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To ban or to Banbury?

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RUSI Commentary, 7 December, 2018

The surprising announcement that Meng Wanzhou, deputy chair of Huawei’s board and daughter of company founder Ren Zhengfei, was detained in Canada on an extradition request from the US over allegations that the Chinese telecommunications giant may have exported US–licenced technology to Iran in contravention of US sanctions has come at a tumultuous time for the company. Earlier in the week, British Telecom stated that it intends to strip out Huawei components from the core of its 4G network. And this comes on the heels of a speech by Alex Younger, Chief of the Secret Intelligence Service, who warned against the use of the Chinese telecommunications firm in the development of Britain’s 5G network. Given the ongoing review being undertaken by the Department for Digital, Culture, Media and Sport (DCMS) and the National Cyber Security Centre (NCSC) seeking to ensure that Britain’s ‘critical national infrastructure remains resilient and secure’, it is clear that there has been a significant shift in both global and UK stances towards the company.

The perception that Huawei might be too close to the Chinese government – and its military signals department – has been there from the very beginnings of the company. It is partly a legacy, perhaps, of founder Ren Zhengfei’s prior career as a military technologist in the PLA’s Information Technology research unit. According to Philippe Le Corre, an expert based at the Harvard Kennedy School, Chinese state banks have been extremely generous to the company as it expanded its operations across key sectors of the European telecommunications market.

However, Huawei is perhaps also the victim of the past reputational damage caused by the first wave of Chinese companies and their international behaviour. Concerns about how private Chinese companies moved hand-in-hand with the Chinese state first arose in the late 1990s, when a US Congressional study – the so-called Cox Report – revealed how the Chinese state used family ties, social connections and party membership to get Chinese corporations to carry out industrial espionage across the US defence and information technology sectors. Unlike the Soviet model, which gave primacy to the official intelligence organs, the Chinese model preferred a widely dispersed approach, using front companies, non-intelligence agencies and individuals, educational research exchanges, and friendly Chinese companies.

It is only a small leap for those same companies to be pressed from carrying out industrial espionage to transferring data – especially when their business model is handling data. Indeed, Huawei was accused of hacking the African Union (AU) IT system it helped build – including computing, data storage, and WiFi. Servers were transferring data from inside the AU’s Addis Ababa headquarters to servers in Shanghai every night between 12 midnight and 2am. The fact that such practice has been codified in Chinese law, whereby Chinese companies are obliged to assist the nation’s intelligence agencies, puts paid to the idea that Huawei could resist pressure from Beijing.

This very concern was uppermost in the mind of Malcolm Rifkind when he oversaw the publication of an Intelligence and Security Committee report in 2013, Foreign Involvement in the Critical National Infrastructure: The Implications for National Security. This report and one published the year before by the US Congress Permanent Select Committee on Intelligence identified a number of systemic risks in allowing Huawei or ZTE – another Chinese telecommunications giant – to insert technology into the national network. First, it would allow the entity to modify or steal data from the government, private citizens, and corporations. While one might argue that China could simply hack those entities, the 2013 report quotes the Joint Intelligence Committee’s argument that network access ‘would be very difficult to detect or prevent and could enable the Chinese to intercept covertly or disrupt traffic’. Second, insertion of backdoor code or malicious hardware could allow an entity to shut down or degrade critical national security systems in a time of crisis or war. When one thinks of the importance of data on the UK financial network, one realises what a capable weapon this network access would be. Nor would this be a one-time risk, when 5G infrastructure is being laid down. Huawei also offers a service known as systems maintenance. This provides technicians with authorised access in the form of software updates and patches to glitches. Such access offers additional avenues for inserting malicious code.

Until this year, the British answer to such concerns was the creation of a Huawei Cyber Security Evaluation Centre (CSEC) at Banbury, which was staffed by employees and technicians from GCHQ who checked over all code and hardware used by Huawei in the United Kingdom. This has sought to mitigate risk and identify threat somewhat successfully for over eight years – until this past summer. This July, just prior to the announcement of the DCMS/NCSC review, the evaluation centre at Banbury issued a report which found that ‘shortcomings in Huawei’s engineering processes have exposed new risks in the UK telecommunication networks and long-term challenges in mitigation and management’. Whether this means that Huawei will be banned from developing 5G in the UK – as it has in the US, India, Australia and New Zealand – is unclear. It might well be that the UK mitigation model can adjust to the more severe levels of scrutiny required by 5G code. If we were to read into Younger’s speech this week, it would appear that the intelligence agencies have – for the moment, anyway – come to their own conclusions about the future viability of the CSEC system.

