22 October 2014

US Army Cyber Command Growing to Meet Shifting Foreign Threats

Felicia Schwartz
Wall Street Journal
October 15, 2014

Army Bolsters Cybersecurity Force Amid Shifts in Threats, Technology


Lt. Gen. Edward Cardon, commander of U.S. Army Cyber Command, speaks during the Armed Forces Communications and Electronics Association Cybersecurity Summit in Washington, D.C., on May 28, 2014. (Saul Loeb/AFP/Getty Images)Agence France-Presse/Getty Images

Cybersecurity threats are increasing in frequency and sophistication as technological advances make it easier to wage cyber attacks, according to the Army’s top cyber officer.

As recently as five years ago, would-be cyber attackers needed expert knowledge to take down systems and networks. Now, they can download tools to conduct these operations online, said Lt. Gen. Edward Cardon, commanding general of U.S. Army Cyber Command.

Gen. Cardon, speaking to reporters at the Association of the United States Army annual meeting on Monday, said threats are coming faster and are “increasing in volume and velocity.”

The Pentagon established the U.S. Cyber Command in 2009 to bolster the military’s cyber warfare and cyber defense capabilities. The command is overseen by Adm. Michael Rogers, who also is in charge of the National Security Agency, a military intelligence agency.

The Army created its own dedicated cyber branch in August, partly as a move to recruit and retain cyber specialists for the effort. To combat the changing environment, the U.S. Cyber Command is carrying out plans to recruit 6,000 cyber-focused personnel by 2016, and has already hired about 2,000 of them, Gen. Cardon said.

The Army’s Cyber Command, which falls under the U.S. Cyber Command umbrella, will move to Fort Gordon in Augusta, Ga., by 2019, and will break ground on its new headquarters there in 2016.

Gen. Cardon said the Army is working on ways to recruit and retain a highly skilled and experienced cyber workforce. The Army competes with private tech companies to recruit these workers, and is exploring innovative ways to do so, including making military hiring policies more flexible.

“As I’ve traveled around to the different tech companies, a lot of them would like to work with us, but they don’t want a permanent job with us. So right now the personnel polices doesn’t really allow us to do that, they don’t allow us to bring somebody in for a year,” Gen. Cardon said.

Changing this policy could help bring in more talent, and also allow the Army to be more flexible in recruiting soldiers with specific expertise based on current threats, he said.

Clear Strategic Thinking About Drones

BY MAJOR MATT CAVANAUGH
*Disclaimer: The materials published on War Council are unofficial expressions of opinion; views are those of the authors and not necessarily those of the US Military Academy, Department of the Army, the Department of Defense, or any agency of the US (or any other) government. *Note: Link to online cite guide


Note: Last week (on October 7, 2014) I had the privilege of speaking at the West Point Philosophy Forum on the subject of "Killer Machines" (aka drones). A representative version of my remarks follows:

First, you will note that I use the term "drones" instead of the US Air Force's preferred term of art ("remotely piloted vehicle"). I think the USAF's public relations people lost that one. All the major dictionaries go with "drones." So will I.

Let's start with the current debates; drones are everyone’s favorite punching bag. To some, they murder American citizens abroad as part of the country’s “Dirty Wars.” For others, they fundamentally undermine democracy. Charles Dunlap, formerly the Air Force’s top lawyer, argues that technologically advanced airpower of this sort is America’s asymmetric advantage. Civilians like them: drones provide overwatch in conflict areas for the United Nations, deliver packages in Germany (coming soon via Amazon “Air” to you), and make Hollywood cinematography even cooler. And it's not just the shots - it's the movie plots - the recentCaptain America: Winter Soldier sequel featured a villain's plan to create three giant "super drones" with global reach and strike capabilities to kill any terrorist, anywhere, at any time. Or the current season ofHomeland, where the main character, CIA agent Carrie Mathison (played by Claire Danes) has earned the nickname the "drone queen." And, as if he didn't already have everything, George Clooney even has a fleet ofdrones through his NGO.

Maybe we should take a step back and look at airpower more broadly.

Since November 1911, when an Italian pilot dropped three hand grenades out of his monoplane at some Turks in Libya, there have been two general conditions for success when using airpower.
Enemy moves in open terrain, no cover or concealment (i.e. desert)
Enemy has no air force or useful anti-aircraft weapons to speak of

The second has to be modified slightly with drones - defensive measures taken against drones are difficult when there is no threatened pilot and no will to deter. This can be initially frightening. Consider the British public's terrified response to Hitler's V-1 and V-2 rockets - which they called "pilotless planes." Today, drones can seem similarly invincible - they do offer marked operational advantages – they are persistent, precise, greater reach, provide force protection in unique places, and they are relatively stealthy (see Stimson Task Force Report on US Drone Policy, p. 18).

But they are not a dominant weapon – there never has been one and probably never will be. At varying times, the crossbow, dynamite, and nuclear weapons have been raised as potential war-winning weapons. They certainly shaped war, but did not have the power to end it. 

So we should start with the proposition that drones are simply another, arguably more effective and more efficient, variant of airpower. Drones are a tactical weapon that should be “neither glorified nor demonized.” So how should we think strategically about this new airpower tool?

Unfortunately, in invoking strategy, many look to simple “cost benefit analysis” (Stimson Report, p. 11). Journalist Tom Ricks prefers a different term, the "Law of Conservation of Enemies." Or, more famously, right here at West Point this past May 28, the Commander in Chief stated that in using drones, “our actions should meet a simple test: we must not create more enemies than we take off the battlefield.”

The problem with this analysis is that it considers each strike on it's particular tactical merits. For example, did “we” finish that engagement +1 or -1? We end up seeking a series of tactical victories in the hopes that the overall picture will end up favorable to “our” side. This is the rough equivalent of a football team measuring the net thrust of an offensive versus a defensive line (i.e. who pushed who in what direction, and how far). You can see how it might be a useful indicator, but must acknowledge that this only tells one part of the game's story. 

Obama, Please Leave "All Options on the Table" When Fighting Ebola

October 18, 2014 

"It seems that a better policy might be for the president to truly keep all of his (and by extension, all of our) options on the table with regard to the burgeoning Ebola crisis." 

