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 Forecasting America's Destiny ... and the World's


Generational Dynamics Web Log for 14-Oct-2012
14-Oct-12 World View -- Huawei scandal exposes potential 'Cyberwar Pearl Harbor' from China

Web Log - October, 2012

14-Oct-12 World View -- Huawei scandal exposes potential 'Cyberwar Pearl Harbor' from China

China continues economic warfare against Japan over Senkaku islands

This morning's key headlines from

Defense Secretary Panetta warns of 'Cyberwar Pearl Harbor'

Huawei office in Wuhan, China
Huawei office in Wuhan, China

In a speech on Friday, Secretary of Defense Leon Panetta described the dangers of cyberwar. His remarks were timely, coming just after the House Intelligence Committee issued a report warning of potential cyberattacks through devices sold by the Chinese companies Huawei and ZTE. Panetta said:

"These attacks mark a significant escalation of the cyber threat and they have renewed concerns about still more destructive scenarios that could unfold.

For example, we know that foreign cyber actors are probing America's critical infrastructure networks. They are targeting the computer control systems that operate chemical, electricity and water plants and those that guide transportation throughout this country.

We know of specific instances where intruders have successfully gained access to these control systems.

We also know that they are seeking to create advanced tools to attack these systems and cause panic and destruction and even the loss of life.

Let me explain how this could unfold. An aggressor nation or extremist group could use these kinds of cyber tools to gain control of critical switches. They could, for example, derail passenger trains or even more dangerous, derail trains loaded with lethal chemicals.

They could contaminate the water supply in major cities or shutdown the power grid across large parts of the country.

The most destructive scenarios involve cyber actors launching several attacks on our critical infrastructure at one time, in combination with a physical attack on our country. Attackers could also seek to disable or degrade critical military systems and communication networks.

The collective result of these kinds of attacks could be a cyber Pearl Harbor; an attack that would cause physical destruction and the loss of life. In fact, it would paralyze and shock the nation and create a new, profound sense of vulnerability.

As director of the CIA and now Secretary of Defense, I have understood that cyber attacks are every bit as real as the more well-known threats like terrorism, nuclear weapons proliferation and the turmoil that we see in the Middle East."

It's pretty clear that Panetta was referring to an attack by China. China is thought to have some 3,000 long-range missiles, many of them nuclear weapons targeted at American cities, has developed missiles specifically designed to target American aircraft carriers, and has been conducting cyberwar at the business espionage level for years. Panetta is saying that a full-scale attack is coming, and that when it comes it will paralyze the nation.

His phrase "create a new, profound sense of vulnerability" might be an allusion to the words of Carl von Clausewitz in his 1832 book "On War," in which he describes what happens to the initial war euphoria of a country when it suffers its first defeat:

"The effect of defeat outside the army -- on the people and on the government -- is a sudden collapse of the wildest expectations, and total destruction of self-confidence. The destruction of these feelings creates a vacuum, and that vacuum gets filled by a fear that grows corrosively, leading to total paralysis. It's a blow to the whole nervous system of the losing side, as if caused by an electric charge. This effect may appear to a greater or lesser degree, but it's never completely missing. Then, instead of rushing to repair the misfortune with a spirit of determination, everyone fears that his efforts will be futile; or he does nothing, leaving everything to Fate."

In other words, it's like the reaction to 9/11 a million times over. Dept. of Defense and Carl von Clausewitz

House Intelligence Committee warns against doing business with Huawei and ZTE

On Monday, the House Intelligence Committee issued a report warning government agencies and private companies of the substantial risks of doing business with Chinese companies Huawei [pronounced WAH way] Technologies Company and ZTE Corporation because of their links to the Chinese Communist Party and the People's Liberation Army (PLA). After a year long investigation, the committee said that Huawei and ZTE provided incomplete, contradictory, and evasive responses to the Committee’s core concerns. According to the report:

"Despite hours of interviews, extensive and repeated document requests, a review of open-source information, and an open hearing with witnesses from both companies, the Committee remains unsatisfied with the level of cooperation and candor provided by each company. Neither company was willing to provide sufficient evidence to ameliorate the Committee’s concerns. Neither company was forthcoming with detailed information about its formal relationships or regulatory interaction with Chinese authorities. Neither company provided specific details about the precise role of each company’s Chinese Communist Party Committee. Furthermore, neither company provided detailed information about its operations in the United States. Huawei, in particular, failed to provide thorough information about its corporate structure, history, ownership, operations, financial arrangements, or management. Most importantly, neither company provided sufficient internal documentation or other evidence to support the limited answers they did provide to Committee investigators.

