Friday News Roundup — June 4, 2021

Greetings and happy Friday from Washington, D.C. While showing greater job growth than last month, today’s jobs report was another reminder that the economic recovery and reopening still faces some lingering headwinds.

Ransomware attacks have continued, with the latest incidents ranging from urban transit companies to threatening the food supply. Now, FBI Director Chris Wray is comparing the ransomware threat to that of September 11th, arguing for a whole-of-government and whole-of-society approach.

Finally, in the report on unidentified flying objects seen by U.S. military pilots, it appears that the findings of the U.S. government and intelligence community conclude that these objects are indeed flying and remain unidentified.

In The Hill, Ethan Brown dove into the controversy surrounding politicization and the military “whistleblower” tipline. In The Diplomatic Courier, Joshua reviewed “Insanity Defense,” a work by former Congresswoman Jane Harman about the thorny, unresolved national security challenges we face.

In this week’s roundup, Dan looks at how the lessons of history and understanding them are key for influence in the 21st century. Michael looks at shareholder and customer pressures on climate change and the shake up of the energy industry. Ethan covers China’s latest aggressive actions towards its neighbors, while Joshua looks at the latest reorganization of Russian military forces. As always, we wrap with news you may have missed.

History, Accountability, & Competition for Influence

Dan Mahaffee

“Tank Man” at Tiananmen Square

In our work at CSPC on great power competition, we have seen that the future competition and the balance of power rests as much on questions of influence and narrative as it does traditional metrics of economic and military power. When we’ve looked at international technology competition, numbers of patents and manufacturing capacity are important but so is the influence that U.S. companies and officials have in the international bodies that set technology standards. At the same time, the story we tell of our nation, our society, ourselves — and our history — is also part of the soft-power competition for influence.

This week, with today being the 32nd anniversary of the Tiananmen Square massacre and June 1st marking the 100th anniversary of the Tulsa massacre, the difference in how China and the United States address their history cannot be clearer. How we embrace or avoid our history is a fundamental part of the battle for influence. The role both politics and media will play in this is also worth considering. After all, in the battle for influence, the “first draft of history” will be increasingly important.

The Tulsa massacre is an indisputable blight on our history. Not only was there the mass murder of the Black community but also the destruction of the wealth and entrepreneurship of what was known as the Black Wall Street. In this massacre, it was not enough to go house-by-house in racial slaughter, as aircraft flown by the white supremacists bombed Greenwood — the first air attacks on American soil. What is more shocking is how many did not know about this in detail until recently — partially prompted by the HBO Watchmen series which prominently featured the event in its storyline. Even in my own relatively progressive AP US History curriculum, I recall it at most as a bullet point in a list of events or an aside section in a textbook.

To understand this history, to account for it, and to learn from it is not to degenerate the idea of America or believe that it is somehow irrevocably weighed down by its past. Instead, it should help us to acknowledge that a democracy, being a government of its people, is as perfect or imperfect as its people, reflecting all of humanity’s perfections and flaws. Learning history means to learn from the good and bad, so that we can be better.

The Greenwood neighborhood of Tulsa burns

Contrast this with China, where the memory of the Tiananmen Square massacre is brutally suppressed — including now in Hong Kong, which once held vibrant remembrances of those students gunned down by their government. Where Tulsa came about by the indifference, if not tacit support of government, Tiananmen was a brutal crackdown orchestrated from the highest levels of the leadership of the Communist Party of China. At the time, they rightly predicted that the commercial interests of the west would help to move past any accountability for their bloody actions. That Beijing goes so far to suppress this memory, as well as to ensure the groveling adherence to the party line on Taiwan, Tibet, or Xinjiang (see Cena, John). We should listen when Xi Jinping speaks of “international communications work” as a key arena in which the party needs to compete for Beijing’s interest.

If we consider journalism, mass media, and, to some extent, pop culture to be a “first draft of history,” we should also be concerned about Beijing’s influence over those corporations that are the key players in those fields, as well as the engines of American soft power. Second, we cannot let our overpoliticizaiton of nearly everything pull us from establishing the truth. That both the Covid Lab Leak Theory and a true accounting of the events of January 6th have become over politicized, it is unlikely to ever have a clear accounting and accountability for either.

