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There’s no way we can trust the tech arm of the Chinese state to run our communications

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With Bob Seely, MP, The Telegraph, 24 April, 2019

The decision by the National Security Council to greenlight Huawei’s limited participation in the construction of Britain’s 5G network is incomprehensibly short-sighted. It is a cyber Trojan horse. 

The NSC approval of some sort of half-way measure – which will allow Huawei to participate while limiting it to the periphery away from the “core” of the network – sounds reassuring. However, behind all the techno-babble is the hubristic argument that the UK Government believes that it can contain Huawei-related risks by technical means. Not only is this wrong, it reveals an approach to risk-assessment that is so narrow it is basically useless.

There are two vital questions that the Government needs to ask: What is Huawei’s relationship to the People’s Republic of China? And what are the risks to the UK – economic, security, and political – of including Huawei in its digital infrastructure? As far as we are concerned, from months of research towards a report that will be published next month, these questions have not been adequately answered.

We still lack enough knowledge about 5G to ascertain whether concepts about layered defence will still hold with the new system. There are arguments for and against the Government’s position, but not even the technical community is unified in this understanding. Indeed, the idea of merely allowing Huawei to build the 5G antennae has serious flaws related to the re-purposing of subcircuits.

We have been reassured that US warnings about Huawei are overblown because it is a “private” company. Huawei even invited scores of Western journalists to its massive campus in Shenzhen to share its heart-warming tale of the brave little firm that could, rising up against all odds to become a global powerhouse as an employee-owned firm. But this is simply not true. It is, to all intents and purposes, part of the Chinese state.

We know from the CIA’s briefings to its Five Eyes allies that Huawei is known to have been funded by Chinese state intelligence. It’s Chairwoman, Sun Yafang, between 1999 and 2017, worked for state security before assuming her role at Huawei. 

Why should all this matter? Because Huawei is to all intents and purposes a state-owned, state-directed, and state-funded entity. They do not operate on capitalist principles, often work in line with state strategic direction, and are unfairly subsidised, outcompeting the local firms. Huawei’s rise in Europe from 2.5 per cent market share to 25 per cent market share occurred at least in part because it had a credit line of £30 billion, allowing it to undercut European competitors by 18 percent. That’s not capitalism as we know it, that’s a state-funded monopoly. And it is a state-funded firm which is operating to China’s state agenda. 

Who controls communications will have great power over our societies in the future. Therefore, ownership of those communications structures, access to the information flows and the attitude toward human freedom, is paramount in shaping free societies in the 21 st Century and beyond. Huawei, whilst a private company, is the preeminent commercial communications firm of the Chinese state which, under Chinese law, must support the state’s intelligence work. By allowing Huawei to be a part of our hugely complex 5G networks, we take a risk with the future of free societies. How much risk is the question, not whether there is risk.

In all this, the risks are more varied and more concerning than simply network stability. They are economic as Huawei eats up Western 5G competitors; they are security-linked as Huawei maintains our networks, running our systems without transparency and without proper safeguards in place; and finally, they are social as Huawei enters Western society through our devices. 

Last year Australia blocked Chinese 5G providers. The US, Japan, and India appear to be doing the same. We need to be mindful of our alliances and security partnerships. In 2017, we learned that Western companies had misused user-data to impact a democratic election. These were companies staffed by people who were raised in Western liberal societies, who for the most part think that democracy is a plus. Huawei’s workers have grown up in an increasingly-authoritarian China that has planned a complex Orwellian techno-surveillance state for the past 10 years and is now on the cusp of rolling it out.

If we can’t trust our own high-tech firms, what’s to say that we can trust the corporate arm of the Chinese Party-State with our data, our security, and our values? The simple answer is that we can’t.


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”.


AUKMIN 2018: The Future of Global Britain?

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RUSI Commentary, with Milia Hau, 14 August, 2018

Britain and Australia face an uncertain strategic landscape. But there is much they can do together, as they deal with the two big powers which appear determined to change the current status quo: China and Russia.

