March 26, 2015

Saudi Arabia and Iran Compete in Yemen

STRATFOR

Analysis MARCH 25, 2015 | 08:58 GMT    
 
Militiamen loyal to the government of Yemeni President Abd Rabboh Mansour Hadi sit on top of tanks in the southern city of Aden. (STR/AFP/Getty Images)
Summary

While the al-Houthi movement struggles to manage multiple regional challenges to its north, its rise to power in Yemen is a setback for Saudi Arabia on its southern flank. After the fall of the Yemeni government, Riyadh will have to capitalize on the al-Houthis' need for political and financial support to re-establish its influence in the country. But because Iran is trying to fill that support gap, too, Yemen has become another battleground where the two sectarian rivals will struggle against one another.

Analysis

After being driven from the capital of Sanaa in September, Yemen's government is at war with itself. President Abd Rabboh Mansour Hadi issued a statement March 19 denouncing the airstrikes on his compound in the southern port city of Aden as an attempted military coup by forces loyal to his predecessor and one-time ally, former President Ali Abdullah Saleh. Earlier that day, soldiers and militiamen loyal to Hadi battled their way into Aden's airport and stormed a nearby military base, both of which were under the control of Gen. Abdel-Hafez al-Saqqaf, a Saleh loyalist.

The infighting in Aden comes after Ansar Allah, the pro-Iranian Zaidi group led by Abdul-Malik al-Houthi, emerged as the single largest force in the country after taking over large swathes of territory in north and central Yemen. The al-Houthis represent a change in the balance of power in Yemen and even the Arabian Peninsula that has opened the door for Iran to become a major player in what was the exclusive domain of Saudi Arabia not too long ago.

The Rise of the al-Houthis

A number of factors facilitated the al-Houthis' power grab in Yemen. First, Saudi Arabia's attempts to manage the Yemeni government in the wake of Arab Spring protests did not go as planned. Saleh stepped down in favor of his one-time vice president, Hadi, but the move exacerbated intra-government fissures along tribal, ideological, political and military lines. By the time Hadi took over, Riyadh's method of playing the various Yemeni factions against each other had undermined the old system to the point where the al-Houthis could take advantage of and align enough tribes to push beyond its northern stronghold of Saada and make their way down into areas south of the capital.



While Saudi Arabia has long meddled in Yemen and focused on combatting al Qaeda in the Arabian Peninsula, Riyadh lost sight of developments in Yemen while focusing on other regional fights. Saudi Arabia has been trying to stem chaos in the region in the aftermath of the Arab Spring, especially threats from transnational jihadist groups such as the Islamic State. It has also been occupied with supporting Bahrain's pro-Saudi Sunni monarchy as it faces a democratic uprising from its Shiite majority. It was not that Saudi Arabia was not paying attention to Yemen, but it was not expecting Iran to gain ground on its southern frontier via a movement that is not a traditional Shiite one and in fact is theologically closer to Sunni Islam.

Also, Saudi Arabia did not do enough to prevent Saleh from returning to Sanaa, where he could plot against those he felt were responsible for his fall from power and execute his own return. His plotting weakened the Yemeni government and diminished its ability to combat the al-Houthi insurgency.

Finally, it appears the al-Houthis have learned lessons from when they clashed with Saudi border guards in 2009. Now the al-Houthis are taking caution to steer clear of any direct engagement with the Saudis along the border and have instead focused inward. They are consolidating the nascent power they have accumulated and are weakening groups that might resist them.

 

The strategy appears to have worked. The Saudis have focused on the conflicts to their north and have not reacted aggressively to the power shift that has taken place in Yemen. Now it is too late to reverse course — at least in the short term. Riyadh lacks the military capabilities to directly intervene in the country and impose order like it did in Bahrain. Also, the different political factions they used to operate through by proxy do not have the same power they once did, making any efforts less effective.

Even if it had the means to intervene, it is not entirely clear the Saudis would want to. The al-Houthis do not pose a major threat to Saudi Arabia; on the contrary, the rebels' control over north and central Yemen insulates Saudi Arabia from the chaos in other parts of the country and especially from al Qaeda in the Arabian Peninsula, which is a more immediate threat. The Saudis would rather have the al-Houthis on their southern border instead of a jihadist quasi-state that is hostile to them. While the Saudis would prefer not to have al-Houthi control of such a large piece of Yemen so close to their border, the situation seems to be the best outcome in a situation where all options are bad — as long as the al-Houthis do not start pushing northward.

Potential Border Incursions

Even if the al-Houthis decided to change course, Saudi Arabia would be able to defend itself. It already has a fence — though it is nothing more than a concrete-filled pipeline — with surveillance equipment in place along long stretches of the border. Nonetheless, Zaidi militiamen were able to penetrate the border in 2009, but they did not make it past the mountains. The Saudi military was able to contain them there and used airstrikes to eliminate them.

The eastern part of the border in Hadramawt is open desert with little cover to conceal an incursion force. Surveillance aircraft can spot ground vehicles from long distances, and reaching a Saudi city or even a road would require traversing hundreds of miles of desert.

The west appears to be the only place where an incursion could have success because there are mountains, roads and people there. The area also happens to be adjacent to the al-Houthi stronghold of Saada. However, the Saudi military has enough capacity to deploy forces that outnumber al-Houthi fighters. Fighting could possibly last for a while, but in the end, the al-Houthis would not be able to withstand or break through the Saudis, who have artillery and air support.

Financial Aid Is Key

The biggest factor keeping the al-Houthis from antagonizing Saudi Arabia is their need for financial support. The country's poor financial and economic situation means the al-Houthis — or any other governing group for that matter — cannot maintain order in country without external assistance. Without long-term financial support, Yemen's water shortages could turn into a humanitarian crisis that draws in Saudi Arabia, creating the need for Sanaa and Riyadh to cooperate. The al-Houthis are aware of this, explaining why they have reached out to Riyadh to participate in indirect talks.

While it would seem logical for the al-Houthis to seek more aid from Iran, they know that Tehran is not capable of matching Saudi aid, even if the West were to lift economic sanctions. Iran can provide military, intelligence, logistical, and political support, but it has little hard cash to offer. Besides, Iran is more than 1,950 kilometers (1,200 miles) from Yemen, while Saudi Arabia is just on its northern border. Saudi Arabia can also help the al-Houthis gain international recognition as the legitimate government of Yemen.

Implementing the Hezbollah Model

The al-Houthis find themselves in a situation fairly similar to that of Hezbollah in Lebanon. Both groups are the biggest force in their respective countries, but they exist within political and demographic conditions that keep them from running their countries alone. Ansar Allah is trying to emulate Hezbollah in terms of getting other factions to work with it and to form a government like the confessional democracy in Lebanon.

Ansar Allah, however, is where Hezbollah was in the 1980s, and it will need time to translate its military prowess into political power. Also, the Saudis will try to prevent the group from going the route of Hezbollah. Unlike Lebanon in the 1980s, Yemen is not under Israeli occupation, and it does not have a neighbor like Syria that the Iranians can use as a conduit to nurture the al-Houthis.

Negotiating Yemen's Future With Iran

Saudi Arabia knows the threat is not pressing and has decided to abstain from any formal diplomatic talks with Yemen. Riyadh also knows Tehran wants to use the al-Houthis to gain a seat at the negotiating table and become a stakeholder in Yemen, so it is being cautious. Ultimately, serious geographic and political limitations prevent Tehran from undermining Riyadh in Yemen.

Though the Saudis see the situation as ultimately favorable, they cannot become too comfortable and allow the al-Houthis to take hold in Sanaa. Riyadh must ensure that the opposition improves its position enough to sufficiently counter the al-Houthi movement. At the same time, Riyadh will need to engage Ansar Allah in talks at some point, especially while the opposition is weak from infighting — and jihadists reap benefits from the struggle.

Many of Ansar Allah's opponents — including tribes, religious Sunni elements and members of the ousted government's security establishment — are open to cooperating with jihadist forces to fight the al-Houthis. The Salafists and jihadists are the most eager to engage in a sectarian battle because they see it as a way to enhance their position. Saudi Arabia cannot allow al Qaeda or the Islamic State to emerge as the most effective forces against Ansar Allah.

In fact, the United States has already indicated that it will work with the al-Houthis to fight jihadists in Yemen, another sign of the shift in the United States' position in the Middle East. Washington sees Iran, Hezbollah and even the Syrian government — except for President Bashar al Assad — as partners in the fight against the Islamic State, a development Saudi Arabia feels threatened by.

If the al-Houthis successfully consolidate their power in Yemen, the southern Saudi provinces of Jizan and Najran will become vulnerable to al-Houthi expansion in the long run because of the significant Shiite Ismaili populations that live there. Certainly the Iranians would welcome this outcome, influencing their support for the Zaidis.

The Saudis see the al-Houthis as a possible threat from Iran. How the Saudis engage with the group and try to put distance between them and Iran will be a key factor to watch. Nonetheless, Yemen's deteriorating security situation has created another Saudi-Iranian geopolitical struggle that will last for the foreseeable future.

How Singapore Became an Entrepreneurial Hub


Scott Anthony
FEBRUARY 25, 2015
 

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"You are crazy."

