Missile Defense for Saudi Territory

In a Reuters story yesterday we find out what one of the "military purchases" was that the President of the US was talking about in establishing his continued support for Saudi Arabia after the killing of a critic in Turkey.    One of those things was the same high altitude interceptor (THAAD) that China found objectionable in South Korea.  The Chinese object to THAAD because they know it works, not because of those radars they claim looked into their territory.  That was absurd.

Now we have something even better.  The Saudis will have a high altitude interceptor for any missiles coming their way from Iran, giving them a strategic long-range defense.  They already have short-range missiles that work pretty well against the missiles being fired at them from Yemen, and they are getting more experience with that as time goes on.  In the last couple of days, the Houthi's have managed to violate their cease fire by firing some more missile into Saudi territory.  We should not forget that those missiles are coming from Iran.

No Indictments in the Obama Administration?

I was kind of wondering how President Obama thought he had gone though all those years in the White House "without anyone being indicted" when he seems to have forgotten one of his National Security Advisers, General James Cartwright.  He was famous for being the one who described many of the cyber operations of the Obama Administration to the New York Times, including such famous ones at Stuxnet, the computer worm that attacked Iran's centrifuges.  He was not only charged, he was convicted.  But, because the President pardoned him, he never had to serve any time in jail.  The real crime may have been in letting him hang for something he didn't do.  It ruined his career when the real culprit got off. 

 His defense attorneys said just that in a written letter to the court.  They said he went to the New York Times to try to stop publication of the stories they were about to publish.  The New York Times isn't going to tell who really did it, and the White House covered that part up at the time it occurred.  Like others in the past who have taken responsibility for something they didn't do, the General took the blame for somebody higher up.  There were not too many people higher up than he was.

Synthetic You

Yes, I'm concerned about the ability of technology to recreate my voice and image described in my previous posts as possible ways to make it look like I said something I never said.  But, now comes something else - AI generated fingerprints.  So, somebody can now generate my voice, image my face onto someone else's face in a video, and generate fingerprints that "prove" I was there.  All those security devices use fingerprints to get in and mine was used to get into the place I never was.  We better be ready for this kind of thing and be able to find generated fakes on line.

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Iranians and SamSam Ransomware

Interesting the way two different outlets covered the story of the two Iranians indicted by the US Justice Department.  The Hill covered the story as a case of ransomware, focusing on the common element that the thieves used TOR to hide their communications both with their victims and their internal network being operated from Iran.  The Wall Street Journal covered the same story but with the emphasis on the use of Bitcoin to launder the money into hard currency. The Journal emphasizes these two points:

"Treasury’s action marks the first time the U.S. has used digital-currency addresses to identify sanctioned targets.

It also marks a new step by the U.S. to impose regulatory requirements on digital-currency exchanges that can be used to mask illicit activity." 

I think the Journal has the right points here.  Treasury reporting of transactions has not gone well with digital currencies, partly because enforcement is harder when the controls are not put on by the currency owners.  There is no doubt that blockchain gives them the ability to know to whom, and where the transactions were made, but they aren't using it in the way they are required.  It is still the wild west in digital currencies. 

Putin, Xi and the Testing of Trump

The leaders of Russia and China are testing the resolve of the US President in almost exactly the same way, one in Crimea and the other in the South China Sea.  Russia has become the "go to" country now that North Korea has stopped testing and launching missiles.  This is a dual test of the ability of other countries to seize territory that does not belong to them (by international law) and enforce their domain over that territory.  For the Russians this is the strategy of forcing confrontation with the Ukraine (see the Wall Street Journal editorial on this in today's paper) while the EU is weakened by the problems in France and Germany. 

At the same time, China continues its militarization of the South China Sea, which they said they would never do.  This strategy of denial-of-area has been working pretty well.  Slowly strangle the ability of military forces to get into an area that needs to be controlled.  They choke off Taiwan, manipulate the countries around the SCS, build up their islands and threaten any aircraft or ship that comes in.  Use a combination of economic, diplomatic and military power to deny the space. 