During the investigation, the Committee received information from industry experts and current and former Huawei employees suggesting that Huawei, in particular, may be violating United States laws. These allegations describe a company that has not followed United States legal obligations or international standards of business behavior. The Committee will be referring these allegations to Executive Branch agencies for further review, including possible investigation."

Huawei and ZTE's primary business is selling high-end computer networking switches and other equipment used by cell phone carriers, Internet service providers, and other companies to run communications networks. American companies like Cisco sell similar equipment, but the Chinese versions are much cheaper, supposedly because of cheaper labor in China. There are Huawei and ZTE equipment used in internet switches and phone switches around the world. The fear is that the Chinese have installed "backdoor" capabilities into this equipment so that, at the appropriate times, the PLA could send out commands over the internet telling these devices to spy or to shut down, or to cause the kind of disasters that Panetta outlined in his "Cyberwar Pearl Harbor" warning.

I'd now like to address a comment to those morons who claim that this idea is so fantastical that it could never be done, or that if it was done it would be easily detected through extensive testing of these devices, such as what is already being done on a regular basis.

Anyone who, like myself, has spent part of his career developing chip-level operating system software for embedded systems can tell you that not only is this doable, it's not even particularly difficult for someone with the right skills. A backdoor capability would not be detected by testing because it would be designed not to do anything until a particular encrypted command was sent to it to enable it. The backdoor capability could be hidden so deeply in the chip structure of a device that even other programmers working on the same project would not be aware of it. And of course the company managers might not even be aware of it, especially the president of the American division of the Chinese company.

Now, having said that can be done easily, there's no doubt that it HAS been done. The PLA has been preparing for war with the U.S. in every possible way, as I've been writing about for years. In addition to the forces I've already described, China has stationed military forces in the South China Sea, taking possession of islands that belong to other countries; they've declared economic warfare against Japan for the same reason; they have thousands of missiles ready to launch against Taiwan; they have large military deployments in western Tibet ready to invade India; and they've demonstrated a capability to destroy American communications and GPS satellites.

What would be absolutely fantastical is to think that after China has made all these war preparations in other areas, the Chinese haven't bothered to do the easiest thing of all: Implement backdoors in internet and phone switches, and subsidize the equipment so that it can be sold cheaply and in high volume to companies and governments around the world. One can be absolutely certain that this has happened. House Intelligence Committee and Technology Review

China continues economic warfare against Japan over Senkaku islands

For years, people have been telling me that the predictions of war by Generational Dynamics are certainly wrong because businessmen would prevent these wars from occurring and harming their businesses. This was always a moronic argument, but the conflict between China over the Senkaku/Diaoyu islands emphasizes what really happens. China's levels of nationalism and xenophobia towards the Japanese have reached astronomical levels. Even the businessmen are highly nationalistic, and believe (or are forced to believe) that it's their patriotic duty to give up some business for the good of the country. Thus, China has been conducting an economic war against Japan: Japanese car sales in China are in free fall; Japanese speakers in China are booed or threatened; Chinese tourists in droves are canceling trips to Japan; China's government has encouraged riots to smash Japanese cars, Japanese businesses and Japanese manufacturing plants in China.

Contrary to the naive criticisms that have been leveled at me and Generational Dynamics over the years, wars are not prevented because they're bad for business. To the contrary, business ties are used as economic warfare, usually in preparation for military warfare. AP

(Comments: For reader comments, questions and discussion, see the 14-Oct-12 World View -- Huawei scandal exposes potential 'Cyberwar Pearl Harbor' from China thread of the Generational Dynamics forum. Comments may be posted anonymously.) (14-Oct-2012) Permanent Link
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