That was the predominant sentiment I heard a little more than five years ago when I told U.S.-based venture capitalists about my plans to move my family out to Singapore to oversee Innosight's nascent investment and incubation arm. Since I had never done venture investing before, I was trying to get advice from as many people as I could. The conversations all went pretty much the same.

"Why Singapore? You'll never find any interesting deals there."

Sure, I would respond. At the time Singapore didn't have a sizzling start-up scene. But the conditions seemed to be ripe for one to develop. Like Silicon Valley, Singapore has strong research institutions and limited enforcement of noncompete clauses, a condition that academics now suggest can be a major driver of innovation. Like Israel, Singapore is small, with limited natural resources, which means economic growth requires innovative macroeconomic approaches. Both Singapore and Israel have liberal immigration policies for skilled workers. Both also have mandatory military conscription for males (Israel also has mandatory conscription for females), and as Dan Senor and Saul Singer argue in Start-up Nation, the Israeli military has been a breeding ground of innovation.

"Yes, but Israelis and Americans are innovative by nature. Singaporeans are not," critics would respond. "Name a Singapore start-up. I can't think of a single one"

A fair point. If you had asked Singaporeans in 2010 to identify a successful local start-up, they might have paused for a few minutes before mentioning Creative Labs. That company was a pioneer in the audio component market, having entered the MP3 market before Apple. But it was founded in 1981 and hit its revenue peak about a decade ago before delisting from NASDAQ in 2007 and shrinking substantially.

With the cautionary notes in mind, I arrived in Singapore in March 2010. It was indeed challenging in those early days to find good investment propositions. We made a couple, but they were proverbial needles in a haystack of business plans and pitches we sat through that were amateur at best, and outright naïve at worst.

Fast forward to 2015, and you see an island transformed. There are dozens, if not hundreds, of interesting start-ups, many clustered in "Block 71," a building close to INSEAD, the National University of Singapore, and government-sponsored innovation hubs carrying Star Trek–like names of Fusionoplis and Biopolis. The Economist dubbed Block 71, "the world's most tightly packed entrepreneurial ecosystem."

In my first year in Singapore we might hear news about a company landing venture funding every few months, and an exit (cashing out either through an IPO or by selling itself to a larger company) every year. Today, there's an investment seemingly every week; venture-capital investment in the tech sector increased from less than $30 million in 2011 to more than $1 billion in 2013. And we counted 10 local exits in 2014. Some of those so-called liquidity events are small by global standards, like the $30 million that customer service chat provider Zopim fetched. But others have been larger, such as the $200 million price Japanese e-commerce company Rakuten put on Viki, a video-streaming provider.

The Singapore surge seems particularly surprising given the city-state's staid reputation and stagnant start-up scene just a few years ago. As governments around the world try to spur entrepreneurialism to drive job creation and economic vibrancy, it's worth stepping back to consider the three components that in my view have combined together to power the Singapore story.

A hospitable environment. Singapore is regularly ranked as one of the easiest countries in the world in which to do business. There are rules, for sure, but they are clearly laid out and easy to follow. New companies can be set up in hours, if not minutes. Intellectual property is respected, and the rule of law is transparent. Immigration is no less a hot topic in Singapore than other countries, but Singapore makes it easy to get highly educated workers into the country, and has a specific employment pass targeting would-be entrepreneurs. The clean, efficient city has some livability advantages over Shanghai, Manila, Jakarta, or Bangkok.

Mindful of its international reputation among the creative class it's trying to attract, the government has worked hard to address the old view that there isn't much to do in "Singa-bore" with two casinos, a Universal Studios, Asia's largest aquarium, a "botanic garden masquerading as a theme park" called Gardens by the Bay, a 55,000 seat multipurpose stadium, internationally acclaimed restaurants, and an efficient, modern airport that makes leaving the country a breeze.


Serious government skin in the game. Entrepreneurs have long been able to tap into a range of grants and related programs to help with early development activities. In 2008, under the National Framework for Innovation and Enterprise (NFIE), the government launched the Early Stage Venture Investment Fund program. The initiative, which drew inspiration from a joint program between Israel and the United States called the Binational Industrial Research and Development Foundation, allowed five venture capital companies to receive matching funds from the government. One year later, we partnered with the government to prototype a new program under the NFIE. Ultimately dubbed the Technology Incubation Scheme (in Singapore, a scheme is a good thing), the program helped bring a flood of diverse investors into the country by offering to put up 85% of the capital in a start-up when investors put in 15%.

This level of support was critical for us. We had long been interested in venture investing. But as first-time investors without a deep track record in a country thousands of miles away from our U.S. headquarters, it was unlikely we (or any similar outside investor group) would have been able to develop the financial backing required to build a robust portfolio without government support. It is not a free lunch, however. We and other investors in the ESVF and TIS programs have had to make real commitments, as the government doesn't cover the salary of the team (and since it typically takes years for investments in start-ups to bear fruit that's important) or other overhead, and of course the investors have to pony up the capital to activate the government matching programs. It is hard to create an ecosystem overnight, but consistent, concerted efforts by the government have given a serious boost to start-ups in Singapore.

Wide use of soft power to address hidden barriers to entrepreneurialism. There is a misbegotten notion that entrepreneurs take risks because they don't have much to lose. In fact, research shows that the number one factor predicting whether someone will become an entrepreneur is whether the person has received an inheritance or a gift. Singapore's phenomenal development over the past 50 years means many of its citizens are sufficiently well off to take the entrepreneurial plunge without truly risking everything.

But doing something as uncertain as starting a business when you could go to work for a big bank or, even better, the government, was countercultural for the best and brightest a decade ago. So over the past few years political leaders have relentlessly talked up the importance of entrepreneurialism (see, for example, this Facebook post from Prime Minister Lee Hsien Loong); state-sponsored universities have aggressively pushed innovation (the National University of Singapore has a program to send students overseas to get firsthand experience in other entrepreneurial hubs); and the state-owned television company MediaCorp (full disclosure, I sit on its board) has run television programs celebrating entrepreneurialism.

Anafore, a company that we invested in two years ago, shows how times have changed. The company's software-as-a-service offering, called ReferralCandy, helps small businesses organize customer referral campaigns. The company's co-founders, Dinesh Raju and Zach Cheng, are both Singaporean whose academic track record scored them prestigious government scholarships to study at a top overseas university, Carnegie Mellon. In a previous generation, both would have likely followed a lucrative career in the government or perhaps even stayed overseas. Today, their company lives in Block 71 and is growing substantially.

These three ingredients create a reinforcing cycle, as entrepreneurs who enjoy success find they want to do it again. For example, in 2010 Melvin Yuan co-founded YFind Technologies, a company with a clever technology that could precisely pinpoint people's location inside a building by tracking their cellphones' interactions with WiFi access points. That capability could be the backbone of very valuable business intelligence services such as retail "heat mapping," showing sophisticated analysis of in-store traffic. We invested in the company in 2012 through our fund, with the government contributing 85%, and U.S.-based WiFi service provider Ruckus Wireless snatched it up in 2013. Yuan did well in the transaction, and was bitten by the entrepreneurial bug. He's gone on to found another start-up that's developing a disruptive way to match people seeking original art with the vast trove of untapped artistic talent all over the world.

Some successful Singaporean entrepreneurs are beginning to invest in the next generation of  start-ups. For example, Hian Goh, who in 2005 cofounded the Asian Food Channel,  in 2011 invested in Chope, a regional restaurant booking portal that our investment arm backed. And after Scripps Networks Interactive acquired the Asian Food Channel in 2013, Goh launched his own venture capital firm to invest in regional start-ups.

Global investors are increasingly taking notice. Dave McClure's 500 Startups recently invested in a local real estate portal. Established global venture firms like Sequoia and DFJ are stepping up local activities (in mid-February the "D" in DFJ — Tim Draper — said he views Singapore as a great environment for start-ups). In 2014 the government announced a new batch of participants in the ESVF program, including old names like Walden International (which was part of the 2008 batch) and new ones like Monk's Hill Ventures. Many of these investors view Singapore as a launching pad to regional emerging markets like Indonesia, the Philippines, and Vietnam. More broadly, of the 156 software companies founded since 2003 that are now worth more than $1 billion, close to a third are based in Asia.

There is beginning to be a critical mass of companies creating a self-sustaining innovation hub in Singapore. No local start-up has broken through as a major international player, but I'm quite convinced that will happen in the next five years. Maybe it will be RedMart, which could expand from its base of on-line grocery delivery in Singapore to address the complex challenge of food retailing in markets like Indonesia. Maybe it will be Anchanto (one of our companies), which is working on a "logistics as a service" platform that allows any small business to master the intricacies of e-commerce. Or perhaps it will be Clearbridge Biomedics, which has a disruptive way detect cancer via a "liquid biopsy"; Garena, whose popular gaming platform has attracted more than 100 million members (and driven its valuation above the magical $1 billion mark); Reebonz, whose on-line luxury portal is booming across Southeast Asia; or one of dozens of other interesting local start-ups.

No place is perfect. While there is substantial seed capital to get a business started (arguably too much), plenty of investors primed to write huge checks to drive expansion, and significantly more entrepreneurs in Singapore than there were only a few years ago, building a team to start a new company remains challenging. And the so-called "Valley of Death" where a company has to move from a promising smart to real viability remains very real.

