Obama’s Secret Cyber Directive, The Power Behind China’s Throne?

Category: Cyber, Economic Warfare, China, PLA, FBI, Obama, Cyber Security Bill

EWI Digest Posting No. 326, November 20, 2012
>
> CYBER:
>
> Obama’s Secret Directive, Senate Cybersecurity Bill Fails, >
> FBI Access to Electronic Communications,
>
> Supercomputer Rankings, How the SEC Almost Shut Down Wall Street >
> CHINA:
>
> Sinopec Buys Nigeria Oil Field, China’s Bad Loans,
>
> Hong Kong and the Gold Trade,
>
> Ambrose Evans-Pritchard on the New Politburo
>
> Standing Committee and the Chinese Economy,
>
> He Di: The Insider Trying to Save the Chinese Communist Party from Itself, WSJ on > the New Leadership,
>
> The PLA: China’s Power Behind the Throne?
>
> PLEASE NOTE: YOU CAN WATCH THE VIDEO OF EWI’S JULY 9 CAPITOL HILL BRIEFING ON ECONOMIC > THREATS AND WARFARE AT
>
> http://www.youtube.com/playlist?list=PL80F8C53F783A1741&feature=plcp >
> To: Friends
>
> From: Ken Jensen, Rachel Ehrenfeld
>
>
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> EWI BLOG: Kenneth D.M. Jensen: Cyber, China http://EconWarfare.org [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.x4mmtmgab.wus7micab.3290&ts=S0837&p=http%3A%2F%2FEconWarfare.org]
> Thanks to Foreign Policy,Ganesh Sahathevan, and Sol Sanders for item contributions. > CYBER
> Obama’s Secret Directive
> Ellen Nakashima of the Washington Post reports that in mid-October President Obama
> signed a secret directive that allows the military to be more aggressive in acting > to thwart cyber attacks.
> “The new directive is the most extensive White House effort to date to wrestle with
> what constitutes an ‘offensive’ and a ‘defensive’ action in the rapidly evolving
> world of cyberwar and cyberterrorism, where an attack can be launched in milliseconds
> by unknown assailants utilizing a circuitous route. For the first time, the directive
> explicitly makes a distinction between network defense and cyber operations to guide
> officials charged with making often rapid decisions when confronted with threats.
> “The policy also lays out a process to vet any operations outside government and
> defense networks and ensure that U.S. citizens’ and foreign allies’ data and privacy > are protected and international laws of war are followed.”
> It’s difficult to know what exactly this means, although Nakashima mentions that
> “an example of a defensive cyber operation that once would have been considered
> an offensive act, for instance, might include stopping a computer attack by severing
> the link between an overseas server and a targeted domestic computer.” She suggests
> that maybe now authorization to do this sort of thing is forthcoming. However, > she also says that
> “The new policy makes clear that the government will turn first to law enforcement
> or traditional network defense techniques before asking military cyber units for > help or pursuing other alternatives, senior administration officials said.”
> What’s clear is that whatever Obama did, this is not the anticipated executive order > on cybersecurity.
> Senate Cybersecurity Bill Fails
> David Perera, writing for fiercegovernmentit.com, reports that on November 14 the
> Senate failed to pass a cybersecurity bill. That will likely guarantee that Obama > will issue an executive order on the matter.
> FBI Access to Electronic Communications
> Greg Miller and Ellen Nakashima of the Washington Post, focusing on the Petraeus-Broadwell
> scandal, report on the extent to which the FBI has access to electronic communications. > Supercomputer Rankings
> The Wall Street Journal has produced an interesting piece on supercomputers. It
> turns out that China’s No. 1 rating in 2010 has changed. The United States is
> back in front with the fastest machine and China’s fastest has slipped to No. 8.