While it will likely be hard to hold the Chinese leadership to account for their role in the Covid pandemic, the danger with warping the memory of January 6th is that we play right into the hands of our adversaries who say that our system is broken. Rep. Liz Cheney and others have been at the forefront of this argument. For Putin, it does not matter who wins, as long as the United States is increasingly ungovernable. For Xi, as long as we are distracted by culture wars and casino capitalism, China’s ascent enjoys a less complicated path.

Thus telling and learning from the story of our history, learning to deal openly and transparently with our flaws and crises, and always striving to make America a better place are strong weapons against the despots who seek to divide us and tell the world that America’s better days are behind us. If we can learn from history’s mistakes, our better days are always ahead.

ExxonMobil Fight Shows How Capitalism Can Beat Climate Change

Michael Stecher

Photo Credit: Reuters

In these pages over the last year, we have tracked the ways that the fight against climate change has become more tangible. While high-level international agreements like the Paris Climate Agreement are important as expressions of public opinion, they are not self-executing. Being a signatory to that agreement does not, in itself, reduce the amount of carbon that is released into the atmosphere. The entire edifice of top-down climate action suffers from this shortcoming. In the United States, there are plenty of things that can be done within the federal government like buying hybrid or electric vehicles for the government’s fleet or using green energy on military bases, but most of what the government can do relies on the private sector to implement the plan.

“The private sector” is not a single thing that acts with a unified agency, however: it is a diffuse web of actors all of whom respond to their own incentives. This is especially pernicious in the case of climate change because all the people who are negatively affected by emitting carbon — everyone — are not usually parties to the transactions that cause, what economists call a “negative externality.”

Last fall, we described how the business community, as expressed through the Business Roundtable, was supporting collective action to fight climate change. A criticism I heard of that was that talk is cheap and public statements from lobbying groups are also not self-executing. This viewpoint has been quite popular and everyone, including on Wall Street and in corporate boardrooms around the world, has sort of assumed that things would just continue on. That is what makes last week’s shareholder rebellion at ExxonMobil’s annual shareholder meeting so interesting.

Publicly traded companies are democratic, in a sense. Each shareholder is entitled to vote at a company’s annual meeting on resolutions and elect members of the board of directors. There is also a public forum where members of the shareholding public can raise their concerns in front of management. But it is not one shareholder one vote; it is one share one vote. Usually, these things are all wrapped up in advance and the shareholder meeting is just for show. A handful of activists will come to the meeting and announce a plan to have the company do something that management does not want — when I worked at Goldman Sachs, a group of nuns from the Sisters of Saint Francis of Philadelphia came to a shareholder meeting to talk about executive pay. By and large, management treats these like public meetings in Pawnee, Indiana, and quickly moves on to other business.

That is clearly what the management team at ExxonMobil thought about a plan put forth by Engine №1. Engine №1 is a relatively small, relatively new hedge fund that has a mission statement that talks about aligning investment outcomes with public values, just like a lot of firms. They bought 0.02% of Exxon’s outstanding shares and launched a (very expensive) campaign to try and elect 4 new members of the company’s board to enforce a more climate friendly agenda on management.

The crazy thing is that this strategy worked! Engine №1 appears to have won 3 seats, but the most interesting part is how they won. It was not an alliance of mom-and-pop small stockholders who voted en masse, but rather the heaviest of heavy hitters: Vanguard, State Street, and BlackRock, along with major institutional investors like the California Public Employees’ Retirement System (CALPERS). Vanguard, State Street, and BlackRock all manage enormous funds, most of which are designed to track investment benchmarks like the S&P 500 Index. Since Exxon is one of the largest components of that index, these big players are required to own a lot of shares. Vanguard owns 8.2% of Exxon stock, BlackRock owns 6.7%, and State Street owns 5.8%.

In most cases, these big, institutional investors do not rock the boat. They tend to view many of the things those activist investors want as being too disruptive to the business. They cannot threaten to sell shares to pressure management, so they have a reputation for a status quo bias. In this case, however, they got on board for what amounted to a medium-scale corporate raid. The capital markets took notice: if your company gets too far out of line on an issue that the business and investment community cares about, the millions of passive holders of the BlackRock LifePath Index Retirement Fund are coming for you. Engine №1, having landed a punch on the champ in the main event, will get to go to thousands of prospective new investors with plans to make them money while sustainably investing.