But if the next five years feature anything close to the development of the past five, I expect a lot fewer questions about why Singapore makes sense for entrepreneurs.


Scott Anthony (@ScottDAnthony) is the managing partner of the innovation and growth consulting firm Innosight. He is the author of The Little Black Book of Innovation and the HBR Single, Building a Growth Factory. His new book is The First Mile: A Launch Manual for Getting Great Ideas into the Market.

March 03, 2015

Netanyahu, Obama and the Geopolitics of Speeches

Netanyahu, Obama and the Geopolitics of Speeches
Geopolitical Weekly MARCH 3, 2015 | 08:49 GMT   Print   Text Size 
 
Stratfor
By George Friedman

Israeli Prime Minister Benjamin Netanyahu is visiting the United States this week to speak to Congress on March 3. The Obama administration is upset that Speaker of the House John Boehner invited Netanyahu without consulting with the White House and charged Boehner with political grandstanding. Netanyahu said he was coming to warn the United States of the threat of Iran. Israeli critics of Netanyahu charged that this was a play for public approval to improve his position in Israel's general election March 17. Boehner denied any political intent beyond getting to hear Netanyahu's views. The Obama administration claimed that the speech threatens the fabric of U.S.-Israeli relations.

Let us begin with the obvious. First, this is a speech, and it is unlikely that Netanyahu could say anything new on the subject of Iran, given that he never stops talking about it. Second, everyone involved is grandstanding. They are politicians, and that's what they do. Third, the idea that U.S.-Israeli relations can be shredded by a grandstanding speech is preposterous. If that's all it takes, relations are already shredded.

Speeches aside, there is no question that U.S.-Israeli relations have been changing substantially since the end of the Cold War, and that change, arrested for a while after 9/11, has created distance and tension between the countries. Netanyahu's speech is merely a symptom of the underlying reality. There are theatrics, there are personal animosities, but presidents and prime ministers come and go. What is important are the interests that bind or separate nations, and the interests of Israel and the United States have to some extent diverged. It is the divergence of interests we must focus on, particularly because there is a great deal of mythology around the U.S.-Israeli relationship created by advocates of a close relationship, opponents of the relationship, and foreign enemies of one or both countries.

Building the U.S.-Israeli Relationship

It is important to begin by understanding that the United States and Israel did not always have a close relationship. While the United States recognized Israel from the beginning, its relationship was cool until after the Six-Day War in 1967. When Israel, along with Britain and France, invaded Egypt in 1956, the United States demanded Israel's withdrawal from Sinai and Gaza, and the Israelis complied. The United States provided no aid for Israel except for food aid given through a U.N. program that served many nations. The United States was not hostile to Israel, nor did it regard its relationship as crucial.

This began to change before the 1967 conflict, after pro-Soviet coups in Syria and Iraq by Baathist parties. Responding to this threat, the United States created a belt of surface-to-air missiles stretching from Saudi Arabia to Jordan and Israel in 1965. This was the first military aid given to Israel, and it was intended to be part of a system to block Soviet power. Until 1967, Israel's weapons came primarily from France. Again, the United States had no objection to this relationship, nor was it a critical issue to Washington.

The Six-Day War changed this. After the conflict, the French, wanting to improve relations with the Arabs, cut off weapons sales to Israel. The United States saw Egypt become a Soviet naval and air base, along with Syria. This threatened the U.S. Sixth Fleet and other interests in the eastern Mediterranean. In particular, the United States was concerned about Turkey because the Bosporus in Soviet hands would open the door to a significant Soviet challenge in the Mediterranean and Southern Europe. Turkey was now threatened not only from the north but also from the south by Syria and Iraq. The Iranians, then U.S. allies, forced the Iraqis to face east rather than north. The Israelis forced the Syrians to focus south. Once the French pulled out of their relationship with Israel and the Soviets consolidated their positions in Egypt and Syria in the wake of the Six-Day War, the United States was forced into a different relationship with Israel.

It has been said that the 1967 war and later U.S. support for Israel triggered Arab anti-Americanism. It undoubtedly deepened anti-American sentiment among the Arabs, but it was not the trigger. Egypt became pro-Soviet in 1956 despite the U.S. intervention against Israel, while Syria and Iraq became pro-Soviet before the United States began sending military aid to Israel. But after 1967, the United States locked into a strategic relationship with Israel and became its primary source of military assistance. This support surged during the 1973 Arab-Israeli War, with U.S. assistance rising from roughly 5 percent of Israeli gross domestic product to more than 20 percent a year later.

The United States was strategically dependent on Israel to maintain a balance of power in the eastern Mediterranean. But even during this period, the United States had competing strategic interests. For example, as part of encouraging a strategic reversal into the U.S. camp after the 1973 war, the United States negotiated an Israeli withdrawal from Sinai that the Israelis were extremely reluctant to do but could not avoid under U.S. pressure. Similarly, U.S. President Ronald Reagan opposed an Israeli invasion of Lebanon that reached Beirut, and the initial U.S. intervention in Lebanon was not against Arab elements but intended to block Israel. There was a strategic dependence on Israel, but it was never a simple relationship.

The Israelis' national security requirements have always outstripped their resources. They had to have an outside patron. First it was the Soviets via Czechoslovakia, then France, then the United States. They could not afford to alienate the United States — the essential foundation of their national security — but neither could they simply comply with American wishes. For the United States, Israel was an important asset. It was far from the only important asset. The United States had to reconcile its support of Israel with its support of Saudi Arabia, as an example. Israel and the Saudis were part of an anti-Soviet coalition, but they had competing interests, shown when the United States sold airborne warning and control systems to the Saudis. The Israelis both needed the United States and chafed under the limitations Washington placed on them.

Post-Soviet Relations

The collapse of the Soviet Union destroyed the strategic foundation for the U.S.-Israeli relationship. There was no pressing reason to end it, but it began to evolve and diverge. The fall of the Soviet Union left Syria and Iraq without a patron. Egypt's U.S.-equipped army, separated from Israel by a demilitarized Sinai and token American peacekeepers, posed no threat. Jordan was a key ally of Israel. The United States began seeing the Mediterranean and Middle East in totally different ways. Israel, for the first time since its founding, didn't face any direct threat of attack. In addition, Israel's economy surged, and U.S. aid, although it remained steady, became far less important to Israel than it was. In 2012, U.S. assistance ($2.9 billion) accounted for just more than 1 percent of Israel's GDP.

Both countries had more room to maneuver than they'd had previously. They were no longer locked into a relationship with each other, and their relationship continued as much out of habit as out of interest. The United States had no interest in Israel creating settlements in the West Bank, but it wasn't interested enough in stopping them to risk rupturing the relationship. The Israelis were no longer so dependent on the United States that they couldn't risk its disapproval.

The United States and Israel drew together initially after 9/11. From the Israeli perspective, the attacks proved that the United States and Israel had a common interest against the Islamic world. The U.S. response evolved into a much more complex form, particularly as it became apparent that U.S. forces in Afghanistan and Iraq were not going to pacify either country. The United States needed a strategy that would prevent jihadist attacks on the homeland, and that meant intelligence cooperation not only with the Israelis but also with Islamic countries hostile to Israel. This was the old problem. Israel wanted the United States focused on Israel as its main partner, but the United States had much wider and more complex relations to deal with in the region that required a more nuanced approach.

This is the root of the divergence on Iran. From Israel's point of view, the Iranians pose an inherent threat regardless of how far along they are — or are not — with their nuclear program. Israel wants the United States aligned against Iran. Now, how close Tehran is to a nuclear weapon is an important question, but to Israel, however small the nuclear risk, it cannot be tolerated because Iran's ideology makes it an existential threat.

The Iran Problem

From the American perspective, the main question about Iran is, assuming it is a threat, can it be destroyed militarily? The Iranians are not fools. They observed the ease with which the Israelis destroyed the Iraqi nuclear reactor in 1981. They buried theirs deep underground. It is therefore not clear, regardless of how far along it is or what its purpose is, that the United States could destroy Iran's nuclear program from the air. It would require, at the very least, special operations on the ground, and failing that, military action beyond U.S. capabilities. Aside from the use of nuclear weapons, it is unclear that an attack on multiple hardened sites would work.

The Israelis are quite aware of these difficulties. Had it been possible to attack, and had the Israelis believed what they were saying, the Israelis would have attacked. The distances are great, but there are indications that countries closer to Iran and also interested in destroying Iran's nuclear program would have allowed the use of their territories. Yet the Israelis did not attack.

The American position is that, lacking a viable military option and uncertain as to the status of Iran's program, the only option is to induce Iran to curtail the program. Simply maintaining permanent sanctions does not end whatever program there is. Only an agreement with Iran trading the program for an end of sanctions would work. From the American point of view, the lack of a military option requires a negotiation. The Israeli position is that Iran cannot be trusted. The American position is that in that case, there are no options.

Behind this is a much deeper issue. Israel of course understands the American argument. What really frightens the Israelis is an emerging American strategy. Having failed to pacify Afghanistan or Iraq, the United States has come to the conclusion that wars of occupation are beyond American capacity. It is prepared to use air power and very limited ground forces in Iraq, for example. However, the United States does not see itself as having the option of bringing decisive force to bear.