Speaking at the Centers for Disease Control and Prevention in Atlanta on September 16, President Obama assured the American people that:

“our experts, here at the CDC and across our government, agree thatthe chances of an Ebola outbreak here in the United States are extremely low. We’ve been taking the necessary precautions, including working with countries in West Africa to increase screening at airports so that someone with the virus doesn’t get on a plane for the United States. In the unlikely event that someone with Ebola does reach our shores, we’ve taken new measures so that we’re prepared here at home.” [emphasis added]

Given the alacrity with which the Ebola crisis has unfolded, the above seems like an address from an altogether different era. As usual, the president and his speechwriters get no points for prescience. Only three days later on September 19, Thomas Duncan boarded a flight from Monrovia to Dallas. On September 30, the CDC confirmed that Duncan had contracted the disease prior to flying to Dallas. He died eight days later but not before passing the disease on to two of his nurses, one of whom, Amber Vinson, boarded a commercial flight from Dallas to Cleveland on October 10. She returned to Dallas three days later and is now being treated at Emory University in Atlanta. What makes the story even worse (as if that were possible) is that Ms. Vinson asked for, and received, a go-ahead for her trip from the CDC, though the CDC had initially denied that it had done so.

All the while, roughly 150 people from Liberia, Sierra Leone and Guinea continue to travel to the United States on a daily basis. According to the World Health Organization, there have now been over 9,000 people have been diagnosed with Ebola, of which only 4,500 have survived.

As if to allay concerns over the less than robust response by his administration, President Obama took what for him passes for resolute action and cancelled a fundraising trip to Connecticut and New Jersey ostensibly in order to monitor the situation from the White House. And for its part, while facing a difficult situation, the CDC is not exactly covering itself in glory. Consider this exchange between CNN’s Rene Marsh and the lamentably ubiquitous Wolf Blitzer on the CDC’s efforts to contact Ms. Vinson’s fellow passengers:

RENE MARSH, CNN CORRESPONDENT: …they are reaching out to those passengers -- we're talking about 132 people who were on board this flight -- to answer any questions and follow-up with them. They even put out this 1-800 phone number for people who were on board this flight. If they have any concerns, they could call the CDC. We dialed that number today and at last check, the wait time to get through, 390 minutes.

BLITZER: Three hundred and ninety minutes? There's obviously a problem that they have there.

Nothing, you see, gets by Wolf.

Opinions differ over whether a severe outbreak of the African virus will or will not hit the States. Writing in the London Review of Books this week, Harvard epidemiologist Dr. Paul Farmer wrote that “there’s little doubt that the epidemic will be contained in the U.S., which has the staff, stuff and systems” to prevent a large-scale contagion. Yet Laurie Garrett, a senior fellow for global health at the Council on Foreign Relations, seems to disagree. In a recentWashington Post editorial, she outlined five popular “myths” regarding Ebola, the first being: “Ebola won’t spread in rich countries.” According to Garrett, “no system of prevention is 100 percent,” warning further that “hubris is the greatest danger in wealthy countries—a sort of smug assumption that advanced technologies and emergency preparedness plans guarantee that Ebola and other germs will not spread.” So much for having the “staff, stuff and systems.”

The Real Ebola Threat

October 16, 2014 

West Africa may be at the center of the ongoing Ebola crisis, but the fear of the virus is pan-African. Much of the world sees Ebola as an African problem and Africans are beginning to internalize this perception as well. The continent’s response to the virus is seen domestically and internationally as a litmus test of the capacity and abilities of national governments which are using the crisis as a means to assure their citizens and international partners of their newfound capacities and crisis response potential.

In southern Africa, Zambia was one of the first countries to announce restrictions on travel from the Ebola affected countries in early August. Shortly thereafter, Kenya Airways halted flights to countries at the center of the Ebola epidemic.* South Africa, a major destination of travelers from West Africa, blocked visitors from the affected countries a few weeks later despite advice to the contrary from the World Health Organization. Namibia and Botswana followed suit soon after.

More recently, the continued spread of the virus has started to impact travel within Africa even outside of the Ebola hotspots. In late September, Namibia’s health minister advised Namibian nationals not to visit Zimbabwe due to Ebola fears. Zimbabwean officials in turn have encouraged their citizens to avoid all of West Africa, explicitly requesting that they cancel visits to popular Nigerian preachers.

Delving further into the Zimbabwe example, the Ebola crisis regularly makes headlines in the national press there. The country has adopted stringent Ebola prevention measures; including placing nearly one hundred travelers from West Africa under close observation for twenty-one days. Doctors and nurses have received Ebola training and a forty-bed Ebola treatment center has been established in Harare. Ebola has severely disrupted customary cultural greetings in West Africa and Zimbabwe’s minister of health has similarly advised Zimbabweans to avoid handshakes and other intimate greetings. From HIV testing centers in the high-density township of Chitungwiza, to Africa University near the border with Mozambique, Ebola awareness posters are common across the country, indicating that both the state and its citizens take the disease very seriously.

Despite the precautionary measures, rumors of Ebola deaths at several Zimbabwean hospitals have gained traction. As a result of these fears, there have been major cancellations of reservations in resort towns like Victoria Falls and postponement of public events. Opponents of the governing party have used the disease as a political tool, leveraging that with Zimbabwe’s decaying health infrastructure and susceptibility to diseases like cholera, Ebola is positioned to devastate the country.

Following successful containment efforts in Nigeria and Senegal, Ebola now appears to be confined to the countries of the Mano River Basin. However, the inadequate conditions that allowed the disease to spread in those countries can be found across the continent. Citizens of countries like Zimbabwe, vividly remember similar failings of their governments to contain impending disasters, such as the initial voices of dissent from war veterans that culminated in the violent appropriation of farmland and hyperinflation. For much of the world, Africa is seen as a monolithic block, and Ebola perceptions will tarnish the whole continent, not only the countries where people are suffering from the virus.

ON PRINCIPLED RESIGNATION [MILITARY]: A RESPONSE

BY THOMAS E. RICKS
October 15, 2014 
http://fortunascorner.com/2014/10/15/on-principled-resignation-military-a-response/

By Lt. Gen. James M. Dubik, U.S. Army (Ret.)