And another generation of plucky funds will have their own chances to take big swings. Chevron’s investors already showed a willingness to buck management at their annual meeting with a call from activists to reduce emissions; they will need to have a better plan next year. Total, the French oil and gas company, has rebranded as TotalEnergies to emphasize how they plan to transition to a post-hydrocarbon world. The oil and gas industry recognizes that the time to get on board for mitigating climate change has passed and they will be punished for continued obstinance: not by politicians or judges (though them too), but by their own customers and shareholders. It is a capitalist solution to the problem.

There are not many areas where public opinion is so powerful that it forces an alliance of big, institutional investors and activists — I would be shocked to see a similar move on executive compensation or boycotting Israel, to pick two examples. But that is probably right: climate change is the biggest problem facing the world, and it is one where there are groups that are dramatically out of step with common preferences. Self-correction is meant to be one of the goals of liberal institutional setups like shareholder capitalism and democracy. It is encouraging to see it deployed to good use, to see the capital markets executing what would otherwise appear like empty words.

Sovereignty means nothing to China’s PLA

Ethan Brown

Chinese Xian Y-20 pictured over sovereign Malaysian airspace (Royal Malaysian Air Force/AFP/Getty Images)

Opening a column with reporting on aircraft or maritime vessel’s from China’s People’s Liberation Army (PLA) hardly moves headlines anymore, an unfortunate reality to which the international space is seeing as the norm. On Tuesday, the Foreign Ministry of Malaysia announced that it would summon China’s envoy to the capitol to account for the repeated intrusion of Chinese aircraft into sovereign Malaysian airspace over Borneo.

Per reports, as many as 16 PLA Air Forces planes violated airspace boundaries and performed “suspicious activity”, having been detected by Malaysian air traffic radar which resulted in a scramble of the southeast Asian nations interceptors. The PLAAF aircraft, which was a formation of Ilyusin iL-76 and Xian Y-20 large transports (similar to the U.S. Boeing C-17 in size and capabilities), were at one point flying in trail no further than 60 nautical miles from Sarawak (located near the state of Borneo). While those large flying buses may seem innocuous at first glance, the presence of a healthy formation of large transports could well portend a rehearsal of mass air delivery or Joint Forcible Entry operations, so the assertion that it’s just maneuvers doesn’t hold up to scrutiny, and radar doesn’t lie (often).

Nothing to see here

Chinese spokespersons have remained coy on the matter, rotely asserting PLA forces strictly abided by international law without violating any such airspace. This follows in the weeks after a massive fleet of 200 Chinese vessels composed of reported militia forces docked at Whitsun reef, well within the Economic Exclusion Zone held sovereign by the Philippines, leading to stark protests from Manilla. And of course, Australia received a stark warning from the Chinese embassy earlier in the year when the Australian Department of Defence pushed an uptick in maritime patrols through the South China Sea, correlating the increased presence to a potential threat of war regarding Taiwan independence. A noted increase in Chinese fighter formations up and down its eastern coast — the Taiwan side — have been captured by tourists near Guangdong Province, including the vaunted J-16 Strike Fighter (a ‘Wish’ brand MiG-29) and J-10’s (a knock off of the French Dassault Rafale fighter-interceptor).

All of these may correlate to China’s upcoming centennial celebration of the Chinese Communist Party, forthcoming in July with a great many military spectacles being planned as part of the festivities. But most likely, these incursions and overt displays of military prowess are closer to incendiary provocations and challenges to those in opposition of growing Chinese influence. Taken in the current context of the fallout from a full media reversal about the potential Wuhan-lab source of the Coronavirus outbreak, it stands to reason that Beijing is looking to signal strength and determination as this fallout continues.

Tit for Tat

That global opposition remains ongoing and expounds, not including the narrative change about China and its Umbrella Corporation-style biohazard facilities. This space has spilt plenty of digital ink on what the United States and allies are doing to reshape the balance of power and influence in the Pacific theater, including modular warships, South Korean 5th-gen fighters, a new Marine amphibious regiment, and non-spoofable GPS networks.