An Intricate U.S. Strategy

Therefore, the United States has a double strategy emerging. The first layer is to keep its distance from major flare-ups in the region, providing support but making clear it will not be the one to take primary responsibility. As the situation on the ground deteriorates, the United States expects these conflicts to eventually compel regional powers to take responsibility. In the case of Syria and Iraq, for example, the chaos is on the border of Turkey. Let Turkey live with it, or let Turkey send its own troops in. If that happens, the United States will use limited force to support them. A similar dynamic is playing out with Jordan and the Gulf Cooperation Council states as Saudi Arabia tries to assume responsibility for Sunni Arab interests in the face of a U.S-Iranian entente. Importantly, this rapprochement with Iran is already happening against the Islamic State, which is an enemy of both the United States and Iran. I am not sure we would call what is happening collaboration, but there is certainly parallel play between Iran and the United States.

The second layer of this strategy is creating a balance of power. The United States wants regional powers to deal with issues that threaten their interests more than American interests. At the same time, the United States does not want any one country to dominate the region. Therefore, it is in the American interest to have multiple powers balancing each other. There are four such powers: Turkey, Iran, Saudi Arabia and Israel. Some collaborate, some are hostile, and some shift over time. The United States wants to get rid of Iran's weapons, but it does not want to shatter the country. It is part of a pattern of regional responsibility and balance.

This is the heart of Israel's problem. It has always been a pawn in U.S. strategy, but a vital pawn. In this emerging strategy, with multiple players balancing each other and the United States taking the minimum possible action to maintain the equilibrium, Israel finds itself in a complex relationship with three countries that it cannot be sure of managing by itself. By including Iran in this mix, the United States includes what Israel regards as an unpredictable element not solely because of the nuclear issue but because Iran's influence stretches to Syria and Lebanon and imposes costs and threats Israel wants to avoid.

This has nothing to do with the personalities of Barack Obama and Benjamin Netanyahu. The United States has shown it cannot pacify countries with available forces. The definition of insanity is doing the same thing repeatedly and expecting a different outcome. If the United States is not involved on the ground in a conflict, then it becomes a problem for regional powers to handle. If the regional powers take the roles they must, they should balance against each other without a single regional hegemon emerging.

Israel does not want to be considered by the United States as one power among many. It is focused on the issue of a nuclear Iran, but it knows that there is no certainty that Iran's nuclear facilities can be destroyed or that sanctions will cause the Iranians to abandon the nuclear program. What Israel fears is an entente between the United States and Iran and a system of relations in which U.S. support will not be automatic.

So a speech will be made. Obama and Netanyahu are supposed to dislike each other. Politicians are going to be elected and jockey for power. All of this is true, and none of it matters. What does matter is that the United States, regardless of who is president, has to develop a new strategy in the region. This is the only option other than trying to occupy Syria and Iraq. Israel, regardless of who is prime minister, does not want to be left as part of this system while the United States maintains ties with all the other players along with Israel. Israel doesn't have the weight to block this strategy, and the United States has no alternative but to pursue it.

This isn't about Netanyahu and Obama, and both know it. It is about the reconfiguration of a region the United States cannot subdue and cannot leave. It is the essence of great power strategy: creating a balance of power in which the balancers are trapped into playing a role they don't want. It is not a perfect strategy, but it is the only one the United States has. Israel is not alone in not wanting this. Turkey, Iran and Saudi Arabia don't want it, either. But geopolitics is indifferent to wishes. It understands only imperatives and constraints.

India and the World – an Update



A Bi-weekly News Digest on India's Foreign Policy

February 16th - March 2nd, 2015
Volume: 2-4

Neighbourhood

Pakistan

Foreign Secretary S Jaishankar to visit Pakistan on March 3 
The Indian Express | February 25th, 2015 
One major consideration from the Indian side was that the talks had to take place "substantially before or after" Pakistan Day which falls on March 23. On that day, the Pakistan High Commission in New Delhi invites the Kashmiri Hurriyat leaders for the official reception and the Hurriyat leaders always attend the event. Since talks were cancelled in August last over Pakistan High Commissioner Abdul Basit's meeting with the Hurriyat leaders, New Delhi was determined not to let it act as a "spoiler" for the talks again.

Pakistan visit: S Jaishankar to talk Zaki-ur Rehman Lakhvi, Dawood Ibrahim 
PTI / Deccan Chronicle | February 26th, 2015 
Underworld don Dawood Ibrahim's continuous presence in Pakistan, Pakistan-based terrorist groups' activities in Jammu and Kashmir besides other issues are said to have discussed by the two top officials, sources said.

No dramatic results expected from Foreign Secretary's Pakistan visit: India 
PTI / Zee News | February 27th, 2015 
"I would be surprised if there are any dramatic results in terms of bilateral ties when Jaishankar talks with the Pakistani side. How the visit impacts on the ties was difficult to predict at this point," said an official.

'Normalisation of ties between India-Pakistan urgently needed' 
IANS / Business Standard | March 2nd, 2015 
"It is premature to predict the outcome of foreign secretary level talks between Pakistan and India scheduled for March 3, but chances of a decision to resume a composite dialogue are likely either in the upcoming or the follow-up meetings," DawnMonday quoted Aziz as saying.

Sri Lanka

Lankan president Sirisena gets the red carpet with deals on defence, nuclear safety 
The Indian Express | February 17th, 2015 
"The bilateral agreement on civil nuclear cooperation is yet another demonstration of our mutual trust. This is the first such agreement Sri Lanka has signed. It opens new avenues for cooperation, including in areas like agriculture and healthcare," Modi said at a joint media appearance with Sirisena.

Bangladesh

India-Bangladesh join hands to defeat terror
PTI / DNA | February 19th, 2015 
The talk discussed in detail security and border management related issues between the two countries. Significantly, both India and Bangladesh expressed satisfaction over the District Magistrates level talks that took place recently. India also assured Bangladesh of its resolve to get the Land Boundary Act through in the parliament as soon as possible that would help the two countries resolve the boundary dispute and related problems. India and Bangladesh have also agreed to resolve the issues concerning fishermen drifting inadvertently across the maritime boundaries.

Boundary issues solved, will take up Teesta with Bangla PM: Mamata Banerjee 
PTI / Business Standard | February 20th, 2015 
"Political geography has divided us, but there is no division in our two minds," she said during her interaction with litterateurs and cultural figures. "Tell me all your expectations...we will respond to them in due time," Ms. Bannerjee said.

Top ULFA leader Anup Chetia won't be deported by Bangladesh till land boundary pact? 
PTI / The Economic Times | February 22nd, 2015 
"The issue of Anup Chetia came up during the Home Secretary level talks. Hints were dropped by the Bangladesh side, which we think as linking the agreement to Chetia's return," an official privy to the discussion said. At the home secretary-level talks held last week, Bangladesh senior secretary for home affairs, Mohammed Mozammel Haque Khan, conveyed to his Indian counterpart Goyal that Dhaka expected early ratification of the agreement.

Nepal

Joint India-Nepal Military Exercise 'Surya Kiran-VIII' commences 
India Today | February 24th, 2015 
The objective of the ongoing exercise is to carry out counter insurgency and counter terrorist operations by guarding the mountains, jungle terrain  and respective borders by joint monitoring and dedicated effort. Focus was also laid on deriving ways for providing assistance and relief during pandemic, endemic and natural disasters. Issues like environmental degradation and pollution are also included in the scope of this exercise.

Asia Pacific

China

China proposes triangular partnership with India, Sri Lanka
The Hindu | February 18th, 2015 
Asked to comment on the visit to India by Sri Lankan President Maithripala Sirisena, Chinese Foreign Ministry spokesperson Hua Chunying said, "We are happy to see close and friendly development of India-Sri Lanka relations". She added: "We believe the sound relations among the three countries are conducive to the three countries and to the whole region. Therefore we are happy to see development of relations between Sri Lanka and India."

No Chinese incursion into India's territory: Defence Minister Manohar Parrikar 
PTI / DNA | February 27th, 2015 
The Minister also said that appropriate measures are taken from time to time to maintain/upgrade the country's defence preparedness along the borders to safeguard the sovereignty, territorial integrity and security of India.

Japan

Japanese firms facing multiple problems in India: Envoy 
PTI / Business Standard | February 27th, 2015 
DIPP Secretary Amitabh Kant said the government is committed to take steps to improve ease of doing business in the country. "We will make India an easy place for people to enter and exit. This is a challenge but we have taken up this task. We have announced several steps to improve ease of doing business...Japanese companies will grow and prosper in India and not in Japan," Kant said.

The United States

India now among US' most important strategic partners: US Ambassador Richard Verma 
PTI / Deccan Chronicle | February 18th, 2015  
Inaugurating the US Pavilion at the 'Aero India' show, Ambassador Verma termed the exhibit as "the best of US aviation and defence technology". "Air shows like 'Aero India' allow us to demonstrate our commitment to the strategic relationship with key international partners," he said, adding that "and in 2015, the strategic relationship the United States has with India is one of our most important."

