world: dominance over Asia and expanded influence globally, with the United States’ role correspondingly weakened…

"Following 30 years of economic growth and 20 years of concerted military modernization that is finally delivering rapidly advancing capabilities to support the military’s regional objectives, China is now in a position to assert its vision…

“At its core, China’s governing ideology centers on development—which might be appealing to some in the developing world—as opposed to the Western liberal focus on freedom.

“Most of China’s current governing ideas in the international, domestic, and economic realms are underpinned by the government’s emphasis on national sovereignty.

“However, an important—if unrealized—strain of China’s historical worldview is Tianxia, or “all under heaven.” Tianxia prescribes an almost supranational elite global governance centered on Beijing, which presents a fundamental contradiction with Beijing’s traditional acceptance of Westphalian concepts of sovereignty. This inherent tension is an important intellectual thread to monitor because it could challenge the core tenet of the U.S.-led order” …

“Despite China’s efforts to popularize its ideology, the results are uncertain. There is no specific polling on China’s ideological projects that would help to disentangle their effects from China’s material sources of influence, and global public opinion of China is uneven”…

“Since the collapse of the Soviet Union, Russia has primarily railed against Western ideals but struggled to articulate its own ideologies. However, more recently, Russia explicitly embraced ‘conservative and antiliberal elements’”…

“With the exception of survival of the regime, regional influence is the most important strategic interest of Russia … Another key interest is that Russia be regarded as a “leading world power” whose role is to maintain strategic stability and act as a check against the United States and the West. A common narrative that has emerged in Russian geopolitical discourse is the impact of globalization dominated by a liberal worldview, and the need for Russia to offer a “traditional” or anti- Western alternative”…

“The key ideas underlying this evolving narrative are anti-Westernism, polycentrism, antiliberalism, and conservatism, which are, in some respects, a reversion to the mean of Russian political and cultural history that goes back centuries” …

“The extent to which these ideas are deeply held among the Russian elite or are being opportunistically exploited as relations with the United States and the West deteriorate is difficult to know…However, history and polling suggest that there will likely be, at a minimum, a substantial minority of the Russian elite, particularly in the security and military sectors, that will see a Russian embrace of Western political and cultural ideas as antithetical to Russia’s national identity” …

“Russia has developed the capabilities to promote its ideas on a global scale…Russia developed social media capabilities that have facilitated the propagation and, in some cases, weaponization of information and that appeal to disaffected groups to capitalize on political and cultural divisions”…

“Rapid ideological change typically occurs in periods of crisis: In ordinary times, most people tend to resist sweeping updates to their political ideologies. However, in times of crisis—especially following defeat in war or deep and sustained economic dislocations— people might become much more receptive to ideas that appear to offer solutions to systemic problems. Such rapid propagation of new ideas occurred during the collapse of the Soviet Union.

"Depending on the duration and depth of current economic dislocations, including those from automation, global trade, and potential environmental catastrophes, rapid ideological change might occur again.”

The authors conclude with descriptions of alternative scenarios for the trajectories of great power competition in the years ahead.

“One War Is Not Enough: Strategy and Force Planning for Great Power Competition”, by Brands and Montgomery

SURPRISE
Brands and Evan Braden Montgomery discuss the gap between America's global commitments and the military challenges it can realistically meet.

A quiet revolution in American defense strategy is currently underway. The U.S. military is no longer focusing on combating rogue states, terrorist groups, and other deadly, albeit relatively weak, enemies. Instead, the Defense Department is setting its sights on China and Russia: great power rivals that are contesting American military advantages and threatening to reorder the world. “The central challenge to U.S. prosperity and security is the reemergence of long-term, strategic competition by … revisionist powers,” the 2018 National Defense Strategy states.

"Deterring these rivals, and defeating them should deterrence fail, will require far-reaching changes in what the American military buys and how it fights.
rather than planning to win multiple medium-sized wars, the Defense Department is preparing to win a single major war against a formidable competitor, one that can match (at least in some areas) American military might.

"This shift represents the most significant departure in American defense strategy since the end of the Cold War, and it has tremendous ramifications for a country that still has security commitments — and security challenges — around the globe.
The one-war standard reflects serious strategic thinking and is rooted in real budgetary constraints. It is a recognition that defeating a great-power adversary would be far more difficult than anything the U.S. military has done in decades, and that losing a great-power war would be devastating to America’s global interests.

"It is meant to galvanize a sluggish bureaucracy to undertake the radical changes necessary to prevent this grim scenario from coming to pass. Yet, it is far more dangerous than its advocates publicly acknowledge

"The most obvious risk of a one-war standard is that America might need to fight more than one war at a time. In fact, a one-war standard could increase this risk by tempting an opportunistic adversary to use force in one theater while Washington is occupied in another.

"Proponents of the one-war approach offer a number of options for avoiding a second war, if possible, or fighting it, if necessary, but these options are not promising: They would leave the United States strategically exposed, militarily overextended, or much more reliant on highly escalatory options that lack credibility. And as America loses the ability to handle challenges in more than one theater, it will also lose leverage in peacetime competitions and diplomatic crises. In short, the one-war standard exposes a serious mismatch between America’s global commitments and the military challenges it can realistically meet — a grand strategy-defense strategy gap that may prove extremely damaging in war and peace alike."

“Fog, Friction, And Thinking Machines”, by Zach Hughes

SURPRISE
“For four reasons, the proliferation of battlefield AI and autonomous systems is likely to increase the fog of war.

“First, new technologies tend to make life harder for individuals, even as they add capability.

“Second, AI introduces new kinds of battlefield cognition.

“Third, combining AI, hypersonic weapons, and directed energy will accelerate decision-making to machine speeds.

“And fourth, AI enables military deception of both a new quality and quantity…

“Fog and friction will likely be as prevalent in the era of thinking machines as at any other time in history. The U.S. military should view with great skepticism any optimistic claims that new technology will remove the fog of war. Instead, by taking a more realistic view that fog and friction are here to stay, the U.S. military can focus on training its leaders, present and future, to navigate the increasing complexity and dynamism of a battlefield operating at machine speeds.”

Final Report of the Cyberspace Solarium Commission, March 2020

The Cyberspace Solarium Commission (CSC) was established in the National Defense Authorization Act for Fiscal Year 2019 to "develop a consensus on a strategic approach to defending the United States in cyberspace against cyber attacks of significant consequences."

Its final report is a sobering read.
Among its key conclusions:

“For over 20 years, nation-states and non-state actors have used cyberspace to subvert American power, American security, and the American way of life…The perpetrators saw that their onslaught damaged the United States without triggering significant retaliation”…

“The US Government is currently not designed to act with the speed and agility necessary to defend the country in cyberspace”… For example, see another new analysis, “How Adversarial Attacks Could Destabilize Military AI Systems”, by David Danks

“The United States now operates in a cyber landscape that requires a level of data security, resilience, and trustworthiness that neither the US government nor the private sector alone is currently equipped to provide. Moreover, shortfalls in agility, technical expertise, and unity of effort, both within the US government and between the public and private sectors are growing.”

The report concludes with a long list of recommendations to address the challenges it identifies.

COVID19 has once again laid bare underlying tensions in the European Union.

A flashpoint is Italy, which has seen more deaths than other countries, but with a debt/GDP ratio of 136% was likely to find it hard to finance the increased government spending critical to minimizing the COVID19’s negative impact on the economy.

One proposal was for the EU to issue “Eurobonds” which were backed by the governments of all EU nations. But northern countries, like Germany with a debt/GDP ratio of only 59%, refused to back this idea, fearing that the lack of spending and borrowing discipline by Italy (and also Spain) would leave its more prudent taxpayers on the hook.

For the time being, the conflict has been dampened by the decision of the European Central Bank to purchase significant amounts of sovereign debt, from Italy and other issuers, to fund at least the initial portion of their economic support and recovery programs.
Going forward, however, this latest example of the EU’s north/south divide (coming on top of the East/West divide most recently highlighted by Brexit and the EU’s silence when Hungary’s Viktor Orban assumed near dictatorial power) will almost certainly further weaken the EU. It is highly unlikely that Italians will forget how they were treated – a point that was only highlighted by both Russia’s and China’s very public delivery of COVID19 medical supplies to Italy.

China has launched an aggressive propaganda campaign to deflect blame for the COVID19 pandemic.

This was matched by many other new articles advocating for and/or describing the “hard decoupling” that is now occurring between the United States and China.

E.g., “China is Trolling the World and Avoiding Blame”, by Shadi Hamid from Brookings, “China Goes on the Offensive to Control the Global Coronavirus Narrative” by Don Weinland in the FT, “China Takes a Page from Russia’s Disinformation Playbook” on Axios.com, 25Mar20, “How China Built a Twitter Propaganda Machine then Let It Lose on Coronavirus”, by Kao et al on ProPublica.com, “China’s Devastating Lies”, by Jim Geraghty, and “The Chinese Big Lie”, by Gary Schmidt

There have been scattered reports that the COVID19 pandemic may have originated from an accident at a laboratory in Wuhan that was studying bat coronaviruses. If further evidence accumulates that supports this theory, it has substantial negative implications for China’s relationships with other nations.

SURPRISE
In “The Possible Origins of 2019-nCoV Coronavirus”, Xiao and Xiao of the School of Biology and Biological Engineering, South China University of Technology note that, “An article published on The Lancet reported that 41 people in Wuhan were found to have the acute respiratory syndrome and 27 of them had contact with Huanan Seafood Market. The 2019-nCoV was found in 33 out of 585 samples collected in the market after the outbreak. The market was suspicious to be the origin of the epidemic, and was shut down according to the rule of quarantine the source during an epidemic.

“The bats carrying CoV ZC45 were originally found in Yunnan or Zhejiang province, both of which were more than 900 kilometers away from the seafood market. Bats were normally found to live in caves and trees. But the seafood market is in a densely-populated district of Wuhan, a metropolitan of ~15 million people. The probability was very low for the bats to fly to the market.

"According to municipal reports and the testimonies of 31 residents and 28 visitors, the bat was never a food source in the city, and no bat was traded in the market. There was possible natural recombination or intermediate host of the coronavirus, yet little proof has been reported. Was there any other possible pathway?”

The authors present a plausible hypothesis that the origin of the COVID19 pandemic was an accidental release from one of two laboratories in Wuhan.

They “identified two laboratories conducting research on bat coronavirus. Within ~280 meters from the market, there was the Wuhan Center for Disease Control & Prevention (WHCDC). WHCDC hosted animals in laboratories for research purpose, one of which was specialized in [bat] pathogens collection and identification.”

“Surgery was performed on the caged animals and the tissue samples were collected for DNA and RNA extraction and sequencing. The tissue samples and contaminated trashes were source of pathogens. They were only ~280 meters from the seafood market.

"The WHCDC was also adjacent to the Union Hospital where the first group of doctors were infected during this epidemic. It is plausible that the virus leaked around and some of them contaminated the initial patients in this epidemic, though solid proofs are needed in future study.”

“The second laboratory was ~12 kilometers from the seafood market and belonged to Wuhan Institute of Virology, Chinese Academy of Science. This laboratory reported that the Chinese horseshoe bats were natural reservoirs for the severe acute respiratory syndrome coronavirus (SARS-CoV) which caused the 2002-3 pandemic.

“The principle investigator participated in a project which generated a chimeric virus using the SARS-CoV reverse genetics system, and reported the potential for human emergence. A direct speculation was that SARS-CoV or its derivative might leak from the laboratory.”

“In summary, somebody was entangled with the evolution of 2019-nCoV coronavirus. In addition to origins of natural recombination and intermediate host, the killer coronavirus probably originated from a laboratory in Wuhan.”

Since this article was published, the Chinese government has imposed centralized control over the release of any papers related to the origin of the COVID19 pandemic.

See also: “How Did COVID19 Begin? Its Initial Origin Story is Shaky”, by David Ignatius in the Washington Post, 2Apr20, and “U.S. government gave $3.7million grant to Wuhan lab at center of coronavirus leak scrutiny”, Daily Mail, 12Apr20

“China’s Coming Upheaval Competition, the Coronavirus, and the Weakness of Xi Jinping”, by Minxin Pei in Foreign Affairs

SURPRISE
“Over the past few years, the United States’ approach to China has taken a hard-line turn, with the balance between cooperation and competition in the U.S.-Chinese relationship tilting sharply toward the latter. Most American policymakers and commentators consider this confrontational new strategy a response to China’s growing assertiveness, embodied especially in the controversial figure of Chinese President Xi Jinping.”

“But ultimately, this ongoing tension—particularly with the added pressures of the new coronavirus outbreak and an economic downturn—is likely to expose the brittleness and insecurity that lie beneath the surface of Xi’s, and Beijing’s, assertions of solidity and strength” …

“The diplomatic, economic, and military pressure that Washington can bring to bear on Beijing will put Xi and the Chinese Communist Party (CCP) he leads under enormous strain. Indeed, a prolonged period of strategic confrontation with the United States, such as the one China is currently experiencing, will create conditions that are conducive to dramatic changes” …

“Under Xi, correcting policy mistakes has proved to be difficult, since reversing decisions made personally by the strongman would undercut his image of infallibility. (It is easier politically to reverse bad decisions made under collective leadership, because a group, not an individual, takes the blame.)

"Xi’s demand for loyalty has also stifled debate and deterred dissent within the CCP. For these reasons, the party lacks the flexibility needed to avoid and reverse future missteps in its confrontation with the United States. The result is likely to be growing disunity within the regime.”

“Simplicity Before Complexity: Conceptualizing Long-Term Military Competitions”, by Sam Canter on Real Clear Defense (17Feb20)

SURPRISE
This paper does an excellent job of providing a conceptual model of military competition based on different mixed of the ends pursued and the means used to achieve them.

Given the rising tension between the different nations and alliance blocs in the world today, it can serve a very useful basis for organizing your thinking about their underlying dynamics, and projecting how they could evolve.

This paper is hard to summarize; it really needs to be read in full.

“Protracted Great Power War: A Preliminary Assessment”, by Andrew Krepinevich, from the Center for a New American Security (CNAS)

SURPRISE
Krepinevich “finds the U.S. Department of Defense is giving insufficient attention to preparing for such wars. While the probability of an extended great-power war may be low, the costs involved in waging one would likely be extraordinarily high, making it an issue of strategic significance for senior Defense Department leaders…

“Following the Cold War, planning for protracted great power war contingencies was essentially abandoned. Now, however, with the rise of revisionist China and Russia, the United States is confronted with a strategic choice: conducting contingency planning for a protracted great-power conflict and how to wage it successfully (or, better still, prevent it from occurring), or ignoring the possibility and hoping for the best.

“Should they choose the former course of action, U.S. defense leaders and planners must understand the characteristics of contemporary protracted great-power war, which are likely to be far different from those of both recent conflicts and World War II—the last protracted great-power conflict…

“The time elapsed between today and the start of World War II, 80 years, is roughly the same as the time between America’s entry into World War II and the start of the American Civil War. Just as the combatants in the Civil War would have felt greatly out of place at Pearl Harbor, those who fought in World War II might feel disoriented in a contemporary great-power war.

“Given the continued rapid advance of technology, a future protracted great-power war would likely produce surprises, some of strategic significance…

“Given modern conventional, biological, and cyber weaponry, the level and scope of destruction in a great-power war would be far greater than anything the American people have experienced.

"Under these circumstances, the social dimension of strategy—the ability to sustain popular support for the war effort, along with a willingness to sacrifice—would be a crucial factor in the United States’ ability to prevail.”

“Deterring Attacks Against the Power Grid”, by Narayanan et al from RAND

SURPRISE
“The rapid pace of technological change has touched nearly every facet of life in the United States, and armed conflict is no exception. Increased reliance on intelligence processing, exploitation, and dissemination; networked real-time communications for command and control; and a proliferation of electronic controls and sensors in military vehicles (such as remotely piloted aircraft), equipment, and facilities have greatly increased the U.S. Department of Defense (DoD)’s dependence on energy, particularly electric power, at installations.

“Although the power grid has long been susceptible to natural disasters, deliberate attacks, and the problems of aging infrastructure, its vulnerability to attacks is increasing. Paralleling technological advancement in vital mission support systems, the ability of adversaries to exploit vulnerabilities through cyber means has expanded, creating considerable risk to the stable supply of electric power.

“Strictly preventive measures have been unable to completely eliminate threats to the electric power grid. Recent armed conflicts have seen both physical attacks and cyberattacks on electric power grids…

"Although threats to the power grid are by no means confined to state actors, many of these incidents have been attributed to nation-states. "

Iran appears to have accelerated its uranium enrichment activities, at the same time as it is failing to control an exponentially growing COVID-19 crisis.

Public trust in the regime was already low after the shootdown of the Ukranian airliner in January. It’s failure to effectively manage the coronavirus outbreak will further erode it. If this leads to the regime fearing for its survival, it could tempt it into increasing external conflict (with Saudi Arabia, Israel, and/or the United States) as a means of shoring up its domestic support.

“Managing China: Competitive Engagement with Indian Characteristics” by Tanvi Madan

The author argues that, “the persisting boundary dispute [between India and China], China’s support for Pakistan, concerns about China’s increasing activities and influence in South Asia and the Indian Ocean region through the Belt and Road Initiative and beyond, and an unbalanced economic relationship have ensured that the Sino-Indian relationship remains a fundamentally competitive one.

“In response, at home India is trying to enhance its military, nuclear, space, and technological capabilities, as well as its infrastructure. Abroad, it is establishing or enhancing partnerships in India’s extended neighborhood, as well as with like-minded major powers — including Australia, France, Japan, Russia, and the United States — that can help balance China, and build India’s and the region’s capabilities.

“In this context, India has largely approved of the Trump administration’s more competitive view of China, even as it does not have similar concerns about China as an ideological challenge and despite Delhi’s discomfort with certain elements of Washington’s approach toward Beijing.

“Their broad strategic convergence on China has laid the basis for U.S.-India cooperation across a range of sectors, particularly in the diplomatic, defense, and security spheres, as well as incentivized the two sides to manage or downplay their differences."

This convergence could unravel if there is a major Indian reorientation on China, but the paper argues that is unlikely.

“India is facing twin economic and political crises”, by Martin Wolf, FT 25Feb20

SURPRISE
“The current government does at the least have the mandate it needs to revitalise the economy and so opportunities for better lives for all. That mandate is also due to Prime Minister Narendra Modi’s indubitable political talents. But knowing how to use such a mandate is no less vital than being able to win it.

“One alternative to the hard road of making good economic policy is making dramatic gestures, such as demonetisation, or botched reforms, such as the introduction of a far-too-complex goods and services tax.

“An even easier alternative is reliance on identity politics. That seems to be the current choice…India has now come to a watershed. Its powerful government can either focus its efforts on reinvigorating the economy or it can proceed with a transformation of an imperfect liberal democracy into something very different.”

Before the dramatic increase in coronavirus cases, EU nations had deadlocked over next year’s budget for the bloc.

Underlying the deadlock is the problem of how to fill the 75 billion Euro funding gap left by the loss of the UK. Nations that are net payers (Germany, Sweden, Netherlands, Denmark, and Austria) are being asked to give more, while net recipients are being asked to take less. Neither side is happy with this proposal.

For background, about 40% of the EU budget goes to agricultural subsidies, and a further 33% goes to “Structural and Cohesion Funds”, which are intended to stimulate and support economic development in the EU’s poorest nations. Both programs have been accused (e.g., by a New York Times investigation) of having high levels of corruption in the use of their funds.

EU Commission President Ursula von der Leyen wants a quarter of the budget to kick start a trillion euros of green spending. Plus she wants more money for migration and border management, security and defence and a “digital Europe” program (“The EU is in Trouble, and Ursual Von der Leyen is the Wrong Person to Rescue It” in the Spectator, by Ashoka Mody).

Mody concludes that, “one consequence of the economic and political decline is the increasing social anxieties and political alienation within member states, leading to domestic political fragmentation…

"Political fragmentation creates a trap. Nation-states struggle to articulate their priorities. At the European level, compromises to achieve forward-looking policies become harder. Unilateral actions and gridlock become the norm on sensitive issues impinging on core national sovereignty. Economic decline persists. European evolution stops. The obsession with process and ceremony becomes the norm.”

China is now moving to blame the United States for COVID-19, in an attempt to deflect popular anger at the way it was handled by Xi Jinping’s regime.

SURPRISE
In “How Xi Jinping’s “Controlocracy” Lost Control”, Xiao Quiang notes that, “the first coronavirus case appeared in Wuhan, the capital of Hubei province, on December 1, 2019, and, as early as the middle of the month, the Chinese authorities had evidence that the virus could be transmitted between humans. Nonetheless, the government did not officially acknowledge the epidemic on national television until January 20. During those seven weeks, Wuhan police punished eight health workers for attempting to sound the alarm on social media. They were accused of “spreading rumors” and disrupting “social order.”

“Meanwhile, the Hubei regional government continued to conceal the real number of coronavirus cases until after local officials had met with the central government in mid-January. In the event, overbearing censorship and bureaucratic obfuscation had squandered any opportunity to get the virus under control before it had spread across Wuhan, a city of 14 million people.

“By January 23, when the government finally announced a quarantine on Wuhan residents, around five million people had already left the city, triggering the epidemic that is now spreading across China and the rest of the world.

“When the true scale of the epidemic finally became clear, Chinese public opinion reflected a predictable mix of anger, anxiety, and despair. People took to the Internet to vent their rage and frustration. But it did not take long for the state to crack down, severely limiting the ability of journalists and concerned citizens to share information about the crisis.” (See also, “Losing the Mandate of Heaven”, by Aaron Sarin in Quillette on 22Feb20).

Regarding domestic frustration with the way Xi Jinping has dealt with the coronavirus outbreak it was interesting to see an account, in the official Communist Party magazine Qiushi, that Xi had been aware of the outbreak in Wuhan well before its existence was made public. This could indicate that competing factions in the Chinese Communist Party may at some point attempt to use Xi’s poor handling of the crisis as the pretext for removing him from power (see, “China’s Xi Jinping knew of coronavirus earlier than first thought Communist party magazine contradicts timeline that blames local officials for virus spread”, FT 22Feb20. Also, “How Damaging Will the Coronavirus be to Xi Jinping’s Authority?” by Brian Eaton in Quillette, 13Feb20).

Inevitably, Xi Jinping’s regime has tried to deflect blame away from itself and onto foreign parties.

A recent attempt at this (which will further intensify the China-US conflict), came in mid-march. As described by the New York Times, “China is pushing a new theory about the origins of the coronavirus: It is an American disease that might have been introduced by members of the United States Army who visited Wuhan in October” (“China Spins Tale That the U.S. Army Started the Coronavirus Epidemic”, NYT 13Mar20)

“Deterrence in the Age of Thinking Machines”, by Wong et al from RAND

SURPRISE

The authors, “present a wargame in which several countries with AI and advanced autonomous systems confronted one another, AND offer potential implications that these technologies have for deterrence and escalation…

“The wargame began with China attempting to exert greater control in the region and the United States and Japan resisting this attempt. The game escalated at several points, first into conflict between unmanned systems, then eventually into one in which Chinese and U.S. military personnel were killed. There was both intentional and inadvertent escalation…

“The game ended with the crisis still escalating…
Although this was only a single wargame, there were several interesting, initial insights: Manned systems may be better for deterrence than unmanned ones. Replacing manned systems with unmanned ones might not be seen as a reduced security commitment.

"Players put their systems on different autonomous settings to signal resolve and commitment during the conflict. Deliberately taking actions and decisions out of human hands and going to “full auto” emerged as a way to show that players were willing to use force.

"The speed of autonomous systems led to inadvertent escalation in the wargame. Setting forces on “full auto” to signal resolve did in one case lead to inadvertent escalation. Systems set to autonomous mode reacted with force to an unanticipated situation in which the humans did not intend to use force.”

“The Drone Beats Of War: The U.S. Vulnerability To Targeted Killings”, by Barno and Bensahel

SURPRISE

“The fiery explosions from the recent U.S. drone attack that killed Iranian general Qassem Soleimani have sent shock waves reverberating across the Middle East. Those same shocks should now be rippling through the American national security establishment too. The strike against the man widely considered the second-most powerful leader of a long-standing U.S. adversary was unprecedented, and its ultimate effects remain unknown”.