The Russians have discovered this strategy actually works, but given their less than subtle nature, have crudely implemented it in the Black Sea.  They took Crimea with more care than they show in the Kerch Straits.  You can see the video of this confrontation in several places like this one, https://www.wsj.com/video/russia-fires-on-ukrainian-military-vessels-near-crimea/583408DC-2048-4074-8571-6C86DE21BC93.html  It clearly shows which country is using the force and which one is not.  They are cutting the Black Sea off from the Sea of Azov which is north of the Kerch Straits. 

In my most current version of the Chinese Information War (McFarland), I said this is war by another name, "annexation".  It is armed confrontation, supplemented with economic and political warfare. 

Russia Picks Up the Pace in Ukraine

The Russians never give up, agreement or not, and have captured three little boats from the Ukraine.  The story appears in several news outlets.  They want to choke off the Ukraine and continue to support rebels in the south of the country. 

We can clearly see the progress on the bridge to Russia from the video.  That has to be one of the most expensive bridges ever built.   The Kerch Strait links the Black Sea and the Sea of Azov and the Russians wanted to be able to get supplies into Crimea which they liberated from the Ukraine.  The Ukrainians were not helping them out very much, of course.  Hitler thought this path was the way to Moscow, and it may turn out to be the path from Moscow to the Ukraine and west. 

The Russians are using the Chinese trick of claiming territorial waters they control but don't own.  This is why we have freedom of navigation agreements in the UN, which neither of the two countries follow.  The Russians now say these little ships were intentionally sent to upset them (which it did) and the Ukrainians say they were doing nothing wrong by sailing there (probably right).  They can claim innocent passage, but the Russians are trying to undo that claim with their approach.  Now the Ukraine wants more sanctions on Russia.  Good luck with that. 

Report on Pegasus

I like the work Citizen Lab does and this one is particularly good.  An Israeli company, NSO Group, selling software around the world that allows any country to monitor its citizens.  Forbes has good summary of what NSO does.

The Citizen Lab article tells how Pegasus works, and where they found evidence of it being used.  It wasn't the Russia, China, usual bad guys scenario.  For those unfamiliar with the range of capabilities of these spying tools, it is well worth the read.  They are very broad-based tools and monitor almost everything the target does.

The graphic in the Executive Summary comes from Wikileaks and was internal email of NSO.  I don't approve of using it, but it was a nice summary of the capabilities of the software.

Interest in Huawei Picks Up

The Wall Street Journal had an article yesterday about the damage done to Huawei by a recent push on encouraging allies to buy their infrastructure hardware from another company - probably not ZTE.

Apparently, this effort has had some success and people are starting to buy their products from Nokia or Ericsson.  This means more as more people are starting to understand the connections between Huawei and the Chinese Intelligence Services.  We can remember that David Sanger at the New York Times said in 2014 that the National Security Agency went further than just guessing whether Huawei was actually doing this kind of thing.  It is not a great leap to suggest that is still going on.

President Rodrigo Duterte Plays Dangerous Game

Trying to play off China and the United States by pretending to  cooperate with both is a game a lot of dictators played in the Cold War.  A few of them ended up dead, since major powers of the world have little tolerance for this game, but others are allowed to get away with it for long periods of time.  Duterte has been playing it a little too long for his own good. 

The Wall Street Journal has a piece today on what is happening between him and Xi Jinping currently.  It seems they have forgotten all that money that China put into Duterte's home town and have moved on to joint oil exploration which has not made as much money as outright bribery has so far.  Duterte may not be as stupid as China is making him out to be.  He is dragging his feet on the joint exploration, knowing that the "joint" may not outlast his lifetime.  The Chinese can claim anything in the South China Sea and nothing the Philippines does can stop it.  That makes joint exploration a little risky for him.  He seems to be aware of that.  Smart man. 

US Asks Allies to Avoid Huawei

An article in the Wall Street Journal today says the US has asked allies to avoid Huawei network equipment (see posts on Huawei, below)  We forget sometimes that the New York Times, during the Obama Era used to publish articles on Huawei that told how we know what we know about Huawei.  The most important is shown in my post. 

We are not guessing about Huawei, or suggesting it might be possible for them to be up to something.  Somebody knows. 