Great opportunity for India-US relationship: Bobby Jindal 
PTI / DNA | February 24th, 2015 
Highly critical of Obama's foreign policy, Jindal appeared to be supportive of the president's efforts to strengthen ties with India, which he noted is in America's interest. Responding to questions, Jindal supported joint effort between India and the US in the fight against terrorism, in particular Islamic extremism.

Middle East

'Multiplicity of opportunities' in India, Sushma tells Oman 
PTI / Zee News | February 18th, 2015 
Swaraj also briefed the Omani leadership about the economic reforms and growth agenda of the new Indian government and welcomed increased investments from this oil-rich nation.

Bahrain keen to deepen ties with India in counter-terrorism 
PTI / Business Standard | February 23rd, 2015 
During the meeting with Prime Minister Narendra Modi, the visiting Foreign Minister Shaikh Khalid Bin Mohamed Al Khalifa recalled the "deep emotional bonds of friendship that are felt by the people of Bahrain towards India", a PMO statement said. "He conveyed the commitment of the government of Bahrain to deepen bilateral relations, including in the areas of defence, security, counter-terrorism, trade and investment," it added.

Israel

India-Israel likely to sign $ 2 bn defence deal 
Business Standard | February 20th, 2015 
"Israel had expressed desire to share cutting-edge weapons technologies with India. Both countries are willing to move forward. During my visit to Israel in November last year, I had invited Israel to become a partner in the 'Make in India' initiative in the defence sector," Home Minister Rajnath Singh said on Twitter after a meeting with Israel Defence Minister Moshe Ya'alon.

Europe

Need political spark for India-EU FTA: EU ambassador 
Live Mint | February 18th, 2015 
Joao Cravinho, the 27-member EU's ambassador in India, said agreements like the India-EU FTA would ensure duty-free access for goods made in India to foreign markets, making India more attractive to foreign investors. Negotiations on the FTA, called the bilateral trade and investment agreement, began in 2007, but the two sides have missed at least four deadlines to finalize a deal. While the EU is keen on greater market access to India, including for a large number of agricultural products, India wants to see fewer restrictions on the temporary movement of its nationals working in Europe.

Ukraine issue: EU wants India to leverage ties with Russia 
PTI / The Times of India | February 18th, 2015 
European Union Ambassador Joao Cravinho said India can play an important role in finding a peaceful solution to the Ukraine crisis on which Western countries have threatened Russia of more sanctions if it fails to deescalate the tension. "We hope that India, in its interactions with Russia, should express concerns with regard to territorial integrity (of Ukraine), with regard to maintenance of ceasefire agreements that was agreed upon," Cravinho said.

UK to unveil Gandhi statue on March 14 
PTI / The Asian Age | February 22nd, 2015 
"The statue in Parliament Square not only marks his huge importance in the history of both our countries, but will enrich the firm bond of friendship between the world's oldest democracy and its largest," the British Prime Minister Mr David Cameron said in a statement.

 

March 01, 2015

ISIS IN LIBY:A Winning the Propaganda War




Dr. Aref Ali Nayed  is the Ambassador of Libya to the United Arab Emirates and is the Founder and Director of Kalam Research & Media(KRM) and Chairman of the Board of Directors of the Libya Institute for Advanced Studies (LIAS). He also lectures on Islamic Theology,Logic, and Spirituality at the restored Uthman Pasha Madrasa in Tripoli, Libya and at the Fatih Sultan Mehmet University in Istanbul, Turkey.He is Senior Advisor to the Cambridge Inter-Faith Programme; Fellow of the Royal Aal Al-Bayt Institute in Jordan; Adjunct Professor at FatihSultan Mehmet Vakif University in Istanbul; and is a member of the Board of Advisors of the Templeton Foundation. He was Professor at thePontifical Institute for Arabic and Islamic Studies (Rome), and the International Institute for Islamic Thought and Civilization (Malaysia). Hehas headed an Information Technology company. He received his B.Sc. in Engineering, M.A. in the Philosophy of Science, and a Ph.D. inHermeneutics from the University of Guelph (Canada). He also studied at the University of Toronto and the Pontifical Gregorian University.He has been involved in various Inter-Faith initiatives since 1987 , including the seminal “A Common Word” process. His books include Operational Hermeneutics: Interpretation as the Engagement of Operational Artifacts (KRM, 2011 ); co-authored with Jeff Mitscherling andTanya Ditommaso,  The Author’s Intention (Lexington Books, 2004 ); and his monographs, Growing Ecologies of Peace, Compassion and Blessing: A Muslim Response to “A Muscat Manifesto” (KRM with The Cambridge Inter-Faith Programme, 2010 ), and Beyond Fascism: NewLibya Actualized  (KRM, 2013

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THE ISLAMIC STATE: A COUNTER-STRATEGY FOR A COUNTER-STATE




by Jessica D. Lewis

Many have asked what needs to be done about the Islamic State of Iraq and al-Sham (ISIS), the terrorist organization that recently took control of Mosul, Iraq’s second largest city. Questions range from the acceptability of airstrikes and the viability of a national unity government in Iraq to the feasibility of a counter-offensive that depends upon the remaining capacity of the Iraq Security Forces. These are important and worthy questions, and timely, because ISIS is growing stronger. But these questions preempt the rigorous analysis that is required in order to determine what the U.S. should do about ISIS and why.

ISIS is no longer a mere terrorist organization, but one that operates like an army. It is no longer just an army, but one that is conquering land in Iraq and Syria to establish new ideological rule, in line with al-Qaeda’s endgame. This is no longer a war of ideas against an extremist group with sparse networks, flashy strategic messaging, and limited technical offensive capability. It is necessary to avoid framing a U.S. counter-terrorism strategy to defeat ISIS as if it were. It is particularly important to move beyond narratives of simple or piecemeal solutions. Individual actions are insufficient to dislodge what has become an entrenched strategic adversary.

ISIS draws strength from the complex circumstances that are independently causing Iraq and Syria to fail, including domestic civil and sectarian cleavages, authoritarian leadership, and polarizing regional stressors. Any counter-strategy to defeat ISIS also requires a nuanced strategy to preserve all U.S. foreign policy objectives in the Middle East that are deeply affected by the recent take-over of Iraq’s major cities by ISIS. And yet these considerations call for action rather than deterrence. The ISIS threat is growing, and it threatens the permanent destruction of Iraq and Syria, which will generate exponential threats to U.S. interests abroad.  

ISIS is already a threat to the United States. ISIS is not only dangerous in a regional context because it is overthrowing modern state boundaries in ways that incur massive ethno-sectarian killing and cleansing. ISIS is also a global jihadist organization that shares al-Qaeda’s ideology, such that its progress drives towards a post-state and apocalyptic vision that involves the destruction of the modern state system. ISIS already threatens to escalate violence between states in the Middle East that have been fighting proxy wars in Syria for several years such that ISIS military operations may cascade into a broader regional conflict. ISIS is now a direct threat to neighboring states in the Middle East, and ISIS is broadcasting the intent to attack Saudi Arabia, Israel, and the West. The threat of attacks against the U.S. is present.

It is therefore necessary for the U.S. to consider ways to defeat ISIS, not only to preserve the integrity of the Iraqi state, but to preserve our own security. Defeating the Islamic State will, in fact, be very difficult. Developing a strategy to do so will be very hard. But hard is not the same as impossible. As pressure grows in Washington for a response to the crisis that has engulfed the region, policymakers must move beyond the assessment phase and begin building a comprehensive strategy. This effort must begin with a close examination of the sources of strength, intentions, and vulnerabilities of the Islamic Caliphate created by ISIS. Only then can a coherent counter-strategy emerge. First, we must understand the threat.

This report provides a strategic analysis of the sources of strength and weakness for ISIS. It adapts existing military frameworks to support the development of meaningful national security strategies to counter ISIS. This report does not attempt to formulate a comprehensive counter-strategy, but instead provides a way of conceptualizing such counter-strategies in light of how ISIS forms its own strategy for military and political gain. The frameworks in this study include an evaluation of the ISIS grand strategy and its military objectives in Iraq and Syria; a Center of Gravity analysis to identify the core sources of ISIS’s strength; and a rubric to understand how main efforts and supporting efforts can combine to bring out the strategic defeat of ISIS.

This report finds that the defeat of ISIS must address two Centers of Gravity. The first is a classical military center of gravity that ISIS uses to wrest physical control from modern states and hold what it has gained. The second ISIS center of gravity is a political capacity to provide essential state functions within the territory that ISIS controls. ISIS strength emanates from the ability to translate military control into political control, and thereby to claim that the Caliphate is manifest. A strategy to defeat ISIS must break this synergy among the military and political operations of ISIS and its layered leadership. The U.S. must consider ways to accomplish this in order to propel the strategic defeat of ISIS. Destroying its Critical Capabilities, denying its Critical Opportunities and Critical Requirements, and exploiting its Critical Vulnerabilities are additional component effects that must be synchronized in order to achieve this strategic effect.

A strategy whereby ISIS remains in control of Mosul, Raqqa, and other urban centers in Iraq and Syria will fall short of the desired outcome. Settling for lesser aims or resolving to do nothing are equal. The threat of ISIS is real and expanding, but ISIS is also vulnerable at its present political formation stage. It is vital to design a cogent counter-strategy, and soon, or this door will close.