“But regardless of what happens next, one thing is certain: The United States has now made it even more likely that American military and civilian leaders will be targeted by future U.S. foes”

“The AI Literacy Gap Hobbling American Officialdom” by Horowitz and Kahn on Warontherocks.com 14Jan20

SURPRISE

“Rarely is there as much agreement about the importance of an emerging technology as exists today about artificial intelligence (AI)… Because AI is a general-purpose technology, the corresponding adoption challenges may prove especially difficult. There is a great deal of emphasis at present on how the United States can more effectively recruit and retain AI talent to work for the national security community and the government as a whole. This is critical, but the people making decisions about the use of algorithms from the situation room to the battlefield will not necessarily be informed about current developments in AI, let alone be AI experts, but military leaders and policymakers.

“Thus, a vital challenge is familiarizing and educating government leaders and policymakers about AI. This is a different challenge than that of incentivizing those with AI expertise to work for the U.S. government. Instead, it is about AI education for the policy community… Top policymakers — who are generally not technically trained — are at an increasing risk of being “black boxed” as technological complexity increases.

“This is especially true given questions even at the vanguard of AI research about the “explainability” of algorithms… Without baseline knowledge, policymakers won’t know what questions to ask, will be unable to frame what issues they are trying to solve as an “AI problem,” and might be overconfident in their understanding of AI and therefore what is feasible or practical.”

“The Department of Defense Posture for Artificial Intelligence” by RAND

SURPRISE

This report was mandated by the US Congress as part of the 2019 National Defense Authorization Act.
Among its Key Findings:
“DoD AI strategy lacks baselines and metrics to meaningfully assess progress toward its vision.”
“DoD failed to provide the new Joint Artificial Intelligence Center with visibility, authorities, and resource commitments, making it exceedingly difficult for the JAIC to succeed in its assigned mandate.”

“The current state of AI Verification, Validation, Testing, and Evaluation (VVT&E) is nowhere close to ensuring the performance and safety of AI applications, particularly where safety-critical systems are concerned.”

“DoD lacks clear mechanisms for growing, tracking, and cultivating AI talent, even as it faces a very tight AI job market.”

“Taking Back the Seas” by Clark and Walton from the Center for Strategic and Budgetary Assessments

“Naval surface warfare is undergoing a period of rapid technological and operational change. During the nearly 30 years since the end of the Cold War, navies encountered relatively permissive environments, and the threats they did face could largely be defeated by improved defensive systems. A new generation of challenges has emerged, however, including ubiquitous passive sensors, quiet submarines, supersonic and hypersonic anti-ship missiles (ASM), “smart” mines, and the increasing use of paramilitary forces in naval operations. As a result, many fleets are revising their concepts and capabilities for traditional surface missions such as air defense, anti-submarine warfare (ASW), maritime and land strike, and mine warfare (MIW)”…

“The U.S. Navy has been slow to address the changing threat environment. As a result, today’s surface force lacks the size, resilience, and offensive capacity to effectively support the U.S. National Defense Strategy’s approach of deterring aggression by degrading, delaying, or defeating enemy attacks. The surface fleet is weighted toward large combatants that are too expensive and manpower-intensive to achieve the numbers needed for distributed operations. They also rely on sensors that will likely be unavailable or create unacceptable vulnerabilities during combat against a great power like China. Perhaps of most concern is the fact that the current fleet is fiscally unsustainable due to the escalating costs to crew, operate, and maintain today’s highly integrated manned surface combatants…

“The surface fleet’s shortfalls are especially problematic because the role of surface forces in Navy offensive operations will likely expand over the next few decades.”

“China bond investors battle to claim cash after defaults”, FT 9Jan20

“Bond defaults across the world’s second-biggest economy are rising, with more borrowers failing either to repay creditors’ initial investments, or make regular interest payments…

“In 2016, 46 per cent of borrowers in default made some sort of principal or interest payments to bondholders, according to Wind, a financial information provider. Last year, that total dropped to 13 per cent”…

“China has laws to protect investors when borrowers fail to repay, but enforcement is patchy. Communist party-controlled courts often rule in favour of defaulters that play a major role in the local economy, rather than backing investors who are owed money.”

Tsai Ing-wen was reelected President of Taiwan

“China’s dream of using Hong Kong as model for Taiwan’s future is dead”, by Jamil Anderlini, FT 11Jan20

As the FT notes, “Almost as soon as Hong Kong’s massive pro-democracy protests erupted into violent confrontations between demonstrators and police in June, Ms Tsai began to rise in the polls”...

The FT concludes, “It is clear the Communist party’s dream of using the former British colony as a model for Taiwan’s political future is now completely dead. But that raises the question of whether Beijing would at some point try to take the island by force, something it has vowed to do if ‘necessary’…

"There is no doubt Ms Tsai’s landslide is a victory for the forces of liberal democracy. But it has probably also made the region just a bit more dangerous."

“India’s Economy Faces Severe Challenges”, by Arvind Subramanian, FT 14Jan20

“For several years, analysts and organisations such as the IMF and World Bank have touted India as the fastest-growing major economy, with the world’s brightest medium-term outlook. But in December the Reserve Bank of India, the central bank, cut its forecast for 2019 growth in gross domestic product to 5 per cent.

“That headline figure actually understates the slowdown. High-frequency indicators show that in the first eight months of the current fiscal year, non-oil exports and imports have fallen, as has production of investment goods. Production of consumer goods and real government tax receipts have both grown by only 1 per cent. And a savage credit crunch has reduced commercial lending to less than Rs1tn in the first six months of this fiscal year, one-seventh its level the previous year.”

“Winning the Invisible War” by Clark et al from the Center for Strategic and Budgetary Assessments

SURPRISE
“The electromagnetic spectrum (EMS) is increasingly central to modern life. For more than a century, broadcast or satellite radio and television have provided entertainment, news, and propaganda to mass audiences. During the last three decades, mobile computing and communications became many people’s main way to connect with others and share information. Now, the advent of small, inexpensive antennas and processors is enabling a virtual explosion of new sensors, communications, and related applications operating in the EMS”…

“The proliferation and growing sophistication of civilian and military EMS capabilities has resulted in an increasingly congested and contested electromagnetic environment for which the U.S. military is unprepared. Over the past decade, several government and external assessments found that the U.S. military is falling behind Chinese and Russian forces in electronic warfare (EW) and that U.S. forces will be challenged to achieve EMS superiority in future conflicts. To address these concerns, the U.S. Department of Defense (DoD)—sometimes under Congressional direction—initiated an ongoing series of actions to improve its EW doctrine and capabilities. This study will argue these efforts have been unfocused and are likely to fail at delivering EMS superiority.”

“AI & Robots Crush Foes In Army Wargame”, Breaking Defense 19Dec19

SURPRISE
“How big a difference does it make when you reinforce foot troops with drones and ground robots? You get about a 10–fold increase in combat power, according to a recent Army wargame…That mission: dislodge a defending company of infantry, about 120 soldiers, with a single platoon of just 40 attackers on foot. That’s a task that would normally be assigned to a battalion of over 600. In other words, instead of the minimum 3:1 superiority in numbers that military tradition requires for a successful attack, the simulated force was outnumbered 1:3…

“Of course [the use of drones and ground robots also] requires the network to, well, work. If your cellphone has ever dropped a call, you know that’s not guaranteed. And battlefield networks have to overcome problems no commercial system faces, such as Russia’s extensive arsenal of electronic warfare systems to detect and jam transmissions. In 2017, the Army decided its tactical network was far too vulnerable to hacking and jamming, so it rebooted the entire modernization effort, and since then industry has been laboring mightily to build communications that can function even in the face of Russian or Chinese attack.”

“Russia’s Hostile Measures: Combating Russian Gray Zone Aggression Against NATO in the Contact, Blunt, and Surge Layers of Competition”, by Conable et al from RAND

“Russia threatens the security and stability of the North Atlantic Treaty Organization (NATO) and, bilaterally, many of its individual member states. However, as of early 2019, the nature and extent of the Russian threat was still being debated. We argue that the current consensus on the complex Russian threat is simultaneously understated and overblown…

“Russia is dangerous. It sows disorder, weakens democratic institutions, and undermines NATO cohesion. In some ways, its full conventional threat is perhaps even more dangerous than currently portrayed.

“However, Russia has a long track record of strategic shortfalls and even some ineptitude in its long game; it is neither infallible nor omnipotent. NATO can effectively deter, prevent, and counter Russian hostile behavior in the gray zone—along what the U.S. Department of Defense (DoD) calls the contact layer, where daily adversarial competition occurs—and during state-on-state war.”

“The Illusion of a Rules-Based Global Order”, by Brahma Chellaney professor of strategic studies at the New Delhi–based Centre for Policy Research

“When the Cold War ended, many pundits anticipated a new era in which geoeconomics would determine geopolitics. As economic integration progressed, they predicted, the rules-based order would take root globally. Countries would comply with international law or incur high costs.

“Today, such optimism looks more than a little naive. Even as the international legal system has ostensibly grown increasingly robust—underpinned, for example, by United Nations conventions, global accords like the 2015 Paris climate agreement, and the International Criminal Court—the rule of force has continued to trump the rule of law. Perhaps no country has taken more advantage of this state of affairs than China.

“Consider China’s dam projects in the Mekong River, which flows from the Chinese-controlled Tibetan Plateau to the South China Sea, through Myanmar, Laos, Thailand, Cambodia and Vietnam. By building 11 mega-dams near the border of the Tibetan Plateau, just before the river crosses into Southeast Asia, China has irreparably damaged the river system and wreaked broader environmental havoc, including saltwater intrusion in the Mekong Delta that has caused the delta to retreat.

“Today, the Mekong is running at its lowest level in 100 years, and droughts are intensifying in downriver countries. This gives China powerful leverage over its neighbours. And yet China has faced no consequences for its weaponisation of the Mekong’s waters.”

“Iran’s Strategic Intent” Chapter One in IISS’ new book “Iran’s Networks of Influence in the Middle East”

“By 2019, Iran’s influence in Iraq, Lebanon, Syria and Yemen had become a new normal in a region where such a concept would have once been unthinkable by the region’s leaders, including those in Tehran. Iran had achieved much of this change using a transnational Shia militancy, capable of fighting with varying degrees of skill and discipline, which confronted different Iranian adversaries on disconnected battlefields simultaneously.

“No state has been so active, and perhaps as effective, as Iran in regional conflicts in modern times…its extraterritorial ambitions are laid out in its constitution and the rhetoric of its leadership – though it could not predict the regional seismic shifts and international apathy that have enabled its success…

“This foreign policy has been directed by the Supreme Leader but dominated by two actors: Major-General Soleimani, who engaged directly with Iraqi, Russian and Syrian leaders, and Iran’s Foreign Minister Zarif, who focused on communicating with the broader international community….

“Iran’s interventions have validated an external military doctrine emphasising hybrid-war techniques and cooperation with state and sub-state actors. Iran has been able to threaten international energy and shipping arteries in the Persian Gulf and the Strait of Hormuz, and to some extent the Red Sea and Bab al-Mandeb. A large number of Iranian military personnel have fought difficult and multi-year conflicts in which they may believe they not only achieved strategic objectives but did so at the expense of Arab regional powers, Israel and the US. This confidence will likely guide Tehran’s view as to how it will manage future conflicts.”

On 3Jan20, Quasem Soeimani was killed by a US drone strike.

SURPRISE
The attack came at the end of a quickly escalating series of actions, which began with a rocket attack by Iranian proxy forces on an Iraqi base that killed a US contractor, which was followed by retaliatory air attacks by US forces. This triggered a large demonstration around the US embassy in Baghdad orchestrated by Iran, which was intended to trigger memories of the Iranian takeover of the US Embassy in Tehran in 1979. The US then deployed a Marine Quick Reaction Force to the embassy.

And then Soleimani was killed.

Previously growing domestic demonstrations against the Iranian regime gave way to displays of national unity, and calls for revenge against the United States.

On 5Jan20 Iran announced it would no longer adhere to the terms of its previous nuclear deal.

Iran’s decision to resume activities that logically lead to its acquisition of nuclear weapons (to complement its already potent missile delivery systems). At some point in the future, this will almost certainly lead to a much larger and coordinated attack on facilities that are critical to its nuclear program.

On 8Jan20, Iran retaliated against Soleimani’s death by launching missiles against two bases in Iraq where US forces are stationed.

At the same time, evidence emerged that Iran had shot down a Ukranian passenger jet killing all 176 passengers and crew aboard.

SURPRISE
As the bases were on high alert, no US citizens were killed. However, a Ukranian passenger aircraft crashed in Tehran shortly after the missiles were fired, killing 176 passengers and crew. Three days later, on the strength of overwhelming evidence, Iran admitted that Iranian Republican Guard forces had shot down the plane.

Anti-regime protests soon erupted in Iran, while the Trump administration announced further sanctions and Iran announced it would.

Tightening sanctions and reverberations from the IRGC’s shootdown of Ukranian flight 752 will very likely provoke further demonstrations in Iran, that will almost certainly be met with an aggressive response by the regime, including the use of deadly force.

It is very likely that Iran will also carry out further reprisal attacks against the United States, which in turn would very likely trigger massive American retaliation aimed at substantially reducing Iranian military capabilities. Whether this further inflames domestic opposition to the regime or increases nationalistic support for it remains to be seen. What is clear, however, is that such a substantial attack would make a subsequent attack on Iranian nuclear facilities much easier.

“Across China, the Clocks are Striking Thirteen”, by David Von Drehle, Washington Post 26Nov19

Following the leaded release of secret government documents describing the imprisonment of a million plus Uighurs, the author writes, “Across China, clocks are striking thirteen. But unlike the sheeple of Orwell’s grim prophecy, thousands of freedom-loving Chinese are awakening to the ominous chime and rising against Big Brother.

“China’s communist government is increasingly brazen about creating a massive surveillance state, in which millions of cameras track every person’s whereabouts, every purchase is recorded in state databanks, every keystroke on the strictly controlled Chinese Internet is scrutinized. Powered by facial recognition software and other tools of artificial intelligence, this tireless web of watchers aims to control all that is done and said — even thought — inside the rapidly rising superpower.”

See, for one example, “Tsinghua Professor Lao Dongyan: The hidden worries of facial recognition technology” on chinai.com

“Xi’s Tradeoff: Strategic Patience Versus Political Legitimacy”, by Greg Austin from the International Institute of Strategic Studies

See also, “Xi Jinping’s Annus Horribilis” by Minxin Pei

“China’s President Xi Jinping is facing a leadership crisis. During the November 2019 BRICs summit, he described the current set of challenging circumstances as ‘changes in the world unseen in a century’. This phrase is several years old and not his own, but it captures the gravity of the predicaments now facing him after seven years in charge...

“There are many dangerous currents around Xi’s policy choices that have been swirling for some time, and three of them are now raging torrents that could prove treacherous: Taiwan, Trump and Tiananmen…
“The challenge by Hong Kong protesters, voters and key civil society groups to Chinese sovereignty is unambiguous and profound, but it also represents the worst crisis in Beijing’s relations with Taiwan for 20 years…

“US President Donald Trump has stoked the fires of this simmering dissent against Xi over Hong Kong and Taiwan. Trump or his government have declared China variously to be a cheater country, a thieving country, a repressive country, a murderous regime, a threat to US national security and a threat to world order. The tirade of insults that American officials under Trump have heaped on Chinese leaders is unprecedented since the 1960s…

“The ghosts of the Tiananmen Square crisis of 1989 still haunt the Chinese Communist Party halls of power. These ghosts are numerous and they are haunting different rooms. Just this year, in October, some brave people in China proudly marked the centenary of the birth of Zhao Ziyang, a hero of the Tiananmen demonstrators…In April, the sons of former Party General Secretary, Hu Yaobang, also ousted in 1987 from the same highest office because of his iconoclastic views, visited his grave on the 30th anniversary of his death. It was Hu’s death in 1989 that triggered the student demonstrations…

“This more liberal political faction in China is not strong, but there is another more powerful Tiananmen ghost. It is the fear of a brain drain from China if there is another violent crackdown…

“In sum, the main question is about the trade-off Xi is making between strategic patience (not using force against Hong Kong and Taiwan), and the erosion of his political legitimacy and authority.”

“Hong Kong’s Long View”, by Yang and Rhodes

“Two things have been clear from the beginning: First, neither the Chinese Communist Party (CCP) nor the Hong Kong government would respond positively to the protests and the protestors would experience increasingly harsh suppression. Second, it would be impossible for CCP and the local authorities to completely silence the protestors. This portends that in the near future, the tug of war between the Hong Kong government and the protestors will remain a stalemate with no clear winner…

“The Hong Kong people are not afraid of not winning in the short term, but the CCP is afraid that the Hong Kong people are not losing” and their continued resistance could inspire similar protests on the mainland, particularly if the economic conditions worsen.”

“Chinese Universities’ Communist Party Tilt Sparks Student Backlash”, FT 18Dec19

“Leading universities have removed vows to uphold freedom of thought from their charters and added instead pledges of fealty to the ruling Chinese Communist party, sparking a backlash from students and professors.”

“Money Has Been Leaving China at a Record Rate”, CNN Business 19Dec19

“Beijing is stepping up the battle to stop money flowing out of China as the country contends with economic woes and trade war tensions that have eased but show no sign of ending.”

“Corporate Defaults in China Surge in 2019 to a Record High $18.6 Billion”, FT 26Dec19

See also, “China’s Impending Minsky Moment”, FT 29Dec19

In “China’s Impending Minsky Moment”, Bill Rhodes, the former Citibank executive who played a critical role in resolving the 1980s Latin American debt crisis, writes that, “There is still a danger of a ‘Minsky moment” hitting China’s economy. US academic economist Hyman Minsky, who died in 1996, warned of the risks of periods of financial excesses leading to crises. Today, China’s debt-to-gross domestic product ratio is more than 300 per cent and continues on a dangerously upward trajectory…

“The Chinese authorities are aware of the situation and the risks but they continually refrain from acting with the necessary force. They are concerned that actions to confront rising domestic debt will constrain economic growth.” Yet continuing delay in addressing the underlying causal drivers will only make China’s Minsky moment more painful when it finally arrives.”

“The convergence of the artificial intelligence revolution and the reemergence of great power competition must focus the American mind. These two factors threaten the United States’ role as the world’s engine of innovation and American military superiority.

“If the United States fails to sustain its advantages, it will not be because it was caught by surprise…China, our most serious strategic competitor, has declared its intent to become the world leader in AI by 2030 as part of a broader strategy that will challenge America’s military and economic position in Asia and beyond”…

“Global leadership in AI technology is a national security priority…AI adoption for national security is an urgent imperative. We see no way to protect the American people, US interests, and shape the development of international norms for using AI if the United States is not leading the way in application…

“Private sector leaders and government officials must build a shared sense of responsibility for the welfare and security of the American people…The United States confronts hard choices between economic and security interests, between maintaining our openness and protecting our innovation economy from strategic competitors, and between commercial and national objectives, all while balancing short and long-term considerations.”

“Society, Technology, and Future Warfare”, by Kenneth Pollack

“Military analysts are struggling to understand how the new technology of the information age will transform warfare. There is a persistent, dangerous tendency to assume that all actors will simply employ new technology according to a theoretical set of best practices—and an even more dangerous expectation that the United States will define those best practices and dominate the information-age battlefield because the US is leading the information revolution.

“Historical evidence from the early industrial era, when a similar transformation occurred, offers warnings on both counts.

“Great Britain led the industrial revolution. It was the leading economy of the era and the primary source of civilian innovations that brought about the Industrial Revolution and the military innovations that redefined warfare. Yet its military forces were not the most effective practitioners of industrial-age warfare.

“Similarly, the experience of the Germans and French from World War I to World War II warns that it is extremely difficult to know beforehand which army has learned to use new technologies most effectively before the audit of battle. Overreliance on AI and autonomous systems also comes with uncertainties, both recognized and in the realm of unknown unknowns”.

See also, “The Digital Maginot Line Autonomous Warfare and Strategic Incoherence”, by Michael Ferguson, and “Decide, Disrupt, Destroy: Information Systems in Great Power Competition with China”, by Ainikki Riikonen

“SecDef: China is Exporting Killer Robots to the Mideast”, by Patrick Tucker

SURPRISE
“China is exporting drones that it advertises as having lethal autonomy to the Middle East, Defense Secretary Mark Esper said Tuesday. It’s the first time that a senior Defense official has acknowledged that China is selling drones capable of taking life with little or no human oversight.”

“Australia’s China Syndrome”, by Joel Kotkin

“Australia continues to benefit from China’s rise, though few countries are more threatened by its expanding power. Once closely tied to the British Commonwealth, and later to the United States, the Australian subcontinent, with only 24 million people, now relies on China for one-third of its trade— more than with Japan and the U.S. combined.

“Australia’s major economic sectors rely on Chinese support; investors poured in $17.4 billion in 2017. Australians increasingly understand the implicit danger of this dependency. Unlike the U.S., which possesses the market size, military capacity, and technological power to resist Chinese expansionism, Australia is far more vulnerable to the Communist regime’s efforts to shape its economy, cities, and political system.

“Australians aren’t as threatened as Hong Kong’s democracy activists, but China’s influence has intensified…Many Australians have expressed concern that the country’s intense integration with an authoritarian superpower presages a new life as a “vassal” state

Protests in Iran have been worsening, at the same time that the US has further tightened sanctions on the country. History suggests that this combination will raise the probability that the regime leaders will engage in further external aggression, which has the potential to spiral into a wider conflict.

SURPRISE
As human beings with brains shaped by our evolutionary past, we face an increasingly daunting challenge when it comes to allocating our scarce attention to the daily flood of information we receive about the widening range of developments emerging from our increasingly complex global system. And even when we focus our attention, we often struggle to make sense of dynamic causal processes that are often characterized by time delays and nonlinearities.
As a result, we often feel surprised by events.

Today, there is no shortage of developments vying for our attention, like the UK election, the future of Brexit, the US-China tradewar, and Donald Trump’s impeachment. As a result, accumulating system pressures can easily be overlooked.

Iran is a case in point, as these recent articles about Iran (and in the next evidence item, India) highlight.
In “Iran’s Deepening Malaise Laid Bare by Protests”, on 19Nov19, the editorial board of the FT observed that, “Iran is ablaze with public anger. Banks have been looted, petrol stations torched and highways barricaded as thousands have taken to the streets in cities across the Islamic republic in the biggest protests in two years. The unrest was triggered by the government’s decision to slash subsidies on fuel, as it grapples with crippling US sanctions. This means prices at the petrol pump will rise by at least 50 per cent at a time when the economy is in recession and inflation is above 40 per cent.

“As in Lebanon and neighbouring Iraq in recent weeks, protests over economic grievances have swiftly taken on an anti-regime tone…The middle and lower classes — whose economic and political interests do not always align — also seem united.

“The sense of injustice and disillusionment in Iran is clear. So is the precarious state of the Islamic regime, which is facing its toughest challenge since the 1980s war with Iraq…

“But hawks in Washington would be naive to think the regime is nearing collapse. In the 40 years since the Islamic revolution, the regime has proven itself to be resilient and pragmatic as it has confronted myriad threats. It will happily use force to crackdown on protesters.”

In contrast, in “Is Iran Near Collapse?”, Mohammed Auyoob writes that, “The events of the last few weeks in Iran indicate that the country may be in for a repetition of the events of 1978 that led to the toppling of the Shah. Anti-government protests in Iran have reached a boiling point with the streets of several of Iran’s cities and towns reverberating with slogans demanding the overthrow of Supreme Leader Ayatollah Ali Khamenei.

“One can hear echoes of the “Death to the Shah” slogans of 1978–79 in these frenzied chants. Security forces have repeatedly opened fire, killing people by the dozens—possibly by the hundreds—in order to disperse protestors just as they did in the autumn of 1978.”