The scene for the 10th annual Australia-UK Ministerial Consultations (AUKMIN) earlier this summer was visually stunning. Australian Foreign Minister Julie Bishop and Defence Minister Marise Payne met with their British counterparts, Jeremy Hunt and Gavin Williamson, at the Royal Botanic Garden in Edinburgh for the AUKMIN meeting. While the visuals were good, it was clear that both liberal democracies came to these negotiations nurturing some very serious misgivings about their strategic environment.

For Australia, it has been an annus horriblis, as it has lurched from one diplomatic spat with Beijing to another, all of them driven by Canberra’s belief that Beijing has been meddling in its domestic affairs and waging an influence campaign among the Chinese diaspora, as well as Australia’s own political elite. For the UK – apart from the running sore of Brexit – the year has been dominated by the Skripal incident in Salisbury, which saw the use of a nerve agent on British soil, resulting in the expulsion of 23 diplomats, and a crackdown on Russian oligarch investments inside the City of London. As these two neo-authoritarian powers become increasingly bold, both London and Canberra have had to deal with a US that is seemingly less reliable, or perhaps more transactional.

It has been an odd time for Western liberal democracies, as they have slowly begun to react to the new geopolitical competition that has intensified in the wake of 2014, when China militarised islands in the South China Sea, and Russia invaded and occupied Ukrainian territory. As a result, the AUKMIN joint ministers’ statement resonated with concerns for the rules-based order with a noticeable emphasis on the Indo-Pacific ‘which is open, prosperous, and inclusive’.

While there is a sensible debate on how far the UK can extend its resources to the region, a Henry Jackson Society report sought to argue earlier this year that the Indo-Pacific presents economic opportunities as well as geopolitical challenges. The region accounts for 60% of the global population and accounts for nearly two-thirds of global economic growth; it is – according to the IMF – the world’s most dynamic region by a wide margin. The decision of the UK and Australia to strengthen their track 1.5 Asia Dialogue last year recognised these dynamics.

How Australia and the UK decide to interact in the Indo-Pacific will become an essential part of the Global Britain strategy. The two states already cooperate in the Five Powers Defence Arrangements and both have growing defence and intelligence ties to Japan. Additionally, they might develop other nodes of regional cooperation, such as a potential Australia–France–UK trilateral, or the already-existing US–Japan–India–Australia Quadrilateral.

While there are serious concerns about the UK’s budgetary capabilities – witness the searing disagreement between Defence Secretary Gavin Williamson and Prime Minister Theresa May about alleged proposed cuts to defence this past June – the Indo-Pacific region does at least present economic returns. The agreement by London and Canberra to pursue an ambitious bilateral free trade agreement once the UK has left the EU and its interest in joining the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership are both opportunities, as is the budding defence industrial relationship. The recent revelation that the two signed a £20-billion deal for nine UK-designed warships might well be an indication of such returns.

As the region is set to lead global economic growth over the next 30 years, it makes sense for the UK to invest in capabilities and diplomatic reach in-region.

While distance still offsets the warmth found in the AUKMIN 2018, the fact is that working together can help both overcome this. The Royal Navy already has one base in Singapore. Perhaps basing rights might be exchanged between both navies; if successful, rights might even be extended reciprocally with the French, which have bases in New Caledonia and French Polynesia. In return, French and Australian marines may dock at British facilities in Singapore.

Another area that might be of mutual interest is that of the South Pacific. While it is a part of the world that few – if any – foreign secretaries think about, we could see this begin to change. Over the past few years, Beijing has been pouring money and developments into these tiny Pacific Island states. While development has traditionally been viewed as benign, the possibility of Chinese submarines docking at a recently built dock in Vanuatu – an island sitting on Australia’s shipping route to its ally, the US – has become a serious concern in Canberra this year. Britain’s decision to massively expand its economic and diplomatic footprint on Vanuatu, the Solomon Islands and Tonga will be warmly welcomed in Australia.

