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Old 10-08-2018, 06:36 AM
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Arrow Security Brief: Spy Chip Allegations and Pence Drag Down U.S-China Relations

Security Brief: Spy Chip Allegations and Pence Drag Down U.S-China Relations
BY: LARA SELIGMAN, ELIAS GROLL | OCTOBER 8, 2018, 8:23 AM
RE: https://foreignpolicy.com/2018/10/08...ina-relations/

A new report alleges that China hacked a widely used piece of computer hardware equipment, the White House blames Beijing for the decline of the defense industrial base, Pompeo visits North Korea, what to see at AUSA, and more.

China is to blame for pretty much everything these days, with U.S. officials accusing Beijing of seeking to undermine U.S. politics, technological advantage, military supply chain, among other things. Meanwhile, Secretary of State Mike Pompeo spent the weekend in North Korea, where he appeared to lay the groundwork for a second summit with President Donald Trump, the biggest Association of the United States Army meeting since 2012 starts Monday in Washington, a top Navy admiral previews an upcoming NATO exercise designed to show Russia who’s boss, and more.

Bombshell mystery. Relations between China and the United States found a new low last week with the publication of a bombshell report alleging that Chinese intelligence planted a backdoor in a widely used piece of computer hardware equipment. The same day, Vice President Mike Pence used a highly anticipated address to describe China as a hostile power seeking to undermine U.S. politics, technological advantage, and military might.

Coming against the backdrop of escalating trade tensions, the report and Pence’s speech represented major blows to relations between Washington and Beijing. Bloomberg’s report describes a multi-year investigation by U.S. intelligence agencies that found a covertly implanted chip in the motherboards of the American firm Super Micro Computer. The chip reportedly served as a wide-ranging surveillance tool.

If true, the report may cause hardware manufacturers to abandon China as a factory destination, as suppliers may not be able to verify the integrity of products made there. “It could be a before-and-after moment in China’s relationship with the world, in terms of its role as a technology manufacturer,” Jorge Guajardo, a former Mexican ambassador to China who is now a business consultant, told FP.

Days after its publication, major questions remain regarding the Bloomberg report. The two major firms implicated in the report — Apple and Amazon — both issued blanket denials denying the details of the story. Denials like this matter, since false public statements regarding a breach of this nature could constitute securities fraud. The Department of Homeland Security said in a statement it has no reason to doubt Amazon and Apple’s denials.

So who should you believe? For now, there is insufficient public evidence to judge. Technical experts argue the technical details of the Bloomberg story are plausible, and detailed examinations of the public statements and the article leave room for both Bloomberg’s reporters and Apple and Amazon’s PR pros to be right.

Meanwhile, the Trump administration is making it clear that they are standing by their tougher line on Beijing. Pence’s speech was a resounding rejection of the policy that U.S. leaders have broadly pursued for more than two decades, seeking greater trade ties with Beijing, bringing the country into the World Trade Organization, and investing heavily in its economic modernization.

“America had hoped that economic liberalization would bring China into greater partnership with us and with the world,” Pence said in his speech at the Hudson Institute in Washington. “Instead, China has chosen economic aggression, which has in turn emboldened its growing military.”

Military supply chain at risk. A new White House report blames Chinese influence and budget uncertainty for “unprecedented” risk to the U.S. military’s supply chain. The long-awaited assessment, which was ordered by President Donald Trump more than a year ago, paints an alarming picture of the state of the American manufacturing and defense industrial base. Foreign Policy obtained key details about the report ahead of its release on Friday.

Budget cuts under sequestration and bumpy funding, both driven by congressional gridlock, has been particularly devastating, the report found. But dependence on offshore sources for key items and the industrial policies of foreign competitors have also diminished U.S. manufacturing global competitiveness, according to the study, which condemned China’s deliberate targeting of America’s defense industry in particular.

For example, China has strategically flooded the global market with rare-earth elements – key components in electronics like cell phones and virtually all U.S. military aircraft – at subsidized prices, driving out competitors and deterring new market entrants.

China also uses forced technology transfer as a condition of access to the Chinese market, meaning companies can’t do business in China unless they surrender their IP, according to the report.

“While multiple countries pursue policies to bolster their economies at the expense of America’s manufacturing sector, none has targeted our industrial base as successfully as China,” the report concludes.

So what can we do about it? The report includes a number of recommendations, including creating national industrial policy to support national security efforts, diversifying away from dependency on sources of supply in countries that may cut off U.S. access, and reducing the wait for security clearances.

Most notably, it proposes injecting the lower tier of the supply chain with additional cash through an obscure DOD program, the Defense Production Act Title III, to prop up fragile suppliers. Ellen Lord, undersecretary of defense for acquisition and sustainment, told a small group of reporters Oct. 4 that it would not be “prudent” to put a number on the total dollar investment right now, but told us to stay tuned.