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INTERPOL, Da

For a little while today as the Wall Street Journal has added, we thought we were going to have a Russian nominated to head up Interpol.  This is after a Chinese person was the last person out and he is under arrest in China.  I have never liked Interpol much, though they do have some coordination benefits.  They do issue warrants against a lot of people and ignore many of them knowing where and why they were issued.  I can't imagine a Russian official being in charge, especially the way Russia is toward its internal and distant enemies.  In the Ukraine they criminalized every official that did not agree with them and tried to get him/her arrested.  That didn't work because Interpol didn't honor those warrants.  They were good in Russia and any cooperating country.  That's all. 

Well, it didn't happen after a 12 hour panic period.  No Russians or Chinese. 

China's Stand on Unfair Trade Practices

Most of the news outlets reported that China and the US did not agree on a a statement for Summit of the Asia-Pacific Economic Cooperation (APEC).  CNN say this about the line in question:  The official said the most "problematic" line for the Chinese was: "We agree to fight protectionism including all unfair trade practices."  That could point to some very difficult areas of trade because one would think every country would agree with that statement.  China, of course, thought it was directed towards them, which it was. 

CNN also aptly points out that "China's Global Times, a state-sanctioned tabloid that often promotes hawkish viewpoints, released an editorial Monday stating that it was "not a big deal" that the APEC summit ended without a joint communique for the first time in a quarter of a century."  Perhaps the Chinese view of history is less in tune with other countries, but this is a big deal.  They want to stand on principle even when the principle is difficult to define, and clearly a moving target.  They are playing a game of chicken and they want to play that game out and see if they win or lose. 

Good Read

Wired Magazine. November 2018
The Asset, Garrett M Graff
How the Chinese steal, then accuse others of doing the same thing - whether they did or not.

I recommend reading this article which is long but well done.  It is mostly about collecting intelligence and trade secrets used in military technologies, and some dual use commercial products.  It fits exactly the scenario we have seen so often in the past few years.

You will remember the military members charged by the Obama administration.  When they got caught China made promises to cut back on this kind of spying.  But, they moved it to the security services where it was harder to detect, and went on doing the same kind of stealing in the name of "national security".  That was a hoodwink of President Obama.

I wasn't there - I didn't do it.

BBC had a story this weekend that certainly shows the risk of facial recognition software being used with data that is becoming more common.  Now, look at this technology in the context of what the BBC is talking about - fake news using the technology to put someones face where someone else's had been- and what is being done with voice recognition and generation.  Someone has the capability to put your face and your voice somewhere saying something you never said.  This is a concern, of course, but what we really need is software that can detect the substitution of faces and voices in content.  We have done great things with detecting fake photos and altered stills, but video and voice are a step beyond what we can do today.  It seems like the movie business could use something like this to find alterations to its movies that could not be otherwise detected.  I would pay for something that would find my image in any form on the Internet.  Is there such a thing? 

China Increases Government Censorship

China is expanding its censorship programs and increasing emphasis on companies to do better in censoring their own platforms.  As if they needed to do more than they are doing today, they have the most oppressive government censorship program of any in the world.  Getting better just means getting even more intrusive.  The downside to that is they are exporting this technology to places like Venezuela.  The US could help by disrupting this technology since quite a bit of it originated here.

Reuters is carrying a story today on the sentencing of an author, identified only as Liu, to 10 years in prison for publishing in an area that shows “obscenely and in detail described gay male-male acts...”  I don't read this kind of book anyway, but I do stand with authors who have difficulty (certainly understated in this case)  because of something they write.  It's fiction for heavens sake.

Book burning is always something that will wind up running against the government that does it.  It draws more attention to a book than other types of actions, like undermining sales through the publisher, are much less conspicuous.  This is a "message" sentence to other authors that this is not allowed and will bring a harsh and unjustified sentence because we can.  That will be an underground book for as long as Liu is in prison, and then some.  Banned books are sold in China more than they are elsewhere in the world.  Banning something always helps sales - as to prison sentences- though they are a hell of a way to get an idea across to others.

Keeping Secrets in Congress

When it comes to secrecy, there are few places better at it than the CIA.  They protect their sources;  their reports are highly classified;  they are independent and don’t pretend otherwise, especially since Gina Haspel took over and things got back to normal. 

But, the culture of Washington is so corrupt these days that the CIA can brief Congress on Friday, and before close of business the Washington Post has the story and is running with it.  This was, of course, the killing of Jamal Khashoggi. 