While it is true that the ‘tyranny of distance’ will keep the UK from becoming an Indo-Pacific regional power, Britain can become a significant player. There are multiple nodes of access available, including the Five Powers Defence Arrangements, the Commonwealth and the Five Eyes intelligence-sharing structure. One excellent bit of news from the AUKMIN Ministerial statement is the prospect that London and Canberra will begin coordinating much more closely on foreign direct investment into sensitive digital infrastructure, hopefully avoiding another debacle similar to that which occurred when London allowed the sale of a British data cloud centre to a Chinese consortium in 2017, causing the Australian Department of Defence to remove its data from the company.

Looking into the future, we see that the traditional picture of a US-led Western alliance confronted by Russian and Chinese authoritarianism has returned to mainstream global politics. Only this time, it is not always clear that the US will be as willing to ‘bear any burden’. This requires those great powers and middle powers to band together all the more tightly.


Explaining the Japan–Australia security relationship: it’s complicated…

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International Affairs Blog, with Tomohiko Satake, 13 July, 2018

During the Cold War, Japan defined its security policy by the Yoshida Doctrine — maintaining a low profile security posture while relying on the United States for protection based on the US–Japan Security Treaty. There was little appetite within Japan’s government or military for military-to-military relationships with other regional states. Yet the past three decades have seen a steady diversification of Japanese security partnerships, including with South Korea, Australia and India as well as with some ASEAN and European countries. Notably, these relationships were not meant to replace the still-dominant security reliance on the US–Japan alliance, but instead were part of a strategy — carried out in tandem with the US — which saw the two states moving away from its strict bilateralism to what Michael J. Green calls ‘federated capabilities’.

The case of Japan and Australia — a ‘quasi-alliance’?

In our recent article for International Affairs, we looked specifically at this rapid diversification of Japanese security partnerships from the perspective of Japan–Australia security cooperation in both the bilateral and multilateral contexts, including the US and China. First of all, it was apparent that while some referred to Japan–Australia relations as ‘quasi-alliances’, they were not, in fact, alliances at all, but merely examples of what Thomas Wilkins called‘alignment’. While these groupings have systematically set about developing ‘alliance-like’ characteristics — such as military interoperability, strategic consultations and institutionalized intelligence-sharing — they have carefully avoided the primary ingredient of alliances: defence guarantees.

We asked why political leaders in Tokyo and Canberra went to the trouble of developing such complex security relationships — one need only look at the general security of information agreement (GSOMIA) and the acquisition and cross-servicing agreement (ACSA), for example — while simultaneously avoiding the primary benefit of a formal alliance commitment to each other? Neo-realist theory would have us believe that as authoritarian China rose in the region and expanded its military hard power capabilities across the maritime space and trade routes of both states, Australia and Japan would either balance Beijing’s ambitions or bandwagon behind them. However, the actual record is more complex and sees political leaders adopting elements of both strategies. At times, Australia and Japan developed very close ties and seemed on the verge of committing to the relationship — as when Prime Minister John Howard offered Prime Minister Shinzo Abe a security treaty in 2007 or when, in 2015, both Prime Minister Tony Abbott and Prime Minister Abe began promoting a submarine deal in strategic terms, labelling theirs a ‘special relationship’. Subsequently, however, caution seemed to reassert itself in both cases and domestic factors inside both countries halted further progress.