Friends forever. Secretary of State Mike Pompeo spent the weekend in North Korea, where he met with Kim Jong Un and appeared to lay the groundwork for a second summit with President Donald Trump.

But the North Koreans didn’t roll out the red carpet for Pompeo. Upon arrival in Pyongyang, Pompeo’s hosts informed him he would only be able to bring three people to his meeting with Kim, that he wouldn’t be able to use his preferred translator, and that his bodyguard had to give up his service weapon.

Pompeo laughed it off and described his bodyguard as a “big guy” — apparently in no need of his pistol.

Pompeo returns to Washington with scant concrete progress made, although North Korea and the United States both issued statements describing the talks as positive. KCNA called them ““productive and wonderful.” The State Department claimed that the North had invited inspectors to the Punggye-ri nuclear test.

On the major issues, Washington and Pyongyang remain far apart. American officials are now considering what the Wall Street Journal describes as a “peace declaration” to end the Korean War, a move that would fall short of a formal peace treaty. South Korean officials, meanwhile, are openly advocating for the United States to offer such a declaration in exchange for the closure of nuclear facilities.

New friends. Reports Monday indicated that the Kremlin has invited Kim to visit Russia, although the time and place has yet to be agreed.

Frosty visit. Meanwhile, Pompeo’s visit to China got off to a frosty start on Monday, with the Secretary of State and Chinese Foreign Minister and State Councillor Wang Yi airing grievances. While the two officials emphasized the need for cooperation, their remarks before journalists at the start of their meeting at Beijing’s Diaoyutai Guest House were unusually pointed, Reuters reports.

Crisis averted? Syrian rebel groups will complete the withdrawal of heavy weaponry from a demilitarized zone agreed by Turkey and Russia in northwest Syria’s Idlib on Monday, according to the state-owned Anadolu news agency. The withdrawal is part of a deal reached last month between Turkey and Russia, which halted a threatened Syrian government offensive on Idlib, preventing a humanitarian disaster in a region that is home to about three million people.

Tense meeting. Israeli Prime Minister Benjamin Netanyahu will meet Russian President Vladimir Putin “soon,” in the first such meeting since a Russian military aircraft was shot down over the eastern Mediterranean Sea last month. Russia blamed the incident partly on Israel, which was staging air raids on Iranian targets in Syria at the time.

Pew pew. The United States is expected to announce that it will carry out cyber operations on behalf of NATO allies, the AP reports. The move would continue to integrate cyber operations into NATO doctrine and represents another step by the Trump administration to take a more aggressive posture to deter hacking operations by American adversaries.

Escalation. Western authorities stepped up their efforts to counter aggressive Russian intelligence operations by indicting GRU officers, the Russian military intelligence service responsible for a number of recent incidents in other countries, and exposing a series of intelligence operations. American prosecutors indicted a group of GRU officers for attempting to hack into the computer systems of international agencies. In the Netherlands, authorities provided a detailed account of an attempt by GRU operatives to hack into the Organization for the Prohibition of Chemical Weapons.

The public sphere. Twitter says it’s stepping up its work to combat disinformation campaigns on the platform and will take into account new factors when considering when it bans accounts. The company has already booted 50 accounts impersonating state Republican parties.

AI partnership. Chinese technology giant Huawei signed a $1 million research partnership with UC Berkeley to study artificial intelligence. Chinese firms have been pouring cash into the field, and this latest partnership provides the company with a toehold in one of America’s most prestigious universities.

Life comes at you fast. Chinese Communist Party officials revealed that the missing president of Interpol has been detained in China as part of a claimed corruption probe. The announcement came days after Meng Hongwei was reported missing by his wife and could strike a blow at Chinese efforts to install its top officials in influential posts in international bodies.

AUSA. This year the U.S. Army’s top brass with gather at Washington, DC’s Convention Center for the annual Association of the United States Army meeting. This year’s exhibition will be the biggest since 2012, red Gen. Carter Ham, AUSA’s president, told Army Times in a Sept. 26 interview, when it comes to both the things to see and the expected 30,000 attendees.There is also a renewed sense of excitement from vendors, following the launch of Army Futures Command in Austin, Texas. Ahead of the main event, Defense News has a Q&A with Army Under Secretary Ryan McCarthy. You can find a full schedule of events here.

Russia take note. In a massive show of force designed to send a pointed message to Russia, U.S. and European forces will assemble in Norway at the end of the month for NATO’s Trident Juncture, one of the largest NATO exercises in recent history. The exercise will involve roughly 45,000 people, 10,000 vehicles, 60 ships and 120 aircraft, and will serve as a proving ground for Secretary of Defense James Mattis’ “30-30-30-30” plan proposed at the NATO headquarters in Brussels in July: moving 30 aircraft squadrons, 30 ships and 30 battalions of troops in 30 days. Moscow has been invited to observe the exercise.

Adm. James Foggo, commander of U.S. Naval Forces in Europe and Africa and head of Allied Joint Force Command, addressed reporters at the Pentagon during a Friday briefing.