See also, “Repression Won’t Solve the Deeper Problems Bringing Iranians to the Streets”, by Kadivar et al, and “Iranian protesters strike at the heart of the regime’s revolutionary legitimacy”, by Suzanne Maloney

While India will be strategically critical to the West as conflict with China intensifies in the future, it receives far less mainstream media attention than it deserves. That is gradually changing. Unfortunately, recent coverage has highlighted the challenges facing the country, and Prime Minister Narenda Modi

SURRISE
In “Can India’s Prime Minister Succeed Even as the Economy Plummets?” Milan Vishnav observes that, “When India’s prime minister, Narendra Modi, ran for the top job five years ago, he campaigned as the country’s best hope for economic reform…

“Modi has succeeded politically despite—not because of—the economy, which is in the midst of a protracted downturn that began on his watch. For his second term, the prime minister has doubled down on the grand economic promises he made in his 2014 campaign and gone still further, setting a goal of turning India into a $5 trillion economy by 2024. But his government has struggled to articulate just how it will bring about India’s economic renewal.

“While the prime minister has yet to pay a serious political price for this failure, he cannot count on the indefinite forbearance of Indian voters.”

In “India’s Narenda Modi Has Had a Free Pass form the West for Too Long” (FT 11Nov19), Gideon Rachman notes that, “The world’s democracies are desperate to believe in India…The west’s investment in India is now strategic, emotional, intellectual and financial. But the sunk costs of that investment mean that western countries are reluctant to acknowledge the dark side of Mr Modi’s India — in particular, threats to minority rights and the erosion of democratic norms.”

Rachman concludes that, “The west’s fear of China means that it is likely to continue to give Modi’s India a free pass for some time. But a failure to talk openly about the failings of the Modi model is not cost-free. The danger is that the west is embracing a comforting illusion — that democratic India will act as an ideological bulwark against authoritarian China. The reality is that India’s slide into illiberalism may actually be strengthening the global trend towards authoritarianism” (a conclusion shared by his FT colleague Ed Luce, who spent five years in India – see, ”India’s Journey to Illiberal Democracy”, FT 11Nov19).

In “Imbalance of Power: India’s Military Choices in an Era of Strategic Competition with China”, Kliman et al explore a critical issue for the 2020s: “The United States has made a strategic bet: that India will decisively shape the military balance in Asia. In an era of avowed great power competition with China, at a time when the U.S. military’s edge over the People’s Liberation Army (PLA) continues to erode, this wager will have an outsized impact on the future trajectory of the region. If India can maintain an advantage over China along its Himalayan frontier and sustain its dominance in the Indian Ocean, U.S. efforts to deny Beijing a regional sphere of influence are far more likely to succeed— as is the vision of a free and open Indo-Pacific shared by Washington and Delhi.

[However], “if India fails to realize its military potential, the United States, caught in between its many global commitments, will struggle to uphold a favorable balance of power. Today, America’s wager has yet to fully pay off. The trend lines in the India-China military equation are broadly negative. Despite very real improvements in Delhi’s defense capabilities and a significant advantage conveyed by India’s maritime geography, its longstanding superiority over China in the Indian Ocean is at risk of slipping away.”

See also: “Narenda Modi’s India” by Dexter Filkins; “Can India’s Economy Return to High Growth?” Knowledge@Wharton; and “Past Grudges Overshadow Present Woes in India’s Public Discourse” by the FT’s Henny Sender.

“European Security In Crisis: What To Expect If The United States Withdraws From NATO”, by Fix and Giegerich in WarontheRocks.com, 29Nov19

This article reports on the results of a wargame that assumes a United States withdrawal from NATO after the reelection of Donald Trump is shortly followed by Russian attempts to exploit an apparent weakening of European defense. It is a very sobering read about what may happen if this scenario comes to pass.

“The New German Question: What Happens When Europe Comes Apart?” by Robert Kagan

SURPRISE
“Many have been lamenting the dark path that Europe and the transatlantic relationship are currently on, but there hasn’t been much discussion of where that path leads. European weakness and division, a strategic “decoupling” from the United States, the fraying of the European Union, “after Europe,” “the end of Europe”—these are the grim scenarios, but there is a comforting vagueness to them. They suggest failed dreams, not nightmares.

“Yet the failure of the European project, if it occurs, could be a nightmare, and not only for Europe. It will, among other things, bring back what used to be known as “the German question.”

“The German question produced the Europe of today, as well as the transatlantic relationship of the past seven-plus decades. Germany’s unification in 1871 created a new nation in the heart of Europe that was too large, too populous, too rich, and too powerful to be effectively balanced by the other European powers, including the United Kingdom…

“With the order that made today’s Germany possible now under attack, including by the United States, the world is about to find out. History suggests it may not like [what comes next]. As a historical matter, Germany, in its relatively brief time as a nation, has been one of the most unpredictable and inconsistent players on the international scene.”

“No Country for Young Men”, by John Lloyd

SURPRISE
Many commentators have noted that Italy is likely to be the epicenter of the next EU/Euro crisis. This article explains why.

“No country in Europe is more critically important to the future of the European Union and the euro currency than today’s Italy…

“Italy is going nowhere: which is its, and the EU’s, largest problem. Its growth is minimal—0.1 percent this year. Its debt is highest in the developed world after Japan. Its productivity is among the lowest in Europe. Its unemployment rate is hovering around 10 percent, with the three southern regions of Calabria, Campania, and Sicily registering over 20 percent. And youth unemployment stands nationally at 29 percent.”

SURPRISE
The annual report of this congressionally mandated, bipartisan commission is always a must read.

“In 2019, Beijing declared in unambiguous terms its intent to revise and reorder the international system in ways more befitting its national interests and repressive vision of governance. In a series of national addresses, Chinese leaders suggested the CCP viewed its “historic mission” as being not only to govern China, but also to profoundly influence global governance. The CCP took new steps to promote itself abroad as a model worthy of emulation, casting its political system and approach to economic development as superior alternatives to that of the United States and other democratic countries…

“Chinese leaders took a more strident tone in their discussion of military affairs, reinforcing a sense of urgency in the PLA’s preparations for a potential military conflict while indicating Beijing’s intent to position the PLA as a globally-oriented military force. General Secretary Xi urged the PLA to make preparations for a possible conflict with the “powerful enemy adversary”—a phrase the CCP uses to refer to the United States—central to its modernization and training efforts...

“Despite signs of outward confidence, CCP leadership also revealed a growing unease over the mounting external resistance to its ambitions, which it viewed as threatening its objectives abroad and rule at home. In response to these challenges, the CCP deepened its control over the Chinese government and Chinese society and stepped up an ideological and nationalistic messaging campaign instructing key groups to “win the ideological war” against Western and other democratic countries…

“China continued its efforts to coerce or interfere in the domestic affairs of countries acting in ways contrary to its interests, detaining foreign citizens and carrying out an extensive influence campaign targeting foreign universities, media, and the Chinese diaspora…

“The CCP faces a number of significant internal and external challenges as it seeks to ensure its hold on power while sustaining economic growth, maintaining control at home, and advancing its regional and increasingly global ambitions. Despite a lengthy campaign to clean up its ranks, the CCP has growing concerns over widespread corruption, weakened control and cohesion, and ideological decay. Chinese policymakers credit their state-led economic model for the country’s rapid growth, but the contradictions in China’s approach are increasingly apparent as it faces a struggling private sector, high debt levels, and a rapidly-aging population. China remains deeply dependent on foreign technology and vulnerable to supply chain disruption, but is pouring vast amounts of resources toward encouraging domestic innovation…

“China’s senior leaders are concerned over perceived shortfalls in the PLA’s warfighting experience and capabilities and its failure to produce an officer corps that can plan and lead. These concerns undermine Chinese leaders’ confidence in the PLA’s ability to prevail against a highly-capable adversary. The CCP has also long harbored concerns over the loyalty and responsiveness of the PLA and internal security forces to Beijing and the potential for provincial officials to co-opt these forces to promote their own political ambitions…

“The CCP perceives Western values and democracy as weakening the ideological commitment to China’s socialist system of Party cadres and the broader populace, which the Party views as a fundamental threat to its rule…
“General Secretary Xi’s signature anticorruption campaign has contributed to bureaucratic confusion and paralysis while failing to resolve the endemic corruption plaguing China’s governing system…

“China’s current economic challenges include slowing economic growth, a struggling private sector, rising debt levels, and a rapidly-aging population. Beijing’s deleveraging campaign has been a major drag on growth and disproportionately affects the private sector. Rather than attempt to energize China’s economy through market reforms, the policy emphasis under General Secretary Xi has shifted markedly toward state control.”

"Xi Jinping's “Proregress”: Domestic Moves Toward A Global China", by Cheng Li

“Xi’s insecurity — his shifting identity from a princeling to a populist — stems from the CCP’s precarious hold on the country, an insecurity shared among the party elite as a whole. That observation can help explain the way in which Xi is clamping down to control an increasingly pluralistic, mobile, and restless society on the one hand while he and his leadership are simultaneously pressing to resolve the combined economic, demographic, and technological problems that portend stagnant growth on the other.”

“Military Artificial Intelligence Can Be Easily and Dangerously Fooled”, by Will Knight, in MIT Technology Review

“AI warfare is beginning to dominate military strategy in the US and China, but is the technology ready?” …

“Tesla’s algorithms are normally brilliant at spotting drops of rain on a windshield or following the lines on the road, but they work in a way that’s fundamentally different from human perception. That makes such “deep learning” algorithms, which are rapidly sweeping through different industries for applications such as facial recognition and cancer diagnosis, surprisingly easy to fool if you find their weak points.

“Leading a Tesla astray might not seem like a strategic threat to the United States. But what if similar techniques were used to fool attack drones, or software that analyzes satellite images, into seeing things that aren’t there—or not seeing things that are? … An enemy that knows how an AI algorithm works could render it useless or even turn it against its owners. The secret to winning the AI wars might rest not in making the most impressive weapons but in mastering the disquieting treachery of the software…

“Fortunately, the Pentagon is starting to take notice.” Earlier this year, the Defense Advanced Research Projects Agency launched a new program focused on “Guaranteeing AI Robustness Against Deception” or GARD.

Trump decided to suddenly abandon the Kurds

This will likely further destabilize the Middle East, and create doubts among America’s allies at a time when China poses a growing threat to the West. On the bright side, Russia’s increasing involvement in the region may prove costly, and limit its temptation to act aggressively in the Baltics or elsewhere in Europe.

Stories on “Hybrid Warfare” or “Grey Zone Conflict” have migrated from specialist publications to the mainstream press, as the challenges they pose have become more widely recognized

Surprise
In “Hybrid Warfare: The New Face of Global Competition”, Scott Tait writes in the Financial Times that, “In simplest terms, hybrid warfare uses capabilities not normally associated with war to coerce or subvert. Such techniques are intended to delay recognition that an attack is under way, paralyse decision making through confusion and discourage the victim from responding forcefully due to the absence of “legitimate” military targets. China, Russia (and to lesser degrees Iran and North Korea) are taking on capitalist democracies and hoping to re-make the international political, economic and trade systems through a coordinated hybrid effort that is taking place largely outside the traditional military or diplomatic realms”…

“The goals of these hybrid efforts are to erode economic strength; undermine the legitimacy of key institutions such as governance bodies, academia, diplomatic entities and the media; encourage social discord; and weaken the bonds between the nations and international organisations.”

“The erosion of economic strength is probably the most important element and likely the hardest to reverse once it is accomplished. The key targets in this effort are businesses. The model was best described by John Demers, US assistant attorney general, as “rob, replicate and replace. Rob the American company of its intellectual property, replicate that technology and replace the American company in the Chinese market and, one day, in the global market,” he told a US Senate hearing in December.”

In “Don’t Believe Your Eyes (Or Ears): The Weaponization Of Artificial Intelligence, Machine Learning, and Deepfakes”, Joe Littell (writing on the War on the Rocks website) notes that, “For thousands of years, humanity has relied on five senses to determine threats to their wellbeing. Our ancestors used their keen senses of sight and hearing to assess risk or identify a suitable meal. With the advent of new technologies [especially generative adversarial networks, or GAN], however, this reliability may be slipping away… [Moreover], as it stands, most countries are not equipped to fight weaponized deepfakes”.

Finally, in “The Emerging Risk of Virtual Social Warfare”, Mazarr et al from RAND take a very in-depth look at how present technologies and trends in “hostile social manipulation” may evolve, and present three planning scenarios for the future.

The “report’s primary conclusion is that, as significant as social manipulation efforts have already been, the United States and other democracies have only glimpsed the tip of the iceberg of what these approaches may someday be able to achieve.”

“Prepare for the Worst”, by Graham, Woolsey, and Pry. Graham chaired the Congressional EMP Commission, Woolsey is a former Director of the CIA, and Pry was the Chief of Staff of the EMP Commission

Surprise
“Among the most important findings of 2004, 2008, and 2017 reports by the congressionally mandated Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack is that millions of Americans could die and the loss of our electronic civilization to manmade or natural EMP catastrophe would be a national doomsday. Therefore, EMP is one of a very small number of existential threats that demands immediate high-priority attention from the U.S. Government” …

“The President’s executive order to protect the national electric grid and other life-sustaining critical infrastructures is in danger of being undermined by a small number of highly influential non-expert career bureaucrats in the Department of Homeland Security and the Department of Energy.”

The Heritage Foundation published its annual (and exhaustive) “Index of U.S. Military Strength” report

Surprise
The report “assesses the ease or difficulty of operating in key regions based on existing alliances, regional political stability, the presence of U.S. military forces, and the condition of key infrastructure.

Threats are assessed based on the behavior and physical capabilities of actors that pose challenges to U.S. vital national interests. The condition of America’s military power is measured in terms of its capability or modernity, capacity for operations, and readiness to handle assigned missions successfully. This framework provides a single-source reference for policymakers and other Americans who seek to know whether our military power is up to the task of defending our national interests” …

“Over the past few decades, three vital interests have been specified consistently and in various ways by a string of Administrations:

(1) Defense of the homeland;

(2) Successful conclusion of a major war that has the potential to destabilize a region of critical interest to the United States; and

(3) Preservation of freedom of movement within the global commons (the sea, air, outer-space, and cyberspace domains) through which the world conducts its business.”

The report’s “assessment of the adequacy of today’s U.S. military is based on the ability of America’s armed forces to engage and defeat two major competitors at roughly the same time” …

“As reported in all previous editions of the Index, the common theme across the services and the U.S. nuclear enterprise is one of force degradation caused by many years of underinvestment, poor execution of modernization programs and the negative effects of budget sequestration (cuts in funding) on readiness and capacity”…

“The 2020 Index concludes that the current U.S. military force is likely capable of meeting the demands of a single major regional conflict while also attending to various presence and engagement activities but that it would be very hard-pressed to do more and certainly would be ill-equipped to handle two nearly simultaneous major regional contingencies…

As currently postured, the U.S. military is only marginally able to meet the demands of defending America’s vital national interests.”

“The Russian Military in Contemporary Perspective”, by Steven Blank of the US Army War College, and “Trends in Russia’s Armed Forces” by Crane et al from RAND

Surprise
Both of these extensive analyses provide a sobering perspective on Russia and its improving military capabilities. The first notes that, “today, it cannot be so readily assumed that Russian foreign and defense policies are being guided by classic Russian national interests nor by any coherent set of beliefs or principles. While there are elements of traditional state politics and geostrategic calculus in Russian security policy, much of the behavior of the regime of President Vladimir Putin, both at home and abroad, is driven by internal forces, which possess the characteristics of the unique and potentially dysfunctional system of governance that has developed over the past two decades”…

“To paraphrase Churchill, contemporary Russia is a kleptocracy inside a security services-controlled government wrapped in a failing state. It is a serious mistake for the United States and Western decision makers to view Russia today through the lens of Cold War history or even that country’s traditional struggles for security and defensible borders” …

“Russia is unable to provide the broader population with a better life and growing economy, and it is consumed with fear for its own survival, driving Russia to look outside its borders in order to find the means to maintain its power within. In essence, Putin must be ever more focused on an external and hostile world both as a justification of dictatorial behavior at home and as a source of victories, which are unavailable to the Russian Government in other areas of national life” …

“It is important to appreciate not only how profound the differences are between Putin’s values, perceptions, and interests and our own, but, also, the extent to which U.S. and Western Government officials are driven to explain away these differences, rather than having to deal with the cognitive dissonance that acceptance would require.”

After their study of Russia’s armed forces, the RAND team concludes that, “although Russian projections of its future capabilities are often optimistic, since 2008 the Russian military has become much more capable in general, not only of defending Russian territory but also of launching invasions against its neighbors, Georgia and Ukraine. Improvements have been a result of substantial increases in expenditures on military programs and forces, as well as a focus on readiness, organization, fielding modernized weapons, and updating tactics and doctrine.”

In Hong Kong, violent demonstrations continued

At this point, the choices seem to be a substantial expansion of democracy in Hong Kong, or, at some point, violent repression by the People’s Armed Police. Xi Jinping’s apparent strategy up to now – hoping that the passage of time would lead to reduction in enthusiasm for demonstration – has thus far not worked.

Nobody familiar with Xi is betting this will end with the expansion of democracy in Hong Kong, even if violent repression leads to a higher degree of conflict with the west. After all, the west’s negative reaction to Tiananmen Square eventually gave way to much greater commercial engagement, did it not? And as we recently saw with China’s quick and hard reaction to the “NBA tweet”, that commercial engagement has ultimately given China substantial leverage over many western companies.

A number of articles have highlighted China’s growing weaknesses and the internal – and external – threats they pose.

For example, “Chinese Local Government Funds Run Out of Projects to Back” (FT, 17Oct19); “China inflation hits six-year high as pork prices surge” (FT, 15Oct19); “China’s Tech Scene Struggles to Produce Valuable Start Ups” (FT 22Oct19); “A Million People are Jailed in China’s Gulags. Here’s What Really Goes on Inside” (Haaretz, 17Oct19); and “China’s Looming Class Struggle” (Quillette, 18Oct19).

In “The United States Should Fear a Faltering China” (Foreign Affairs, 28Oct19), Michael Beckley reminds us that history repeatedly shows that it is precisely when they feel most threatened by internal developments that nations tend to trigger external conflicts.

“US Intelligence Needs Another Reinvention”, by Amy Zegart

Surprise
Zegart is the author of an excellent analysis of the intelligence failures leading up to the 9/11 attacks (“Spying Blind: The CIA, the FBI, and the Origins of 9/11). Her conclusions are as applicable to the intelligence analysis challenges facing investors and corporations as they are to those facing nation states.

She notes that “today’s threat landscape is vastly more complex than it was in 2001. Terrorists are one item on a long list of concerns, including escalating competition and conflict with Russia and China, rising nuclear risks in North Korea, Iran, India and Pakistan, roiling instability in the Middle East, and authoritarians on the march around the world. Supercharging all these threats are new technologies that are accelerating the spread of information on an enormous scale and making intelligence both far more important and challenging...

“Now, as in the run-up to 9/11, early indicators of the coming world are evident, and the imperative for intelligence reform is clear…as in the 1990s, many in the intelligence community are sounding alarms and trying to make changes…But these efforts are nowhere near enough. What’s missing is a wholesale reimagining of intelligence for a new technological era...

“In the past, intelligence advantage went to the side that collected better secrets, created better technical platforms (such as billion-dollar spy satellites), and recruited better analysts to outsmart the other side. In the future, intelligence will increasingly rely on open information collected by anyone, advanced code and platforms that can be accessed online for cheap or for free, and algorithms that can process huge amounts of data faster and better than humans.”

“This is a whole new world. The U.S. intelligence community needs a serious strategic effort to identify how American intelligence agencies can gain and sustain the edge while safeguarding civil liberties in a radically different technological landscape.”

China celebrated 70 years of Communist Party rule

Surprise
In conjunction with the 70th anniversary, a number of writers with long perspectives on the region analyzed China’s future prospects.

In The National Interest, Thayer and Han argue that, “Xi Jinping will usher in a dark age for China.” They note that on the 70th anniversary, “Xi will convey China’s global strategy in veiled and honeyed terms. Under his leadership, the world has witnessed China rising beyond regional power into superpower status. He will continue to advance a new global governance framework that is benignly termed “the common destiny of mankind,” less benignly, Chinese domination…Xi’s predatory character and limitless ambition has made him far more reckless and repressive than his predecessors—only Mao is his equal. His megalomania and his weakness will compel him to overcompensate…

[Xi] “is guiding China back to a nadir…China’s economy is worse off than it was at the dawn of his regime. China is also less secure due to the maladroit actions of his regime. The Chinese people are worse off as well…China’s economic, military, and political power will present an existential challenge to the free world and western civilization. It is unclear whether the world is ready to meet that challenge.”

In “The China Dream: Never Closer, yet Never More Elusive”, RAND’s Timothy Heath notes that, “China's ascent as a manufacturing powerhouse upended and reconfigured the global economy. But the next 30 years may see its impact on the world reach new heights. In this third act of China's revitalization, Beijing faces the daunting challenge of improving its dominant position as a global leader, or risk sinking into stagnation…endurance may not be good enough in coming decades…

To achieve its goals of national rejuvenation, China needs to become a true world power. But with its economy softening and its politics gridlocked, an increasingly besieged China seems less and less likely to realize all of its goals.”

Writing in Foreign Affairs, Jiewi Ci argues that, “Without Democracy, China Will Rise No Farther.” He urges us to focus, “not on China’s recent political trajectory but on the dynamic of its society. There one clearly discerns the shape of what Alexis de Tocqueville called a democratic social state—an entity distinct from a democratic political regime, but arguably as important.

“A democratic social state is one in which a historically fixed hierarchy has given way to formal equality of status and opportunity. Four decades of reform since the late 1970s have achieved something close to this in China…The importance of the profound democratization of Chinese society cannot be overstated…Chinese authorities are already paying a gargantuan material and psychological price just to keep the country stable and governable. That the present leadership encounters little resistance to its increased repression and blunt propaganda may indicate that it occupies a position of strength...

“Equally, its willingness to use repression, even at the risk of encountering resistance, is a clear sign of its heightened anxiety. For an undemocratic political regime to manage a democratic society without compromise is an unnervingly tall order…

“Some scholars argue that there is little reason to fear for the legitimacy of a ruling regime under such circumstances. They claim that with economic prowess and national rejuvenation, an atrophying communist system can sustain its legitimacy even when it governs an ever more bourgeois, democratic society. They are mistaken. Performance by itself does not confer legitimacy on a regime, so much as it helps to make its relative absence matter less. Such is increasingly the case in China today…

“How much longer can the CCP hold on without democratizing? The short answer is: only as long as the current leadership is in charge, at best. Xi Jinping is an extraordinary leader in that he effectively keeps in check contradictions that would otherwise produce irresistible momentum toward fundamental change or collapse. Xi is able to do this not merely because he possesses special personal attributes but because he belongs to the last generation of leaders who can draw legitimacy from the communist revolutionary legacy. That legacy is one both of doctrine and of exceptional determination to keep the CCP in power at all costs, including the kind of cost incurred in June 1989.

“When Xi’s generation departs the political scene, the CCP will mark a watershed in its political evolution. Those who come after will be a different breed of leaders. They will not be able to maintain Xi’s level of control of the party, the military, the media, and the private sector. And what they will lack is exactly what will be necessary—what is now necessary—to keep the party united, the country stable, and democratizing forces at bay.”

The crisis in Hong Kong continued to intensify and deteriorate as protests entered their fourth month

Surprise
The latest developments include a student being shot by police, attempts to ban demonstrators from wearing masks, and calls for the Hong Kong government to enact the colonial emergency law.

Writing in the FT, Jamil Anderlini ominously concludes that, “Beijing will have its revenge on Hong Kong.” He notes that, “The Chinese phrase qiu hou suan zhang is literally translated as “to balance the books after the autumn harvest”. But in common parlance it means “to take revenge when the time is ripe”.

“China’s leaders use the aphorism to discuss the problem of Hong Kong. With peaceful and violent protests still escalating, and the police and government struggling to control the situation, Chinese officials have mostly struck a conciliatory tone until now. But even if the demonstrations fizzle out immediately and the former British colony returns to normality, Beijing will settle its scores and “Asia’s world city” will never be the same again…

The conclusion Beijing has drawn from the past four months of rage is the only one possible in an authoritarian — increasingly totalitarian — system: they were far too soft last time around. When the moment is right, they must act ruthlessly to punish Hong Kong…

“The protesters, steeped in Chinese history, are well aware of this impending retribution. It has given their movement a hard, nihilistic edge…”

China’s 70th anniversary military parade confirmed its focus weapons systems intended to create asymmetric advantage versus the United States

Specifically, the systems on display will help China to achieve two strategic goals. The first is deterring a nuclear conflict with the United States. The new DF-41 ICBM can carry 10 warheads plus decoys, and reach targets across the United States. Also displayed was a road mobile version of the older DF-31 ICBM, which would be hard for the US to target in a retaliatory strike.