These are Top Secret briefings (if not that should change) and the number of Congressmen is relatively small who have that level of clearance.  I know the public perception is that Congress gets access to anything that is in print because everyone over there has a security clearance, but that is absolutely wrong.  I spent the better part of two years trying to make sure the Defense Department understood that basic idea. 

Congress needs to have a review of their procedures to handle and safeguard classified information.  It is done often, but without much affect.  This time, the two parties must decide if their country’s security is on a par with the ability of some elected officials to grandstand their way to prominence with the press.  Congress knows who is doing this, and congress can stop it. 

China Trade - the Short Version

The Annual Report for 2018 was published yesterday for the US-China Economic and Security Review Commission.  It reminds me that the Congress actually considered doing away with this Commission but changed its mind at the last minute.  This is a group that has led a good bit of the discussion and factual reporting on what China is really up to.  We have to wonder why anyone would want to stop funding it when the published work is so good. 

"The United States has unilateral, bilateral, and multilateral tools to address the Chinese government’s unfair practices. While these tools have been successful at targeting some discrete aspects of China’s industrial policies (e.g., a particular subsidy program or tariff), they have been less effective in altering the overall direction of Chinese industrial policy, characterized by greater state influence and control, unfair treatment of foreign companies, and pursuit of technological leadership using legal and illicit means. China leverages the attraction of its large market to induce foreign companies to make concessions (including transferring technology) in exchange for promises of access, while protecting and supporting domestic companies both at home and abroad."

This is one paragraph from a 536 page report but it summarizes what the trade negotiations with China are really about.  There is one more paragraph I wanted to mention since it applies to trade and to the South China Sea which is related:  

"Within its region, China took new steps to advance its sovereignty claims over disputed territory as President Xi declared in unusually strong language in his 19th Party Congress address that other countries should not have “the fantasy of forcing China to swallow the bitter fruit of damaging its own interests.” At the Party Congress, President Xi proclaimed the success of China’s South China Sea island-building efforts, while China’s military increased patrols near the Senkaku Islands and continued fortifying its position near the site of a recent military standoff with India. China made new efforts to deepen partnerships with Russia, Iran, and Pakistan - leveraging the relationships to challenge U.S. security and economic interests— and continued taking steps to expand its overseas military presence."

Any wonder why China would want to reduce the influence of this Commission?  

Google ReRouted to China, et al

Wow, what an interesting development in the world of Internet traffic.  Several news outlets are reporting an AP story that Google network traffic (certainly not all of Google traffic just that related to businesses) was rerouted though a Nigerian ISP, then to Russia and then to China.  That kind of routing does not happen by accident and it is the second time in two months that traffic has been rerouted to the ultimate destination of China.  Google says "no worries" because most of the traffic was encrypted, but the companies still do worry because that is a service disruption and they pay for service not promises of service. 

We should worry about COMCAST too.  COMCAST has had a boatload of service outages this past year and they don't seem to have redundancy or backups for a lot of their services.  It may not be the same kind of thing, but this is indicative of an infrastructure that needs work. 

The Pentagon and Strike-back

The Hill has a piece today  that talks about the Department of Defense sending up smoke screens around strike-back telling businesses that they might be violating yet to be defined rules of engagement in cyberspace.  This is ill advised but not for the reasons the Defense Department talks about here.  Defense should be educating businesses and not warning them about the possible policy violations that don't exist. 

Striking back against hackers is dangerous, for sure, but the policies of the UN and treaties between countries are hardly the reasons.  First, Defense has not been striking back at hackers and that is why too many of them are still hacking businesses.  They do it with impunity.  Defense does not feel a need to stop activities against commercial businesses, and they are probably justified in feeling that way.  Our military is not tasked with protecting businesses very often, though they do have the "commerce" clause that justifies them defending trade routes and commerce.  Nobody in the Federal government is charged with offensive actions to reduce the impact of hackers on US businesses.  That could be corrected, but it has not been. 

So, when hackers hack businesses there is nobody to hack them back to discourage the action in the future.  Some businesses go to Congress over this and try to get legislation that will authorize that kind of activity, when that too is not a very good approach.  Congress hates getting involved in this kind of thing, and has yet to pass legislation that would authorize strike-back. Congress does not want to authorize anything with potential liability attached to it.  If a business does strike back, they are on their own and suffer the consequences of retaliation alone.  This is ridiculous on both sides. 