> We have new computer chips China doesn’t have. FYI, the United States has 251
> supercomputers running. China is second with just 72. IBM and Hewlett-Packard > remain first and second in the field for producing fast machines. > How the SEC Almost Shut Down Wall Street
> Adam Levin of ABC News reports on something the EWI Blog and Digest heard about
> weeks ago: injudicious behavior on the part of the SEC with regard to computer security:
> “Here’s a fun fact: Hackers, just like bankers, real estate agents and collectors
> of Star Trek memorabilia, attend conferences. Even better: they play games at the
> conferences. One of the games they play has attendees aggressively competing to
> access any device in the hall, thereby demonstrating prowess in obtaining sensitive
> information. The goal is to exploit any vulnerability, or crack that which is perceived
> to be impenetrable, and share details for both educational purposes and bragging
> rights. This is the kind of thing you’d expect at a Black Hat hacker conference
> and why people with sensitive information on computers probably shouldn’t bring
> them to the party. Especially employees of the Securities and Exchange Commission
> Trading and Markets division. And they really shouldn’t have brought their computers > with them. Except they did. Yes. This really happened.”
> CHINA
> Sinopec Buys Nigeria Oil Field
> Bloomberg reports that
> “Total SA (FP), France’s largest oil company, sold its 20 percent stake in an offshore
> Nigerian field to China Petrochemical Corp. for about $2.5 billion as part of an > asset-disposal program.
> “The OML 138 block includes the Usan field, which started output in February, Paris-based
> Total said today in a statement. The asset accounts for about 10 percent of Total’s > Nigerian production, which averaged 287,000 barrels a day last year.
> “The sale is part of Total’s plans to complete $15 billion to $20 billion of asset
> disposals from 2012 to 2014. China’s state-backed energy companies are seeking new
> oil and gas reserves abroad to feed the world’s second-largest economy, especially
> from regions like Africa where government scrutiny is lighter than in North America > or Europe.
> China’s Bad Loans
> Bloomberg, again, reports that
> “Chinese banks’ bad loans increased for a fourth straight quarter, the longest streak
> of deterioration since the data became available in 2004, highlighting pressures > on profit growth as the economy weakens.
> “Non-performing loans rose by 22.4 billion yuan ($3.6 billion) in the three months
> ended Sept. 30, to 478.8 billion yuan, the China Banking Regulatory Commission said
> in a statement on its website today. Bad loans increased at all types of institutions,
> including the largest state-owned lenders, rural banks and foreign banks, the regulator > said.
> “China’s banking system is grappling with rising defaults and weaker loan demand
> after economic growth decelerated for a seventh quarter. Combined net income growth
> at the nation’s 3,800 lenders slowed to 14 percent in the third quarter from 23 > percent in the second, the regulator said today.”
> Hong Kong and the Gold Trade
> Asiasentinel.com reports that
> “Hong Kong, sitting China’s on flank and on the route to India, appears to be the
> nexus for a huge amount of gold moving around the planet, with as much as 60 metric
> tons of the precious metal crossing through in some months, worth $3.32 billion > at the current price per ounce.
> “There is so much gold passing through the territory from as far away as Switzerland
> that, as Asia Sentinel reported on Nov. 12, in July the Israel-based Malca-Amit
> Global Ltd announced that it had opened a bullion storage facility at Hong Kong
> International Airport that is capable of holding 1,000 tonnes at any given time
> – 22 percent of the gold in the fabled US storage facility at Fort Knox, Kentucky.
> A company official declined to comment on either the direction in or out of gold > and other valuables shipments.
> “The Malca-Amit official is not the only one. Gold is a subject that nobody really
> seems to want to talk about. The World Gold Council office in Hong Kong did not
> return a call requesting an interview. Officials from the Hong Kong Customs and > Excise Department also refused to be interviewed.
> “Where the gold comes from and where it goes from all three sources is somewhat
> a mystery. Research-Works, a Shanghai-based research firm, said a relatively small
> amount of China’s gold, 74.2 tonnes in 2011 goes into industrial use, while consumer > demand – jewelry and investment, swallows some 780 tonnes annually.” > Read on.
> Ambrose Evans-Pritchard on the New Politburo Standing Committee and the Chinese > Economy
> The Telegraph UK’s financial columnist Ambrose Evans-Pritchard offers an ominous > warning about the new Politburo Standing Committee and the Chinese economy:
> “As expected, hardliners have won the power-struggle at the top of China’s Communist
> Party, or at least they have won the latest round judging by the line-up of the > Politburo’s Standing Committee this morning.