- See more at: http://www.understandingwar.org/report/islamic-state-counter-strategy-counter-state#sthash.pz2Dwrhu.dpuf

February 21, 2015

We Are Shining X Eliza Doolittle - "Killing" (Official Video)



If you can watch this video without looking away, flinching, or gasping you're made of tougher stuff than us here at Noisey. London-based production duo We Are Shining first came to our attention thanks to last year's "Hey You" 12" released via XL Recordings' offshoot Young Turks (The xx, SBTRKT, FKA Twigs). 

Their MO is groove rooted electronica—a blend of tribal beats, slapped palms and a heavy dose of soul. The pair's latest track, "Killing," is lifted from their forthcoming mixtape and features British singer Eliza Doolittle (last heard on Disclosure's smash "You & Me"). 

And the video? It's simple in concept, insane in practice and stars knife thrower John Taylor and blade dodging dancer Shannelle 'Tali' Fergus, who is basically the bravest girl around.

https://www.facebook.com/weareshining...
https://soundcloud.com/weareshining
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February 20, 2015

HOW SPIES STOLE THE KEYS TO THE ENCRYPTION CASTLE


AMERICAN AND BRITISH spies hacked into the internal computer network of the largest manufacturer of SIM cards in the world, stealing encryption keys used to protect the privacy of cellphone communications across the globe, according to top-secret documents provided to The Intercept by National Security Agency whistleblower Edward Snowden.

The hack was perpetrated by a joint unit consisting of operatives from the NSA and its British counterpart Government Communications Headquarters, or GCHQ. The breach, detailed in a secret 2010 GCHQ document, gave the surveillance agencies the potential to secretly monitor a large portion of the world's cellular communications, including both voice and data.

The company targeted by the intelligence agencies, Gemalto, is a multinational firm incorporated in the Netherlands that makes the chips used in mobile phones and next-generation credit cards. Among its clients are AT&T, T-Mobile, Verizon, Sprint and some 450 wireless network providers around the world. The company operates in 85 countries and has more than 40 manufacturing facilities. One of its three global headquarters is in Austin, Texas and it has a large factory in Pennsylvania.

In all, Gemalto produces some 2 billion SIM cards a year. Its motto is "Security to be Free."

With these stolen encryption keys, intelligence agencies can monitor mobile communications without seeking or receiving approval from telecom companies and foreign governments. Possessing the keys also sidesteps the need to get a warrant or a wiretap, while leaving no trace on the wireless provider's network that the communications were intercepted. Bulk key theft additionally enables the intelligence agencies to unlock any previously encrypted communications they had already intercepted, but did not yet have the ability to decrypt.

As part of the covert operations against Gemalto, spies from GCHQ — with support from the NSA — mined the private communications of unwitting engineers and other company employees in multiple countries.

Gemalto was totally oblivious to the penetration of its systems — and the spying on its employees. "I'm disturbed, quite concerned that this has happened," Paul Beverly, a Gemalto executive vice president, told The Intercept. "The most important thing for me is to understand exactly how this was done, so we can take every measure to ensure that it doesn't happen again, and also to make sure that there's no impact on the telecom operators that we have served in a very trusted manner for many years. What I want to understand is what sort of ramifications it has, or could have, on any of our customers." He added that "the most important thing for us now is to understand the degree" of the breach.

Leading privacy advocates and security experts say that the theft of encryption keys from major wireless network providers is tantamount to a thief obtaining the master ring of a building superintendent who holds the keys to every apartment. "Once you have the keys, decrypting traffic is trivial," says Christopher Soghoian, the principal technologist for the American Civil Liberties Union. "The news of this key theft will send a shock wave through the security community."



THE MASSIVE KEY THEFT IS "BAD NEWS FOR PHONE SECURITY. REALLY BAD NEWS."
Beverly said that after being contacted by The Intercept, Gemalto's internal security team began on Wednesday to investigate how their system was penetrated and could find no trace of the hacks. When asked if the NSA or GCHQ had ever requested access to Gemalto-manufactured encryption keys, Beverly said, "I am totally unaware. To the best of my knowledge, no."

According to one secret GCHQ slide, the British intelligence agency penetrated Gemalto's internal networks, planting malware on several computers, giving GCHQ secret access. We "believe we have their entire network," the slide's author boasted about the operation against Gemalto.

Additionally, the spy agency targeted unnamed cellular companies' core networks, giving it access to "sales staff machines for customer information and network engineers machines for network maps." GCHQ also claimed the ability to manipulate the billing servers of cell companies to "suppress" charges in an effort to conceal the spy agency's secret actions against an individual's phone. Most significantly, GCHQ also penetrated "authentication servers," allowing it to decrypt data and voice communications between a targeted individual's phone and his or her telecom provider's network. A note accompanying the slide asserted that the spy agency was "very happy with the data so far and [was] working through the vast quantity of product."

The Mobile Handset Exploitation Team (MHET), whose existence has never before been disclosed, was formed in April 2010 to target vulnerabilities in cellphones. One of its main missions was to covertly penetrate computer networks of corporations that manufacture SIM cards, as well as those of wireless network providers. The team included operatives from both GCHQ and the NSA.

While the FBI and other U.S. agencies can obtain court orders compelling U.S.-based telecom companies to allow them to wiretap or intercept the communications of their customers, on the international front this type of data collection is much more challenging. Unless a foreign telecom or foreign government grants access to their citizens' data to a U.S. intelligence agency, the NSA or CIA would have to hack into the network or specifically target the user's device for a more risky "active" form of surveillance that could be detected by sophisticated targets. Moreover, foreign intelligence agencies would not allow U.S. or U.K. spy agencies access to the mobile communications of their heads of state or other government officials.

"It's unbelievable. Unbelievable," said Gerard Schouw, a member of the Dutch Parliament, when told of the spy agencies' actions. Schouw, the intelligence spokesperson for D66, the largest opposition party in the Netherlands, told The Intercept, "We don't want to have the secret services from other countries doing things like this." Schouw added that he and other lawmakers will ask the Dutch government to provide an official explanation and to clarify whether the country's intelligence services were aware of the targeting of Gemalto, whose official headquarters is in Amsterdam.

Last November, the Dutch government proposed an amendment to its constitution to include explicit protection for the privacy of digital communications, including those made on mobile devices. "We have, in the Netherlands, a law on the [activities] of secret services. And hacking is not allowed," Schouw said. Under Dutch law, the interior minister would have to sign off on such operations by foreign governments' intelligence agencies. "I don't believe that he has given his permission for these kind of actions."

The U.S. and British intelligence agencies pulled off the encryption key heist in great stealth, giving them the ability to intercept and decrypt communications without alerting the wireless network provider, the foreign government or the individual user that they have been targeted. "Gaining access to a database of keys is pretty much game over for cellular encryption," says Matthew Green, a cryptography specialist at the Johns Hopkins Information Security Institute. The massive key theft is "bad news for phone security. Really bad news."

att_sim
AS CONSUMERS BEGAN to adopt cellular phones en masse in the mid-1990s, there were no effective privacy protections in place. Anyone could buy a cheap device from RadioShack capable of intercepting calls placed on mobile phones. The shift from analog to digital networks introduced basic encryption technology, though it was still crackable by tech savvy computer science graduate students, as well as the FBI and other law enforcement agencies, using readily available equipment.

Today, second-generation (2G) phone technology, which relies on a deeply flawed encryption system, remains the dominant platform globally, though U.S. and European cellphone companies now use 3G, 4G and LTE technology in urban areas. These include more secure, though not invincible, methods of encryption, and wireless carriers throughout the world are upgrading their networks to use these newer technologies.

It is in the context of such growing technical challenges to data collection that intelligence agencies, such as the NSA, have become interested in acquiring cellular encryption keys. "With old-fashioned [2G], there are other ways to work around cellphone security without those keys," says Green, the Johns Hopkins cryptographer. "With newer 3G, 4G and LTE protocols, however, the algorithms aren't as vulnerable, so getting those keys would be essential."

The privacy of all mobile communications — voice calls, text messages and Internet access — depends on an encrypted connection between the cellphone and the wireless carrier's network, using keys stored on the SIM, a tiny chip smaller than a postage stamp, which is inserted into the phone. All mobile communications on the phone depend on the SIM, which stores and guards the encryption keys created by companies like Gemalto. SIM cards can be used to store contacts, text messages, and other important data, like one's phone number. In some countries, SIM cards are used to transfer money. As The Intercept reported last year, having the wrong SIM card can make you the target of a drone strike.

SIM cards were not invented to protect individual communications — they were designed to do something much simpler: ensure proper billing and prevent fraud, which was pervasive in the early days of cellphones. Soghoian compares the use of encryption keys on SIM cards to the way Social Security numbers are used today. "Social security numbers were designed in the 1930s to track your contributions to your government pension," he says. "Today they are used as a quasi national identity number, which was never their intended purpose."

Because the SIM card wasn't created with call confidentiality in mind, the manufacturers and wireless carriers don't make a great effort to secure their supply chain. As a result, the SIM card is an extremely vulnerable component of a mobile phone. "I doubt anyone is treating those things very carefully," says Green. "Cell companies probably don't treat them as essential security tokens. They probably just care that nobody is defrauding their networks." The ACLU's Soghoian adds, "These keys are so valuable that it makes sense for intel agencies to go after them."