The power brokerage from both sides continues unabated. In April, a new commander took the reins for the U.S. Indo-Pacific Command, Admiral John Aquilino, who recently held talks in Tokyo with new Prime Minister Yoshihide Suga and Foreign Minister Toshimitsu Motegi. The focus of these talks aimed to bolster already-strong ties between the United States and Japan, and took a direct shot across the bow at Beijing’s heightened aggression, reaffirming concern for “continuous and intensified attempt[s] to unilaterally change the status quo in the East and South China Seas”. The growing presence and in many cases, direct interdiction by Chinese forces of military and sub-liminal ilk, pose threats to the $3trn international trade routes that crisscross the Pacific, while a partnership by the U.S., Japan, Australia and India (dubbed the “Quad”) has invoked Beijing’s ire, calling it an exclusionist bloc of Cold War thought. More accurately, these actions by China may be catalogued into the Realist bloc of international relations theory, while the Quad falls somewhere between realism and constructivism.

The weapons and defense tech environs continue to shift to a post-Afghanistan, strategic competition mindset amidst the ever-increasing Chinese power gambit. Already implemented into the final quarters of its 2021 defense budget and beyond, the DoD will curtail its purchases of close air support focused Joint Direct Attack Munitions, Hellfire missiles, and GBU-39 Small Diameter Bombs, and instead vector acquisitions to long range stand off and radiation-guided strike packages (*bad segue* — weapons like these are why the Air Force sneers at the Army talking about long range artillery for INDOPACOM). These new hammers include the Air-Launched Rapid Response Weapon “ARRW” hypersonic glide missiles, the Joint Air-to-Surface Standoff Missile Extended Range “JASSM-ER”, and the Long Range Anti-Ship Missile “LRASM”. These standoff systems tout weapon engagement zones of up to 600 nautical miles, and are only limited by radar acquisition constraints or timely targeting data (hence the aforementioned spoof-proof GPS networks for data sharing).

It’s worth noting that on Wednesday, Hu Xijin, editor for the Global Times, a Chinese state-run media publication, ran an op-ed calling for massive expansion of the PLA nuclear forces and long-range DF-41 missile inventories. The op-ed (and correlating Weibo post) followed President Biden’s call for intelligence services to double-down on their efforts to determine the source of the COVID outbreak and its relation to any state-run Chinese laboratories. The rhetoric from Xijin asserts that China’s nuclear capability must “reach the quantity that makes the U.S. elites shiver should they entertain the idea of engaging in a military confrontation with China”.

Actions speak louder than words, and with wording like that, its pretty clear that sovereignty and a free and open Indo-Pacific mean nothing to the global ambitions of the Chinese Communist Party.

Russia Announces Creation of New Military Units in its Western Military District

Joshua C. Huminski

Sergei Shoigu (left) with Russian President Putin

On Monday, Russia’s Minister of Defense, Sergei Shoigu announced that the country was establishing 20 new military units in the Western Military District ostensibly to counter the growing threat to Moscow. Some 2,000 additional pieces of unspecified equipment will also be deployed to the region to strengthen the district’s posture against the perceived threat from NATO. While substantial on paper, the move says more about the signals and messages Moscow wishes to send and less about actual military capability in the near term.

According to Shoigu, “The actions of our Western colleagues destroy the security system in the world and force us to take adequate countermeasures. We are constantly improving the combat composition of the troops.” He cited increased flights of U.S. and NATO aircraft near Russian airspace, the presence of naval vessels in and around Russian territorial waters, and an increase in exercises as justification for the establishment of new units — of an indeterminate size. Interestingly, the announcement was not included in the English language version of the read-out of the meeting, located on the Russian Ministry of Defense’s website.

Shoigu’s comments about NATO exercises are not wholly without merit. At the moment, NATO is engaged in Steadfast Defender 2021, which is simulating a response to an attack on a NATO member and testing the alliance’s ability to deploy forces and sustain supply chains during a conflict. NATO says the exercises are not directed at Russia, but it is not difficult to read between the lines to find out what scenario the alliance is preparing to fight.

For his part, Shoigu made no mention of the recent deployment and subsequent redeployment of forces to and from Crime and Ukraine, which dramatically raised tensions. In previous remarks, Shoigu noted that it was only an exercise, the forces were being withdrawn, but some of the equipment was being left behind, ostensibly for Russia’s own exercise, Zapad-2021.