Drawing from Tomohiko Satake’s 2011 article on the origins of the trilateral relationship between the US, Japan and Australia and from John Hemmings’ doctoral research, we developed a model for explaining this apparent discrepancy. Faced, for example, with a triple security dilemma, that pits them between (1) a security dilemma with China, (2) an abandonment/entrapment dilemma with each other and (3) a quite separate abandonment/entrapment dilemma with their mutual ally, the United States, Japanese and Australian foreign policy elites simply cannot tell what the optimum policy choice is. What we found, through interviews and by analysing government policy documents, was how bureaucratic coalitions within Canberra or Tokyo would push for given policies, prioritizing one or another of these three drivers. This meant that in some cases the two would align more closely — such as when a pro-alliance group prioritizing the danger of abandonment was in control of the tools of foreign policy — only to pull back after new bureaucratic coalitions, which promoted policies that engage with China and emphasized the dangers of entrapment, took power. This was apparent, for example, after the 2008 election in Australia which saw Kevin Rudd replace John Howard as prime minister, as Australia unilaterally withdrew from the US–India–Japan–Australia Quadrilateral (QUAD) and warned against closer defence engagement with Japan.

What does this mean for the future?

This model explains both the specific pattern of Japan–Australia security ties as well as the historically atypical alignment policies that are rising across the region, in which states begin implementing multipronged strategies to pair balancing with engagement. We see these states building evermore institutionalized security relations, while continuing to closely monitor their relations with Beijing. In academia, this dual-approach has become known as ‘hedging’. As we look to the future, instability and threats to the rules-based order are discussed not only in terms of Chinese assertive behaviour, but also in terms of the Trump administration’s challenge to the liberal international order. Given these circumstances, we must also ask whether our model will see even more non-committal alignments — particularly between medium-sized regional states — or whether China will be able to successfully restrain states from forming balancing alliances. Examples of these alignment patterns are to be found in the Trilateral Strategic Dialogue, created in 2002; in the creation of an Australia–India–Japan trilateral in 2015; and in the revival of the QUAD in 2017.

One interesting implication of our research is that, while abandonment concerns regarding the US engagement in Asia significantly encouraged Tokyo to seek closer ties with India, India itself has been less motivated by abandonment issues. Instead, internal debates in Delhi are more concerned with the risk of becoming entrapped between the United States and a rising China. This, combined with a fear of provoking a security dilemma and India’s longstanding ‘non-alignment’ foreign policy approach, has compelled some factions inside the Indian Ministry of External Affairs to eschew strong commitment to the QUAD. As we can see, this ‘commitment dilemma’ explains why all of these groupings see an ebb and flow of defence institutionalization, despite the fact that all share concerns about China’s intentions and growing military capabilities.

Should the US–China rivalry intensify, we might expect to see bureaucratic coalitions inside all four countries debate the prioritization of alliance commitments versus the prioritization of their relationship with China. Much of this has a mercurial dynamic, meaning that if any player decreases its security commitment to the QUAD, one will see a reaction from the others. If the Trump administration cannot sustain strong and consistent commitment to regional security, one might see a worrying shift in balancing behaviours by other QUAD members, with some reaching out to Beijing. The future of the QUAD therefore not only depends on Chinese assertiveness, but also on the appearance of US resolve to the defence of its smaller allies and partners. No doubt, this debate is occurring now at the domestic level.


Sydney Morning Herald, Latika Bourke, 30 June, 2018

“I think the British government has now woken up to the fact that the Chinese are not on our side on a number of issues,” [Lord] Howarth says.

John Hemmings, a close observer of China at the Westminster think tank the Henry Jackson Society, agrees.

“Despite Brexit, some aspects of UK government have quietly begun to shift into the new paradigm vis a vis a rising geopolitically ambitious China,” he says. “On the home front, they have begun to follow the lead of countries like the US, Germany and Australia in screening Chinese state-led investing into sensitive sectors of the economy.”

 


Chinese strategy in full force in Australia

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Sydney Morning Herald, with Dr Andrew Foxall, 3 June, 2018

Don’t be fooled by last week’s China Zhejiang–Australia Trade and Investment Symposium in Sydney. For all the positive spin put on the event, Canberra is increasingly wary of the influence Beijing reaps from its investments.