While there are no easy answers to the debate over Huawei, it is important to note that in asking for Meng Wanzhou’s detention and extradition, the US is sending its allies a strong signal about doing business with the company. Whether or not those reasons are fully substantiated remains to be proven. However, the conclusions of the 2013 Intelligence and Security Committee report are worth bearing in mind: ‘The Government’s duty to protect the safety and security of its citizens should not be compromised by fears of financial consequences’. While the chances might be low, the consequences of malicious infiltration by the Chinese state into our network would be disastrous.


Should the UK follow its allies’ lead and ban Huawei?

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CapX, 22 November, 2018

The news this week that the EU has provisionally agreed to screen foreign investments into its digital sector is an indication that worries about Chinese state-driven investment into the West’s digital infrastructures are growing.

The fact that Germany is now thinking of following India, Australia, and the US in banning the Chinese electronics firm Huawei from deploying or taking part in the construction of its 5G network puts immense pressure on the UK to follow suit. While the Department of Digital Culture, Media and Sport and the National Cyber Security Centre sent telecoms companies a letter earlier this month warning of changes that might take place after Spring 2019, when a security review is completed, media reports have played down the idea that it is aimed at Huawei or other Chinese telecoms companies.

However, the timing is auspicious, since according to media sources, the review was begun in July. While it is not clear the two events are connected, the Huawei Cyber Security Evaluation Centre Oversight Board also released its annual report in July, which found that “shortcomings in Huawei’s engineering processes have exposed new risks in the UK telecommunication networks and long-term challenges in mitigation and management”. Naturally, if the two are connected, it puts at risk the £3 billion that the Chinese telecoms giant has promised to spend in the UK over the next five years.

That such a review comes in the middle of the Brexit crisis seems ludicrous. Can Britain really afford to look this particular gift horse in the mouth?

This debate – one that is taking place between those who seek the nation’s fortune and those who commit to its security – is at full tilt this year, not only in Whitehall, but in the City as well. The possible ban is only the tip of the iceberg as the Government considers a proposal organised by the Business, Energy, and Industrial Strategy Department, to tighten restrictions around investments into sensitive sectors of the UK economy.

However, while the UK’s actions might seem perverse, it is actually behind the herd as various countries have begun to do the same. In July 2017, Germany tightened its investment restrictions over foreign firms attempting to take over companies that possess key technologies or to acquire parts of Germany’s “critical infrastructure”. This autumn, after a year’s debate, the EU provided similar investment screening standards and a mechanism for cooperation.

While this might look as though President’s Trump’s protectionist policies are having an effect across the global economy, the problem actually lies with China. Under President Xi Jinping, the Communist Party has begun to roll back economic reforms, particularly those around its state-owned enterprises. While they only make up five per cent of Chinese companies, such is their size that they account for one third of China’s economy and play a direct role in state strategy.

The controversial Made in China: 2025 policy – now absent from Xi’s speeches – revealed a bold strategy for China to fund its national champions to go out and acquire sector dominance in the supply chains of critical technologies. Many of these – like AI, quantum computing, and machine learning – have multiple usages, including those in military and security sectors. Were China to fund its companies to buy up or dominate its Western competitors, it would not only be breaking WTO rules, it would also have grave geostrategic implications for the future of the rules-based order.

There are those who see Xi as making a colossal strategic mistake by pushing state control over the Chinese economy. In his 2016 book China’s Future, noted China scholar David Shambaugh argues that  that Beijing’s existing policies amount to a “terminal cancer”. For Carl Minzner, an expert on Chinese law, the current situation “makes it easy to imagine Chinese politics devolving into a steady spiral of elite infighting, economic decline, ideological polarisation, and rising social unrest”.

Does this have anything to do with Huawei in the UK? Well, that’s the main question that the review is shirking, as it attempts to look at technical vulnerabilities. What it won’t consider is the wider domestic situation in China, where a new intelligence law requires Chinese companies and individuals to cooperation with Chinese intelligence organs at home and abroad. Article 11 from the legislation reads: “National intelligence work institutions shall lawfully collect and handle intelligence related to foreign institutions, organisations or individuals carrying out, directing or funding foreign or domestic institutions, organisations, or individuals colluding to carry out, conduct activities endangering the national security and interests of the People’s Republic of China”.