Russia is presently organized into five military districts — Western, Central, Southern, and Eastern and the recently formed Northern Military District which succeeded its predecessor, the Northern Fleet Joint Military Command. Naturally, the Western Military District is most adjacent to Europe and NATO countries, although the Southern Military District does border Georgia.

The reality is that it is far easier to announce the creation of 20 units than it is to actually staff, equip, and field those units in a timely manner, as noted by Russia watcher, Michael Kofman in a series of tweets in response to the announcement. Even if those units are established numerically, it is highly unlikely that they will be at operational strength for some time. In the near term, there will likely be some unit cannibalization and reconsolidation of other units to craft this magical number of 20 units.

At a macro-level, the announcement certainly raised eyebrows and likely caused some concern amongst cursory watchers of Russia, and that was the point. “Russia’s creating 20 new units? That’s terrible and threatening” is a likely refrain. Unpacking that announcement, as Kofman does, offers more nuance and complexity. How will Russia staff those units? That is, as of yet, unclear. How will Russia pay for those units? Again, that is also unclear. Economic pressure on Russia resulting from a downturn in oil and gas is being compounded by the impact of Covid and likely limiting potential expenditures.

Russia is certainly in the midst of an expansive military modernization campaign, but adding 20 divisions is no small feat in the best of times, especially if those 20 new units are meant to be of high quality, well-armed, and capable. Indeed, some of its units have been getting hands-on, on-the-ground experience in Syria, which is testing some of the concepts and doctrines articulated by Moscow, but as with the United States in Afghanistan, this is low-intensity conflict and not the high-intensity warfare that would inevitably result in the metaphorical balloon went up between Moscow and Brussels/Washington.

Here again, this matters less than the signaling aspect of the announcement. Russia does not need to wage kinetic war against NATO in the near term. The consequences of such a conflict would be prohibitively high and it is far easier and indeed better for Moscow to wage irregular warfare via proxies, covert operations, hacking, and propaganda and influence operations.

Twenty units sounds like a lot, but it is unclear as of yet (at least in available reporting) how large these units will be: twenty divisions? A lot. Twenty platoons? Not so much. Moreover, the composition of these units also matters. Twenty understaffed and underequipped units matter a lot less than twenty units at fully operational readiness staffed not with conscripts, but professional soldiers (also an unlikely prospect).

This is not to say that these units will not actually end up on the order of battle, but in the near term it is a demonstration of chest-thumping and posturing. The English language reporting recycled Shoigu’s remarks ad nauseum, with little analysis or context. There was, of course, the obligatory quote from Secretary-General Jens Stoltenberg, but little else. As a result, the announcement and subsequent reporting can fit whatever narrative the reader wants — Russia is responding to NATO aggression; Russia is being aggressive, ergo NATO needs to increase its posture; or any permutation in between.

This also fits within the domestically focused narrative of many of the actions of President Vladimir Putin’s government. Moscow is forming these units to respond to the actions of the West: NATO is conducting exercises on Russia’s borders and the Motherland is under threat. The Kremlin hopes to stoke domestic fears of an aggressive (and unstable) West to ensure quiescence from the population, or at least passive support for Putin and an unquestioning body politic.

News You May Have Missed

South African Police Issue Interpol Notice for Gupta Brothers & Wives

A name synonymous with the corruption known as “state capture” in South Africa, the Guptas and their business empire have increasingly drawn the scrutiny of South African prosecutors and anti-corruption advocates. Now, in a case involving the diversion of funds from an agricultural dairy program for the impoverished, South African police have issued Interpol warrants for two Gupta brothers: Atul and Rajesh, and their respective wives Chetali and Arti. They are believed to be living in the United Arab Emirates.

Biden Administration Takes Aim at Corruption

One of the most important schisms in global politics is the one between kleptocracy and the rule of law. Kleptocracy, in its viral form, is not just a symptom of weak states; the flow of dirty money across borders creates groups in well-established democracies who want to see enforcement a little bit weaker: cryptocurrency hawkers; offshore bankers; certain real estate developers in Palm Beach. Like a market for lemons, the bad money chases out the good. That is why it is so important that the United States take a strong stand against international corruption and kleptocracy. This week, President Biden launched a 200-day interagency study on strengthening U.S. policy responses to fighting corruption abroad and curbing illicit finance. We will be watching this space closely for the recommendations and the follow-through.

The views of authors are their own and not that of CSPC.



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