Best Defense guest respondent

Justice in the conduct of war sometimes demands principled resignation of senior political and military leaders. In this, Colonel Anderson is right. But while the current situation calls for a straightforward, no-holds-barred discussion between the president and his military advisors, the criteria for resignation are not present — at least not yet.

When fighting war, soldiers and their leaders are not mere instruments, automatons, or programmed killing machines. Even in battle, they remain capable of making moral judgments, hence retaining responsibility for their decisions and actions. This is what separates legitimate killing from butchery, murder, and massacre. And this is why Americans expect their soldiers and leaders to protest commands that would require them to violate the rules of war. Senior political and military leaders who wage war also remain moral agents. How well they identify war aims; choose the military and non-military strategies, policies, and campaigns necessary to attain those aims; and use their bureaucracies to take action and adapt as a war unfolds determine the length of a war, the costs of a war, and ultimately the success or failure of a war. To say it plainly, the decisions and actions associated with waging war determine whether the lives used in fighting are used well or in vain.

Principled resignation must meet two important criteria.

One, the matter must be more than just “disagreement with the final decision” or “feeling one’s advice is being ignored” or “not getting one’s way.” It must cross the threshold into illegality or immorality. Waging war becomes unjust when the lives of citizens in military service are being wasted. Part of war’s hellishness lies in this: war necessarily uses lives, and sometimes honest mistakes of omission and commission results in live lost in battle. But when lives are wasted in avoidable ways like promulgating manifestly inept policies and strategies, or conducting campaigns that have no reasonable chance of success because they are neither properly resourced nor connected to strategic aims worthy of the name — lives are not used, they are wasted. Senior political and military leaders are co-responsible for the lives of the citizens-now-soldiers they use in waging war. The purpose of the sometimes-heated dialogue among these senior leaders is to increase the probability of wise war-waging decisions and actions.

Central to this first criteria is Colonel Anderson’s claim that “without American combat troops…to physically clear the cities and towns that [ISIS has] occupied, we are in for a long and frustrating open-ended conflict that the American people will quickly tire of.” At the very least, this claim is debatable. This much is clear: without adequate numbers of combat advisors that enhance the capacity of Kurds and Sunni tribes, link Iraqi troops to well-targeted air strikes, help the Iraqis reconstitute their units, and help them coordinate and sustain a nation-wide air/ground counteroffensive, such a counteroffensive is unlikely to succeed. Also clear is the requirement for U.S. quick-reaction forces, medical-evacuation elements, and search and rescue forces to support the advisors who will be on the ground. But whether American ground combat troops are necessary to do the fighting is not clear at all. Also unclear is whether Americans will tire more of U.S. troops clearing cities and towns or of Americans helping Iraqis to do that. Regardless of who does the fighting, the counteroffensive will take long and frustrating years, U.S. assistance and commitment will be needed throughout, and some of that assistance will take the form of uniformed American troops.

5 Places Where World War Three Could Break Out

October 17, 2014 

Where the unthinkable could happen. 

It seems these days the world is literally on fire. Conflict continues on and off in Ukraine, there are tensions throughout the Asia-Pacific, Ebola is on the rampage, ISIS continues its bloody war of attrition throughout Syria, into Iraq and on and on. Yet, could something even worse be on the horizon—a conflict with more-severe global ramifications?

Before we begin this foray into the five places where World War Three could break out, I should note a few qualifiers and weasel words.

First off, what’s World War Three? As illustrated by the Ukraine crisis and the Obama administration’s struggle to define what is going on in Syria/Northern Iraq, “20th-Century Industrial War” is out of fashion and has been for some time.

Some of the predictions below envisage regime collapse that leads to war, while the specter of a terrorist WMD attack has the capacity to turn apocalyptic very quickly. That said, this might just be a phase: state-on-state violence will still be theoretically and practically possible as long as nation-states possess the means to expend blood and treasure.

That’s why most of the predictions below examine the possibility of conventional strike and counterstrike between nations. No nuclear-armed power—whether it is the United States, China or Russia—would accept defeat to a peer competitor in conventional warfare without then inflicting the maximum penalty on its opponent.

That is one very good reason why World War Three as we know it is unlikely to happen; it is also why all of the possibilities mentioned below involve nuclear-armed—or potentially nuclear-armed—entities.

North Korea vs. the World:

News out of Pyongyang over the last several weeks that Kim Jong-un is feeling unwell has reminded people that Northeast Asia contains its very own brand of extremist Kool-Aid drinkers. The smart line on North Korea is that its “provocations,” to use the accepted term, are graduated steps in a controlled game of escalation that Kim plays to receive concessions in the form of aid or economic largesse from the international community.

The current talks between North Korea and Japan over the longstanding abduction issue are just one particularly cruel variation on this, where Pyongyang is trying to leverage the political importance of the abductees in Japan at a moment where both sides are short of allies in Northeast Asia.

The “provocation” theory works fine until you realize that at the end of the day, North Korea is still developing a nuclear-weapons program and mobile systems to deliver atomic-tipped warheads. Meanwhile, South Korea is building its own deterrent in the form of the “kill chain,” which ambitiously proposes knocking out Pyongyang’s nuclear weapons before they can leave the ground. Throw in the fact that China appears to have lost patience—and more importantly, influence—in North Korea since the purging and execution of Jang Song Thaek, and the situation on the peninsula becomes a lot less predictable.

For sure, North Korea’s behavior is grounded in the absolute logic of regime survival. But if Kim dies or can no longer ensure that the Pyongyang elite benefit from his rule, then all bets are off.

China vs. India (vs. Pakistan)

The border confrontation between India and China that was finally de-escalated on September 27 after nearly three weeks is the latest illustration of just how uneasy relations can be between these two massive neighbors. The recent arrival of a PLA Navy Type 039 submarine in Sri Lanka—China’s westernmost foray with a submarine—is another sign that Delhi and Beijing’s strategic priorities may clash.

Other than history and bloody-mindedness, there is no real reason why the two countries would be destined to go to war. China has concluded a number of successful negotiations with its land neighbors over border disputes—theLine of Actual Control is the only remaining dispute, in fact—and India has the strategic position and military power to exert regional supremacy over the Indian Ocean Region (IOR). The natural borders of the Himalayas and southeast Asia have created geographical spheres of influence that should keep both sides happy.