If someone is going to stop hackers by disrupting their operations, we should designate an agency to do it, task them to do it, and prioritize the groups that we are going to hack-back on.  The activity does not have to be as overt as strike-back.  It can be covertly done so that hackers do not know what is happening to them, or who is doing it.  We disrupt and deny hackers the ability to continue unrestrained.  The Dutch have an interesting way of doing this by disrupting the websites that distribute tools that hackers use.  We need to do a lot more of the same kinds of things which businesses that have been hacked can help with. 

Second, businesses need to get their act together so they don't need so much defending.  Some of the companies that complain about government support don't do enough for their own protection - and I could name some big companies that habitually lose their designs and personal data.  Before you get help, do something for yourselves. 

US and China in AI Competition

The Wall Street Journal has a good article today on the race for AI dominance and it has some surprising observations from Oren Etzioni, chief executive of the Allen Institute for Artificial Intelligence in Seattle, and Tsuhan Chen, and a deputy president at the National University of Singapore.  The interviews were done separately and put together. 

Surprisingly, it looks like the experts agree that the US is in the lead in AI, though both have that academic qualifier "for now".  Things change. 

Part of the rise of China in AI is ready sources of data, especially in medical data, privacy data and biometrics on a large scale.  The US could not do what the Chinese have been able to do by ignoring privacy and collecting all kinds of data on people, their patters of life, and how they interact.  That data would be less available in the US. 

I have often commented on the foreign businesses that operate in China and cooperate in the gathering of data and the censorship of products and services that are connected to those people.  They allow themselves to believe that this is "just business" and that they can cooperate with China on the overwatch of their people, no matter how intrusive it might be.  In some cases it is more than just China, but China stands out because of the number of people who are potential customers.  It has some of the elements of the cooperation of industries with Nazi Germany or Japan prior to World War II.  Where is the line between "just business" and the cooperation with tyrants who don't have compliance with international norms?  Perhaps AI will sort that out, but somehow that doesn't seem possible. 

The Ugly Chinaman

In 1963, there was a movie called the Ugly American about a class of people of people who go abroad and run over the poorer countries of the world.  BBC has a reminder of that class of people in a story about Africa having substantial amounts of its debt held by China.  As far as debt goes, it doesn't sound like much when one says China owns 20% of the African debt.  But Djibouti, Republic of Congo and Zambia have concentrations of debt that are higher.  Djibouti owes China 77% of its debt load. 

These are infrastructure projects like roads, dams and the like, which the Chinese link to other commerce.  Buy Chinese trucks to do the transport, Chinese firms to build the dam, use Chinese ports for shipments and use Chinese workers where possible.  That escalates the amounts China makes in return for this debt, and creates leverage on countries which depend on China for their continued support. 

If they can't, or don't pay up on that debt, China is perfectly willing to refinance for a longer term or accept something of value in return - a port or a transport hub or a percentage of the marketplace.  Both the Chinese and the African countries know where this is going. 

Uighur Children Separated from Parents

The Atlantic has an article that is a real zinger to Muslims in China.  It is good reading.

It says the Chinese treat Muslims like their religion was a mental illness.  They have separated children from their parents and send them to schools where they learn how bad their parents have been.  This kind of forced separation is an interesting way to get to the end result they desire, but it sends a message to all Muslims that China does not have a good view of Islam.  I wonder how they can go to the Arab states or Pakistan for that matter, and say what good friends they are.  They talk out of both sides of their mouths. 

Ant Financial and Moneygram International, Part II

The Justice Department had an announcement today on Moneygram International that company that Ant Financial was trying to buy last year.  It seems that Moneygram had a consent decree to avoid prosecution for money laundering over a 5-year period beginning in 2012.  Had they complied, they would be off the hook by now.  Justice extended the agreement for another 30 months. 

It is hard to believe that a criminal complaint like this would not have been known to Ant Financial which would have been doing due diligence on Moneygram before they bought them.  It involved schemes to get older people to believe they were getting money under different pretexts and defrauding them.  That doesn't sound like money laundering to me, but I'm not sure how it was charged or if those are separate crimes. 