On the growing military threat from Russia to NATO allies:

Russia is not 10 feet tall, but they do have capabilities that keep me vigilant, concerned. One of them is in the undersea domain. Russians have produced the new Dolgoruky-class submarine, the Savorod-class submarine, the new Kilo hybrid-class submarines. Six of them are operating in the Black Sea of the eastern Mediterranean right now. They’re firing the Kalibr missile, a very capable missile. It has a range which, if launched from any of the seas around Europe — Europe’s really a peninsula; Caspian, Baltic, Arctic, North Atlantic, Mediterranean or Black Sea — could range any one of the capitals of Europe.

That’s a concern to me, and it’s a concern to my NATO partners and friends. So we should know where they are at all times. Do I think that they would do something like that? No, I think they’d be foolish to do something like that.

On Moscow’s reported violation of the INF treaty:

I think you’re referring to the recent discussion of the breakout with the Novator missile SSC-8. This missile recently was revealed to have a range that’s an INF treaty buster. That is indeed unfortunate in the abrogation of a treaty which the United States has observed for a very long time.

But these things happen, and so it’s necessary to have strong defensive capabilities in terms of defensive weapon systems.

On tensions with Turkey:

I would obviously prefer that they not buy the Russian S-400 missile defense system, but that’s something that’s been ongoing dialogue between our Department of Defense, their Ministry of Defense and our key leaders.

The mil-to-mil relationship, I think, is strong, and we wanted to keep it that way. We do many things, in missile-defense, in exercises at sea, in port visits, and the Turkish navy is extremely professional, and as a force, a fighting force, we want them on our team, and we’re happy that they’re on our team.

Silenced. Turkish officials said they believe the dissident Saudi journalist Jamal Khashoggi was killed inside Saudi Arabia’s Istanbul consulate last week. While close to the Saudi government, Khashoggi had recently been living in exile and become an outspoken critic of the country’s current de-facto leader, Crown Prince Mohammad bin Salman. If confirmed, Khashoggi’s murder is likely to trigger a diplomatic crisis with Turkey, will likely undermine relations between Riyadh and Washington, and strip MBS of the modernizing image he has so carefully cultivated.

Musical chairs. The White House and Pentagon are looking for a new slate of senior officers to fill several key jobs with several senior military figures set to retire, including the vice chairman and the chairman of the Joint Chiefs of Staff. Some defense officials believe Army four-star Gen. Vincent Brooks, who heads the US military command in South Korea, could be a leading candidate for the vice chairman position when Air Force Gen. Paul Selva is set to retire in early 2019. Meanwhile, Gen. David Goldfein, the Chief of Staff of the Air Force, could be a frontrunner for nomination to succeed Gen. Joseph Dunford as chairman after he completes his second two-year term in the fall of 2019.

Another use for F-35? The Marine Corps set a milestone recently: destroying a target by connecting an F-35B with its rocket precision artillery system known as HIMARS for the first time. The shot was all done through data link, officials said. The F-35 used sensors and pushed data about the location of the target that was then fed to a HIMARS system. The HIMARS unit then destroyed the target.

One day you’re in… Trump is peeved with Air Force Secretary Heather Wilson over her handling of his directive to stand up a separate Space Force in the U.S. military, and he’s considering ousting her after the midterm elections, three sources with knowledge of the matter told Foreign Policy.

Name the dead. A roadside bomb in Afghanistan’s Helmand province killed U.S. Army Spec. James A. Slape, a 23-year old who is the seventh American military member killed there this year. The attack on Thursday came just days before the war’s 17th anniversary on Sunday, a day that saw at least 54 people killed across the country.

He’s baaaack. Blackwater founder Erik Prince is back in Afghanistan, where he has wasted no time making enemies while trying to pitch his idea of a private force to bring security to the country, the New York Times reports. Unable to gain traction with the sitting Afghan government, Prince has been meeting with President Ashraf Ghani’s political rivals to pitch his ideas. Ghani is furious, and may have even tried to block his visa.

At this stage, Prince’s proposal remains a far off prospect, but U.S. government officials aren’t entirely ruling him out either. A White House spokesperson told the Times that the government is open to reviewing new ideas but isn’t examining examining any proposals from Prince, who has been introducing himself as a Trump advisor in meetings.

Arms exports. American arms makers continued to pick up foreign clients at a dominant clip in fiscal year 2018, with the State Department approving just shy of $70 billion in foreign arms sales, Defense News reports.

Knife fighter. The U.S. Army opened the design competition for its new reconnaissance and attack helicopter, a future weapon that military officials are describing as the future “knife fighter” of the force, Defense News reports. Army officials are hoping to get prototypes flying by 2023.

About the writers:
Lara Seligman is Foreign Policy's Pentagon correspondent.
Elias Groll is a staff writer at Foreign Policy covering cyberspace.
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