Interview With Outgoing Head of GCHQ

Charles Moore
Daily Telegraph
October 11, 2014

GCHQ: ‘This is not Blitz Britain. We sure as hell can’t lick terrorism on our own’

On the outskirts of Cheltenham stands a huge circular building known as The Doughnut. This is the Government Communications Headquarters (GCHQ), the heir of the war-winning codebreakers in those little huts in Bletchley Park. The 5,500 employees monitor the communications of the world – in the interests, says the relevant Act, of national security, “economic well-being’’ and combating serious crime – but they do not communicate with us.

I pass through multiple security, traverse “the Street’’ that circles inside the edifice, and sit down to wait. I am the first print journalist ever to interview GCHQ’s director, Sir Iain Lobban. He is about to leave after six years in the top job and 31 in the organisation.

He is bursting to speak. Young Iain, a Southport boy fresh with a languages degree from Leeds University, began here in 1983. At that time, GCHQ was the dingy provincial sister of the big boys in Whitehall – MI5 (the Security Service) and MI6 (the Secret Intelligence Service). Today, thanks to the march of technology, it dominates. Foreign heads of government come on pilgrimages here. The director has a seat on the National Security Council (NSC). GCHQ is our most important global intelligence asset.

Yet just as everything got good for the boys in Cheltenham – this being the techie world, most still are boys – it also got bad. Last year, The Guardian published the information Edward Snowden had purloined from the US National Security Agency (NSA). Some of what he revealed compromised GCHQ: “He made my job a thousand times more difficult,’’ one man charged with cracking terrorists’ internet games tells me. At a time when Isil, also known as Islamic State, is a clear and present threat, the imperative is greater than ever. In the eyes of GCHQ’s critics, Snowden also revealed unacceptable levels of intrusion into the personal data of British citizens.

Sir Iain Lobban, left, shows Charles Moore around GCHQ

“When I heard the news,’’ says Iain Lobban, “I lay awake saying to myself: ‘I hope this isn’t a Brit.’” He asked colleagues if they suspected anyone in their departments (“Anyone on a protracted holiday?’’), but he doubted it because “We would have noticed something a lot earlier – red tags on the security file.”

Snowden was a contracted systems administrator without personal commitment to the NSA. Lobban believes that GCHQ “treats our contractors as if they are people. We wouldn’t ‘body-shop’ them,’’ so such profound disaffection is unlikely here. But if the leak had been British, he admits, “That would have been the end of me.’’ As it was, senior NSA officials came to Cheltenham and apologised to staff: “This happened on our watch.’’

So the man in charge is boiling with a mixture of pride in his troops and frustration at what has happened. I have never met a top bureaucrat so unlike Sir Humphrey – colloquial, boyishly showing off, passionate. He bounces into the room as if there are springs in his black suede shoes.

“Let’s get going,’’ he says, before the door has swung shut. We have four hours together, but he never stops. “It’s the awards first,’’ he says, and we join a party for staff members celebrating 30 years’ service. Lobban likes to hand out their medals in person, firing off jokey quiz questions about 1984, their year of joining (“Which Swedish group won the Eurovision Song Contest? No, it was not Abba. It was the Herreys with Diggi-loo, Diggi-ley”). Exact dates feature. They are a nerdy obsession of Iain Lobban. “I worked in America,” he tells me, “for three years, two months and 13 days.”

The atmosphere is merry. Sir Iain is “Iain” to all – though also, I notice, “Boss”. He has no director’s parking space and no office, only an open-plan desk “within shouting distance of the lawyers”. This is modern management style. But it also reflects a view dating back to 1914, when Winston Churchill, First Lord of the Admiralty, issued a charter to “Room 40”, GCHQ’s signals intelligence (SIGINT) ancestor. SIGINT’s unique importance, Churchill wrote, lay in getting inside the mind of the enemy: only then can you predict his actions, and secure your own communications against him. To achieve this, says Lobban, you must mirror what you are dealing with. In the Cold War, GCHQ mirrored the Soviet security structures. In the age of the internet, they must swim as freely as possible in its democratic soup.

Climate change threatens national security, Pentagon says

October 13

A snow-covered C-130 Hercules sits on the flightline at Yokota Air Base, Japan, during a snowstorm, Feb. 8, 2014. Increasingly drastic weather patterns and concerns over global warming are being scrutinized by the Pentagon, defense officials said in a plan released Monday. (Osakabe Yasuo/ U.S. Air Force) 

Drastic weather, rising seas and changing storm patterns could become “threat multipliers” for the United States, vastly complicating security challenges faced by American forces, the Pentagon said in a new report on the impact of climate change released Monday. 

The report, described as a “climate change adaptation roadmap,” included a foreword from Defense Secretary Chuck Hagel in which he urged the nation’s military’s planners to grapple now with the implications of a warming planet, even as scientists are “converging toward consensus on future climate projections.” 

“Politics or ideology must not get in the way of sound planning,” Hagel said. “Our armed forces must prepare for a future with a wide spectrum of possible threats, weighing risks and probabilities to ensure that we will continue to keep our country secure.” 

The plan was released as Hagel attended a conference in Peru with his counterparts from across North and South America. 

In remarks released alongside the 20-page report, Hagel said the Pentagon is nearly done with a survey that will assess the vulnerability of its military installations to climate change. He cited the Hampton Roads region of Virginia as an example of an area that has both military bases and recurrent flooding, adding that defense officials are developing plans to address a projected sea-level rise of about 1.5 feet in the next 20 to 50 years. 

The Defense Department developed a climate change working group in 2012. The Pentagon must assess the potential effects of the phenomenon on the frequency of disaster relief missions, additional military operations in the Arctic and instability within and among other countries, the new climate change plan says. 

“The Department will need to monitor these developments and decide which situations will require intervention based on U.S. security interests — either preemptively through security cooperation and capacity building, or with stability measures once conditions escalate,” the plan says. 

It isn’t the first time the military has examined the potential effects on climate change. The Navy, for example, released a climate change“roadmap” in April 2010, saying that while climate change probably wouldn’t lead to conflict on its own, “it may be a contributing factor.” 