According to Australian intelligence sources, there is already evidence of Huawei collusion with Chinese intelligence in accessing a third country’s network. For British officials in Whitehall, this is all well and good, but the economic pressures of Brexit are difficult to ignore. There may yet be a halfway house that allows the UK to protect its infrastructure while reaping the benefits of Huawei’s technology.

The big question is whether the watchers can catch everything they are supposed to? What are the repercussions if malign code or back-door components are allowed into Britain’s digital infrastructure? What happens to Britain’s place in the Five Eye’s intelligence network if it is found to have been compromised? Outside the EU, London would not want to lose yet another important grouping over which it is able to understand global events and exert leverage in the “special relationship”.


Spying Chinese microchips give the West an electric shock

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The Times, Red Box, 9 October, 2018

Last week’s Bloomberg story that the Chinese military has been interfering in computer supply chains was like a bolt of lightning — and we are bound to hear the thunder rumble for some time yet. Around the world national security services will be scrambling to see if their own systems have been similarly compromised.

The fact that the infected parts made their way to CIA drones — presumably a highly-controlled procurement environment — means that the vulnerabilities were extremely well-hidden. Since they also allegedly went to online shopping firm, Amazon, China’s tiny chips are a giant Trojan horse wheeled directly into the international community’s trading gates and let loose. It is yet another example of how Beijing and Moscow are approaching the new Cold War against the west.

The question for governments like Britain that depend on Chinese-manufactured goods – is have they also been penetrated? Certainly, the prime minister’s concerns over letting China gain access to our nuclear sector in 2016 now seem justified. But what of our dependence on Chinese supply chains? All of our iPhones are made in China, and while the company’s press release sought to reassure us that none of their systems were compromised, it’s too soon to know for sure. All we know is that this is the beginning of a long investigation of Chinese-manufactured electronics. After all, If they could pull one over on the CIA . . .The story is not exactly new for the UK. In 2013, a report from the parliamentary intelligence and security committee warned that Chinese electronic giant Huawei’s provision of digital hardware to BT presented clear risks to British security. The report noted that while a compromise had been found while checking Huawei components at a centre in Oxfordshire, the amount of code involved would make it impossible to verify every bit of software. Now it seems the company might be in the running to help build Britain’s 5G network, despite having been blocked from providing digital infrastructure in the US, Australia, and India.

For those who don’t know, 5G entails a faster, tighter bundling of data that will massively improve the capabilities of the mobile internet, and in turn the use of artificial intelligence in transport, health, education, not to mention the development of “smart” cities. One reason that Huawei has been so instrumental in developing the technology is their championing of a Turkish code developer.Since 2008, when Dr Erdal Arikan invented polar codes, a number of countries have raced to develop the infrastructure indigenously. Not all are confident about the state’s role in rolling out this new technology: In the US, for example, the Trump administration rejected proposals for a “national effort” to develop 5G.

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In many ways, this has been an “I told you so, moment” for many security and tech experts. Chinese-owned technology has long been viewed with scepticism amid concerns over its close links with the state. George Osborne’s “golden era” of Chinese investment into the British economy — and the inclusion of its companies in sensitive parts of the UK infrastructure — is truly at an end. As Bloomberg reports, the US counterintelligence operation has found the Chinese government directly culpable, with individuals and two factories in China identified.

The impact is likely to be serious. It will destroy already-crumbling domestic support inside the US for halting the trade war — and will strike a fatal blow for Chinese electronics firms trying to enter the US market. Most of all, it will be a serious stain on the reputation of Chinese manufacturing firms and a major justification for the Trump administration’s insistence that manufacturing in critical industries needs to be brought home.

The next step in this saga is for the US intelligence community to share its findings with its closest intelligence allies. This primarily means Australia, Canada, New Zealand, and the UK; but also NATO allies in Europe and treaty allies in the Indo-Pacific like Japan, South Korea, and the Philippines. Washington should also share the technical data with non-ally security partners like India, Singapore, and Vietnam.

The most difficult part will be setting up mechanisms to screen electronic parts coming into the UK – after all, what isn’t made in China these days? What is now up for discussion — no matter how improbable — is the exclusion of certain Chinese firms from the UK and a search for other partners to develop the next generation of digital infrastructure. To do otherwise and to bury one’s head in the sand would jeopardise our national security, our personal data, and, ultimately, our intelligence partnerships.