China’s second strategic goal is increasing its power and influence in the western Pacific, through a strategy called Anti-Access/Area-Denial (A2/AD) that is intended to make it far more difficult for US military assets to operate in the region. On display in Beijing were a new missile launched hypersonic (Mach 5 or faster) glide vehicle capable of carrying a conventional or nuclear warhead, and a new supersonic reconnaissance drone that will operate at very high altitudes. In essence, these two systems (along with existing DF-21 long-long range anti-ship missile and DF-26 intermediate range ICBM) will increase the speed and precision with which China can strike targets in Asia.

Commenting on this display of new weaponry, the Economist noted that, “It is understandable, indeed inevitable, that a wealthier China would seek to become a great military power. What was not inevitable was that Mr Xi would embrace populist, nostalgic, red-flag waving nationalism, while glossing over the party’s terrible mistakes…By telling his people that Communist China has never taken a wrong turn, he is stoking an impatient, hair-trigger nationalism in which criticism from abroad equates to hostility…[Such] heavily armed, self-righteous nationalism can start wars.”

Recent polling by Pew Research has found a sharp increase in unfavorable views of China in many other countries

Surprise
“Opinion of China across most of Western Europe is, on balance, negative. While 51% in Greece have a positive view of China, pluralities or majorities in Western European countries have an unfavorable view, ranging from 53% in Spain to 70% in Sweden. The share of people who evaluate China positively has also dropped since 2018 by double digits in nearly half of the Western European countries surveyed, including Sweden (down 17 percentage points), the Netherlands (-11 points) and the UK (-11). Only in Greece and Italy has opinion improved.”

Between 2005 and 2019, the percent of people holding a negative view of China increased from 27% to 67% in Canada, and from 35% to 60% in the United States. “In both countries, this is the highest unfavorable opinion of China recorded in the Center’s polling history.”
China also receives unfavorable marks from most of its neighbors in the Asia-Pacific region. In Japan, 85% say they have an unfavorable opinion of China – the most negative among all countries surveyed. More than half in South Korea (63%), Australia (57%) and the Philippines (54%) share this sentiment.

Opinion of China has also fallen across the region over the course of Pew Research Center’s polling and is now hovering at or near historic lows in each of the countries surveyed. In Indonesia, the change over the past year has been particularly stark, falling 17 percentage points.

With its cruise missile and drone attack on critical Saudi oil facilities, Iran has significantly raised the stakes in its conflict with Saudi Arabia and the United States.

US Secretary of State Mike Pompeo characterized the attack as “an act of war.”

On the other hand, the success of the attack highlighted the difficulty of defending against an attack by a swarm of relatively inexpensive drones (17) and cruise missiles (8). If human operator overload was at least partly to blame, this presents another argument for taking humans “out of the loop” and using AI to more fully automate integrated air defense systems.

“The Coming Automation of Propaganda” by Adkins and Hibbard

“As U.S. policymakers remain indecisive over how to prevent a repeat of the 2016 election interference, the threat is looming ever more ominous on the horizon. The public has unfortunately settled on the term “bots” to describe the social media manipulation activities of foreign actors, invoking an image of neat rows of metal automatons hunched over keyboards, when in reality live humans are methodically at work. While the 2016 election mythologized the power of these influence-actors, such work is slow, costly, and labor intensive. Humans must manually create and manage accounts, hand-write posts and comments, and spend countless hours reading content online to signal-boost particular narratives.

However, recent advances in artificial intelligence (AI) may soon enable the automation of much of this work, massively amplifying the disruptive potential of online influence operations.

“This emerging threat draws its power from vulnerabilities in our society: an unaware public, an underprepared legal system, and social media companies not sufficiently concerned with their exploitability by malign actors.”

“The Weaponization of Information is Mutating at an Alarming Rate”, by Sophia Ignatidou in The Guardian 19Aug19

“Communication has been weaponised, used to provoke, mislead and influence the public in numerous insidious ways. Disinformation was just the first stage of an evolving trend of using information to subvert democracy, confuse rival states, define the narrative and control public opinion. Using the large, unregulated, open environments that tech companies once promised would “empower” ordinary people, disinformation has spread rapidly across the globe. The power that tech companies offered us has become a priceless tool in propagandists’ hands, who were right in thinking that a confused, rapidly globalising world is more vulnerable to the malleable beast of disinformation than straightforward propaganda.”

“Whatever we do, however many fact-checking initiatives we undertake, disinformation shows no sign of abating. It just mutates. While initially countries that were seasoned propagandists, such as Russia and North Korea, were identified as the main culprits, the list of states employing disinformation is growing.”

“Hostile Social Manipulation”, by Mazarr et al from RAND

“The role of information warfare in global strategic competition has become much more apparent in recent years. Today’s practitioners of what this report terms hostile social manipulation employ targeted social media campaigns, sophisticated forgeries, cyberbullying and harassment of individuals, distribution of rumors and conspiracy theories, and other tools and approaches to cause damage to the target state.

“This emerging practice reflects an updated and modified version of many long-established forms of influence, including propaganda, “active measures,” disinformation, and political warfare, a group of techniques sometimes referred to with the overarching term measures short of war…These emerging tools and techniques represent a potentially significant threat to U.S. and allied national interests…

“The analysis examines these issues through a detailed assessment of available evidence of Russian and Chinese social manipulation efforts, the doctrines and strategies behind such efforts, and evidence of their potential effectiveness…”

The authors conclude that, “it is now undeniable that leading autocratic states have begun to employ information channels for competitive advantage—plans that remain in their initial stages and that could unfold in several ways…[While] there is as yet no conclusive evidence about the actual impact of hostile social manipulation to date…the marriage of the hostile intent of several leading powers and the evolution of several interrelated areas of information technology has the potential to vastly increase the effectiveness and reach of these techniques over time.”

“Averting Crisis: American Strategy, Military Spending, and Collective Defence in the Indo-Pacific”, by Townshend, Thomas-Noone, and Steward of the University of Sydney

SURPRISE
This new study by a team of Australian researchers reaches some very sobering conclusions:

“America no longer enjoys military primacy in the Indo-Pacific and its capacity to uphold a favourable balance of power is increasingly uncertain…”

“Over the next decade, the US defence budget is unlikely to meet the needs of the [US] National Defense Strategy owing to a combination of political, fiscal and internal pressures…”

“America has an atrophying force that is not sufficiently ready, equipped or postured for great power competition in the Indo-Pacific — a challenge it is working hard to address…”

“A strategy of collective defence is fast becoming necessary as a way of offsetting shortfalls in America’s regional military power and holding the line against rising Chinese strength.”

“An Attack Against Them All?” by Binnendijk and Priebe from RAND

SURPRISE
“This report provides an analytical framework for understanding allies’ willingness to contribute to a military response to Russian attacks on a North Atlantic Treaty Organization (NATO) member…”

The authors conclude that, “The factors likely to drive allies’ decision making could vary substantially depending on whether Russia uses conventional or unconventional means. For example, widely discussed proposals to counter Russian influence attempts against the public and policymakers would be particularly important during an unconventional conflict or phase. [In contrast], the value that allied political elites place on the perpetuation of NATO is likely to be a determinative factor in a decision to commit forces to a conventional conflict with Russia.”

“Speed and Security: Promises, Perils, and Paradoxes of Accelerating Everything”, by Bouskill et al from RAND

“Technological developments and social dynamics are working in tandem to shift society into hyperdrive, which can usher in unprecedented security concerns…

“Speed is an elusive, often paradoxical concept. In this work, speed is a heuristic designed to represent accelerated development and implementation of technologies across a host of domains: production, movement and transportation, communication, high-frequency trading and financial transactions, cognitive processing, data-sharing, information and knowledge transfer, weapon (e.g., missile) deployment, natural selection and evolution, computational processing, collective social organization, and cultural change…”

“As the velocity of information—and just about everything else—accelerates, leaders face immense pressure to act or respond quickly…Nothing has had a more profound effect on government and the challenges of government.”

The evolving situation in Hong Kong was aptly summed up in two Financial Times headlines: “Hong Kong Protestors Play Dangerous End Game with China” (16Aug), and “Hong Kong’s Water Revolution Spins Out of Control” (2Sep19)

16Aug: “Events over three dramatic days have threatened the long-held assumption that Beijing would never do anything that might jeopardise Hong Kong’s status as a leading international financial centre…the Chinese government might have no other choice but to intervene if Hong Kong’s 30,000-strong police force cannot contain what has become a “flash mob” rebellion, with fleet-footed, lightly clad protesters routinely running circles around clunkily armoured police in the city’s notorious summer heat and humidity.”

2Sep: “Much of the analysis of the Hong Kong unrest has focused on economics. While unaffordable housing and extreme inequality contribute to popular anger, it is condescending and misleading to blame these factors entirely. Many of the radicals are wealthy and highly educated. When they scatter to avoid police they often escape in luxury cars. Polling among protesters consistently shows that economic factors are less important to them than ideas…”

The protestors’ “idealism has been fueled by constant references to historical liberation movements…If Beijing continues with its ultra-hardline approach, it is possible Hong Kong will descend into a situation resembling the Northern Irish “Troubles” of the 1970s and 1980s. That would mark the end of the city as a global financial centre. But it would not end the water revolution, which could easily spill across the border into mainland China, as IRA attacks did in the UK.”

Events in Hong Kong have sparked an increase in articles seeking to put the protests – and China’s trade war with the United States – into a larger context.

An excellent example is “Hong Kong Shows the Flaws in China’s Zero-Sum Worldview”, by Michael Schuman. He observes that both the trade war and Hong Kong protests “have similar roots deep within Beijing’s view of the world: Fixated on promoting their own power, Chinese leaders struggle to accommodate the interests of others. They often speak of “win-win” cooperation that benefits all parties, but their approach to the world around them is, in the end, zero-sum.”

He also notes that, “China finds altering course especially difficult, mainly because of how its domestic political system functions. As an authoritarian regime—and one that is more and more centered on a personal cult surrounding Xi Jinping— admitting fault is perceived as a threat to credibility. Nor is it clear how much bad news filters up to top decision makers through a bureaucracy fearful that policy disagreements could be mistaken for disloyalty.”

“Party Man: Xi Jinping’s Quest to Dominate China”, by Richard McGregor in Foreign Affairs

SURPRISE
McGregor observes that, “in the years since he took power, Xi has harshly suppressed internal dissent, executed a sweeping anticorruption campaign, and adopted a bold, expansive foreign policy that has directly challenged the United States. Few foresaw the extent of Xi’s ambition before he took over as leader...”

“By the time he took office, Xi seemed possessed by a deep fear that the pillars of party rule—the military, the state owned enterprises, the security apparatus, and the propaganda machine—were corrupt and crumbling. So he set out on a rescue mission…”

“Xi has chosen to govern China as a crisis manager. That might help him in China’s immediate rivalry with the United States. But along the way, his enemies at home and his critics abroad have piled up…There is good reason to think, as many Chinese officials and scholars do, that Xi’s overreach will come back to haunt him before the next party congress, in late 2022, especially if the Chinese economy struggles…Sooner or later, as recent Chinese history has shown, the system will catch up with him. It is only a question of when.”

Tensions remained high in the conflict between Iran and the United States, as the former seized a UK flagged tanker and sanctions continued to impose a high price on the Iranian economy. Some articles noted that the government may be forced to reduce the subsidies it uses to buy social peace, which could lead to an increase in domestic conflict.

It seems likely that regime change in Iran is the goal the US is seeking to achieve through the actions it has taken, as it has left Iranian leaders with few if any ways out of the predicament they face, short of conceding to US demands that it end its nuclear program.

Iranian leaders likely regard this as an existential threat to the survival of their regime, which makes likely both increasing threats to the flow of oil through the Strait of Hormuz (with attendant consequences for oil prices and thus the global economy), and at some point violent conflict with the US some of its allies.

Demonstrations continued in Hong Kong, with indications that this may soon become a flash point in US-China relations, and perhaps an important turning point.

As Gideon Rachman noted in the 8Jul19 Financial Times, “a spectre is haunting China, the spectre of democracy. The mass demonstrations that are taking place on the streets of Hong Kong have a significance that extends well beyond the territory itself. They represent the biggest challenge to the Chinese Communist party since the Tiananmen uprising of 1989.

“The authorities in Beijing will be hoping that the demonstrations in Hong Kong fizzle out, allowing a gradual return to the status quo. Something like that happened after the “umbrella movement” protests of 2014.”

However, as July progressed, they did not fizzle out; instead, they became more confrontational, with more acts of violence both by and against the protesters (including alleged attacks on the latter by Hong Kong crime Triads). As Rachman observed, “The essential dilemma is that ordinary Hong Kongers have no desire to live in an authoritarian one-party state. Their resistance to this fate could flare up again, at any time.

“For President Xi Jinping, the ultimate danger is that the contagion of dissent spreads from Hong Kong to the mainland.”

As July came to an end, there was talk of potential Chinese army intervention in Hong Kong, and the Chinese press was reporting the United States was somehow behind the demonstrations.

Chinese military intervention in Hong Kong would undoubtedly be compared to the Soviet invasions of Hungary in 1956 and Czechoslovakia in 1968, and would likely mark a turning point in China’s relations with the west from which there is no turning back from a new Cold War.

On the other hand, in so far as a substantial portion of Hong Kong’s 7.4 million people chose to flee to their bolt holes abroad, they could provide a substantial injection of entrepreneurial spirit, experience, and resources to the nations to which they flee, with the most likely destination being Vancouver, where many Chinese have their “just in case” flats. In this sense, a better analogy might be the flight of talent out of Cuba after Castro’s takeover (or the flight of Hungarians in 1956), which proved to be of great benefit to the nations where they settled.

China published a new defense white paper, titled “China’s National Defense in the New Era”

SUPRRISE
Writing in The National Interest, US Naval War College professor Andrew Erickson titled his article, “China’s Defense Whitepaper Means Only One Thing: Trouble Ahead.”

Erickson concludes, “no one should miss the ambition, assertiveness, and resolve permeating this official policy document. Real and consequential actions will follow from these sometimes vague but often forceful statements. Prepare for trouble ahead: we have been warned.

In the UK, Boris Johnson won the Conservative Party leadership contest. Shortly thereafter, in a by election for a parliamentary seat, the Conservatives split the vote with the new Brexit Party, which allowed the Liberal Democrats to win (after drawing a substantial number of former Labour voters who have been turned off by the hard left policies and anti-Semitism of a Labour Party led by Jeremy Corbyn).

Johnson’s election raises the probability that on 31Oct, the UK will leave the European Union, quite possibly without a go forward agreement – trading would revert to WTO rules, and a period of confusion would ensue. This autumn will also likely see a general election called in the UK. If the Tories can forge an alliance with the Brexit Party (more likely than before with Johnson as PM), then they are likely to end up forming a new government, assuming that Jeremy Corbyn remains head of Labour, as the LibDems have said they cannot join a government he would head.

“Putin Tests the EU’s Mettle”, by Alan Riley in The American Interest

SURPRISE
This excellent article describes a growing crisis over the supply of Russian gas to Europe that is likely to crest as winter peaks in early 2020.

The current contract for piping Russian gas across the Ukraine to supply Central, Eastern, and Western Europe expires on 1Jan20. The new Nord Stream pipeline across the North Sea will, when completed, bypass the Ukraine, which will enable Russia to restrict gas to that nation as well as deprive it of $3 billion in annual transit fees. However, Denmark has thus far refused to permit the portion of Nord Stream that will cross its territory. This sets up a game of chicken scenario in which Russia cuts of gas supplies to European customers in the middle of winter.

The alternative source of supply would be LNG inflows from the United States (and to a lesser extent Canada), which has substantially expanded its gas export capacity.

Depending on how this crisis is resolved, it could produce either a humiliating defeat for Europe which would likely significantly reduce popular support for the EU, or further isolate Russia, boost the EU, and bring Europe into closer alignment with the US and Canada.

“An Unnatural Partnership? The Future of US-India Strategic Cooperation”, by Ganguly and Mason, published by the US Army War College

SURPRISE
“As global competition with an increasingly assertive Chinese Government expands, the strategic relationship between India and the United States is assuming ever-greater importance.

From a superficial perspective, a strategic partnership seems to make a great deal of sense for both countries. Yet, enormous political, cultural, and structural obstacles remain between them, which continue to slow the progress in security cooperation to a crawl, relative to China’s economic and military advances.”

June 4th marked the 30th anniversary of Tiananmen Square; this month also saw unprecedented protests in Hong Kong over a proposed new extradition bill

SURPRISE
The anniversary was marked by stories noting China’s economic growth over the past 30 years, the creation of a large middle class, the failure of these changes to produce the political liberalization that many had expected, in part because of disenchantment with developments in the US and Europe. Indeed, under Xi Jinping China has become a more repressive state.

Yet two weeks later, the world witnessed demonstrations in Hong Kong of unprecedented size (involving at least one in five residents) against a proposed extradition treaty that would have further eroded the “one country, two systems” arrangement (established in the 1984 China-UK Joint Declaration) that followed the British handover of Hong Kong to China in 1997.

As described by the US-China Economic and Security Review Commission, the proposed law “would amend Hong Kong’s laws to allow extraditions to mainland China. A broad range of offenses that carry a minimum three-year jail sentence under Hong Kong law would be eligible for extradition, and the bill would remove independent legislative oversight in the extradition process. Such changes would undermine the strong legal protections guaranteed in Hong Kong and leave the territory exposed to Beijing’s weak legal system and politically motivated charges…”

“The new arrangement would diminish Hong Kong’s reputation as a safe place for U.S. and international business operations, and could pose increased risks for U.S. citizens and port calls in the territory…Passage of the bill would almost certainly make operations harder for prodemocracy advocates and the business community, who are already worried about Beijing’s illegal detention of Hong Kong and other foreign citizens.”

Under popular pressure, the proposed bill has been temporarily withdrawn. What remains to be seen is how Xi and the CCP will react in the face of large-scale popular resistance that was visible to many people on the mainland, who themselves face a slowing economy, worsening demographic, income, and geographic inequalities, and rising uncertainty about their economic future in the face of worsening China-US relations.

As Jamil Anderlini put it in a recent Financial Times column (“Beijing Tightens Its Grip on the Periphery”, 4Jul19), “the very first line of Romance of the Three Kingdoms, one of the four great classical novels of Chinese literature, holds a prophecy for anyone seeking to rule China: ‘The empire, long divided, must unite; long united, must divide. Thus it has ever been’…

“Probably the biggest question facing Chinese President Xi Jinping today is whether the empire is in one of its centrifugal or centripetal phases.”

I estimate the probability of an eventual aggressive and repressive Chinese response in Hong Kong to be 70%, which will further worsen relations with the US and ratchet up global uncertainty.

June also saw the ratcheting up of tensions between the United States and Iran, including a “kinetic” act on a US military asset – the shooting down of an American surveillance drone, and president Trump’s last minute cancellation of a retaliatory military strike on Iranian targets (although a reported US cyberattack on Iranian missile command and control systems took place). Iran has also announced that it will soon resume enriching uranium, which could subsequently be used to develop nuclear weapons.

SURPRISE
Since 1979, the United States has been engaged in a conflict with Iran, in which casualties have continued to mount (e.g., see “Killing Americans and Their Allies: Iran’s Continuing War Against the US and the West” by Kemp and Driver-Williams).

This has been just part of a larger conflict between Shia Iran and Sunni Saudi Arabia that increasingly resembles the Thirty Years War. An on a global level, Iran, along with Russia and China, has become a key player in an increasingly robust de facto anti-US alliance.

Finally, possession of nuclear weapons is clearly a redline that Israel is unlikely to allow Iran to cross, as it lacks confidence that the theory of nuclear deterrence reliably applies to a nation that remains messianic in character.

Both Iran and the United States undoubtedly realize that an all out war between the two would impose very high costs (on themselves and the world economy) that would likely exceed the eventual gains for either side. However, as this month’s drone shootdown shows, when tensions are high, conflict escalation can happen rapidly.

From a macro perspective, the key point is that the escalating conflict between the US and Iran has undoubtedly increased uncertainty, which is likely to have a delayed but debilitating impact on global GDP growth.

Recent stories highlighted deteriorating conditions in two important countries.

The headline of a 6Jun editorial in the Financial Times says it all: “Debt and Populism Test Italy’s Bedraggled Polity.” In the case of the Greek Crisis, the European Union could impose its will. Because of Italy’s far larger size, that will be far harder, if not impossible, if the slowly building crisis there continues.

As the FT noted on 6Jun, “Italy is the only large EU country where the eurozone crisis never truly ended. Its economy is burdened with extremely high public debt, chronically low growth and too much fragility in the banking sector. Its traditional political classes have lost so much public trust that the government fell last year into the hands of an unholy alliance of anti-immigrant, rightwing nationalists and inexperienced anti-establishment populists. Each wing of the government, the League and the Five Star Movement, is hostile to the EU’s economic and fiscal orthodoxies.”

The next day, the FT’s Henny Sender warned that, “Foreign investors should be wary of the seductive India story”, noting that “Mr Modi’s victory comes just as the macro numbers suggest an economy that not only is unable to take advantage of the broken international trading system, but is slowing dramatically after years of dysfunctional policies — many of them from Mr Modi’s own administration.”

Two new papers provide more insight into critical national security issues

SURPRISE
In “Cybersecurity of NATO’s Space-Based Strategic Assets”, Beyza Unal from Chatham House (The Royal Institute of International Affairs) notes that “almost all modern military engagements rely on space based assets”, and that “all satellites depend on cyber technology including software, hardware and other digital components. Any threat to a satellite’s control system or available bandwidth poses a direct challenge to national critical assets.”

Hence, “Cyber vulnerabilities undermine confidence in the performance of strategic systems. As a result, rising uncertainty in information and analysis continues to impact the credibility of deterrence and strategic stability. Loss of trust in technology also has implications for determining the source of a malicious attack (attribution), strategic calculus in crisis decision-making and may increase the risk of misperception...

“However, the increasing vulnerability of space-based assets, ground stations, associated command and control systems, and the personnel who manage the systems, has not yet received the attention it deserves…policymakers are struggling to grasp the full impact of cyber vulnerabilities in the context of both space-based assets and strategic systems.”

“The Power of Will in International Conflict: How to Think Critically in Complex Environments” is a new book by Wayne M. Hall, a retired US Army General officer with a military intelligence background. While far from a light read, Hall’s analysis is innovative and thought provoking, and correctly identifies “will” as a critical and often decisive phenomenon that emerges from complex national systems and their interaction when they come into conflict.

This is an issue that was first touched on years ago in Colonel John Boyd’s pioneering work on the interaction of two adversaries’ repeating decision cycles, which he characterized as being composed of four critical activities: Observe, Orient, Decide, and Act (i.e., the “OODA” loop). If one party was able to perform its OODA loop faster than another, it would gradually gain a psychological advantage that would eventually undermine its opponent’s will to continue the conflict. Hall’s approach is a more sophisticated approach to this critical determinant of conflict success.

“Artificial Intelligence and National Security” by Kelley Sayler, Congressional Research Service

“From the Cold War era until recently, most major defense-related technologies, including nuclear technology, the Global Positioning System (GPS), and the internet, were first developed by government-directed programs before later spreading to the commercial sector…Today, commercial companies—sometimes building on past government-funded research—are leading AI development, with DOD later adapting their tools for military applications. Noting this dynamic, one AI expert commented, “It is unusual to have a technology that is so strategically important being developed commercially by a relatively small number of companies”…

“An apparent cultural divide between DOD and commercial technology companies may also present challenges for AI adoption. A recent survey of leadership in several top Silicon Valley companies found that nearly 80% of participants rated the commercial technology community’s relationship with DOD as poor or very poor. This was due to a number of factors, including process challenges, perceptions of mutual distrust, and differences between DOD and commercial incentive structures.