For the Sake of Its Political & Economic Future, Iraqi Kurdistan Must Shake Off Its Dependence on Oil

Roger Guiu
October 17th, 2014

Iraqi Kurdistan is on the verge of a fiscal crisis. Given the autonomous region’s vast and untapped oil reserves, disputes over the right to manage these resources have sparked tension between Baghdad and Erbil. In January, Iraq’s central authority froze transfers to the Kurdistan Regional Government (KRG) representing its share of the national budget. The move came in response to the KRG’s back-channel oil exports. Since the governorate’s operations depend on budget transfers from Baghdad, the freeze has undermined the KRG’s ability to maintain local institutions.

The dispute between Baghdad and Erbil has coincided with a major outbreak of violence in Iraq. As a result of efforts to contain ISIS’s advance, the KRG has gained control of historically disputed territories to the south. Iraqi Kurdistan has also become home to half of Iraq’s 1.8 million internally displaced people, who have fled on-going violence elsewhere in the country.

Without funding and increases in expenditures, the KRG is unable to pay the salaries of government employees. It is also under severe pressure to continue providing public services to the populations under its control. These financial considerations have rekindled the underlying conflict with the central government over the KRG’s political autonomy. Kurdish authorities are pressuring a beleaguered Baghdad for increased independence, by leveraging hydrocarbons resources and recent territorial gains.

If the KRG breaks away from Iraq, it is clear that, fiscally, the Kurdish government would use oil revenues to offset the current annual transfers of $12 billion from Baghdad. In this sense, Kurdistan could be heading toward the same mistakes made by many oil-rich countries in the Middle East: becoming a rentier state dependent on a single revenue source. So far, public discourse in the region has not included discussions of a diversified development strategy beyond the export of oil. Without addressing this issue, however, Iraqi Kurds may achieve a weak and fragile independence.
Oil & Statehood

Should the option be available, any fledgling government would jump at funding public finances through the development of natural resources. For the KRG, oil revenues also provide a short-term solution to the ongoing fiscal crisis (although they are, in many ways, also the cause of this crisis). Since May, the KRG has been transporting oil to Turkey’s Ceyhan seaport for sale at discounted rates to undisclosed buyers. The KRG’s decision to sell oil on its own, instead of through the central government, is a legally dubious one. Baghdad claims that only the Federal Ministry of Oil is the only one entitled to sell the crude and has threatened to take legal action against potential buyers of Kurdish oil. The U.S. government’s seizure of an oil tanker chartered by the KRG near Texas is a clear example of the lengths Iraq’s government is willing to go to ensure that Erbil does not circumvent its authority.

To offset budgetary transfers from Baghdad, oil production levels must reach 450,000 barrels per day, according to estimates made in June of this year. Minimum levels are likely even higher now. Kurdistan lacks the infrastructural capacity to produce or transport oil at such levels. Exacerbating these limitations, development projects in the region are threatened by the on-going violence.

Separate from these logistical problems, Kurdish authorities are pursuing a political vision that is fraught with risks. Years of empirical research have shown the inherent shortcomings of development policies dependent on oil revenues. These include the disruptive impact oil price volatility has on state finances and political stability. Agricultural and manufacturing sectors also become less competitive, as domestically-produced goods tend to experience price hikes in oil-dependent economies. Unproductive rents, like income from oil, also make governments more likely to apply public funds to magnificent infrastructure projects with little use or value to average citizens. Oil rents help sustain and nurture unaccountable governments, which can buy popular allegiance or complacency through cash handouts to citizens.

But vast natural resources do not inherently condemn a country to the resource curse. This negative outcome can be avoided in Kurdistan, if the government prioritizes the quality of its governance mechanisms and carefully thinks through how to use its oil reserves.

Neglected Reforms

Unfortunately, however, it appears Kurdistan is already showing signs of the resource curse. Apart from its oil industry, many economic sectors in the KRG are largely underdeveloped. While real estate development is rapidly increasing in urban areas, thishas not been accompanied by public investments in areas critical to economic growth, including transportation, communications, and energy facilities. Financially, the currentdrop in oil prices has also exhausted both Kurdish and Iraqi coffers. Also, some commentators have already expressed concerns over the democratic environment in Kurdistan, where the government has used oil rents to seek legitimacy and average citizens do not play a role in sustaining the region’s civic and political institutions.

Sustained development requires responsible investment. In many ways, the KRG is trying to build a state without the changes required to put Iraqi Kurdistan on a development track similar to other successful, emerging economies. The institutions that underpin healthy economic growth require governments to diversify public finances, such as through the adoption of an appropriate taxation policy, rather than relying solely on oil revenues. The government must use its revenue sources, whether from oil or taxes, to finance the right kinds of investments.

SWITZERLAND: TAX BREAKS FOR RICH FOREIGNERS UNDER FIRE – ANALYSIS


By Samuel Jaberg


Lump sum taxation, the tailor-made measure tax regime designed to attract wealthy foreigners to Switzerland, is facing a crucial test as voters head to the polls on November 30 to decide whether or not to abolish the system for good.

Proponents of the initiative say lump sum taxation is unfair and opaque, while opponents fear Switzerland will lose in attractiveness and suffer a mass exodus of wealthy taxpayers should the system be abolished.

Those taxpayers, the so-called “tax exiles”, include big names like British rock star Phil Collins, Formula One driver Lewis Hamilton and Russian billionaire Viktor Vekselberg. All benefit from the system of lump sum taxation which sees some 5,600 foreigners without a revenue-raising activity in Switzerland taxed solely on their spending and not on their revenue or real fortune.

But succumbing to a wave of public pressure, lump sum taxation, which boosted federal, cantonal and local coffers by some CHF700 million ($733 million) in 2012, has already been killed off in five of the country’s 26 cantons in recent years.

The system no longer exists in Zurich, Basel City, Basel Country, Schaffhausen and Appenzell Outer Rhodes.

However, St Gallen, Thurgau, Lucerne, Nidwalden and Bern, have voted to keep the system, albeit with tougher eligibility conditions.

Leftwing initiative

At the end of November, a nationwide vote will decide whether or not to deliver the knockout blow to the system of taxation that was originally created as a means of taxing wealthy English who retired to the Lake Geneva region at the end of the 19th century.