What China could expect from a Global Britain

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The National Interest, with Rob Clark, 17 August, 2018

As India celebrates seventy-two years of Independence from the British Empire this week, a grand historical milestone for the ancient nation, it is notable to see the Royal Navy sailing in India’s waters once more—however this time it comes as an ally to India to sail together in an increasingly troubled world.

Pulled from its forty-two-year involvement in the European project, the United Kingdom has begun a major re-think of its global posture. What does Global Britain mean? Where might it best orient itself in relation to a growing Indo-Pacific region, where trade, rising powers, and naval grand strategies reveal a region that is increasingly a central part of the global economy and political center?

Stretching from the Gulf of Aden to the Malacca Strait, the Indian Ocean is vital to international trade and commerce, with 50 percent of the world’s maritime oil trade passing through every day. It is a global market that the United Kingdom cannot afford to ignore. The global significance of this region has seen many vested naval powers transit this ocean to maintain their own interests.

But rather than coming as an imperial trading power—as it once did—the Royal Navy is coming to the region under a liberal democratic trading nation. The United Kingdom seeks to uphold an open and inclusive rules-based order, an order where all have rights—not simply great powers. And this commitment is more than just rhetoric.

Over the past year, London has committed to three separate missions across the Indo-Pacific region. HMS Albion, Sutherland and Argyll have all made their way through the Indo-Pacific region this year to carry out sanctions enforcement against North Korea and to conduct freedom of navigation operations to counter the growing Chinese naval activity. These missions have revealed the role the Royal Navy will play in a Global Britain strategy.

The sudden and rapid rise of Mahanian strategies among Asia’s powers has seen sea lane security re-emerge as a major geopolitical issue after three generations of U.S. naval preponderance. The most active driver of change in the Indian Ocean has been the Chinese People’s Liberation Army Navy (PLAN). Far from its traditional sphere of influence of the first island and second island chains, the Chinese navy has rapidly established itself as a naval power in the Indian Ocean, and beyond into theMediterranean Sea . Beijing has done this by developing blue-water capabilities and a port strategy that secures its Beijing’s trade routes and energy supply line from the Middle East.

The emergence of China’s blue-water navy and greater power projection has complimented China’s long-term grand strategy of becoming the Asian hegemon, an ambition not lost on India’s ruling elite. Beijing has sought to ensure that “all roads lead to China,” with the Belt and Road Initiative (BRI) and the Maritime Silk Road projects. Furthermore, China has encroached upon the territory and neighborhood of the region’s fastest-growing power—India—developing economic dependencies with nearly all of New Delhi’s neighbors.

As powers that are dependent on Indian Ocean trade routes, liberal democracies like Britain and India (and others) will have to learn to manage relations with Beijing. This will include balancing some of China’s more predatory behaviors such as the debt diplomacy.

The Royal Navy and Indian Navy will also have to learn to operate in close proximity to the PLAN, which has rapidly up-scaled its presence in the Indian Ocean, with recent estimates indicating a presence of at least fourteen PLA Navy ships throughout August 2017, including SSN class nuclear-powered submarines, with that number rising throughout 2018. There have already been positive examples of recent UK-Sino naval cooperation, including the arrival of two PLA Navy frigates in London last year for a ‘goodwill’ visit. It is precisely from these exchanges that the Royal Navy—respected for its long traditions—can impart best practices and norms to the still-young PLAN. Possible areas of planned cooperation might take place in the anti-piracy missions and with humanitarian responses to natural disasters.

As the Indo-Pacific once again takes center stage in global politics, we will see China and India each attempting to stamp their influence on the international order. This does not have to be confrontational, of course. As part of a wider Anglo-American security alliance which helped construct the current global order, the UK has a vested stake in seeing that these changes abide by the current norms underpinning the rules-based international system. This includes respect for national sovereignty, freedom of navigation, and free trade.

As Global Britain approaches the Indian Ocean, it will work closely with all navies, including the Indian Navy and the PLAN. No doubt, it will work more closely with some more than others. And, of course, it will have to ensure that its resources match its ambition. Should Beijing’s quasi-imperial approach toward the Indian Ocean continue, the UK and other European powers will begin to lend their support to the India-Japan-US-Australia Quad.

Regardless of geopolitical trends, the Royal Navy will seek to support joint naval drills and uphold the maritime principle of freedom-of-navigation. Bolstered by its own bases in Duqm and Singapore, the Royal Navy will seek to cooperate with all, including the United States, Australia, Singapore, and India. Global Britain as a philosophy will promote a collaborative approach toward Beijing while aligning carefully with like-minded friends and allies

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