> “This is beginning to look like a shocker for the world economy, with big implications > for global growth, trade, oil and commodity demand, investment flows, etc.
> “Two key reformers were shut out of the seven-man Standing Committee: Guangzhou
> party chief Wang Yang and the head of the national party organisation Li Yuanchao.
> “Wang Qishan – the torchbearer of economic modernisation – did make it onto the > committee but will be in charge of fighting graft, not fighting dinosaurs.
> “The North-Korea trained Zhang Dejiang – a champion of the state-owned behemoths > – has risen further to prominence.
> “There is a growing risk – though only a risk – that China will hit the ‘invisible
> glass ceiling’ that lies in wait for catch-up economies that rely too long on cheap
> labour and imported know-how, failing to make the crucial switch to a different > kind of model before it is too late.
> “It is not easy to make the leap to self-sustaining growth on the creative frontier. > No country has achieved it with a fully authoritarian system.” > He Di: The Insider Trying to Save the Chinese Communist Party from Itself
> John Garnaut, writing for Foreign Policy, has produced a terrific article on (former?)
> UBS vice chairman He Di and his thoughts on the Chinese economy. Here’s the lede.
> “Two years ago, one of China’s most successful investment bankers broke away from
> his meetings in Berlin to explore a special exhibit that had caught his eye: ‘Hitler
> and the Germans: Nation and Crime.’ In the basement of the German History Museum,
> He Di watched crowds uneasily coming to terms with how their ancestors had embraced
> the Nazi promise of ‘advancement, prosperity and the reinstatement of former national
> grandeur,’ as the curators wrote in their introduction to the exhibit. He, vice-chairman
> of investment banking at the Swiss firm UBS, found the exhibition so enthralling,
> and so disturbing for the parallels he saw with back home, that he spent three days > absorbing everything on Nazi history that he could find.
> “‘I saw exactly how Hitler combined populism and nationalism to support Nazism,’
> He told me in an interview in Beijing. ‘That’s why the neighboring countries worry
> about China’s situation. All these things we also worry about.’ On returning to
> China he sharpened the mission statement at the think tank he founded in 2007 and > redoubled its ideological crusade.
> “He’s Boyuan Foundation exists almost entirely under the radar, but is probably
> the most ambitious, radical, and consequential think tank in China. After helping
> bring the Chinese economy into the arena of global capital through his work at UBS,
> He now aspires to enable Chinese people to live in a world of what he and his ideological
> allies call ‘universal values’: liberty, democracy, and free markets. While the
> foundation advises government institutions, including leaders at the banking and
> financial regulators, its core mission is to ‘achieve a societal consensus’ around
> the universal values that it believes underpin a modern economic, political and > social system.”
> WSJ on the New Leadership
> The Wall Street Journal editorial staff has given its own assessment of the Chinese
> leadership turnover. Although cautious, it agrees with the consensus that the hardliners
> have won out. Given that we’re talking about China here almost anything can happen. > The WSJ’s conclusion is that, sooner or later, something’s got to give:
> “In the provinces, pressure is building from the grass roots for greater participation
> in government, and some officials are experimenting with new ways to deal with social
> unrest. Change will come to China when the regime has reached an economic or political
> impasse as the Soviet Union did in the 1980s, and only then will Beijing find its > Gorbachev.”
> The PLA: China’s Power Behind the Throne?
> Parris Chang, writing for the Taipei Times, makes an extended argument for the power
> of the People’s Liberation Army in the recent leadership turnover. There is no > doubt that the PLA is more important than it used to be. As Chang says,
> “The 18th Party Congress started today, with the PLA expected to send 251 delegates
> – three times more than those from Henan, China’s most populous province – a very
> good measure of its political clout. Xi [Jinping] has maintained close relations
> with the PLA, and his public and informal remarks on China’s foreign policy and > Sino-US relations echo the tough line of the PLA.”