As a general rule, phone companies do not manufacture SIM cards, nor program them with secret encryption keys. It is cheaper and more efficient for them to outsource this sensitive step in the SIM card production process. They purchase them in bulk with the keys pre-loaded by other corporations. Gemalto is the largest of these SIM "personalization" companies.

After a SIM card is manufactured, the encryption key, known as a "Ki," is burned directly onto the chip. A copy of the key is also given to the cellular provider, allowing its network to recognize an individual's phone. In order for the phone to be able to connect to the wireless carrier's network, the phone — with the help of the SIM — authenticates itself using the Ki that has been programmed onto the SIM. The phone conducts a secret "handshake" that validates that the Ki on the SIM matches the Ki held by the mobile company. Once that happens, the communications between the phone and the network are encrypted. Even if GCHQ or the NSA were to intercept the phone signals as they are transmitted through the air, the intercepted data would be a garbled mess. Decrypting it can be challenging and time-consuming. Stealing the keys, on the other hand, is beautifully simple, from the intelligence agencies' point of view, as the pipeline for producing and distributing SIM cards was never designed to thwart mass surveillance efforts.

One of the creators of the encryption protocol that is widely used today for securing emails, Adi Shamir, famously asserted: "Cryptography is typically bypassed, not penetrated." In other words, it is much easier (and sneakier) to open a locked door when you have the key than it is to break down the door using brute force. While the NSA and GCHQ have substantial resources dedicated to breaking encryption, it is not the only way — and certainly not always the most efficient — to get at the data they want. "NSA has more mathematicians on its payroll than any other entity in the U.S.," says the ACLU's Soghoian. "But the NSA's hackers are way busier than its mathematicians."

GCHQ and the NSA could have taken any number of routes to steal SIM encryption keys and other data. They could have physically broken into a manufacturing plant. They could have broken into a wireless carrier's office. They could have bribed, blackmailed or coerced an employee of the manufacturer or cellphone provider. But all of that comes with substantial risk of exposure. In the case of Gemalto, hackers working for GCHQ remotely penetrated the company's computer network in order to steal the keys in bulk as they were en route to the wireless network providers.

SIM card "personalization" companies like Gemalto ship hundreds of thousands of SIM cards at a time to mobile phone operators across the world. International shipping records obtained by The Intercept show that in 2011, Gemalto shipped 450,000 smart cards from its plant in Mexico to Germany's Deutsche Telekom in just one shipment.

In order for the cards to work and for the phones' communications to be secure, Gemalto also needs to provide the mobile company with a file containing the encryption keys for each of the new SIM cards. These master key files could be shipped via FedEx, DHL, UPS or another snail mail provider. More commonly, they could be sent via email or through File Transfer Protocol, FTP, a method of sending files over the Internet.

The moment the master key set is generated by Gemalto or another personalization company, but before it is sent to the wireless carrier, is the most vulnerable moment for interception. "The value of getting them at the point of manufacture is you can presumably get a lot of keys in one go, since SIM chips get made in big batches," says Green, the cryptographer. "SIM cards get made for lots of different carriers in one facility." In Gemalto's case, GCHQ hit the jackpot, as the company manufactures SIMs for hundreds of wireless network providers, including all of the leading U.S.— and many of the largest European — companies.

But obtaining the encryption keys while Gemalto still held them required finding a way into the company's internal systems.


Diagram from a top-secret GCHQ slide.
TOP-SECRET GCHQ documents reveal that the intelligence agencies accessed the email and Facebook accounts of engineers and other employees of major telecom corporations and SIM card manufacturers in an effort to secretly obtain information that could give them access to millions of encryption keys. They did this by utilizing the NSA's X-KEYSCORE program, which allowed them access to private emails hosted by the SIM card and mobile companies' servers, as well as those of major tech corporations, including Yahoo and Google.

In effect, GCHQ clandestinely cyberstalked Gemalto employees, scouring their emails in an effort to find people who may have had access to the company's core networks and Ki-generating systems. The intelligence agency's goal was to find information that would aid in breaching Gemalto's systems, making it possible to steal large quantities of encryption keys. The agency hoped to intercept the files containing the keys as they were transmitted between Gemalto and its wireless network provider customers.

GCHQ operatives identified key individuals and their positions within Gemalto and then dug into their emails. In one instance, GCHQ zeroed in on a Gemalto employee in Thailand who they observed sending PGP-encrypted files, noting that if GCHQ wanted to expand its Gemalto operations, "he would certainly be a good place to start." They did not claim to have decrypted the employee's communications, but noted that the use of PGP could mean the contents were potentially valuable.

The cyberstalking was not limited to Gemalto. GCHQ operatives wrote a script that allowed the agency to mine the private communications of employees of major telecommunications and SIM "personalization" companies for technical terms used in the assigning of secret keys to mobile phone customers. Employees for the SIM card manufacturers and wireless network providers were labeled as "known individuals and operators targeted" in a top-secret GCHQ document.

According to that April 2010 document, "PCS Harvesting at Scale," hackers working for GCHQ focused on "harvesting" massive amounts of individual encryption keys "in transit between mobile network operators and SIM card personalisation centres" like Gemalto. The spies "developed a methodology for intercepting these keys as they are transferred between various network operators and SIM card providers." By that time, GCHQ had developed "an automated technique with the aim of increasing the volume of keys that can be harvested."

The PCS Harvesting document acknowledged that, in searching for information on encryption keys, GCHQ operatives would undoubtedly vacuum up "a large number of unrelated items" from the private communications of targeted employees. "[H]owever an analyst with good knowledge of the operators involved can perform this trawl regularly and spot the transfer of large batches of [keys]."

The document noted that many SIM card manufacturers transferred the encryption keys to wireless network providers "by email or FTP with simple encryption methods that can be broken … or occasionally with no encryption at all." To get bulk access to encryption keys, all the NSA or GCHQ needed to do was intercept emails or file transfers as they were sent over the Internet — something both agencies already do millions of times per day. A footnote in the 2010 document observed that the use of "strong encryption products … is becoming increasingly common" in transferring the keys.

In its key harvesting "trial" operations in the first quarter of 2010, GCHQ successfully intercepted keys used by wireless network providers in Iran, Afghanistan, Yemen, India, Serbia, Iceland and Tajikistan. But, the agency noted, its automated key harvesting system failed to produce results against Pakistani networks, denoted as "priority targets" in the document, despite the fact that GCHQ had a store of Kis from two providers in the country, Mobilink and Telenor. "[I]t is possible that these networks now use more secure methods to transfer Kis," the document concluded.

From December 2009 through March 2010, a month before the Mobile Handset Exploitation Team was formed, GCHQ conducted a number of trials aimed at extracting encryption keys and other personalized data for individual phones. In one two-week period, they accessed the emails of 130 people associated with wireless network providers or SIM card manufacturing and personalization. This operation produced nearly 8,000 keys matched to specific phones in 10 countries. In another two-week period, by mining just six email addresses, they produced 85,000 keys. At one point in March 2010, GCHQ intercepted nearly 100,000 keys for mobile phone users in Somalia. By June, they'd compiled 300,000. "Somali providers are not on GCHQ's list of interest," the document noted. "[H]owever, this was usefully shared with NSA."

The GCHQ documents only contain statistics for three months of encryption key theft in 2010. During this period, millions of keys were harvested. The documents stated explicitly that GCHQ had already created a constantly evolving automated process for bulk harvesting of keys. They describe active operations targeting Gemalto's personalization centers across the globe, as well as other major SIM card manufacturers and the private communications of their employees.

A top-secret NSA document asserted that, as of 2009, the U.S. spy agency already had the capacity to process between 12 and 22 million keys per second for later use against surveillance targets. In the future, the agency predicted, it would be capable of processing more than 50 million per second. The document did not state how many keys were actually processed, just that the NSA had the technology to perform such swift, bulk operations. It is impossible to know how many keys have been stolen by the NSA and GCHQ to date, but, even using conservative math, the numbers are likely staggering.

GCHQ assigned "scores" to more than 150 individual email addresses based on how often the users mentioned certain technical terms, and then intensified the mining of those individuals' accounts based on priority. The highest-scoring email address was that of an employee of Chinese tech giant Huawei, which the U.S. has repeatedly accused of collaborating with Chinese intelligence. In all, GCHQ harvested the emails of employees of hardware companies that manufacture phones, such as Ericsson and Nokia; operators of mobile networks, such as MTN Irancell and Belgacom; SIM card providers, such as Bluefish and Gemalto; and employees of targeted companies who used email providers, such as Yahoo and Google. During the three-month trial, the largest number of email addresses harvested were those belonging to Huawei employees, followed by MTN Irancell. The third largest class of emails harvested in the trial were private Gmail accounts, presumably belonging to employees at targeted companies.

"PEOPLE WERE SPECIFICALLY HUNTED AND TARGETED BY INTELLIGENCE AGENCIES, NOT BECAUSE THEY DID ANYTHING WRONG, BUT BECAUSE THEY COULD BE USED."
The GCHQ program targeting Gemalto was called DAPINO GAMMA. In 2011, GCHQ launched operation HIGHLAND FLING to mine the email accounts of Gemalto employees in France and Poland. A top-secret document on the operation stated that one of the aims was "getting into French HQ" of Gemalto "to get in to core data repositories." France, home to one of Gemalto's global headquarters, is the nerve center of the company's worldwide operations. Another goal was to intercept private communications of employees in Poland that "could lead to penetration into one or more personalisation centers" — the factories where the encryption keys are burned onto SIM cards.