Dubbed ‘End tax breaks for millionaires (abolish lump sum taxation)’, the initiative was launched by the leftwing Alternative List groups, supported by the centre-left Social Democrats, the Greens and the trade unions.

They argue the preferential regime is arbitrary and contrary to equal rights enshrined in the Swiss constitution.

“Lump sum taxation has led to an intolerable climate in Switzerland. It is not acceptable that somebody who is middle class pays more taxes than a foreign millionaire or billionaire living a couple of kilometres away,” says Senator Christian Levrat, who is also president of the Social Democratic Party.

But the initiative faces strong opposition from the right and centrist parties.

The lump sum system was originally devised to prevent double taxation of assets spread over multiple countries. Many rich foreigners living in Switzerland either earn their income abroad or hold some of their wealth there, and are also taxed in other countries accordingly.

The use of lump sum taxation has been favoured in recent years primarily by cantons known for their favourable climate and environmental conditions.

Vaud, with 1,396 cases in 2012 uses the regime the most, followed by Valais (1,274) and Ticino (877), Geneva (710), Graubünden (268) and Bern (211).

According to its opponents, the initiative represents an intolerable attack on federalism and the autonomy of cantons to determine their own tax statutes.

“Each canton should be able to decide its own tax system and adapt it according to its individual situation. Other cantons have for decades attracted foreign multinationals by offering tax breaks. Is that more ethical?”, argues Fournier.

But the left argues the system creates a kind of competition between the cantons that is akin to dumping.

21 October 2014

The Role of Nuclear Energy in Pakistan's Energy Crisis and its Strategic Implications - Part 1 of 2


Ramya P. S., Junior Research Fellow, International Strategic and Security Studies Programme, National Institute of Advanced Studies (NIAS), Bangalore.


The burning issue under which Nawaz Sharif ran his election campaign last year was Pakistan’s economic debt and its acute energy shortage. The energy crisis gripping the nation has not only resulted in long hours of power shortages and load shedding but has adversely impacted the economy with commercial sectors and industries facing the brunt of the energy crunch. The fertilizer industry for instance has faced setbacks due to the irregularity in the supply of gas, leading to imports of fertilizer when in reality Pakistan has the capacity to produce the same.[i]

The crisis has caused a major setback to the economy with concerns being raised due to the increase of the circular debt. Significantly, debt is being incurred as a result of theft and power losses. The circular debt has reached over Rs.300 billion and several transformers such as in Lahore have defaulted adding to the Government’s woes.[ii]

However, this internal crisis of Pakistan is taking a significant strategic turn. In August, it was reported that China may help Pakistan to operationalise a 1 GW nuclear power reactor at Karachi.[iii] This raises concerns in India because the nuclear cooperation between China and Pakistan has been strengthening with the addition of reactors to both the Chashma and Karachi nuclear plants. Therefore, the questions to be asked are: how far is Pakistan going to promote its civilian nuclear industry in the light of an energy crisis and more significantly, how far would such a policy impact the regional security dynamics?

Energy Shortage and Nawaz Sharif’s Policy

Owing to the circular debt and intensive load shedding Pakistan is now placed in a precarious situation on the energy front. Pakistan is highly dependent on thermal power which contributes to around 67 per cent of electricity generation. It gets electricity from hydel (30 per cent) and around 3 per cent from nuclear power.[iv] High dependence on thermal power has led to an increase in prices and made it dependent on international oil prices, which are prone to volatile price fluctuations.

Presently, the energy shortage has touched nearly 6,000 MW in April 2014 leading to load shedding for over 12 to 18 hours.[v] Fuel shortages, delays in subsidy payment by the Government and the lack of private players and investments have led to such a severe shortage. Although, Pakistan has hydropower potential (both tapped and untapped), which is cheaper than thermal power, it remains poor in power generation because of the capital intensive nature of constructing dams. Furthermore, poor policies have increased the shortage.

The policies implemented by successive governments in Pakistan have proved ineffective as they do not address the core concerns of enhancing efficiency of existing power generation units, a lack of institutional arrangements and implementation of policies without proper assessment has contributed to the existing shortage. For instance, the policy to shift from oil to natural gas without properly assessing the reserves of natural gas has led to increased reliance on oil for thermal power generation, increasing the prices per unit.

However, the new energy policy outlined by the Sharif Government has goals set across a three-year period and focuses on the principles of efficiency, competition and sustainability. It aims at reducing supply-demand gap to 0 from 4500-5000 MW per day by 2017, slashing the generation cost of each unit to 10c/ unit from 12c/unit by 2017, lowering distribution and transmission costs by 16 per cent etc.[vi] This policy like the energy policy of 1994 seeks to meet the goals by encouraging local and foreign investments. The need for investments in this sector is high and the Government has sought to reduce subsidies to increase foreign investment and decrease the likelihood of circular debt occurring again.

Nuclear Energy and Sino-Pakistan Nexus

In this scenario of energy shortages and heightened need to invigorate the economy of Pakistan, the Government has been looking to expand its options to generate power from different sectors. One option has been, to emphasise the civilian nuclear sector of Pakistan. This came to light with the Sharif Government signing an agreement with China to finance a nuclear power project in Karachi worth 9.59 billion dollars and is said to produce about 2,200 MW.[vii] More recently, the alleged operationalization of a 1 GW nuclear reactor is increasing India’s concerns. This deal is unique in many ways as such a reactor comes under the ambit of new technology and the growing cooperation between the two nations in this sector. Moreover, such a deal would have immense strategic ramifications because it has been reported that diversion of nuclear waste from such a large reactor for re-processing would be easier since the protocols followed for standard reactors are not applicable to the 1 GW reactor.[iii]

Cooperation between China and Pakistan in the nuclear sector has been deep, with the former being responsible for constructing the Chashma Nuclear Plant which consists of CHASNUPP 1 and 2. Moreover, the construction of a third plant CHASNUPP-3 began in 2011 and that of CHASNUPP-4 is set to begin soon. Significantly, for the first time China has agreed to export the new pressurised water reactor (PWR), ACP 1000. This has raised international concerns due to proliferation threats. Although, some analysts believe that Pakistan would refrain from diverting plutonium towards for it nuclear weapons programme as it would jeopardise its ongoing cooperation with China. Furthermore, Pakistan maintains separate military nuclear reactors at Khushab complex in Punjab which requires plutonium rather than the PWR being provided by China.[viii]  However, proliferation concerns persist because the spent fuel from Kushab is reprocessed at separation plants in Chashma and Nilore which remain outside the purview of IAEA safeguards.