Moreover, some companies are refusing to work with DOD due to ethical concerns over the government’s use of AI in surveillance or weapon systems…U.S. competitors may have fewer moral, legal, or ethical qualms about developing military AI applications.”

“Space Threat Assessment 2019” by Harrison et al from CSIS

SURPRISE
“Satellites are vulnerable to a wide array of intentional threats, such as killer satellites. Other nations have learned how to attack the global commons of space. Our vulnerability is acute because our satellites are the juiciest targets. Cripple our satellites, and you cripple us.

“Satellites are not only our crown jewels but the crown itself—and we have no castle to protect them.

“The United States is not the leader in anti-satellite technology. We had naively hoped that our satellites were simply out of reach, too high to be attacked, or that other nations would not dare. As this report meticulously documents, other nations are developing, testing, and fielding a range of counterspace weapons that threaten to deprive us of the many economic and military advantages we derive from space.

“The risk of a space Pearl Harbor is growing every day. Yet this war would not last for years. Rather, it would be over the day it started. Without our satellites, we would have a hard time regrouping and fighting back. We may not even know who had attacked us, only that we were deaf, dumb, blind, and impotent.

“We have been officially warned of this danger since at least 2001 when the Rumsfeld Report was released, but the Pentagon has done very little to reduce this existential risk. The 2008 Allard Report even warned that ‘no one is in charge’ of our space strategy. Sadly, this is still true.”

“The Mexico Tragedy” by Shepard Barbash in The American Interest

SURPRISE
“Will Mexico ever become a healthy democracy—more law abiding and better governed, more prosperous and free?

“The question is as enduring as it is hard to answer. Few nations have inspired such a mixture of love, fear, and revulsion—a perennial sense that it has come so far, yet has so far to go…political dysfunction and the resulting feebleness of many government institutions threaten to destroy all this progress. Adding to the worries: the landslide victory in July of a president, Andrés Manuel López Obrador, who is a creature of the system at its worst…

“Whereas ten years ago, most crime came from drug cartels on the U.S. border, the problem has since metastasized nationwide. In cities and villages, from north to south and sea to sea, an ever-evolving, ever-replenishing population of thieves, extortionists, kidnappers, drug traffickers, cheats, and assassins has besieged society, defying or coopting governments at every level. Mexicans’ ingenuity and ambitions, long stifled by their self-dealing political class, are finding an outlet in outlawry…

“The numbers shock. More than 135,000 people have been killed since 2012. More than 1,300 clandestine graves have turned up since 2007. More than 37,000 people are reported missing. More than 600 soldiers have been killed in the drug war. At least 130 politicians and nine journalists were killed preceding the elections in July…

“And the violence is indeed spreading. Murder rates have risen in 26 of the country’s 32 states. In 2014, 152 municipalities accounting for 43 percent of Mexico’s population reported at least one execution-style murder per month; in 2017, the number grew to 262 municipalities and 57 percent of the population. Villages have become worse than cities: 40 percent of the population lives outside metropolitan areas but suffers 48 percent of homicides…

“Most killings remain tied to the drug wars, but a growing share comes from robbery, assault, extortion, and kidnapping…All told, the government reports 33.6 million crimes with a victim in 2017, an all-time high. Most victims were women… Only one in 6,000 crimes ends in a conviction…

“According to the World Values Survey, the percentage of Mexicans who say that most of their countrymen can be trusted has fallen from 34 percent in 1990 to 11 percent in 2017, the lowest rate ever recorded in Mexico and among the lowest rates in the world…Resignation is realism in Mexico. The country breaks one’s heart.”

“Russia Has Americans’ Weaknesses All Figured Out” by Jim Sciutto of CNN in The American Interest

“What are Americans supposed to think when their leaders contradict one another on the most basic question of national security—who is the enemy?

“This is happening every day on the floors of the House and the Senate, in committee hearing rooms, on television news programs, and in President Donald Trump’s Twitter feed. Is Russia the enemy, or was the investigation of Russia’s interference in the 2016 election just a slow-motion attack on the president and his supporters? Are Russian fake-news troll farms stirring up resentment among the American electorate, or are mainstream-media outlets just making things up?

“U.S. military commanders, national-security officials, and intelligence analysts have a definitive answer: Russia is an enemy. It is taking aggressive action right…now, from cyberspace to outer space, and all around the world, against the United States and its allies. But the public has been slow to catch on, polls suggest, and Trump has given Americans little reason to believe that their president recognizes Russia’s recent actions as a threat.

“All the uncertainty is part of Vladimir Putin’s plan. America’s confusion is both a product and a principal goal of a qualitatively new kind of warfare that the Kremlin is waging—a campaign that systematically targets a democratic but politically divided society whose economy, media environment, and voting systems all depend on vulnerable electronic technologies. The essence of this strategy is to attack U.S. interests just below the threshold that would prompt a military response and then, over time, to stretch that threshold further and further.

“The purpose of this shadow war is simple: to create what Russian General Valery Gerasimov has called ‘a permanent front through the entire territory of the enemy state.’” …

“Yet for years after the end of the Cold War, leaders in the United States and other Western nations were willfully blind to Russia’s hostility. They fell victim to “mirroring,” imagining that the Russians—and the Chinese, for that matter —wanted what the U.S. wanted: for them to be drawn into the rules-based international order.

“But leaders of both Russia and China view that system as skewed toward the interests of the West. Perhaps not coincidentally, China is pursuing a strategy nearly identical to Russia’s, and with similar success—from stealing U.S. trade and government secrets to manufacturing territory in the disputed South China Sea to deploying offensive weapons in space.

“Only now, as these events unfold, are decision makers in the American public and private sectors abandoning misconceptions about the kind of relationship they might have with Moscow and Beijing.”

In India, Prime Minister Narendra Modi’s Bharatiya Janata won re-election by a large margin that surprised many commentators, and provoked a mix of reactions.

Some (e.g., Ed Luce, who was the Financial Times’ correspondent in India for five years) saw it as another example of “the global advance of ethno-nationalism around the world” (FT, 24May19), and what Kanchan Chandra has called the “triumph of Hindu majoritarianism” and the death of the original pluralist idea of a secular Indian state (Foreign Affairs 23Nov18. See also “How Hindu Nationalism Went Mainstream in Modi’s India” by Amy Kazmin in the 8May19 Financial Times).

In contrast, Guy Sorman, writing in City Journal, noted that the socialist and redistributive orientation of the previously dominant Congress had for many years held down India’s economic growth, even as its population continued to rapidly grown. On the economic front, Modi has implemented reforms that have increased economic growth and raised living standards (“Triumph of a Free Society”, 29May19).

To be sure, more reforms are needed; however, Sorman notes that “By keeping Modi and his BJP party in power, Indians are declaring that a free economy is good for them, particularly for the poor.” Whether Hindu majoritarianism will increased domestic conflict and derail rising growth remains to be seen, and remains, in the medium term, a critical issue global security and economic issue.

“The New Revolution in Military Affairs” by Christian Brose

SURPRISE
A recurring pattern in the history of private and public sector organizations is the lag in their adoption of disruptive technologies, due to the time it takes to rethink strategy and doctrine to incorporation them, and then implement the new approach via changes in processes, systems, structure, staffing, and often culture.

This creates a dynamic in which organization(s) – including companies and nations – can gain a significant (if temporary) competitive advantage by being the first to complete these changes. However, this often carries with it the seeds of later danger, as established advantages tend to blind an organization to the emergence of disruptive technologies and their adoption by others.

This paper documents the same process at work in the US military, and in particular its intensifying Great Power competition with China. Brose notes, for more than 20 years now (since the term “Revolution in Military Affairs” or RMA first entered the language), “the basic idea has remained the same: emerging technologies will enable new battle networks of sensors and shooters to rapidly accelerate the process of detecting, targeting, and striking threats, what the military calls the “kill chain.”

“The idea of a future military revolution became discredited amid nearly two decades of war after 2001 and has been further damaged by reductions in defense spending since 2011. But along the way, the United States has also squandered hundreds of billions of dollars trying to modernize in the wrong ways. Instead of thinking systematically about buying faster, more effective kill chains that could be built now, Washington poured money into newer versions of old military platforms and prayed for technological miracles to come (which often became acquisition debacles when those miracles did not materialize).

“The result is that U.S. battle networks are not nearly as fast or effective as they have appeared while the United States has been fighting lesser opponents for almost three decades. Yet if ever there were a time to get serious about the coming revolution in military affairs, it is now.

“There is an emerging consensus that the United States’ top defense-planning priority should be contending with great powers with advanced militaries, primarily China, and that new technologies, once intriguing but speculative, are now both real and essential to future military advantage. Senior military leaders and defense experts are also starting to agree, albeit belatedly, that when it comes to these threats, the United States is falling dangerously behind.

This reality demands more than a revolution in technology; it requires a revolution in thinking. And that thinking must focus more on how the U.S. military fights than with what it fights. The problem is not insufficient spending on defense; it is that the U.S. military is being countered by rivals with superior strategies. The United States, in other words, is playing a losing game. The question, accordingly, is not how new technologies can improve the U.S. military’s ability to do what it already does but how they can enable it to operate in new ways.

It is still possible for the United States to adapt and succeed, but the scale of change required is enormous. The traditional model of U.S. military power is being disrupted, the way Blockbuster’s business model was amid the rise of Amazon and Netflix. A military made up of small numbers of large, expensive, heavily manned, and hard-to replace systems will not survive on future battlefields, where swarms of intelligent machines will deliver violence at a greater volume and higher velocity than ever before. Success will require a different kind of military, one built around large numbers of small, inexpensive, expendable, and highly autonomous systems. The United States has the money, human capital, and technology to assemble that kind of military. The question is whether it has the imagination and the resolve.”

For an argument that China will struggle to develop and implement disruptive military technologies, see, “Why China Has Not Caught Up Yet: Military- Technological Superiority and the Limits of Imitation, Reverse Engineering, and Cyber Espionage”, by Gilli and Gillin in International Security.

See also, “America’s Nightmare” by Harry Kazianis in National Interest; “Piercing The Fog Of Peace: Developing Innovative Operational Concepts For A New Era” by Mahnken et al from CSBA; and “Forecasting Change in Military Technology, 2020-2040” by Michael O’Hanlon for a detailed discussion of potential technology developments, and his companion paper “A Retrospective on the Revolution in Military Affairs, 2000-2020”

“America’s Strategy-Resource Mismatch” by Bonds et al is a major new analysis from RAND

SURPRISE
“The 2018 National Defense Strategy (NDS) identifies long-term, strategic competition with China and Russia as the central challenge to U.S. security and the principal priority for the U.S. Department of Defense (DoD). The NDS tasks DoD with simultaneously defending the homeland and deterring aggression in Europe, the Indo-Pacific, and the Middle East. The NDS also directs DoD to counter North Korea and Iran and defeat terrorist threats to the United States…Unfortunately, the NDS is not adequately supported by military forces, causing a strategy-resource gap…

“Significant gaps exist in the ability of the United States and its allies to deter or defeat aggression that could threaten their national interests. NATO members Estonia, Latvia, and Lithuania remain vulnerable to a rapid Russian invasion. South Korea is vulnerable to a drawn out barrage from a relatively small percentage of North Korea’s artillery. China’s neighbors— especially Taiwan—are vulnerable to coercion and aggression. Finally, violent extremists continue to pose a threat in the Middle East, Afghanistan, and around the world.

“Solutions to these problems will take both money and time. In the United States, the needed funds are limited today by the Budget Control Act and the competing imperatives to modernize nuclear and conventional forces.”

The authors make recommendations for “discuss which missions should be prioritized and suggest changes to U.S. strategy and investments to best close these gaps”

Two other new reports from RAND, focused on Russia, must be seen in light of the above report

SURPRISE
“Overextending and Unbalancing Russia”, evaluates low cost options for weakening Russian power through low cost means that exploit its many serious economic, social, and military vulnerabilities.

“Deterring Russian Aggression in the Baltic States Through Resilience and Resistance” proposes a wide spectrum of deterrence, low and high intensity warfare options that would enable national governments, along with their NATO allies, to prevent a successful Russian takeover of Balkan territory, as occurred in the Crimea.

This month saw the publication of two new thought-provoking documents on China

As mandated by law, the US Defense Department published its annual “Chinese Military Power Report.” It summarized China’s strategy as follows: “China’s leaders have benefited from what they view as a “period of strategic opportunity” during the initial two decades of the 21st century to develop domestically and expand China’s “comprehensive national power.”

“Over the coming decades, they are focused on realizing a powerful and prosperous China that is equipped with a “world-class” military, securing China’s status as a great power with the aim of emerging as the preeminent power in the Indo-Pacific region. In 2018, China continued harnessing an array of economic, foreign policy, and security tools to realize this vision…

“China’s leaders employ tactics short of armed conflict to pursue China’s strategic objectives through activities calculated to fall below the threshold of provoking armed conflict with the United States, its allies and partners, or others in the Indo-Pacific region. These tactics are particularly evident in China’s pursuit of its territorial and maritime claims in the South and East China Seas as well as along its borders with India and Bhutan…

“In support of the goal to establish a powerful and prosperous China, China’s leaders are committed to developing military power commensurate with that of a great power. Chinese military strategy documents highlight the requirement for a People’s Liberation Army (PLA) able to fight and win wars, deter potential adversaries, and secure Chinese national interests overseas, including a growing emphasis on the importance of the maritime and information domains, offensive air operations, long-distance mobility operations, and space and cyber operations…

“China’s military modernization also targets capabilities with the potential to degrade core U.S. operational and technological advantages.”

SURPRISE
The second important publication was “The Sources of CCP Conduct”. Its author, US Congressman Mike Gallagher, has extensive experience in the intelligence community, as well as a PhD in International Relations. He notes that his title deliberately echoes George Kennan’s famous Long Telegram and anonymously published 1947 article on “The Sources of Soviet Conduct” that advocated a long-term policy of containment.

Gallagher argues that “understanding the CCP is essential to understanding China’s external ambitions and why they cannot be reconciled with those of the free world.” He describes three fundamental sources of the CCP’s conduct:

(1) “Chinese history – or, more precisely, two strongly held and CCP-perpetuated narratives about China’s history…The first narrative comes from Chinese dynastic history. Unlike Europe, where countries competed constantly for power, China enjoyed long periods without true rivals … Xi’s message is clear: It is time for the Americans to leave and for China to return to its Idealized traditional primacy over its Asian neighbor-vassals… The second narrative is that the greatest threat to China is weak central leadership that invites foreign aggression and corresponding national humiliation…

(2) The second source of CCP conduct, and one habitually discounted by Westerners, is the Party’s own history as an underground influence organization. From its earliest days, the CCP has played the role of insurgent, first within China and then abroad as it has sought to expand its power. A central tool in this struggle has been “United Front” work, or “a range of methods to influence overseas Chinese communities, foreign governments, and other actors to take actions or adopt positions supportive of Beijing’s preferred policies

(3) The third defining source of CCP conduct is the dictatorial nature of its power. Like the ruling class in any autocracy, CCP leaders fear losing power. The party perceives itself to be engaged in a “life-or-death struggle” against Western ideas, including democracy, the universality of human rights, neoliberal economic policy, and even independent journalism… [This] sense of ideological struggle also creates an absolutist view of security.”

“Sri Lanka’s Pain is Going to Spread”, by Mihir Sharma, Bloomberg, 22Apr19

SURPRISE
Following the Easter terrorist attacks in Sri Lanka, the author concludes that, “The entire subcontinent that the British once ruled from Delhi has seen, over the past decade, religious and ethnic identities harden and divisions deepen…The naive presumption that economic growth and prosperity, or even increasing education, would help minimize these cleavages and prevent them exploding into violence stands completely discredited…

“The truth is that all of our postcolonial states have failed in one crucial respect. They never built up the sort of modern, inclusive, all=embracing national identity that is the only defense against violence in a region as integrated and as burdened with history as this one.

India came close. But the Indian state’s preferred belief in the country’s “composite culture” depended on the myth that different communities had lived in peace with each other for centuries before colonialism. That was, of course, nonsense; and a liberal project of nation-building that centers upon lies about the past cannot survive.”

See also, “How Hindu Nationalism Went Mainstream in Modi’s India”, by Amy Kazin, FT 8May19

US-Iranian relations are rapidly deteriorating, with an increasing chance of some type of kinetic conflict between the two.

Key developments have included the US designating the Iranian Republic Guard Corps as a terrorist organization, the decision to eliminate sanctions waivers on Iranian oil exports (which will put more pressure on its economy, with the IMF forecasting a 6% decline in GDP), Iranian threats to break its nuclear treaty and resume uranium enrichment (a precursor to nuclear weapons development), deployment of additional US military resources to the Middle East (in response to reports that Iran was “escalating its military activity”), and Iranian threats to block the Strait of Hormuz and sink American ships. About 19 million barrels/day of oil pass through the Strait, out of a forecast global total daily consumption of about 100 million b/d in 2019.

For more on this, see, “How Iran Could Strike the US Military in a War”, by Harry Kazianis and “Worry About This: Could Iran Sink America's Aircraft Carriers in a Fight?” by Kyle Mizokami, both in National Interest

“Future of War: Not Back to the Future”, by Lt. General Mike Dana, USMC, in WarontheRocks.com

Surprise
This is a short but content rich article by a career Marine approaching retirement. It is well worth a read.

Like most Marines, Dana doesn’t mince words. He states his conclusion at the outset: “The rhythm of 21st century warfare is accelerating…We are ill prepared for the next war, because we are not fully adapting to the changing character of 21st century warfare.”

Key elements of his argument include the following:

“The information evolution will bring extraordinary complexity and lethality to the next war.”

“In World War II we primarily fought a three-domain fight — sea, air, and land. American factories ensured we had the mobility and mass to overwhelm our enemies in these three domains. Today, and in the future, we will be fighting adversaries in seven domains — sea, air, land, space, cyber, as well as two “new-old” domains: perception and time. Space and cyber operations hold the potential to have more of an impact on future war than the bombs and bullets in wars past.”

Artificial intelligence — better described as augmented intelligence — has the potential to create man-machine teams that will establish overmatch at every level and function of warfare. All of this is new and foreboding.”

“Artificial intelligence has the potential to accelerate John Boyd’s observe-orient-decide-act loop to cognitive speeds never before seen in the history of warfare — across every capability area, every domain of warfare, and all levels of war.”

“We need to recognize that our Napoleonic staff" structure and processes will not keep pace with the demands of the future operating environment…Twenty-first century war will not be a war of mass. It will be won by whoever best takes advantage of information and connectivity”

“Tomorrow’s foes may defeat or destroy us before the first kinetic round is fired, because cyber attacks will render our systems inoperable or unreliable. On the other hand, if we go “kinetic” and start destroying targets, man-machine teaming has the potential to deliver precision lethality and decapitate leadership, literally and figuratively.”

Two recent articles highlighted the accelerating development of hypersonic weapons.

In “Gliding Missiles that Fly Faster than Mach 5”, the Economist notes that, “A new generation of hypersonic missiles [that travel at Mach 5 or more] is changing all that. Some might be capable of gliding across continents at great speed, their target unpredictable until seconds before impact. Russia claims to have a hypersonic glider on the cusp of deployment; others are redoubling their efforts. Many are likely to start entering service in the 2020s…What is different about the hypersonic weapons in the pipeline is that they are designed to sustain such speeds over long distances, manoeuvre as they do so and, in some cases, hit targets with pinpoint accuracy…All this opens up new military possibilities—and problems.”

In “Hypersonics Are Speeding up Great Power Competition”, Lyle Goldstein, in the National Interest, notes that “China is deploying or on the cusp of deploying a hypersonic weapon (DF-17), joining Russia in possessing that novel capability. It is worth emphasizing that, despite ample research in this area, the United States is yet to field any equivalent military capability. It may be true that hypersonic threats do not require hypersonic responses, but the argument that these weapons are not significant is not persuasive.”

Release of the “Electromagnetic Defense Task Force Report” was followed by issuance of a new Executive Order by President Trump, “ordering federal government agencies to harden the nation’s infrastructure against potentially devastating attacks by a nuclear-bomb-produced electromagnetic pulse, or EMP.”

Surprise
Co-authored by former CIA Director James Woolsey, the Task Force’s conclusion was sobering:

“At present, the United States and its allies are at an EMS crossroads. In some areas, if timely actions fail to advance allied EMS capabilities, there is a likelihood adversaries can achieve parity or even dominance of the spectrum in a matter of years.

“Communications and data and a myriad of essential military and economic functions—including precision navigation and timing and banking— are maintained in and through the EMS. The EMS may be described as a “Super Domain.” While the only internationally recognized domains are land, sea, air, space, and cyber, electromagnetic activities operate in and through all domains regulating the most critical functions therein. EMS is arguably the one domain that can rule them all.

“Failure to maintain technological dominance or freedom of operations in EMS can diminish or stop a modern nation’s broad civil and defense activities…

“While EMS vulnerabilities and threats have matured, national and even international capabilities to deny or mitigate such threats and vulnerabilities remain highly dispersed or incomplete.

“In some areas, there is a complete absence of strategy. In other cases, traditional deterrence efforts afford little to no utility in preventing adverse enemy action in the EMS. In many respects, this is not dissimilar from deterrence activities in cyber space—which are almost completely ineffective…

“Based on the totality of available data, the task force contends the second- and third-order effects of an EMS [electromagnetic spectrum] attack may be a threat to the United States, democracy, and the world order…The prospect of oppressive control of communications and information represents not only a capability to dictate how mankind may access information, but in an world increasingly run through the internet of things (IoT), it may disparagingly allocate or deprive individuals, groups, or societies of elements required for their survival, such as food, water, and sanitation. Therefore, the ways and means relating to EMS activities must be safeguarded.”

“China Building Long-Range Cruise Missile Launched From Ship Container” by Bill Gertz, Washington Free Beacon, 27Mar19

Surprise
“China is building a long-range cruise missile fired from a shipping container that could turn Beijing's large fleet of freighters into potential warships and commercial ports into future missile bases. The new missile is in flight testing and is a land-attack variant of an advanced anti-ship missile called the YJ-18C, according to American defense officials.”

“The missile will be deployed in launchers that appear from the outside to be standard international shipping containers used throughout the world for moving millions of tons of goods, often on the deck of large freighters….”

“The YJ-18C container missile also is being developed as China is engaged in a major global program called the Belt and Road Initiative that will provide Chinese military forces and warships with expanded access through a network of commercial ports around the world.”

“China operates or is building deep water ports in several strategic locations, including Bahamas, Panama, and Jamaica that could be used covertly to deploy ships carrying the YJ-18C.”

“Other locations include Pakistan's Gwadar port near the Arabian Sea and in Djibouti on the Horn of Africa close to the strategic choke point of the Bab el Mandeb at the southern end of the Red Sea…”

“Retired Navy Capt. Jim Fanell, a former Pacific Fleet intelligence chief, said a containerized YJ-18 anti-ship cruise missile would add a significant threat to the Navy given the volume of Chinese container ships that enter U.S. ports on the west and east coast, well within range of the vast majority of the U.S. fleet.”

“The Strongmen Strike Back” by Robert Kagan in the Washington Post, 14Mar19

Surprise
Kagan argues that, “Authoritarianism has reemerged as the greatest threat to the liberal democratic world — a profound ideological, as well as strategic, challenge. And we have no idea how to confront it…

“In this new battle of ideas, we are disarmed, perhaps above all because we have forgotten what is at stake. We don’t remember what life was like before the liberal idea…”

Kagan provides an excellent history of the long contest between the liberalism of the Enlightenment, and various forms of authoritarianism. Consistent with a theme in the articles noted abode, Kagan observes that, “Humans do not yearn only for freedom. They also seek security — not only physical security against attack, but the security that comes from family, tribe, race and culture. “

“Liberalism, [with its focus on individual freedom] has no particular answer to these needs… Liberalism’s main purpose was never to provide the kind of security that people find in tribe or family. It has been concerned with the security of the individual and with treating all individuals equally regardless of where they come from, what gods they worship, or who their parents are. And, to some extent, this has come at the expense of the traditional bonds that family, ethnicity and religion provide…”

When economies cease to provide broadly distributed improvements in living standards, and uncertainty increases, it is deeply ingrained in human nature to seek security by hewing more closely to one’s own tribe, whether defined by nationalism, group identify, or in some other manner, usually by a strong leader.