At any rate, we have to believe that Ant Financial is either really bad at doing due diligence, or that they knew Moneygram was into these schemes and didn't mind.  Certainly not good on either count. 

Hardware Counterfeiting

A small story in PC Magazine got my attention today because there is probably more to it than just the story being printed.  The story goes that Seagate is going to verify that its hard drives are "authentic" using a variation of block chain.  I'm sure the main audience of this user oriented mag thought this was a good thing for Seagate to do - and it is - but not for the reasons being stated. 

Why did Seagate think it was important to verify the authenticity of its hard drives?  Are there getting to be so many counterfeits that they are being hit by the loss of sales?  I went to see what was out there on this issue and found similar guidance by Western Digital as follows:

There are key areas where you can ensure you are getting a genuine external WD drive:

Manufacturing Date: When purchasing your WD hard drive, make sure it has a manufacturing date no more than one year from purchase.

Package Integrity: WD packages should have no marks, scratches or other signs of tampering. Original WD products come in WD packaging with a tamper proof sticker.

Serial Number: If there is any concern, verify your warranty below and enter your serial number of your product to check the warranty.

New WD hard drive nomenclatures: Check our website for the latest brands available and images of what the drive logo looks like. It should not have the word “Recertified”.

How to identify a counterfeit WD product

Incorrect packaging

Low quality printing on label

Improperly sized hard drive labels

Made up or incorrect product names. Visit wd.com for a complete list of WD products.

Low quality packaging/plastic or low quality printing on packaging/labels.

“Made in China”. WD only manufactures internal and external hard drives in Malaysia and Thailand.

Has a lower actual capacity than the capacity printed on the packaging or label.

If the price is too good to be true, it probably is.

Just how big is the counterfeiting market for hard drives?  It seems - so far in my Internet searches-  that most of the problem seems to be selling used drives as new.  Refurbished is not a term that is used on these drives but that is what it may be.  These small drives are not very expensive and it seems like they would not be worth reselling under any circumstances, but the vendors are pointing out how to recognize one.  My concern would be drives made in China that were not the brand they are sold under - a Shenzhen drive made as a Western Digital drive, when they don't make drives in China.  How do we know which drives those might be?  Maybe we can find out pretty soon because the vendors are getting better at making sure we can recognize a fraud when we see one. 

China Makes Do with Stolen Designs

If we ever wondered about the extent of China's theft of modern technology, we needn't look further than an article today in Business Insider where pictures show the current version of China's drone looks a lot like a couple of US versions of the same thing.  We should remember the first drone the Chinese used in this same air show, several years ago.  It looked exactly like the Predator.

The defense industry is very callous about protecting its designs, some of which include the ability to build that design on commercial machines driven by those stolen instructions.  China is not just stealing designs;  they are stealing the ability to build that same aircraft in exactly the same way the US does.  I used to think the industry was careless in how it protected that material in their IT systems, but I doubt that any company would be that careless out of ignorance.  They do not protect their own designs because that is how the industries are surviving on new upgrades and future designs which are then compromised to the Chinese. There seems to be no penalty for that kind of negligence.

Long ago a defector to this country taught me how this works.  The Russians were flying their missiles and aircraft in the open while US satellites came over, even though they knew they were there.  They continued to do it on purpose, knowing the US could see them.  We would then start new models based on what we saw the Russians doing.  We did the same thing, keeping the industries going.  How corrupt is that?

Note:  There was a short piece out today that says the Defense Department wants to put new clauses in contacts that will require better security, but my sources say that is being fought hard by Defense contractors.  DoD decided to use NIST requirements for systems processing government information and that is not what contractors want.  They haven't said what they do want.  This is going to be a fight that DoD will have a hard time winning.  Contractors will say the costs are prohibitive, but the government will say they are tired of paying for contractors' lack of security in new equipment.  It is compromised before it gets to the field. 

The $529 Cup of Coffee

There was a number in a BBC article today that staggered me for a bit.  Inflation there is astronomical, at a daily rate of 2300%.

2300% a day means a cup of coffee that costs $1 today will cost $23 tomorrow and $529 the next day.  Starbucks would not be a popular place by the end of the work week.  It sounds ridiculous but that is Venezuela’s inflation rate at 833,000 %.  That is an impossible number, being one that no country can survive for long.