As part of these operations, GCHQ operatives acquired the usernames and passwords for Facebook accounts of Gemalto targets. An internal top-secret GCHQ wiki on the program from May 2011 indicated that GCHQ was in the process of "targeting" more than a dozen Gemalto facilities across the globe, including in Germany, Mexico, Brazil, Canada, China, India, Italy, Russia, Sweden, Spain, Japan and Singapore.

The document also stated that GCHQ was preparing similar key theft operations against one of Gemalto's competitors, Germany-based SIM card giant Giesecke and Devrient.

On January 17, 2014, President Barack Obama gave a major address on the NSA spying scandal. "The bottom line is that people around the world, regardless of their nationality, should know that the United States is not spying on ordinary people who don't threaten our national security and that we take their privacy concerns into account in our policies and procedures," he said.

The monitoring of the lawful communications of employees of major international corporations shows that such statements by Obama, other U.S. officials and British leaders — that they only intercept and monitor the communications of known or suspected criminals or terrorists — were untrue. "The NSA and GCHQ view the private communications of people who work for these companies as fair game," says the ACLU's Soghoian. "These people were specifically hunted and targeted by intelligence agencies, not because they did anything wrong, but because they could be used as a means to an end."

key-slide2
THERE ARE TWO basic types of electronic or digital surveillance: passive and active. All intelligence agencies engage in extensive passive surveillance, which means they collect bulk data by intercepting communications sent over fiber-optic cables, radio waves or wireless devices.

Intelligence agencies place high-power antennas, known as "spy nests," on the top of their countries' embassies and consulates, which are capable of vacuuming up data sent to or from mobile phones in the surrounding area. The joint NSA/CIA Special Collection Service is the lead entity that installs and mans these nests for the United States. An embassy situated near a parliament or government agency could easily intercept the phone calls and data transfers of the mobile phones used by foreign government officials. The U.S. embassy in Berlin, for instance, is located a stone's throw from the Bundestag. But if the wireless carriers are using stronger encryption, which is built into modern 3G, 4G and LTE networks, then intercepted calls and other data would be more difficult to crack, particularly in bulk. If the intelligence agency wants to actually listen to or read what is being transmitted, they would need to decrypt the encrypted data.

Active surveillance is another option. This would require government agencies to "jam" a 3G or 4G network, forcing nearby phones onto 2G. Once forced down to the less secure 2G technology, the phone can be tricked into connecting to a fake cell tower operated by an intelligence agency. This method of surveillance, though effective, is risky, as it leaves a digital trace that counter-surveillance experts from foreign governments could detect.

Stealing the Kis solves all of these problems. This way, intelligence agencies can safely engage in passive, bulk surveillance without having to decrypt data and without leaving any trace whatsoever.

"Key theft enables the bulk, low-risk surveillance of encrypted communications," the ACLU's Soghoian says. "Agencies can collect all the communications and then look through them later. With the keys, they can decrypt whatever they want, whenever they want. It's like a time machine, enabling the surveillance of communications that occurred before someone was even a target."

Neither the NSA nor GCHQ would comment specifically on the key theft operations. In the past, they have argued more broadly that breaking encryption is a necessary part of tracking terrorists and other criminals. "It is longstanding policy that we do not comment on intelligence matters," a GCHQ official stated in an email, adding that the agency's work is conducted within a "strict legal and policy framework" that ensures its activities are "authorized, necessary and proportionate," with proper oversight, which is the standard response the agency has provided for previous stories published by The Intercept. The agency also said, "[T]he UK's interception regime is entirely compatible with the European Convention on Human Rights." The NSA declined to offer any comment.

It is unlikely that GCHQ's pronouncement about the legality of its operations will be universally embraced in Europe. "It is governments massively engaging in illegal activities," says Sophie in't Veld, a Dutch member of the European Parliament. "If you are not a government and you are a student doing this, you will end up in jail for 30 years." Veld, who chaired the European Parliament's recent inquiry into mass surveillance exposed by Snowden, told The Intercept: "The secret services are just behaving like cowboys. Governments are behaving like cowboys and nobody is holding them to account."

The Intercept's Laura Poitras has previously reported that in 2013 Australia's signals intelligence agency, a close partner of the NSA, stole some 1.8 million encryption keys from an Indonesian wireless carrier.

A few years ago, the FBI reportedly dismantled several transmitters set up by foreign intelligence agencies around the Washington, D.C. area, which could be used to intercept cellphone communications. Russia, China, Israel and other nations use similar technology as the NSA across the world. If those governments had the encryption keys for major U.S. cellphone companies' customers, such as those manufactured by Gemalto, mass snooping would be simple. "It would mean that with a few antennas placed around Washington, D.C., the Chinese or Russian governments could sweep up and decrypt the communications of members of Congress, U.S. agency heads, reporters, lobbyists and everyone else involved in the policymaking process and decrypt their telephone conversations," says Soghoian.

"Put a device in front of the U.N., record every bit you see going over the air. Steal some keys, you have all those conversations," says Green, the Johns Hopkins cryptographer. And it's not just spy agencies that would benefit from stealing encryption keys. "I can only imagine how much money you could make if you had access to the calls made around Wall Street," he adds.


GCHQ slide.
THE BREACH OF Gemalto's computer network by GCHQ has far-reaching global implications. The company, which brought in $2.7 billion in revenue in 2013, is a global leader in digital security, producing banking cards, mobile payment systems, two-factor authentication devices used for online security, hardware tokens used for securing buildings and offices, electronic passports and identification cards. It provides chips to Vodafone in Europe and France's Orange, as well as EE, a joint venture in the U.K. between France Telecom and Deutsche Telekom. Royal KPN, the largest Dutch wireless network provider, also uses Gemalto technology.

In Asia, Gemalto's chips are used by China Unicom, Japan's NTT and Taiwan's Chungwa Telecom, as well as scores of wireless network providers throughout Africa and the Middle East. The company's security technology is used by more than 3,000 financial institutions and 80 government organizations. Among its clients are Visa, Mastercard, American Express, JP Morgan Chase and Barclays. It also provides chips for use in luxury cars, including those made by Audi and BMW.

In 2012, Gemalto won a sizable contract, worth $175 million, from the U.S. government to produce the covers for electronic U.S. passports, which contain chips and antennas that can be used to better authenticate travelers. As part of its contract, Gemalto provides the personalization and software for the microchips implanted in the passports. The U.S. represents Gemalto's single largest market, accounting for some 15 percent of its total business. This raises the question of whether GCHQ, which was able to bypass encryption on mobile networks, has the ability to access private data protected by other Gemalto products created for banks and governments.

As smart phones become smarter, they are increasingly replacing credit cards and cash as a means of paying for goods and services. When Verizon, AT&T and T-Mobile formed an alliance in 2010 to jointly build an electronic pay system to challenge Google Wallet and Apple Pay, they purchased Gemalto's technology for their program, known as Softcard. (Until July 2014, it previously went by the unfortunate name of "ISIS Mobile Wallet.") Whether data relating to that, and other Gemalto security products, has been compromised by GCHQ and the NSA is unclear. Both intelligence agencies declined to answer any specific questions for this story.


Signal, iMessage, WhatsApp, Silent Phone.
PRIVACY ADVOCATES and security experts say it would take billions of dollars, significant political pressure, and several years to fix the fundamental security flaws in the current mobile phone system that NSA, GCHQ and other intelligence agencies regularly exploit.

A current gaping hole in the protection of mobile communications is that cellphones and wireless network providers do not support the use of Perfect Forward Secrecy (PFS), a form of encryption designed to limit the damage caused by theft or disclosure of encryption keys. PFS, which is now built into modern web browsers and used by sites like Google and Twitter, works by generating unique encryption keys for each communication or message, which are then discarded. Rather than using the same encryption key to protect years' worth of data, as the permanent Kis on SIM cards can, a new key might be generated each minute, hour or day, and then promptly destroyed. Because cellphone communications do not utilize PFS, if an intelligence agency has been "passively" intercepting someone's communications for a year and later acquires the permanent encryption key, it can go back and decrypt all of those communications. If mobile phone networks were using PFS, that would not be possible — even if the permanent keys were later stolen.

The only effective way for individuals to protect themselves from Ki theft-enabled surveillance is to use secure communications software, rather than relying on SIM card-based security. Secure software includes email and other apps that use Transport Layer Security (TLS), the mechanism underlying the secure HTTPS web protocol. The email clients included with Android phones and iPhones support TLS, as do large email providers like Yahoo and Google.

Apps like TextSecure and Silent Text are secure alternatives to SMS messages, while Signal, RedPhone and Silent Phone encrypt voice calls. Governments still may be able to intercept communications, but reading or listening to them would require hacking a specific handset, obtaining internal data from an email provider, or installing a bug in a room to record the conversations.

"We need to stop assuming that the phone companies will provide us with a secure method of making calls or exchanging text messages," says Soghoian.