But China’s influence doesn’t flow solely from this. It uses a combination of diplomatic and political pressure, manipulation of its diaspora, illicit financing of political parties, and propaganda. According to some, Beijing spends up to US$10 billion ($13 billion) a year on its overseas operations. If this sounds familiar, it is because these are tactics taken straight from the KGB playbook Russia has followed for well over a decade.

Russia’s aim has been to portray itself as a great power on the world stage. Its tactics are often crude and short-term. China’s, by contrast, are slow-burning and systemic. Beijing’s ultimate ambition is to create a Sino-centric regional order, based around tianxia – an imperial concept that puts China at the centre of nations. This strategy is in full force in Australia.

The effects are striking. Former Labor foreign affairs minister and one-time NSW premier Bob Carr is facing demands that he be expelled from the party because of his deep links to China; he directs a think tank founded with a donation from a Chinese billionaire with close Communist Party links and is alleged to have enlisted Labor senator Kristina Keneally to use estimate hearings to ask pro-China questions. Last December, Sam Dastyari resigned from the party over his dealings with a Chinese billionaire.

Other opportunities to exert influence abound. China is Australia’s biggest export market, and Beijing is currently hampering imports of Australian wine and delaying a big meat-export deal. One-third of all foreign students at Australian universities are Chinese, and the families of Chinese students who have criticised their country while studying here have received warnings. China is now using lawfare and illegal occupation of the South China Sea in order to exert pressure on Australia and other countries who depend on its sea lanes.

Speaking last year, Malcolm Turnbull said that “our system as a whole had not grasped the nature and magnitude of the threat”. He was talking about the Chinese threat in Australia, but he could just as easily have been talking about the West as a whole.

In New Zealand, Jian Yang, a Chinese-born sitting MP, was investigated last year by the national intelligence agency in connection with the decade he spent teaching in military and intelligence academies in China – a fact missing from his CV. In Britain, China has developed arrangements with two major British newspapers, The Daily Telegraph and the Daily Mail, and pressured Cambridge University Press into censorship. Elsewhere, it has leant on a number of Western capitals to conform to its view of Taiwan as a province of China.

On the face of it, the threats posed by Beijing should be manageable; each relates to a particular issue that falls under the responsibility of a particular ministry of government. In reality, however, they are difficult to deal with. For the Communist Party, there is no distinction between its business executives, spies, police chiefs, media stars, crime bosses and its politicians. The same people play multiple roles. Everyone, ultimately, is on the same team. The similarities between China and Russia are obvious.

In a report released last week by The Henry Jackson Society, a London think tank, Robert Seely, a British Conservative MP, argues that the Kremlin is waging a “new kind of conflict … in which military and non-military tools are combined in a dynamic, efficient, and integrated way to achieve political aims”. In this conflict, Russia “makes use of at least 50 tools of state power”, ranging from assassinations and blackmail to cyberattacks and disinformation.

Although Seely calls this “contemporary Russian conflict”, he notes that the tools are also being used by other authoritarian states – including China.

Highlighting the threat is a start; the real question is how to deal with it. Unlike elsewhere, the debate about Chinese influence is at full blast in Australia. Duncan Lewis, the head of ASIO, recently told lawmakers in Canberra: “Hostile foreign spies are currently conducting harmful activity … on an unprecedented scale.” In response, Canberra is mulling tough counter-measures, which would require anyone acting on behalf of a foreign state to publically register their activities – akin to the Foreign Agents Registration Act in the US.

But, as Seely’s report makes clear, the questions raised by the behaviour of China and Russia are much broader. They relate to how Western states collectively defend themselves in an age when authoritarian states turn the freedoms of open societies against those same societies.

China is playing a game of divide-and-rule between Western countries as well as inside Australia. Its aim is to weaken individual countries – and, in doing so, make them vulnerable to Beijing’s influence. But as a member of the Five Eyes intelligence-sharing alliance and a NATO partner, Australia should remember that it has powerful friends.

Jeremy S. Maxie

Energy & Political Risk Consultant

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