In 1923, Germany was suffering from hyperinflation and costs doubled every two days. Nobody can live with that kind of inflation and Venezuelan people are leaving in droves.  Hitler rose out of that confusion in Germany and it would be nice to avoid that following form by the leaders of the current Venezuela.

More Detail on MSS Commercial Cyber Thefts

For reasons unknown, the Justice Department has decided to expand on their information provided about the theft of aircraft information by the Jiangsu Province Ministry of State Security.  Most of the elaboration focuses on how and where the Chinese hacked French industries to get what they wanted.  The previous announcement focused on the use of Chinese nationals who worked for the companies to steal the information, so that part may have been overstated in the original.  The article quotes  John C. Demers, Assistant Attorney General for National Security saying this was the third time since September that representatives from the  Jiangsu Province Ministry of State Security were caught stealing and about the only difference was the method used.  This one focuses on the hacking aspects, while the two others focused on the use of insider Chinese nationals who cooperated with the thefts.  This is not out of the ordinary for intelligence services, though getting caught that often is.  These guys are not very professional and are embarrassing China to no end.  They don't need this kind of publicity for their espionage at a time when it is the stated cause of the reluctance of the US to forge an arrangement with China to settle their differences over trade. 

China steals everything, but specifically those things that they do not have a technological lead.  Apparently, one of those things is aircraft engines where they are stealing from the US and EU at the same time.  They don't want to buy engines from us or the EU, but are willing to steal the technology so they can build them themselves.   This is precisely the point of the trade disputes with the US and should be the point of the same kind of dissatisfaction with the EU and China.  Why don't we see that? 

Micron and DRAM Technology Theft by China

There is a good deal of current information on the way China steals technology in the indictment of UNITED MICROELECTONICS
CORPORATION and FUJIAN JINHUA INTEGRATED CIRCUIT, CO., LTD.;
CHEN ZHENGKUN, a.k.a. STEPHEN CHEN;
HEJIANTING, a.k.a. J.T. HO;
WANG YUNGMING, a.k.a. KENNY WANG.

The indictment carries a long and extensive study in how the relationships, both business and personal are involved in an elaborate scheme to steal dram technology and use it for the profit of Chinese companies. 

China Says it Will Lower Tariffs

BBC covered President Xi Jinping at the Shanghai trade expo where he said China would be open to reducing tariffs and making it easier for foreign firms to get access to Chinese markets. 

I know we have heard this story before, but each time it repeats the news media makes it into a glorifying moment.  As the BBC points out, he did not say he was going to stop, or curb, stealing technology.  that will make it easier for companies to get into China but won't change the consequence of being there.  It goes to the rationale given by Steve Balmer, formerly of Microsoft, of selling software in a country where over 90% of the people who use it don't pay for it.  The 10% who do are a big number and, in spite of losing $10B a year in license revenue, the money that does come in helps the bottom line.  If they are going to steal it, we might as well benefit.  They will steal it whether we do or not.  Every businessman has some sympathy for that view, but it is one that keeps China ahead by stealing its way to success.  Businesses cooperate. 

China Feels the Backlash

In an opinion piece in the Wall Street Journal, which thankfully still separates its opinions from its news stories, Michael Auslin, summarizes the forces moving against China in what appeared to be a smooth progression to world economic domination.  It now looks like some of those initiatives have been shown to be less than good economics to those dealing with the Central government.  Malaysia and Pakistan have finally decided the One Belt One Road initiative was a financial trap that lured countries in but wouldn't let them out of bad deals. 

He mentions the "heavy handed" approach by the government in labeling Taiwan as part of China, and failed to mention the number of countries talked into disparaging Taiwan's independence, often using economic incentives as the price of political beliefs. 

Questions are being raised about China's real economic growth.  "Doubts about the country’s official 6.7% economic growth are widespread, while its massive debt burden, estimated at 300% of gross domestic product, raises alarms, especially within the private and state-owned-enterprise sector." 

In the meantime, the camps grow for the largely Muslim population in the Northwest, surveillance dominates the state view of its citizens, and it seems unwilling to change any of its approaches to accommodate its own people. While those are signs of the stamping grounds of revolution, Auslin sees that as unlikely.  Still, short of revolution, there is quite a bit of dissent that can manifest itself all over the world.  That makes domination so much harder. 