As Kagan notes, “authoritarians are succeeding, but not only because their states are more powerful today than they have been in more than seven decades. Their anti-liberal critique is also powerful. It is not just an excuse for strongman rule, though it is that, too. It is a full-blown indictment of what many regard as the failings of liberal society, and it has broad appeal.”

He also observes that, “the United States has been experiencing its own anti-liberal backlash. Indeed, these days the anti-liberal critique is so pervasive, at both ends of the political spectrum and in the most energetic segments of both political parties, that there is scarcely an old-style American liberal to be found.”

Another new article highlights the dangers posed by the combination of advanced technology and authoritarian governments.

In “The Autocrat’s New Toolkit”, Fontaine and Frederick claim that,
“a sophisticated new set of technological tools – some of them now maturing, others poised to emerge over the coming decade – seem destined to wind up in the hands of autocrats around the world. They will allow strongmen and police states to bolster their internal grip, undermine basic rights, and spread illiberal practices beyond their own borders. China and Russia are poised to take advantage of this new suite of products and capabilities, but they will soon be available for export, so that even second-tier tyrannies will be able to better monitor and mislead their populations.”

“The Asian Century is Set to Begin”, Financial Times, 26Mar19

“Economists, political scientists and emerging market pundits have been talking for decades about the coming of the Asian Age, which will supposedly mark an inflection point when the continent becomes the new centre of the world.”

“Asia is already home to more than half the world’s population. Of the world’s 30 largest cities, 21 are in Asia, according to UN data. By next year, Asia will also become home to half of the world’s middle class, defined as those living in households with daily per capita incomes of between $10 and $100 at 2005 purchasing power parity (PPP)…”

“Leaders in the region are beginning to talk more openly about the shift. “Now the continent finds itself at the centre of global economic activity,” Narendra Modi, prime minister of India, told the last annual meeting of the Asian Infrastructure Investment Bank. “It has become the main growth engine of the world. In fact, we are now living through what many have termed the Asian Century,” he said.”


“So when will the Asian Age actually begin? The Financial Times tallied the data, and found that Asian economies, as defined by the UN trade and development body Unctad, will be larger than the rest of the world combined in 2020, for the first time since the 19th century. The Asian century, the numbers show, begins next year…To put this in perspective, Asia accounted for just over a third of world output in 2000…Asia’s recent surge, which began with Japan’s postwar economic surge, represents a return to a historical norm. Asia dominated the world economy for most of human history until the 19th century.”

“China Military Power 2019”, by the US Defense Intelligence Agency

The subtitle of this report says it all: “Modernizing a Force to Fight and Win”. The report contains a rich amount of unclassified detail, covering threat perceptions, national security strategy, and military doctrine, capabilities, and strategy, all of which help readers to better understand and assess the potential threat China could pose in a range of future scenarios.

In the US, The Committee on the Present Danger has been reformed, with a focus on China. This is a significant step in institutionalizing a much more competitive and conflict laden relationship between the United States and the PRC.

Surprise
The Committee’s predecessor played a critical role during the Cold War with the Soviet Union. It’s press release said the “the independent, nonpartisan group will seek to educate and inform the American public and government policymakers regarding the threat from China ruled by the Communist Party of China.”

Its first act was to issue a warning about the expected trade deal the Trump administration is negotiating with China: “"The trade deal is expected to address its Communist Party's longstanding practice of stealing American intellectual property—the lifeblood of our information-based economy and a key component of our national security. It remains to be seen whether any new commitments from the Chinese to end this practice will be honored since past ones have not."

Three articles and reports provide further indicators of China’s mounting economic problems – some of which could also have negative implications for the United States

In “A Forensic Examination of China’s National Accounts”, Chen et al from Brookings observe that, “China’s national accounts are based on data collected by local governments. However, since local governments are rewarded for meeting growth and investment targets, they have an incentive to skew local statistics.” As a result, they conclude that growth in Chinese GDP between 2008 and 2016 was overestimated by 12%.

The Economist notes a critical change in China’s economy (“China May Soon Run Its First Current Account Deficit in Decades”) and the Financial Times notes one of its possible consequences (“Chinese Appetite for US Assets Imperiled at Worst Possible Time”).

A nation’s current account balance reflects the difference between its aggregate domestic savings and investment. In the case of China, its rapidly aging population is saving less, and in a growing number of cases drawing down accumulated funds. This has pushed domestic savings below investment, leading to the nation’s first current account deficit since 1993.

This will potentially create at least two problems. Nations running current account deficits must import savings from abroad. However, given deteriorating relations with the west, as well as an uncertain legal environment for foreign investors, this is likely to prove challenging, and may act to constrain China’s behavior in ways we do not yet fully understand.

On the other hand, the United States is forecast to run very substantial government deficits in the coming years, and China, when it ran a current account surplus, has been a major purchaser of those bonds (as well as private sector debt) as its foreign exchange reserves increased. With China now poised to begin drawing down some of its foreign exchange reserves to cover its current account deficit, challenges will increase for borrowers around the world.

Two new reports analyze the tactical and strategic aspects of Western conflict with Russia.

Surprise
In “Deterring Russia in the Gray Zone”, McCarthy et al from the US Army War College argue that the United States (and by extension its allies) lack a coherent strategy for deterring Russia in what have become known as “gray zone” conflicts.

As the authors note, the gray zone includes “those areas of state competition where antagonistic actions take place; however, those actions fall short of the red lines that would normally result in armed conflict between nations. The lines between war and peace in the gray zone are blurred, and competition occurs across all instruments of national power. By leveraging a creative strategy and hybrid tactics, Russia attempts to achieve its strategic objectives without compelling the United States to respond using military force…”

“Examples of gray zone tactics include cyberattacks, information operations and propaganda, deception, sabotage, proxy war, assassinations, espionage, economic coercion, violations of international law, and terrorism.”

At the strategic level, in “Russian Challenges from Now Into the Next Generation: A Geostrategic Primer”, Zwack and Pierre from the Institute for National Strategic Studies (part of the US National Defense University) note that “Russia remains driven by a worldview based on existential threats—real, perceived, and contrived… However, time is not on Russia’s side, as it has entered into a debilitating status quo that includes unnecessary confrontation with the West, multiple unresolved military commitments, a sanctions- strained and only partially diversified economy, looming domestic tensions, and a rising China directly along its periphery.”

The authors conclude that, “rebuilding atrophied conduits between key American and Russian political and military leadership is imperative in order to calm today’s distrustful and increasingly mean-spirited relations, to seek and positively act upon converging interests, and to avert potential incidents or accidents that could potentially lead to dangerous brinksmanship… Yet in recent months, the relationship has only continued to weaken on multiple fronts too numerous to summarize.”

“The Party Congress Test: A Minimum Standard For Analyzing Beijing’s Intentions”, by Peter Mattis

SURPRISE
The Chinese Communist Party Congress is held every five years. The 19th, and most recent, was in 2017. Mattis emphasizes the important information contained in Party Congress work reports, and how seldom these important indicators are incorporated into forecasts of China’s future actions.

Mattis’ analyzes the most recent work report. He notes that, “One of the benefits of working one’s way through a document like the 19th Party Congress Work Report is that the reader sees a clear nesting of ideas. At the top, national rejuvenation is identified as the overriding objective. The features of national rejuvenation are identified: (1) national reunification; (2) securing China’s international position and leadership in global affairs; and (3) “build[ing] China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful. Each of those words attached to Chinese modernity, as the party defines it, have specific meanings within the party context that may not resemble how we in a liberal democratic society might understand them.”

For example, “’the great rejuvenation of the Chinese nation’ or ‘the Chinese dream of national rejuvenation’— the shorthand for China’s rise to great power capability and status — operates on two levels: domestic and global. There is no intermediate regional space…the report also notes national rejuvenation requires ‘toppling the three mountains of imperialism, feudalism, and bureaucratic-capitalism that were oppressing the Chinese people.’ Contemporary threats of imperialism and bureaucratic-capitalism come from beyond China’s borders…Simply put, the party congress work report does not provide any evidence for regionally constrained ambitions. To those who reject this analysis on the basis that Chinese capabilities and reach fall short of their ambitious aims, Xi Jinping said ‘we should not stop pursuing our ideals because they seem out of our reach.’ China’s capabilities today simply are not a reliable indicator of its intentions for tomorrow.”

“Domestic Repression And International Aggression? Why Xi Is Uninterested In Diversionary Conflict” by George Yin from Brookings

SURPRISE
Rising internal opposition to Xi Jinping is an underreported story in the west. This new article provides an excellent overview. It’s key conclusion: “Forces that oppose Xi may be dormant but their powers remain intact, and criticisms of Xi’s administration have been multiplying since the 19th Party Congress.”

The author also notes that, “the theory of diversionary wars posits that leaders often have the incentive to pursue aggressive foreign policies in order to divert the domestic audience’s attention from domestic troubles. Through international conflict, leaders can either foster national solidarity or demonstrate their competence.” He then asks if Xi could “seek to consolidate power by adopting an assertive foreign policy in his second term?”

In his answer to this question, Yin notes that, “crucially, diversionary war theory rests on a number of assumptions, two of which do not hold for Xi today…First, that leaders prefer foreign adventure over addressing domestic troubles…[and] Second, that key domestic players want conflict…A diversionary conflict is likely to further galvanize Xi’s opposition.”

That said, Yin also cautions that, “Taiwan’s pursuit of de jure independence is probably the only issue that could unite the rival CCP factions under Xi for conflict.”

For most of January, there were many stories speculating that the US and China might be able to reach a face saving trade deal. But at the end of the month, the US announced an expanded series of criminal charges against Huawei Communications, in addition to the charges against the company’s CFO that led to her arrest at Vancouver airport, and pending extradition to the US.

In its negotiations with China, the US is demanding structural reforms – e.g., removal of Chinese regulations forcing foreign investors to disclose their technology – that have been an important part of their economic model. Eliminating the Chinese law the compels its technology companies to cooperate with China’s military and intelligence services would be harder still, and could potentially cause sufficient embarrassment to Xi to trigger attempts at removing him from power (and perhaps subsequent infighting between different Chinese Communist Party factions at a time when economic conditions are worsening at an accelerating pace).

These developments raise the probability that rather than a relaxation of the growing US/China conflict, it may instead grow more intense. One important potential consequences of this was recently highlighted by the Financial Times’ Gillian Tett, who wrote: “Do not underestimate the risk of an iron curtain in tech” which could substantially disrupt those supply chains in which China has played an important role. Should this happen, the negative impact on economic growth would likely be substantial.

Two new papers provide more insight into the threats posed by cyber technologies, and the rate at which we are adapting to them

SURPRISE
“CrowdStrike 2019 Global Threat Report Adversary Tradecraft and the Importance of Speed”:

“It is quite remarkable to see that Russia-based threat actors are almost 8 times as fast [in reaching a system penetration threshold] as their speediest competitor — North Korea-based adversaries, who themselves are almost twice as fast as intrusion groups from China.”

In “Civil Defence Gaps Under Cyber Blitzkrieg”, Greg Austin, Professor of Cyber Security at the University of New South Wales, notes that, “cyber storm thinking [attacks on critical infrastructure] is now being replaced by a concept he calls "cyber blitzkrieg". It's effectively a more nuanced version of the somewhat tired "cyber Pearl Harbor" concept.

"We're really talking the plans by states to attack each other with multiwave, multi-vector destructive cyber attacks across the entire civil and military infrastructure of the enemy…in which suddenness (including pre-emption) may be an essential characteristic”…

“The aim of such a cyber blitzkrieg will be to prevent the billion dollar weapons platforms of an enemy from reaching the front line of combat or (if they get there) to malfunction, to disrupt enemy command and control, and to disrupt civil sector support (including political support) to the enemy’s armed forces.”

“Victory Over and Across Domains”, by Jennifer McArdle, from the Center for Strategic and Budgetary Assessments

“India Will Rise, Regardless of Its Politics”, by Martin Wolf, FT, 5Feb19

“Putin Needs More than Spending to Lift Ratings”, FT 22Feb19

“An independent pollster, Levada, found 45 per cent of citizens think the country is moving “in the wrong direction”, outstripping the 42 per cent happy with the country’s path, for the first time since 2006.

The economy is largely to blame. Russians’ real incomes have fallen every year for five years — the longest decline since the chaotic 1990s — and are now 13 per cent below their 2013 level. Since Mr Putin returned as president in 2012 after four years as prime minister, annual economic growth has averaged less than 1 per cent….

Meanwhile, services and infrastructure are creaking and 13 per cent of Russians, or 19m people, are below an official poverty line of income of Rbs11,280 ($172) per month.

The ruling circle is in a bind. Genuine economic reform, strengthening property rights and rule of law, would threaten its hold on power. Instead, the Kremlin might be tempted to distract attention with another “small war”… But few foreign policy issues rouse strong feelings among Russians beyond Ukraine and Crimea, which an overwhelming majority believed was rightly Russian…

Polling suggests, moreover, that Russians are starting to see the official obsession with restoring national greatness in the face of supposed threats from the west for what it is — a diversion from domestic malaise”.

“Power Transitions and Internal Challenges in East Asian History”, by David Kang

SURPRISE
“Theories promoted by international relations scholars about the Western liberal order, state behavior, and the inevitability of certain types of conflict are less widely applicable around the world than often realized. Indeed, almost all ostensibly universal and deductive theories in the field of international relations are, in reality, inductively derived from European history…

“Structural analyses based primarily on Western examples are profoundly misleading, particularly because they crowd out a larger universe of cases that show what is possible in international politics. Idealized representations about the West are so ubiquitous that it is almost invariably invoked as the obvious reference point for the East…

Perhaps the most important reason it is difficult to transpose power transition theory to East Asian history is that the forms of political regime, survival, and transition in East Asia have all differed from what has been experienced in Europe. The four most long=enduring major powers in the region — China, Korea, Japan, and Vietnam — all had political regimes that have been characterized as “dynasties,” and which had remarkable longevity.

Political regimes rose and fell in East Asia, but not due to power transitions. Most strikingly, only three out of 18 dynastic transitions that occurred prior to the 19th century came as a result of external war. All the other transitions were the result of internal rebellions, coups, or civil wars…This brief look at the rise and fall of East Asian political dynasties reveals that most of them crumbled from within — not due to outside forces as Western historical data would suggest.”

A trio of columns this month provided further indicators of rising tensions in Europe

In France, “A climate of hate is emerging in France. The targets are varied, apparently unconnected and shifting: Jews, journalists, the rich, policemen, members of parliament, the president…The gilets jaunes (yellow jackets) protest movemenet has radicalised as it has shrunk…When the gilets jaunes movement emerged last November, it was broadly a social protest and fiscal revolt. But the infiltration of ultra-left and extreme-right agitators, and the determination of a radical core to seek the overthrow of Mr. Macron, has hardened the movement’s edge. (“Anti-Semitism, racism and anti-elitism are spreading in France”, The Economist 21Feb19)

In the Financial Times, Wolfgang Munchau notes that Germany’s “biggest problem is falling behind in the technological race. Excessive fiscal consolidation has been the main cause of under-investment in roads, telecoms networks, and other new technologies.

Germany is also under-investing in its defence sector. Ursula von der Leyen, defence minister, recently proposed a plan to increase the defence budget from the current 1.3 per cent to 1.5 per cent of gross domestic product by 2023. But Olaf Scholz, finance minister, objects...

“Perhaps the Europeans have been so self-absorbed over the past 10 years that they did not see this coming. The now emerging protectionism, the sudden realisation of a need to protect against Chinese takeovers, are signs that complacency is about to turn into panic.” (“China Gains the Upper Hand Over Germany”)

In Commentary magazine, Josef Joffe’s “Europe Does Not Exist” paints a scathing picture of a continent in accelerating decline.

“By the numbers, the European Union is a giant. Its economy exceeds China’s by $7 trillion and is just a bit smaller than America’s $20 trillion. Russia? Its GDP of $ 1.7 trillion is petty cash. On paper, the EU nations marshal as many soldiers as does the United States, and half a million more than Russia. Their combined population dwarfs both. But if one measures by its weight in world affairs, Europe is a runt…

“The halcyon days are over. Europe confronts new threats aplenty. Indeed, at no time since the birth of European integration in 1952 has the Old Continent faced so many perils all at once, inside and out… Europe’s tragedy is the gulf between fabulous wealth and feeble will, between its glorious past and a future now dimmed by the return of power politics.”

Two recent articles, both well worth a read, are excellent indicators of the state of the external and internal challenges facing the West

SUPRRISE
In “The New Containment” (Foreign Affairs, 12Feb19), Michael Mandelbaum notes that, “Should Vladimir Putin’s [5] Russia succeed in reasserting control over parts of the former Soviet Union, Xi Jinping’s China gain control over maritime commerce in the western Pacific, or Ayatollah Ali Khamenei’s Iran dominate the oil reserves of the Persian Gulf, the United States, its allies, and the global order they uphold would suffer a major blow.”, Hence, “the new world requires a new American foreign policy.” The one he proposes is a coalition-based strategy to contain Russia, China, and Iran, but notes that the greatest challenge to the success of this strategy may come from within the United States itself.

In “The Sources of the West’s Decline” Andrew Michta delves into this critical issue, claiming that, “The real trouble for the West, is what has been happening within our own societies.

Internal changes have made us more vulnerable than any economic calculus would indicate.

For the first time since the end of World War II, the so-called declinists may be onto something fundamental when they argue that the West’s heyday may be a thing of the past.

The problem is not the economy or technology, but the centrifugal forces rising within the Transatlantic alliance: in short, the progressive civilizational fracturing and decomposition, fed by the growing disconnect between political and cultural elites and the publics across the two continents.

Alongside this is an even more insidious trend of fragmenting national cultures and the concomitant debasement of the idea of citizenship, the latter increasingly defined almost exclusively in terms of rights, with reciprocal obligations all but relegated to the proverbial dustbin of history. The growing disunity of the West, exacerbated by tensions caused by the rejection by some in the Transatlantic community of a historical and cultural narrative that once inspired pride and admiration, both across state lines and internally, is now arguably the key national security challenge confronting us…

The greatest challenges to redefining and strengthening the security community of the West will remain internal. In the final analysis, institutions are only as resilient as the people who make them work (or not). The deepening alienation of electorates from policy elites, the increasingly “de-nationalized” corporate practices of the business world, government paralyzed by political polarization, and media that function now more as propaganda channels than as sources of information, all reflect a deeper cultural malaise across the West.

At what point does a democracy’s ability to respond to new challenges become overwhelmed?

“After the Responsible Stakeholder, What? Debating America’s China Strategy” by Brands and Cooper

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Dealing with an increasingly confident, assertive China is arguably the most difficult geopolitical challenge America has faced in a generation … The authors ask, “Now that the responsible stakeholder approach to China is essentially defunct, how should America respond?”

They note that, “there are four basic options for resetting America’s China policy: accommodation, collective balancing, comprehensive pressure, and regime change. These options are ideal-types: They illustrate the range of possible approaches and capture distinct analytical logics about the nature of the China problem and the appropriate response. At one extreme, Washington could seek an accommodation with Beijing in hopes of striking a grand bargain and establishing a cooperative long-term relationship. At the other extreme, the United States could seek regime change or even precipitate a military showdown to prevent China from growing more powerful. Both of these options assume that America must take urgent action to “solve” the China challenge. Yet, neither of these approaches is realistic, and, in fact, each is downright dangerous.

The real debate involves the two middle options: collective balancing and comprehensive pressure. Collective balancing would rely on U.S. cooperation with allies and partners to prevent China from constructing a regional sphere of influence or displacing the United States as the world’s leading power.

Comprehensive pressure would go further, attempting not simply to counter-balance Chinese influence overseas but to actively erode China’s underlying political, economic, and military power. These options, in turn, rest on different fundamental assumptions. Collective balancing accepts that Chinese power is likely to expand but assumes that it is possible to prevent Beijing from using its power in destabilizing ways.

Comprehensive pressure assumes that China’s power must be limited and even diminished, despite the risk that doing so will sharply escalate tensions. Probing the logic of these strategies, and assessing their various strengths and weaknesses, is critical to going beyond “competition” and adopting a new approach. The alternative — practicing tactics without strategy — is no way to confront the daunting geopolitical challenge that China presents.”

If U.S. leaders accept that China poses a formidable challenge without a decisive solution, they are left with two primary options: collective balancing and comprehensive pressure. Where these two strategies differ is in their approach to the changing balance of power. Comprehensive pressure seeks to reverse the ongoing power shift. Collective balancing accepts that shift as a fact of life — and does not attempt to significantly disrupt the economic relationship with China — but maintains that Beijing can be deterred by a coalition of like-minded states…

The authors conclusion: For these reasons, we favor a hybrid approach fusing elements of collective balancing and comprehensive pressure. This strategy, which we call collective pressure, would seek to build a coalition of allies and partners strong enough to deter or simply hold the line against Chinese revisionism until such a time as the Chinese Communist Party modifies its objectives or loses its grip on power. If China continues to challenge critical elements of that order, and if Chinese power continues to grow in dangerous ways, the United States would gradually intensify the pressure. It would lead the coalition in efforts to reduce China’s geopolitical, economic, and ideological influence; weaken its power potential; and exacerbate the strains under which Beijing operates.

There is no shortage of papers and columns published each week on developments in China. This month, we found two of these to be indicators worth noting.

In “China’s High Savings: Drivers, Prospects, and Policies”, Zhang et al from the IMF, the authors address a critical issue at this juncture in Chinese economic history: Its willingness and ability to reduce high savings to increase consumption as a share of GDP, and reduce the dependence of growth on increasingly inefficient investment.

The IMF analysis concludes that, “Boosting household consumption still essentially depends on a more even distribution of growth benefits between households and the state, including greater income-earning opportunities for the private sector. Policy efforts to lower savings should focus on strengthening the social safety net and reducing income inequality.” The authors also note that raising private sector incomes will require an increase in entrepreneurial activity, which in turn depends on increasing private companies’ access to formal financing institutions like bank debt.

The issue that the IMF dances around is that today the informal/shadow banking system that is the main source of finance for many private sector firms – and an important source of investment opportunities for household savings – is in increasingly precarious shape.

The second interesting interest article was the Financial Times’ Yuan Yang’s excellent in-depth analysis of “China’s Crackdown on Young Marxists” (FT, 13Feb19). We have previously noted increasing Chinese student protests over the conditions faced by factory workers. The FT provides valuable background on this movement, and its linkages to rising inequality in China.

Yang notes that, “Despite being a socialist country by name, China has no meaningful social safety net and its labour laws are poorly enforced for the worst-off workers. As a result, family health problems, a bad boss or an economic downturn can be the blow that knocks someone down to a position from which they can’t climb up.”

As Rebecca Karl, a professor of Chinese History at New York University observes, “China is now sufficiently capitalist to make Marxist categories perfectly suited to social analysis.” She also notes that the speed with which the student/worker alliance has grown “has raised a red flag” about the potential danger it poses to the current CCP leadership.

“Movement and Maneuver: Culture and the Competition for Influence Among the U.S. Military Services”, by Zimmerman et al from RAND

This new report provides an outstanding guide to the different cultures the US military services (including the Marine Corps and Special Operational Command), including what they perceive as their primary interests and the different ways they seek to advance them.

As such, this provides a critical addition to mental models of how national security decisions emerge from the complex US defense system.

“The Party Congress Test: A Minimum Standard For Analyzing Beijing’s Intentions”, by Peter Mattis

SURPRISE
The Chinese Communist Party Congress is held every five years. The 19th, and most recent, was in 2017. Mattis emphasizes the important information contained in Party Congress work reports, and how seldom these important indicators are incorporated into forecasts of China’s future actions.

Mattis’ analyzes the most recent work report. He notes that, “One of the benefits of working one’s way through a document like the 19th Party Congress Work Report is that the reader sees a clear nesting of ideas. At the top, national rejuvenation is identified as the overriding objective. The features of national rejuvenation are identified: (1) national reunification; (2) securing China’s international position and leadership in global affairs; and (3) “build[ing] China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful. Each of those words attached to Chinese modernity, as the party defines it, have specific meanings within the party context that may not resemble how we in a liberal democratic society might understand them.”