These deals with China by the Pakistani Government are seen in the light of the Indo-US civil nuclear deal of 2005, following which Pakistan has sought a similar deal for itself without success. When news of these deals came to light concerns were raised regarding proliferation by the international community, owing to Pakistan’s previous track record on the matter. The US has debated the nature of this deal at the Nuclear Suppliers Group (NSG). Although, the Chashma plant comes under the IAEA safeguards Pakistan is not signatory to the Non-Proliferation Treaty (NPT) and the full-scope safeguards by the IAEA are not applicable to it. Therefore, according to the NSG guidelines members of the international community have maintained that China cannot transfer the technology to Pakistan. However, China sees the deal as a ‘grandfathered’ extension of the previous deals it signed with Pakistan prior to becoming a member of the NSG.

The financing by China of the nuclear power projects within Pakistan depicts how China is trying to develop and mature its nuclear sector with Pakistan being its loyal client. China is also involved heavily in supplying nuclear components to the US, Britain and also has struck nuclear deals with Australia and Canada, depicting the scope of China’s nuclear industry.[ix] Concerns regarding proliferation have become pronounced following the expansion of the Karachi plant (two more nuclear power plants) under the current Government. This has also led to fear among the domestic public as it may threaten their livelihood. West of Paradise Point where the reactors are to be constructed lays the village Abdul Rehman Goth, wherein the fishermen are being restricted from entering the water close to the construction site.[x]

Disclaimer: The views expressed in this article are personal.


[i]Shabbir H. Kazmi, “Pakistan’s Energy Crisis”, The Diplomat, August 31, 2013, http://thediplomat.com/2013/08/pakistans-energy-crisis/1/, (accessed on June 2, 2014).
[ii] Zafar Bhutta, “Power Crisis: Khawaja Asif Looks Heavenward”, The Tribune, July 15, 2014, http://tribune.com.pk/story/735805/power-crisis-khawaja-asif-looks-heavenward/, (accessed on July 15, 2014).
[iii] MadhavNalapat, “China Gifts Pak Mega Nuclear Power Plants”, The Sunday Guardian, August 2, 2014, http://www.sunday-guardian.com/news/china-gifts-pak-mega-nuclear-power-plants, (accessed on August 3, 2014).
[iv] Mirza Hamid Hasan, “An Overview of Pakistan’s Energy Sector: Policy Perspective”, in Solutions for Energy Crisis in Pakistan, (IPIR: Islamabad, 2013), http://ipripak.org/books/secp.pdf, (accessed on June 7, 2014).
[v] Ahmad Fraz Khan, “Power Shortage Leads to 12-18 hours of Loadshedding”, Dawn, April 11, 2014, http://www.dawn.com/news/1099086, (June 14, 2014).
[vi] “National Power Policy: 2013”, Government of Pakistan, 2013, http://www.ppib.gov.pk/National%20Power%20Policy%202013.pdf, (accessed on June 25, 2014).
[vii] Salman Masood and Chris Buckley, “Pakistan Breaks Ground on Nuclear Plant Project with China”, The New York Times, November 26, 2013, http://www.nytimes.com/2013/11/27/world/asia/pakistan-breaks-ground-on-nuclear-power-plant-project-with-china.html?_r=0, (accessed on June 18, 2014).
[viii] Mark Hibbs, “Power Loop: China Provides Nuclear Reactors to Pakistan”, Jane’s Intelligence Review, (IHS: USA, 2014), http://carnegieendowment.org/email/DC_Comms/img/JIR1401%20F3%20ChinaPak.pdf, (accessed on August 28, 2014).
[ix] Hasan Ehtisham, “China has Safe Grasp on Pakistan’s Civilian Nuclear Market”, The Global Times, February 25, 2014, http://www.globaltimes.cn/content/844615.shtml, (accessed on June 18, 2014).
[x] Shadi Khan Saif, “Fears Raised over Pakistan’s Nuclear Dreams”, Deutsche Welle, July 2, 2014, http://www.dw.de/fears-raised-over-pakistans-nuclear-dreams/a-17507182, (accessed on July 9, 2014).

Safety and Security Concerns Regarding Pakistan’s Nuclear Energy Policy

Safety concerns with regard to the expansion of the Chashma plant came to light soon after the Fukushima incident in Japan, especially in the light of supposed faulty design of the plant modelled after Qinshan I. Moreover, China over the years has improved the design of Qinshan I and approached other countries to construct new nuclear reactors within China rather than building more of the same type.[i] This has further raised concerns as to how safe the design of Chashma nuclear plant is in reality. The expansion of the civilian nuclear sector in Pakistan has made India uneasy especially taking into account the lack of safety associated with the Chashma plant which is geographically close to India’s Punjab. A nuclear disaster in this case would not only impact Pakistan but the impact on India would be equally dangerous.

Concerns in terms of the overall safety of the nuclear plants and a possible leakage from the Chashma plant as reported in the case of the KANUPP plant therefore still linger. Such a scenario could lead to groundwater contamination in Punjab, which forms the agricultural hub of Pakistan and could cause major problems for India’s neighbouring states. Moreover, many studies have shown that several districts within Punjab have highly contaminated ground water consisting of arsenic and fluoride in over 18 districts.[ii] Although this contamination is not related to any nuclear related leakage, the possibility of such a disaster exists. Such concerns are fuelled by the lack of data released by the PAEC on the geological and geophysical surveys around the Chashma site. In fact, certain reports suggest that the US NCR (National Regulatory Commission) guidelines have not been met during the construction of the plant in the case of an earthquake.[iii] Moreover, when the plant was constructed, China’s lack of experience in the field intensifies safety concerns.