Ant Financial Nosedives

You have heard of Ant Financial but may not remember where from.  In December last year Ant was prohibited by CFIUS from buying MoneyGram, a US money transfer company.  I wrote about this extensively because it was reciprocity for Alibaba divesting itself of AliPay without telling its shareholders (read Yahoo!) what it was doing.  Alibaba owns Ant Financial too.  Things have not gone well for Ant Financial since. 

Ant had its worst quarter in its short life, ending last week.  It lost $353 million in three months. 

Russian Jamming Affects Commercial Aircraft

It seems the Russians are trying to interfere with the NATO exercises going on in east Norwegian Arctic airspaces, but true to form for them, they are jamming commercial aircraft at the same time.  They jam everything and let the civilians work things out for themselves. 

This is a good lesson to pilots that all that training they got on navigation included navigating without a GPS, just in case the equipment on the aircraft failed (This happened to my nephew once and he was the only one on the crew who remembered how to do it).  Without practice, you lose the skill.  The Norwegians who live close to Russia every day, still know how to avoid this kind of jamming. 

China Lowers Yuan

The Wall Street Journal has an article on the lowering of the Yuan to its lowest rate since 2008.  The Yuan is down against a basket of currencies by 2.4% but against the dollar by 6.7%, making Chinese goods cheaper in the US.  They speculate the trend downward will continue. 

Bolton Talks NSP Memorandum 13

John Bolton has edged towards more public comment on National Security Presidential Memorandum 13 which he says minimizes the “procedural restrictions on undertaking offensive cyber operations".  Ellen Nakashima, who has good sources in Cyber operations, wrote the piece for the Washington Post.  Quoting Bolton she said,"“The objective here is not to have unrestricted cyberwarfare. The objective is to create structures of deterrence by making our adversaries understand that when they engage in offensive cyberactivity themselves, they will bear a disproportionate cost.”

There are two aspects to this that I really do not like.  First, putting this kind of activity in the hands of Cyber Command is putting it in the military arm of government, something that is not wise since the telecommunications infrastructure is not military.  Second, making it less difficult to launch operations makes deconfliction with other intelligence related cyber operations more difficult.  One day we will look back on this and wonder why we ever put these kind of operations in the hands of military planners instead of the intelligence community. 

Steve Ballmer on China Theft of Software

Steve Ballmer, former Microsoft Chairman, was on Fox Business this morning talking about software being stolen in China.  His views on this were reflected in the decision to allow Microsoft to sell software in a country that stole all of it.  He was clear that all of it was stolen and would be stolen, even if Microsoft did not sell any software in China.  I always thought that was Bill Gates' idea - to sell software when they know that 90% of people who use it in China were not paying for it.   He thought the same might still be true.  So, sell what you can, knowing that the use of 90% of it would not be paid for.  It makes business sense, but as he mentioned, it also breaks the model of business operations around the world.  That part needs to be addressed.

China is a model of how a criminal enterprise works.  You can't bargain with a criminal enterprise, and you can't set agreements with one to stop some of its successful business practices and settle for less profit.  So, what to do?

The current administration has tried tariffs which is not likely to work, but makes a trade-off that is worth doing in the interim.  If China continues to steal everything, we might as well profit from their theft.  That is kind of how Microsoft was thinking in selling in a place they knew would steal everything.   Tax, though tariffs, works because the US gets revenue from everything that was stolen and manufactured in China, even though the consumers of those products are the ones that pay for it.  It makes manufacturing anything in China more expensive.

Ballmer said he did not know what would work.  I think there is something that would work, but it might be something we don't want to do.  Look at what it takes to disrupt a criminal enterprise. We can't destroy it, but we can disrupt it, and we do know how to do that.  Only history tells us that it takes a concerted effort, requires disruption in ways that use redefined laws to address the criminal enterprise way of operating, and infuse law enforcement with people who understand organized crime and how it works.  The enterprise will fight back, attacking the proponents of the strategies needed to combat this kind of crime.  It takes perseverance and political conviction.  Do we think we have that in the places where it is needed? Unlikely.