For example, “’the great rejuvenation of the Chinese nation’ or ‘the Chinese dream of national rejuvenation’— the shorthand for China’s rise to great power capability and status — operates on two levels: domestic and global. There is no intermediate regional space…the report also notes national rejuvenation requires ‘toppling the three mountains of imperialism, feudalism, and bureaucratic-capitalism that were oppressing the Chinese people.’ Contemporary threats of imperialism and bureaucratic-capitalism come from beyond China’s borders…Simply put, the party congress work report does not provide any evidence for regionally constrained ambitions. To those who reject this analysis on the basis that Chinese capabilities and reach fall short of their ambitious aims, Xi Jinping said ‘we should not stop pursuing our ideals because they seem out of our reach.’ China’s capabilities today simply are not a reliable indicator of its intentions for tomorrow.”

“Domestic Repression And International Aggression? Why Xi Is Uninterested In Diversionary Conflict” by George Yin from Brookings

SURPRISE
Rising internal opposition to Xi Jinping is an underreported story in the west. This new article provides an excellent overview. It’s key conclusion: “Forces that oppose Xi may be dormant but their powers remain intact, and criticisms of Xi’s administration have been multiplying since the 19th Party Congress.”

The author also notes that, “the theory of diversionary wars posits that leaders often have the incentive to pursue aggressive foreign policies in order to divert the domestic audience’s attention from domestic troubles. Through international conflict, leaders can either foster national solidarity or demonstrate their competence.” He then asks if Xi could “seek to consolidate power by adopting an assertive foreign policy in his second term?”

In his answer to this question, Yin notes that, “crucially, diversionary war theory rests on a number of assumptions, two of which do not hold for Xi today…First, that leaders prefer foreign adventure over addressing domestic troubles…[and] Second, that key domestic players want conflict…A diversionary conflict is likely to further galvanize Xi’s opposition.”

That said, Yin also cautions that, “Taiwan’s pursuit of de jure independence is probably the only issue that could unite the rival CCP factions under Xi for conflict.”

For most of January, there were many stories speculating that the US and China might be able to reach a face saving trade deal. But at the end of the month, the US announced an expanded series of criminal charges against Huawei Communications, in addition to the charges against the company’s CFO that led to her arrest at Vancouver airport, and pending extradition to the US.

In its negotiations with China, the US is demanding structural reforms – e.g., removal of Chinese regulations forcing foreign investors to disclose their technology – that have been an important part of their economic model. Eliminating the Chinese law the compels its technology companies to cooperate with China’s military and intelligence services would be harder still, and could potentially cause sufficient embarrassment to Xi to trigger attempts at removing him from power (and perhaps subsequent infighting between different Chinese Communist Party factions at a time when economic conditions are worsening at an accelerating pace).

These developments raise the probability that rather than a relaxation of the growing US/China conflict, it may instead grow more intense. One important potential consequences of this was recently highlighted by the Financial Times’ Gillian Tett, who wrote: “Do not underestimate the risk of an iron curtain in tech” which could substantially disrupt those supply chains in which China has played an important role. Should this happen, the negative impact on economic growth would likely be substantial.

The newly released US National Intelligence Strategy contains a very sobering warning about cyber threats. So too did the US Intelligence Community’s annual Worldwide Threat Assessment report to Congress.

SURPRISE
The National Intelligence Strategy states that, “Despite growing awareness of cyber threats and improving cyber defenses, nearly all information, communication networks, and systems will be at risk for years to come. Our adversaries are becoming more adept at using cyberspace capabilities to threaten our interests and advance their own strategic and economic objectives. Cyber threats will pose an increasing risk to public health, safety, and prosperity as information technologies are integrated into critical infrastructure, vital national networks, and consumer devices.”

The Worldwide Threat Assessment contained this: “Our adversaries and strategic competitors will increasingly use cyber capabilities—including cyber espionage, attack, and influence—to seek political, economic, and military advantage over the United States and its allies and partners.

China, Russia, Iran, and North Korea increasingly use cyber operations to threaten both minds and machines in an expanding number of ways—to steal information, to influence our citizens, or to disrupt critical infrastructure…”

“At present, China and Russia pose the greatest espionage and cyber attack threats, but we anticipate that all our adversaries and strategic competitors will increasingly build and integrate cyber espionage, attack, and influence capabilities into their efforts to influence US policies and advance their own national security interests.”

In the last decade, our adversaries and strategic competitors have developed and experimented with a growing capability to shape and alter the information and systems on which we rely. For years, they have conducted cyber espionage to collect intelligence and targeted our critical infrastructure to hold it at risk. They are now becoming more adept at using social media to alter how we think, behave, and decide. As we connect and integrate billions of new digital devices into our lives and business processes, adversaries and strategic competitors almost certainly will gain greater insight into and access to our protected information…”

“For 2019 and beyond, the innovations that drive military and economic competitiveness will increasingly originate outside the United States, as the overall US lead in science and technology (S&T) shrinks; the capability gap between commercial and military technologies evaporates; and foreign actors increase their efforts to acquire top talent, companies, data, and intellectual property via licit and illicit means.”

“Many foreign leaders, including Chinese President Xi Jinping and Russian President Vladimir Putin, view strong indigenous science and technology capabilities as key to their country’s sovereignty, economic outlook, and national power.”

New publications have addressed the implications of increased cooperation between Russia and China, and the threat this poses to the west.

The title of a new RAND analysis makes an important point: “Russia is a Rogue, Not a Peer; China is a Peer, Not a Rogue.” As the report notes, “Russia and China represent quite distinct challenges. Russia is not a peer or near-peer competitor but rather a well-armed rogue state that seeks to subvert an international order it can never hope to dominate. In contrast, China is a peer competitor that wants to shape an international order that it can aspire to dominate.”

Another new RAND report, “Russia’s Hostile Measures in Europe” goes into great detail about the nature and use of the “measures short of war” that Russia employs to pursue its goals.

Perhaps most interesting of all this month have been reports related to Putin’s falling domestic support.

SURPRISE
In “Don’t Shoot the Messenger” (published in The American Interest), Karina Orloval writes that, “The Kremlin’s trusted polling firm WCIOM, which also happens to be state-owned, has been releasing the results of its surveys faster and faster, and the news isn’t good for Russia’s President Vladimir Putin. The latest poll, measuring Russians’ “trust” in politicians, shows Putin registering only 32.8 percent support—his lowest rating in more than 13 years. This follows a poll released one week ago that had Putin at 33.4 percent. Both of those are a big fall from May of last year, when almost 47 percent of Russians trusted him…[Also], the respected independent pollster Levada reported that 53 percent of the public wants the government to resign, 20 points up from a month ago. Price increases and income drops were cited as prime causes for the discontent.”

There has been continuing chaos in the UK this month, as Theresa May’s government struggled to find an alternative to the draft UK/EU separation agreement that was rejected by Parliament

To oversimplify, the essential stumbling block is where to place the new border between the UK and EU. The problem is that the island of Ireland is divided between the Republic of Ireland (a member of the EU), and Northern Ireland (which is part of the UK). Northern Ireland accounts for about 30% of the population of the island, and 3% of the population of the UK.

Essentially there are three border options: (1) Across the Republic/Northern Ireland border. This border was removed as part of the 1998 Good Friday Agreement that ended the violent period known as “the Troubles”; (2) Across the Irish Sea that separates the island of Ireland from the island containing England, Scotland, and Wales. The Northern Ireland Democratic Union Party objects to having part of the UK treated differently – i.e., remaining under European Union regulations, and since the last UK election, Theresa May’s government’s survival depends on the DUP’s support in Parliament; or (3) Across the English Channel, to which the Republic of Ireland objects because it would be forced to accept UK regulations.

The current UK/EU Separation Agreement (that was rejected by Parliament) contained a so-called “Irish Backstop” to ensure that a physical border would not be rebuilt between the Republic of Ireland and the North. The backstop would force the UK to remain in a customs union with the EU if no subsequent trade agreement between the two was reached by March 2021 – two years after the UK is due to leave the EU. As long as the customs union was in effect, the UK would be prohibited from negotiating separate trade agreements with other nations.

EU negotiators have thus far been unwilling to give any ground on this arrangement, nor has the UK proposed a detailed alternative. The probability has thus increased that in March, the UK will leave the EU without a transitional customs union agreement, and revert to trading with the EU on World Trade Organization terms.
Even if that happens, the Irish border issue may not go away. It has been suggested that the UK could simply state it was not going to establish new customs checks on the Northern Ireland side of the border, and thus continue to comply with the Good Friday Agreement. This would put the EU in the awkward position of having to ask the Republic to build ones on its side. Time will tell.

Overall, however, Brexit has already significantly increased uncertainty, and the likelihood of a negative economic shock for both the UK and the EU at a time when their growth rates are already slowing.

The title of a new column by the FT’s Ed Luce raises a critical issue as we move into a period of heightened US-China competition: “America’s Strange Blind Spot Towards India”

SURPRISE
As Luce writes, “Some time in the coming years, India will become the largest country in the world. It’s the only possible counterweight to neighbouring China, which is America’s only serious rival. It’s the world’s largest democracy. And it's no longer mired in hopeless poverty…India’s economic growth is likely to be higher than China’s for the next 25 years.”

“Macron's Ghosts Return To Haunt Him” – Spiegel’ commentary on the Giletes Jaunes demonstrations in France

“For Macron, for his credibility and authority, which he has orchestrated publicly like few others before him, it is too much. If he ends up having to backtrack on his policies, it will represent a U-turn and a watershed moment for his presidency -- a point from which he will struggle to recover Rather than playing the role of a Jupiter, he would be an Icarus; a man who wished to fly high, but fell. He would have to govern with clipped wings… Almost everything he wanted to accomplish for his country is at stake. Up to this point, he and his government had abided by the principle that no matter what happens, they would stay the course. His aim was nothing less than the "transformation" of France. Everything was to become new, different. But now it appears things could turn out very differently… Many are now talking about the forgotten France, about the rural areas, largely disconnected from public life, where people eke out a grim marginal existence… When Macron traveled through France during his election campaign, he often spoke of the "feeling of degradation" he witnessed in some places. He wanted to fight against it, he said. But perhaps he should have done more to heed his own advice. When people picture him, they don't exactly conjure up images of him visiting remote villages.

"The yellow vests' revolt is also one of the rural areas against Paris, led by French people who, contrary to what is often said about them, do not belong to the middle class. It is the little people, the 'class populaire,' or working class -- those to whom Macron promised social advancement and who voted for him instead of the Socialists in response and helped secure his win. These people feel degraded, even if that is more of a sentiment than reality… If you were to try to sum up the yellow vests, as varied as they may be, one would describe them as pessimists and people who trust nothing, especially not things that take a long time. And democracy takes time. These days, they only rely on themselves -- and, if necessary, on their own capacity for violence. They have also registered that this can be effective given the zig-zagging by a government that appears to be increasingly unstable. It might also be that people in France feel particularly neglected because inequalities seem even crueler in a country that constantly invokes the noble virtue of equality…

"Macron, of all people, is becoming the target of an anger that has been growing for years, and even decades. He is paying for others' mistakes, which is, on the one hand, unfair, but, on the other, understandable.”

“A Macron Failure Would Bode Ill for the EU’s Future”, by Wolfgang Muchau, Financial Times, 29Dec18

“The new year promises to be one of important decisions for the EU. The biggest of these will probably not be Brexit but the European parliamentary elections in May and the resulting decisions on the future direction of the EU. The polls will determine whether the balance of power will tilt towards EU reformers, assorted populists or a new group of Nordic decelerators of European integration.

This coalition is also known under the misnomer of the “ new Hanseatic League” and is led by Mark Rutte, prime minister of the Netherlands. The so-called populists stand no chance of taking control of the European Parliament, but they could end up shifting the balance of power in one direction or another…It is too early to conclude that we are staring at the abyss of yet another failed French presidency — he still has time to recover. But that would require a dramatic presidential reboot…

The more immediate issue is whether he can recover in time for the European elections. He might not, and such a failure would probably end any hopes of further European integration for a long time. Without him, there will be nobody else of weight in the European Council to push for it….

If Mr Macron were to fail, the EU would retreat in on itself and become at the mercy of outside forces, China among them. At no point will you hear a loud bang, but you might discern a faint echo of deflating soft power. That said, we Europeans still have a lot going for us. We are liberal and rich, have some of the world’s most beautiful cities, great art and great wine and are vastly over-represented in international institutions. But we are not investing in the future. We are falling behind in innovation and we are getting old. The 2019 elections are about whether the EU can stand on its own in a more hostile world.”

“Two Roads for the New French Right” by Mark Lilla, 20Dec18

SURPRISE

“Journalists have had trouble imagining that there might be a third force on the right that is not represented by either the establishment parties or the xenophobic populists… In countries as diverse as France, Poland, Hungary, Austria, Germany, and Italy, efforts are underway to develop a coherent ideology that would mobilize Europeans angry about immigration, economic dislocation, the European Union, and social liberalization, and then use that ideology to govern. Now is the time to start paying attention to the ideas of what seems to be an evolving rightwing Popular Front.”

“Divided Kingdom: How Brexit is Remaking the UK’s Constitutional Order” by Amanda Sloat, from Brookings

SURPRISE

While the media is filled with stories about the last minute game of three way Brexit chicken being played between UK Prime Minister Theresa May, the EU, and the British Parliament (current estimate: Parliamentary vote in favor of draft UK/EU separation treaty fails, after which many outcomes seem possible at this point), Sloat’s analysis is unique and takes a closer look at how the Brexit experience is affecting domestic politics in the UK, and where this could lead.

On 20Dec18, in a widely reported speech to a military conference, “Rear Admiral Lou Yuan has told an audience in Shenzhen that the ongoing disputes over the ownership of the East and South China Seas could be resolved by sinking two US super carriers.”

The Hoover Institution (and partners) released a report on China’s broad attempts to influence domestic American institutions and politics (“Chinese Influence & American Interests: Promoting Constructive Vigilance”). “To achieve its global ambitions it is exercising a new form of power—not the hard power of military force, but not the soft power of transparent persuasion either. Rather, this is "sharp power" that seeks to penetrate the institutions of democracies in ways that are often what a former Australian prime minister called "covert, coercive, or corrupting." We need to learn to recognize these forms of influence and strengthen our institutions to resist them.”

There were a variety of indicators related to concerns about the sharp slowing of China’s economy, including Apple’s earnings miss due to weakening sales in China, widening problems in China’s non-bank financial system (and losses being incurred by the nation’s middle class), and increasing unemployment (e.g., “China Factory Jobs Dry Up as Trade Tensions Hit Manufacturing”, Financial Times 26Dec18). Trade tensions continued to increase, with the CFO of Huawei being arrested at US request (on charges of evading US sanctions on trade with Iran) during a transit stop at Vancouver airport (e.g., “Chinese Elites Reel From Shock of Huawei Executive’s Arrest”, Financial Times 12Dec18).

Finally, in the 17Dec18 Financial Times, Gideon Rachman questioned whether China’s leaders have fully grasped that “there has been a profound bipartisan shift in US thinking” about China, while on 14Dec18 Graham Allison wrote an article in National Affairs titled, “China and Russia: A Strategic Alliance in the Making.” Finally, in his 18Dec18 speech
on the 40th anniversary of Deng Xiaoping’s economic reforms, president Xi Jinping aimed squarely at many Chinese’ resentments over past humiliations when he stated that “No one is in a position to dictate to the Chinese people what should or should not be done.”

All of these are further indicators of worsening of China’s domestic economy and its growing conflict with the United States. While we may yet see some sort of face-saving truce in the trade war between the two nations (which will give US President Trump the public relations victory he seeks), it is very unlikely that this will reverse the current trajectory of Chinese-US relations.

“Trump Delivers a Victory to Iran” by Gerecht and Dubowitz

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“Trump’s decision to withdraw U.S. forces from Syria, concurrently with his intention to drastically reduce the number of American soldiers in Afghanistan and the likely soon-to-be-announced further drawdown of U.S. personnel in Iraq, has made mincemeat of the administration’s efforts to contain Iran. If you add up who wins locally by this decision (the clerical regime in Iran, Russian President Vladimir Putin, the Syrian dictator Bashar al-Assad, Lebanese Hezbollah, Iraqi Shiite radicals, and Turkish President Recep Tayyip Erdoğan) and who loses (Jordan, Israel, the Syrian and Iraqi Kurds and Sunni Arabs, everyone in Lebanon resisting Hezbollah, the vast majority of the Iraqi Shia, the Gulf States), it becomes clear that the interests of the United States have been routed.”

“Pattern Analysis of World Conflict Over the Past 600 Years”, by Martelloni et al (See also, “Trends and Fluctuations in the Severity of Interstate Wars” by Aaron Clauset, and “On the Statistical Properties and Tail Risk of Violent Conflict”, by Cirillo and Taleb)

Previously, Clauset has concluded that, “historical patterns of war seem to imply that the long peace may be substantially more fragile than proponents believe, despite efforts to identify the mechanisms that reduce the likelihood of interstate wars.” Cirillo and Taleb have also found that claims of a drop in the frequency of wars and severity of casualties are not supported, and that previous studies have very likely underestimated tail risks. As Reinhart and Rogoff concluded in their study of eight centuries of financial crises, “this time isn’t different.”

Martelloni’s study adds to this growing body of research. He and his co-authors find that, “he causes of human conflicts remain largely an unresolved subject, especially for the large conflicts that we call “wars.” Historians often tend to see wars arising from specific decisions of human actors, in turn the result of specific economic or political strains pitting nations or social groups against each other.

But another possible interpretation is that wars are related to the structure of the human society as a whole.” Based on data covering 600 years of human conflict, they find that “the number of casualties [normalized for human population at the time] tends to follow a power law, with no evidence of periodicity. We also observe that the number of conflicts, again normalized for the human population, show a decreasing trend as a function of time.

Our result agree with previous analyses on this subject and tend to support the idea that war is a statistical phenomenon related to self-organized criticality in the network structure of the human society” and the behavior of human beings that produces it.”

“2019 Index of US Military Strength” by the Heritage Foundation

This new analysis, like similar ones by other organizations (e.g., RAND) documents in detail the decline of relative US hard power versus key military contingencies.

“The Eroding Balance of Terror: The Decline of Deterrence” by Andrew Krepinevich in Foreign Affairs

SURPRISE

“Deterring aggression has become increasingly difficult, and it stands to become more difficult still, as a result of developments both technological and geopolitical. The era of unprecedented U.S. military dominance that followed the Cold War has ended, leading to renewed competition between the United States and two great revisionist powers, China and Russia. Military competition is expanding to several new domains, from space and cyberspace to the seabed, and new capabilities are making it harder to accurately gauge the military balance of power.

Meanwhile, advances in cognitive science are challenging the theoretical underpinnings of deterrence by upending our understanding of how humans behave in high-risk situations— such as when facing the possibility of war. Taken together, these developments lead to an inescapable—and disturbing—conclusion: the greatest strategic challenge of the current era is neither the return of great-power rivalries nor the spread of advanced weaponry. It is the decline of deterrence.”

“How a World Order Ends” by Richard Haas in Foreign Affairs

Haas uses historical analogies to explain the deterioration of the current world order, and where it might lead.

“A stable world order is a rare thing. When one does arise, it tends to come after a great convulsion that creates both the conditions and the desire for something new. It requires a stable distribution of power and broad acceptance of the rules that govern the conduct of international relations. It also needs skillful statecraft, since an order is made, not born. And no matter how ripe the starting conditions or strong the initial desire, maintaining it demands creative diplomacy, functioning institutions, and effective action to adjust it when circumstances change and buttress it when challenges come.

Eventually, inevitably, even the best-managed order comes to an end. The balance of power underpinning it becomes imbalanced. The institutions supporting it fail to adapt to new conditions. Some countries fall, and others rise, the result of changing capacities, faltering wills, and growing ambitions. Those responsible for upholding the order make mistakes both in what they choose to do and in what they choose not to do. But if the end of every order is inevitable, the timing and the manner of its ending are not. Nor is what comes in its wake.”

“Understanding the Emerging Era of International Competition” by Mazarr et al from RAND

SURPRISE

Mazaar and his colleagues in some ways take up with Haas’ article leaves off. This excellent new report from RAND provides a useful framework for better understanding the evolving world of weaker rules and intensified interstate (and inter-bloc) competition.

“The Role of AI in Future Warfare”, by Michael O’Hanlon, published by Brookings

SURPRISE
Good, concise overview. The author concludes that, “Robotics and AI could take on a central, and very important, role in warfare by 2040—even without anything resembling a terminator or a large killer robot.” Critically, this increases the risk of faster escalation of future conflicts.

The U.S.-China Economic and Security Review Commission is mandated by Congress to investigate, assess, and report to Congress annually on “the national security implications of the economic relationship between the United States and the People’s Republic of China.”

This very thorough, 539 page report provides extensive evidence to support key findings that have become familiar but are still critical and in many cases unmet.

Economic Challenges

“China’s state-led, market-distorting economic model presents a challenge to U.S. economic and national security interests. The Chinese government, directed by the Chinese Communist Party (CCP) leadership, continues to exercise direct and indirect control over key sectors of the economy and allocate resources based on the perceived strategic value of a given firm or industry. This puts U.S. and other foreign firms at a disadvantage— both in China and globally—when competing against Chinese companies with the financial and political backing of the state.”

“The Chinese government continues to resist—and in some cases reverse progress on—many promised reforms of China’s state led economic model.”

“Chinese President and General Secretary of the CCP Xi Jinping has prioritized efforts to consolidate control over economic policymaking. However, this strategy may have unintended consequences for China’s economic growth. Increased state control over both public and private Chinese companies may ultimately reduce productivity and profits across a range of industries, with firms pursuing CCP—rather than commercial—objectives.”

“China’s debt burden poses a growing threat to the country’s long-term economic stability. Even as Chinese banks’ nonperforming loans rise and unofficial borrowing by local governments comes due, Chinese policymakers continue to spur new credit growth to combat fears of an economic slowdown.”

“The Chinese government structures industrial policies to put foreign firms at a disadvantage and to help Chinese firms. Among the policies the Chinese government uses to achieve its goals are subsidies, tariffs and local content requirements, restrictions on foreign ownership, intellectual property (IP) theft and forced technology transfers, technical standards that promote Chinese technology usage and licensing, and data transfer restrictions.”

“China has reaped tremendous economic benefits from its accession to the World Trade Organization (WTO), and participation in the rules-based, market-oriented international order.”

“However, more than 15 years after China’s accession, the Chinese government’s state-driven industrial policies repeatedly violate its WTO commitments and undermine the multilateral trading system, and China is reversing on numerous commitments.”

Security Challenges

“China signaled a decisive end to its more than quarter century- old guidance to ‘hide your capabilities and bide your time, absolutely not taking the lead’ as President Xi issued a series of new foreign affairs and military policy directives calling on China to uncompromisingly defend its interests and actively promote changes to the international order.”

“The United States faces a rising power in China that sees the security structures and political order of the Indo-Pacific as designed to limit its power. The widening gap in military capability between China and the rest of region also enables Beijing to coerce its neighbors with the increasingly credible implied threat of force.”

“Beijing is currently capable of contesting U.S. operations in the ground, air, maritime, and information domains within the second island chain, presenting challenges to the U.S. military’s longstanding assumption of supremacy in these domains in the post-Cold War era.”

“By 2035, if not before, China will likely be able to contest U.S. operations throughout the entire Indo-Pacific region…China’s large-scale investment in next-generation defense technologies presents risks to the U.S. military’s technological superiority. China’s rapid development and fielding of advanced weapons systems would seriously erode historical U.S. advantages in networked, precision strike warfare during a potential Indo-Pacific conflict.”

“China continues to develop and field medium- and long-range air, sea, and ground-launched missile systems that substantially improve China’s capability to strike both fixed and moving targets out to the second island chain. China’s ability to threaten U.S. air bases, aircraft carriers, and other surface ships presents serious strategic and operational challenges for the United States and its allies and partners throughout the Indo-Pacific.”

“Prior to the PLA [Chinese military] achieving its objectives of becoming a “modern” and “world-class” military, Beijing may use coercive tactics below the threshold of military conflict rather than resorting to a highly risky use of military force to achieve its goals in the region. However, as military modernization progresses and Beijing’s confidence in the PLA increases, the danger grows that deterrence will fail and China will use force in support of its claims to regional hegemony.”