The issue of security has become crucial especially with KANUPP facility which came into operation in 1972, outliving its shelf-life. The ageing plant was given a ten year extension and raised alarms when an emergency was declared following a radiation leak. In the 1990s as well, radioactive cooling water reportedly leaked but the accident was downplayed by the Pakistani Government. The Pakistan Atomic Energy Commission (PAEC) Chairperson Ansar Pervaiz maintained that the Karachi plant was safe in the case of a nuclear disaster and ‘can remain unaffected in every season’.[iv] He further cited the Chashma plant as an example to depict the safety of Pakistan’s nuclear plants. Also, a US study conducted in 2014 on worldwide security of nuclear material ranked Pakistan 22 out of 25 countries and stated it as ‘most improved’ country out of nine nuclear armed states at safeguarding nuclear materials.[v]

Although, the strategic nature of Sino-Pakistan cooperation on civilian nuclear power is stark, Pakistan for its part maintains that nuclear power is crucial to resolving its existing energy crisis. PAEC Chairperson pointed out that renewable energy sources were only ‘appetisers’[vi] to solve the energy shortage and increase the need for nuclear power. From 2000 to 2012 Pakistan’s nuclear sector saw an annual growth of 15.7 per cent on the grid installed capacity.[vii] The PAEC claims it seeks to augment the nuclear energy output to 8,800 MW by 2030 while, the current nuclear power output is only 750 MW of the total energy output. Therefore, nuclear power is being seen as a viable option to solving Pakistan’s existing energy crisis, although roadblocks exist in terms of funding, the lack of indigenously developed industry and imposition of external sanctions and embargoes.

Conclusion

Nuclear power is not the only solution to the steep energy shortage facing Pakistan. Alternatives in the form of hydropower, solar and wind exist. Pakistan reportedly has a hydropower potential of 100,000 MW. Significantly, in Punjab alone the current Chief Minister Shahbaz Sharif has launched several energy and welfare projects with Chinese assistance. Coal-based power projects are under construction in Sahiwal and Nadipur each set to produce about 660 MW and 100 MW respectively.[viii] The Dongfang Electric Corporation of China is involved in the construction of the Nandipur project. Furthermore, Pakistan’s first solar power plant, namely Quaid-e-Azam solar power project at Bahawalpur was inaugurated this year having about 400,000 solar panels.[ix] Interestingly, it is a joint venture between the state government of Punjab and China and is forecasted to produce about 1000 MW of electricity. Pakistan has also been considering the pipeline option seriously. The long talked about Iran-Pakistan pipeline and TAPI pipeline are also being looked into. Under the previous Zardari Government, Pakistan pushed for the pipeline with Iran ignoring the US pressure against such a deal.

The close cooperation between China and Pakistan depicts how the Sharif Government is seeking to resolve its energy problem through the strategic prism. The role of nuclear power in resolving Pakistan’s energy crisis remains debatable, but Pakistan is viewing it as a feasible option. The larger strategic role of the growing nuclear sector in Pakistan casts shadow over the viability of such an option, especially with growing concerns of the safety of such facilities. Although, the need for alternative forms of energy is crucial for Pakistan, its increasing civilian nuclear cooperation with China proves worrisome for India. The Chashma plant, which comes under only partial safeguards of the IAEA, is seen more as a case of proliferation under the existing control regimes of the NSG.

The expansion of the civilian nuclear sector as a solution has been advocated both by the previous Zardari Government when the KANUUP deal was discussed with China and became a reality under the present Sharif Government. This depicts how the nuclear option to solving energy crisis is accepted in Pakistan across the political spectrum. Therefore, with both KANUUP and CHASNUUP being funded by China, India’s fears taking into account the strategic nature of such cooperation between its neighbours would rise. The lack of international safeguards, debates regarding the feasibility of the reactor designs coupled with proliferation worries with regard to Pakistan’s civilian nuclear programme are not expected to abate in the foreseeable future.

Disclaimer: The views expressed in this article are personal.

[i] S. Chandrasekharan, “Chashma Nuclear Power Plant: CHASNUPP will Continue to be Accident Prone”, South Asia Analysis Group, no. 295, August 16, 2001, http://www.southasiaanalysis.org/paper295, (accessed on July 29, 2014).
[ii] M. IrshadRamay, Tameez Ahmad, Oleg V. Shipin, David Jezeph and A. Kadushkin, “Arsenic Contamination of Groundwater and its Mitigation in the Province of Punjab (Pakistan)”, World Health Organisation,http://www.who.int/household_water/resources/Ramay.pdf, (accessed on July 20, 2014).
[iii] Zia Mian and A.H. Nayyar, “Pakistan’s Chashma Nuclear Power Plant: A Preliminary Study of Some Safety Issues and Estimates of the Consequences of a Severe Accident”,Princeton Environmental Institute, no. 321, December 1999, https://www.princeton.edu/pei/energy/publications/reports/No.321.pdf, (accessed on July 20, 2014).
[iv] “Nuclear Safety: Radiation Leak from K-2, K-3 nuclear plants a far cry, explain experts”, The Tribune, February 17, 2014, http://tribune.com.pk/story/672625/nuclear-safety-radiation-leak-from-k-2-k-3-nuclear-plants-a-far-cry-explain-experts/, (accessed on June 7, 2014).
[v] Talha Ahmed, “2014 Report: Pakistan ‘most improved’ in nuclear security, India not so”, The Tribune, January 11, 2014, http://tribune.com.pk/story/657377/2014-report-pakistan-most-improved-in-nuclear-security-beats-india/, (accessed June 2, 2014).
[vi] “Nuclear Safety: Radiation Leak from K-2, K-3 nuclear plants a far cry, explain experts”, The Tribune.
[vii] Syed Shaukat and AfiaNoureen, “Nuclear Power Generation: Challenges and Prospects”, in Solutions for Energy Crisis in Pakistan, (IPIR: Islamabad, 2013), http://ipripak.org/books/secp.pdf, (accessed on June 7, 2014).
[viii] Imaduddin, “Shahbaz Sharif for Early Completion of Energy and Welfare Projects”, Business Recorder, May 25, 2014, http://www.brecorder.com/pakistan/politics-a-policy/174304-shahbaz-sharif-for-early-completion-of-energy-welfare-projects.html, (accessed on June 8, 2014).
[ix] Meena Menon, “Pakistan’s First Solar Power Project Launched”, The Hindu, May 9, 2014, http://www.thehindu.com/news/international/south-asia/pakistans-first-solar-power-project-launched/article5993633.ece, (accessed on July 9, 2014).