“A Fifth of China’s Homes Are Empty: That’s 50 Million Apartments”, Bloomberg News, 8Nov18

SURPRISE

This article provides further evidence that improvements in China’s military capabilities are occurring at the same time as its financial system and economy’s situation is becoming more fragile and precarious.

“The nightmare scenario for policy makers is that owners of unoccupied dwellings rush to sell if cracks start appearing in the property market, causing prices to spiral. The latest data, from a survey in 2017, also suggests Beijing’s efforts to curb property speculation -- considered by leaders a key threat to financial and social stability -- are coming up short.”

In “China’s Real Estate Market”, Liu and Xiong provide more important background on this issue.

As they note, “The real estate market is not only a key part of the Chinese economy but also an integral component of China’s financial system. In 2017, housing sales totaled 13.37 trillion RMB, equivalent to 16.4% of China’s GDP. The real estate market is also deeply connected to China’s financial system through several important channels.”

“First, housing holdings are the biggest component of Chinese households’ asset portfolios, partly due to a lack of other investment vehicles for both households and firms in China’s still underdeveloped financial markets.”

“Second, China’s local governments heavily rely on land sale revenues and use future land sale revenues as collateral to raise debt financing.”

“Third, firms also rely on real estate assets as collateral to borrow, and since 2007, firms, especially well-capitalized firms, have engaged heavily in acquiring land for investment purposes.”

“Finally, banks are heavily exposed to real estate risks through loans made to households, real estate developers, local governments, and firms that are either explicitly or implicitly backed by real estate assets…”

Through the third quarter of 2016, property-related loans totaled 55 trillion RMB, accounting for about 25% of China’s banking assets. Among these loans, mortgage loans to households accounted for 17.9 trillion, loans to real estate developers accounted for 14.8 trillion (including 7 trillion in regular loans, 6.3 trillion in credit through shadow banking, and 1.5 trillion through domestic bond issuance), and loans collateralized by real estate assets to firms and local governments accounted for 22.2 trillion. This heavy real estate exposure of banks makes the real estate market systemically important in China’s financial system.”

“Risks in China’s Financial System”, by Song and Xiong“

The authors argue that while “a financial crisis in China is unlikely to happen in the near future, the ultimate financial risk lies with declining Chinese economic growth.” They point to “a vicious circle of distortions in the financial system has lowered the efficiency of capital allocation and thus economic growth, which will eventually exacerbate financial risks.”

“Chinese Influence and American Interests”, published by the Hoover Institution

“For three and a half decades following the end of the Maoist era, China adhered to Deng Xiaoping’s policies of ‘reform and opening to the outside world” and “peaceful development.’

“After Deng retired as paramount leader, these principles continued to guide China’s international behavior in the leadership eras of Jiang Zemin and Hu Jintao. Admonishing Chinese to ‘keep your heads down and bide your time,’ these Party leaders sought to emphasize that China’s rapid economic development and its accession to “great power” status need not be threatening to either the existing global order or the interests of its Asian neighbors.”

“However, since Party general secretary Xi Jinping came to power in 2012, the situation has changed. Under his leadership, China has significantly expanded the more assertive set of policies initiated by his predecessor Hu Jintao. These policies not only seek to redefine China’s place in the world as a global player, but they also have put forward the notion of a “China option” that is claimed to be a more efficient developmental model than liberal democracy.”

“While Americans are well acquainted with China’s quest for influence through the projection of diplomatic, economic, and military power, we are less aware of the myriad ways Beijing has more recently been seeking cultural and informational influence, some of which could undermine our democratic processes. These include efforts to penetrate and sway—through various methods that former Australian prime minister Malcolm Turnbull summarized as ‘covert, coercive or corrupting’—a range of groups and institutions, including the Chinese American community, Chinese students in the United States, and American civil society organizations, academic institutions, think tanks, and media…”

“China’s influence activities have moved beyond their traditional United Front focus on diaspora communities to target a far broader range of sectors in Western societies, ranging from think tanks, universities, and media to state, local, and national government institutions. China seeks to promote views sympathetic to the Chinese Government, policies, society, and culture; suppress alternative views; and co-opt key American players to support China’s foreign policy goals and economic interests.”

“China’s Xi Jinping revives Maoist call for ‘self-reliance’”, Financial Times 12Nov18

SURPRISE

Even as Xi has sought to position China as a champion of globalisation amid the US retreat into protectionism, the call for “self-reliance” highlights how he is also advocating mercantilist policies that could reshape global supply chains…

False hopes of trade truce between US and China after the G-20 meeting in Argentina were quickly dashed by the arrest in Vancouver of the CFO of Huawei (on a charge of conspiring to evade US sanctions on Iran), and China’s subsequent threat to impose grave consequences on Canada if she is not released.

Make no mistake. The Second Cold War has begun.

As Ely Ratner notes in Foreign Affairs this month, “There is No Grand Bargain with China”:

“The days when the world’s two largest economies could meet each other halfway have gone. Over the course of his first five-year term, Xi passed up repeated opportunities to avert rivalry with Washington. His increasingly revisionist and authoritarian turn has instead eliminated the possibility of a grand bargain between the United States and China. On most issues of consequence, there is simply no overlap between Xi’s vision for China’s rise and what the United States considers an acceptable future for Asia and the world beyond.”

“Change in Post-Putin Russia?” by Andrew Wood, in The American Interest

SURPRISE

This is an excellent analysis that should improve investors’ mental model(s) of the forces driving future scenarios for Russia.

“Putinist authoritarian rule has returned Russia to the dilemma confronting the Soviet Union at the end of the Brezhnev era: whether it can rethink or reformulate its fundamental purposes without un-leashing forces that its rulers cannot control.”

“Russia has reverted to a condition comparable to that which led in the end to the fall of the USSR. Today’s Kremlin, like its Soviet predecessor, has proved unable to adequately address the linked questions of how to secure beneficial relationships with the outside world, responsible governance, and stable economic and social development.”

“Putin’s Russia is ruled by an opaque and shifting power structure centered on the Kremlin. It is now devoid of authoritative institutions beyond that framework that would enable Russia to develop into a fully functional or accountable state.” Can this change? Putin’s mission was from the beginning to re-establish “order,” with the recipe of a centralized KGB/FSB as its mandatory magic ingredient. Maintaining such order is still his central purpose, within Russia and beyond it.”

“Putinist authoritarian rule has thereby returned Russia to the dilemma confronting the Soviet Union at the end of the Brezhnev era: whether it can rethink or reformulate its fundamental purposes without unleashing forces that its rulers cannot control. Putin’s Kremlin has in consequence become increasingly determined to centralize decision making and to preserve its hold on power.”

“Rethinking Russia’s options as to its international relations, system of governance, and economic and social policies has thereby over time become more difficult and more risky than it once might have been…Putin has no compelling view as to what new domestic policies he can or should offer his public. That has made the myth of defending a besieged Fortress Russia an essential buttress for his regime.”

“Russia’s governing structures have become predominantly staffed and directed by law enforcement and security agencies (Siloviki). The KGB was never in overall political charge in Brezhnev’s time, or even Andropov’s. It occupied a much-reduced place under Yeltsin. But the FSB in its various guises is now at the undisciplined heart of government under Putin, expressed in a variety of security organs under differing acronyms and troubled by internal rivalries. The link between the Russian security organs and Putin’s preoccupation with Russian nationalism is an essential element in that dominance, a preoccupation naturally shared with Russia’s military organizations.”

“The Siloviki, broadly defined, also have parallel interests in the opportunities for enrichment opened up to them by their role. Those interests extend to cooperation with organized crime groups and working with illegitimate but tolerated vigilante forces.”

“The Siloviki will have their say in determining whoever or whatever succeeds Putin. There may well be divisions among them but it would take a stubborn courage to suppose that any of their leaders might perhaps favor liberalizing reform…Absent a change of direction over the next few years, [the Siloviki] will inherit a Russia weakened by an economy and society troubled by low growth, secured in place by the politically determined structures imposed upon it.”

“It follows from the above account that Russia will not in the predictable future find a way to address the linked questions of how to secure beneficial relations with the outside world, responsible governance, and stable economic and social development.

“Those Russians who fear that a car crash is inevitable sooner or later, and possibly even before 2024, have a persuasive case to make. There are a number who judge that only such a catastrophe will enable Russia to escape from its present travails. If the fear of an imminent internal crisis while Putin is still in charge proves justified, its implications for the West could well prove troubling. That would also be the case if, as seems more plausible, the next Russian leadership proves unable to establish and legitimate its authority.”

“Providing for the Common Defense”, by the independent, non-partisan “Commission on National Defense Strategy for the United States”, established by the US Congress.

SURPRISE

This report reviews the 2018 National Defense Strategy published by the Trump Administration.

Its key conclusion is blunt, and needs to be seen in the context of the Report of the US-China Economic and Security Review Commission.

“The security and wellbeing of the United States are at greater risk than at any time in decades. America’s military superiority—the hard-power backbone of its global influence and national security—has eroded to a dangerous degree. Rivals and adversaries are challenging the United States on many fronts and in many domains. America’s ability to defend its allies, its partners, and its own vital interests is increasingly in doubt. If the nation does not act promptly to remedy these circumstances, the consequences will be grave and lasting.”

“The Power of Nations: Measure What Matters” by Michael Beckley

SURPRISE

Most quantitative assessments of relative national power are based on comparisons of gross resources. Beckley argues (and provides evidence) that comparing net resources is a better measure.

Using this metric, he claims that the United States’ net power advantage over China is still substantial. A very thought provoking challenge to a lot of today’s conventional wisdom.

“China may have the world’s biggest economy and military, but it also leads the world in debt; resource consumption; pollution; useless infrastructure and wasted industrial capacity; scientific fraud; internal security spending; border disputes; and populations of invalids, geriatrics, and pensioners. China also uses seven times the input to generate a given level of economic output as the United States and is surrounded by nineteen countries, most of which are hostile toward China, politically unstable, or both. Accounting for even a fraction of these production, welfare, and security costs substantially reduces the significance of China’s rise.”

“What Deters, and Why” by Mazarr et al from RAND

SURPRISE

Another report from RAND that will improve our mental models of conflict.

“The challenge of deterring territorial aggression, which for several decades has been an afterthought in U.S. strategy toward most regions of the world, is taking on renewed importance. An increasingly belligerent Russia is threatening Eastern Europe and the Baltic States with possible aggression, conventional and otherwise. China is pursuing its territorial ambitions in the East and South China Seas with greater force, including the construction of artificial islands and occasional bouts of outright physical intimidation. North Korea remains a persistent threat to the Republic of Korea (ROK), including the possibility of large-scale aggression using its rapidly advancing nuclear arsenal.”

“Yet the discussion of deterrence—as a theory and practical policy requirement—has lagged in U.S. military and strategy circles. This study aims to provide a fresh look at the subject in this context, with two primary purposes: to review established concepts about deterrence, and to provide a framework for evaluating the strength of deterrent relationships…”

“The study stems from a specific research question: What are the requirements of effective extended deterrence of large-scale military aggression? … Our research highlighted several specific themes about successful extended deterrence, including:”

“Potential aggressors’ motivations are highly complex and typically respond to many variables whose interaction is difficult to anticipate.”

“Generally, opportunism in aggression seems less common than desperation caused by real or perceived threats to security or status.”

“Clarity and consistency of deterrent messaging is essential. Half-hearted commitments to allies risk being misperceived.”

“A ‘firm but flexible’ approach strengthens, rather than weakens, deterrence; leaving an adversary no way out is not an effective way to sustain deterrence. Compromise and concession are typically part of any version of successful extended deterrence of large-scale aggression.”

“Multilateral deterrence contexts are especially dangerous. Deterring an aggressive major power while restraining an ally from taking provocative actions at the same time is extremely difficult…”

“In sum, this analysis suggests that aggressor motivations serve as the first, and in some ways decisive, variable for interstate deterrence outcomes. Weakly motivated aggressors are easy to deter; intensely motivated ones, whose level of threat perception verges on paranoia, can be impossible to deter….”

“This analysis also suggests that clarity in what is to be deterred, and how the United States will respond if deterrence fails is the second essential element of a successful deterrent posture.”

Uncertainty in Western Europe continues to increase.

Brexit confusion has only gotten worse this month. Meanwhile, France is faced with worsening street demonstrations over tax increases (and Macron’s policies more generally); in Germany the CDU party struggles to decide on a successor to Angela Merkel who is sufficiently conservative to slow the growth in support for the (right) populist AfD party without moving so far the the right that they lose support of in the center; and Italy continues to play a game of budget chicken with the EU.

“Beijing’s Nuclear Option: Why a U.S. – Chinese War Could Spiral Out of Control” by Caitlin Talmadge, in Foreign Affairs (Also, “Would China Go Nuclear?” by Caitlin Talmadge in International Security)

SURPRISE.

“The odds of a U.S. – Chinese confrontation going nuclear are higher than most policymakers think.”

Chinese nuclear forces are embedded with conventional forces, and thus vulnerable to loss in US deep strike against the latter, which could create a “use them or lose them” situation.

“America’s New Attitude Towards China is Changing the Countries’ Relationship” in The Economist 18Oct18

“A broadly-based interdependence ties Beijing’s pigs to Iowa’s fields, interweaves supply chains and distribution networks across the Pacific and has seen copious Chinese investment in America. That had, until recently, led observers in both China and America to think attitudes like Mr. Trump’s could be nothing but bluster.”

“Though relations might be testy from time to time, the economic logic which favoured getting along was simply too strong to ignore. But American unease about China’s growing technological heft, increasing authoritarianism and military strength is now overriding that logic.”

“America is undergoing a deep shift in its thinking about China on right and left alike. There is a new consensus that China has a deliberate strategy to push America back and impose its will abroad, and that there needs to be a strong American response”.

Meanwhile in China, “Well-connected scholars and retired officials have shared their concerns with Western contacts about a febrile mood within China’s national security establishment. They detect genuine excitement over the prospect of a great-power contest in which China is one of the protagonists. This coincides worryingly with the squeezing of public space for discussion. Scholars are not now supposed to debate foreign policy in the open, and strident nationalists dominate what debate there is.”

“Even the idea of an expensive arms race with America strikes some Chinese experts as a fine plan, given their confidence in the long-run potential of their economy. In this dangerous moment, blending grievance and cockiness, it seems astonishing to remember that less than a generation ago Chinese leaders assured the world that they sought only a ‘peaceful rise’.”

Many stories about China’s mass detention of several hundred thousand to more than one million Muslim Uighurs in the western province of Xinjiang

China has stopped denying, and is now defending its actions in Xinjiang, calling the camps “vocational and educational training centers”. This further worsens China’s relationship with Western nations, and especially the US.

“China Faces a Debt Iceberg Threat, Warns Rating Agency”, Financial Times, 16Oct18

“China could be facing a “debt iceberg with titanic credit risks” following a boom in infrastructure projects at local governments around the country, rating agency S&P Global has warned.”

“Local governments could have accrued a debt pile hidden off their balance sheet as high as Rmb30tn to Rmb40tn ($4.5tn to $6tn) following “rampant” growth in borrowings, said S&P Global.”

“The mounting debt in so-called local government financing vehicles, or LGFVs, hit an “alarming” 60 per cent of China’s gross domestic product at the end of last year and was expected to lead to increasing defaults at companies connected to small governments across the country.”

This month saw more indicator stories about protests by Chinese homeowners angry at falling prices; by parents angry at the education system; and by veterans angry at their treatment. (The Economist has a story about the broader context of these protests (“Why Protests are So Common in China”) and concludes that they are all indicators of rising social stress.

Protests add to pressure on the Chinese government to stimulate the economy, despite already high debt levels and the declining marginal productivity of debt (the amount of GDP growth produced by additional amounts of debt).

While Xi Jinping appears to be firmly in control, protests indicate an underlying level of dissatisfaction, which, at some point, could support rapid change in China.

“Danger: Falling Powers” by Hal Brands

SURPRISE.

“We often lose sight of a different pathway to great-power war, for peril may emerge when a country that has been rising, eagerly anticipating its moment in the sun, peaks and begins to decline before its ambitions have been fulfilled. The sense that a revisionist power’s geopolitical window of opportunity is closing, that its leaders cannot readily deliver the glories they have promised the population, can trigger rashness and risk-taking that a country more confident in its long-term trajectory would avoid.”

“China’s Coming Financial Crisis and the National Security Connection” by Stephen Joske

This article offers a scenario that is an example of Brand’s thesis.

“Improving C2 and Situational Awareness for Operations in and Through the Information Environment” by Paul et al from the RAND Corporation

Noting that “defeat is a cognitive outcome” RAND analyzes the extent to which information operations (IO) in the information environment (IE) have been integrated with situation awareness and operations in the land, sea, air, and space environments. The authors conclude that the integration of IE situation awareness and operations with the other environments has, up to now, been weak.

This echoes findings from Defense Science Board 2018 Summer Study on “Cyber as a Strategic Capability”, which concluded that, “Current cyber strategy is stalled, self-limiting, and focused on tactical outcomes. The DoD must build and adopt a comprehensive cyber strategy.”

US Vice President Mike Pence’s 4Oct18 speech at the Hudson Institute

SURPRISE.

Pence effectively declared a new Cold War with China. His speech complemented the new US National Security Strategy that describes “a new era of great power competition.”

“America had hoped that economic liberalization would bring China into a greater partnership with us and with the world. Instead, China has chosen economic aggression, which has in turn emboldened its growing military.”

“Nor, as we had hoped, has Beijing moved toward greater freedom for its own people. For a time, Beijing inched toward greater liberty and respect for human rights. But in recent years, China has taken a sharp U-turn toward control and oppression of its own people”

“By 2020, China’s rulers aim to implement an Orwellian system premised on controlling virtually every facet of human life — the so-called “Social Credit Score.” In the words of that program’s official blueprint, it will “allow the trustworthy to roam everywhere under heaven, while making it hard for the discredited to take a single step.”

While there have been many indicators that a return to the previous relationship between China and the United States is increasingly unlikely, this speech was a surprisingly blunt statement that the US administration’s view that the relationship will be characterized by higher levels of conflict in the years ahead.

Interagency Task Force Report: “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States”

Also: GAO Report: “Weapons Systems Cybersecurity”

This new report found significant vulnerabilities, particularly dependence on foreign made components (including components manufactured in China), as well as weakening worker capabilities in the United States.

The GAO concluded that, "The Department of Defense (DOD) faces mounting challenges in protecting its weapon systems from increasingly sophisticated cyber threats. This state is due to the computerized nature of weapon systems; DOD’s late start in prioritizing weapon systems cybersecurity; and DOD’s nascent understanding of how to develop more secure weapon systems. DOD weapon systems are more software dependent and more networked than ever before.”

“Automation and connectivity are fundamental enablers of DOD’s modern military capabilities. However, they make weapon systems more vulnerable to cyber attacks. Although GAO and others have warned of cyber risks for decades, until recently, DOD did not prioritize weapon systems cybersecurity. Finally, DOD is still determining how best to address weapon systems cybersecurity.”

In addition to headlines about the growing China-US trade war, (and to a lesser extent high Chinese debt/GDP and the fragility of its shadow banking system), other stories appeared in September, including growing frustrations as increasing automation produces rising layoffs, repression of Marxist student movements that have attempted to unionize workers, protests by People’s Liberation Army veterans over their treatment, and parental anger over school crowding.

As summarized by George Magnus in his new book, “Red Flags: Why Xi’s China is in Jeopardy”, increasing use of repression in China – from growing use of surveillance technology to Uyghur concentration camps to forced acquisitions of private companies by state owned companies – comes in response to evidence of growing dissatisfaction within the nation. In the context of Chinese history, this is a pattern that repeats. These indicators provide a reminder that as China-US conflict increases, its domestic problems are also serious.

“China Doesn’t Want to Play by the World’s Rules: Beijing's plans are much bigger than the trade war.” By Abigail Grace

“Securing economic growth is a question of existential importance for Xi and his comrades. The Chinese Communist Party knows that it must deliver a higher quality of life to Chinese citizens in order to retain popular support—or else increase repression of internal dissent.

Xi has personally staked out hypernationalist positions and silenced any opposition to his authority, thereby increasing his own personal culpability for losses in a trade war. In fact, rumors that Xi could be facing domestic political trouble have abounded in recent weeks, raising questions about the costs of his shift away from the collective leadership model.

China’s leadership knows that addressing the U.S.-China trade imbalance is a personal priority for
Trump and is priming its own population for a long and ugly fight.

Despite U.S. pressure, China remains committed to its own economic agenda because it believes that achieving technological supremacy today will enable it to write tomorrow’s rules…As long as Chinese leaders
think that the key to winning tomorrow is dominating today’s technology through all means short of war, they will remain unwilling to address the structural issues driving economic tensions between the United States and China.”

An insightful compliment to Magnus’ book, that helps to develop a better mental model of the various forces driving Chinese behavior, that could push us closer to, or away from, potential critical national security thresholds.

“The Perfect Weapon: War, Sabotage, and Fear in the Cyber Age” by David Sanger “Bluntly, there are no effective laws which govern cyberhacking originating in St Petersburg or Shanghai— or, for that matter, in Tehran or Pyongyang”

Further evidence of the profound change that is occurring in the nature of international conflict, which has substantially heightened uncertainty and the potential for non-linear events with substantial negative impact.

“Assessment of the Role of Cyber Power in Interstate Conflict” by Eric Altamura.

“To understand how actors attack computer systems and networks to accomplish limited objectives during war, one must first identify what states actually seek to accomplish in cyberspace… Achieving such an advantage requires targeting the key functions and assets in cyberspace that enable states to accomplish political objectives…To deny an opponent the ability to utilize cyberspace for its own purposes, states can either attack information directly or target the means by which the enemy communicates its information.

Once an actor achieves uncontested use of cyberspace, it can subsequently control or manipulate information for its own limited purposes, particularly by preventing the escalation of war toward its total form…access to information through networked communications systems provides a decisive advantage to military forces by allowing for “analyses and synthesis across a variety of domains” that enables rapid and informed decision-making at all echelons. The greater a decision advantage one military force has over another, the less costly military action becomes.

Secondly, the ubiquity of networked information technologies creates an alternative way for actors to affect targets that would otherwise be politically, geographically, or normatively infeasible to target with physical munitions.
Finally, actors can mask their activities in cyberspace, which makes attribution difficult. This added layer of ambiguity enables face-saving measures by opponents, who can opt to not respond to attacks overtly without necessarily appearing weak.

In essence, cyber power has become particularly useful for states as a tool for preventing conflict escalation, as an opponent’s ability to respond to attacks becomes constrained when denied access to communication networks.
Societies’ dependence on information technology and resulting vulnerability to computer network attacks continues to increase, indicating that interstate violence may become much more prevalent in the near term if aggressors can use cyberattacks to decrease the likelihood of escalation by an adversary.”

Surprise.

This article caused me to expand my mental model based on a more detailed understanding of the logic that could guide nations’ use of cyberweapons in future conflicts, and how a cyber advantage could actually lead to an increased probability of kinetic conflict.

“How China’s Middle Class Views the Trade War”, by Cheng Li in Foreign Affairs.

Up to now the middle class has quietly criticized Xi; but harsher trade sanctions may shift them to blaming Trump.

“National Will to Fight” by McNerney et al from RAND Corporation

Surprise.

The authors “define national will to fight as the determination of a national government to conduct sustained military and other operations for some objective even when the expectation of success decreases or the need for significant political, economic, and military sacrifices increases.” They also note that it is “poorly analyzed and the least understood aspect of war.” This initial study is the beginning of an attempt to change that, and improve our mental models for thinking about this critical issue.

“Clash of Civilizations – Or Clash Within Civilizations?” by Cropsey and Halem in The American Interest

Surprise.

On the 25th anniversary of the publication of Samuel Huntington’s classic essay on “The Clash of Civilizations”, the authors analyze how well this concept has stood the test of time, and how it needs to be modified to better understand interstate conflict drivers in today’s world, including conflicts within and not just between civilizations. It should provide a significant improvement to many people’s mental models of international competition and conflict. It also integrates well with RAND’s “National Will to Fight.”