> Thanks to old Asia business hand Sol Sanders for this piece. > CONTENTS
> CYBER
> ITEM 1: Ellen Nakashima: Obama signs secret directive to help thwart cyberattacks
> http://www.washingtonpost.com/world/national-security/obama-signs-secret-cybersecurity-directive-allowing-more-aggressive-military-role/2012/11/14/7bf51512-2cde-11e2-9ac2-1c61452669c3_story.html?hpid=z3
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.tr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.washingtonpost.com%2Fworld%2Fnational-security%2Fobama-signs-secret-cybersecurity-directive-allowing-more-aggressive-military-role%2F2012%2F11%2F14%2F7bf51512-2cde-11e2-9ac2-1c61452669c3_story.html%3Fhpid%3Dz3]
> ITEM 2: WALL STREET JOURNAL: Supercomputer Ranking Offers Clues About Chips, China
> http://blogs.wsj.com/chinarealtime/2012/11/14/supercomputer-ranking-offers-clues-about-chips-china/?mod=WSJ_Opinion_LatestHeadlines
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.ur9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fblogs.wsj.com%2Fchinarealtime%2F2012%2F11%2F14%2Fsupercomputer-ranking-offers-clues-about-chips-china%2F%3Fmod%3DWSJ_Opinion_LatestHeadlines] > ITEM 3: David Perera: Last attempt at Senate cybersecurity bill fails
> http://www.fiercegovernmentit.com/story/last-attempt-senate-cybersecurity-bill-fails/2012-11-15?utm_medium=nl&utm_source=internal
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.vr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.fiercegovernmentit.com%2Fstory%2Flast-attempt-senate-cybersecurity-bill-fails%2F2012-11-15%3Futm_medium%3Dnl%26utm_source%3Dinternal]
> ITEM 4: Greg Miller, Ellen Nakashima: FBI investigation of Broadwell reveals bureau’s > comprehensive access to electronic communications
> http://www.washingtonpost.com/world/national-security/fbi-investigation-of-broadwell-reveals-bureaus-comprehensive-access-to-electronic-communications/2012/11/17/5f27d636-3012-11e2-9f50-0308e1e75445_story.html?hpid=z1
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.wr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.washingtonpost.com%2Fworld%2Fnational-security%2Ffbi-investigation-of-broadwell-reveals-bureaus-comprehensive-access-to-electronic-communications%2F2012%2F11%2F17%2F5f27d636-3012-11e2-9f50-0308e1e75445_story.html%3Fhpid%3Dz1]
> ITEM 5: Adam Levin: How the SEC Almost Shut Down Wall Street: Computers owned by
> the Securities and Exchange Commission Trading and Markets division were brought > by SEC staffers to a hacker convention.
> http://abcnews.go.com/Business/sec-shut-wall-street/story?id=17730628#.UKvi6DUh9PI
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.yr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fabcnews.go.com%2FBusiness%2Fsec-shut-wall-street%2Fstory%3Fid%3D17730628%23.UKvi6DUh9PI] > CHINA
> ITEM 6: Tara Patel: Total Sells Nigeria Oil Field to Sinopec for $2.5 Billion
> http://www.bloomberg.com/news/2012-11-19/total-sells-nigeria-oil-field-to-sinopec-for-2-5-billion.html
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.zr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2012-11-19%2Ftotal-sells-nigeria-oil-field-to-sinopec-for-2-5-billion.html]
> ITEM 7: John Garnaut: National Socialism with Chinese Characteristics. Meet He Di, > the insider trying to save the Chinese Communist Party from itself.
> http://www.foreignpolicy.com/articles/2012/11/15/national_socialism_with_chinese_characteristics?page=full
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.8r9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.foreignpolicy.com%2Farticles%2F2012%2F11%2F15%2Fnational_socialism_with_chinese_characteristics%3Fpage%3Dfull]
> ITEM 8: Ambrose Evans-Pritchard: Chinese perma-growth at risk as Leninists tighten > Politburo grip
> http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100021331/chinese-perma-growth-at-risk-as-leninists-tighten-politburo-grip/
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.7r9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fblogs.telegraph.co.uk%2Ffinance%2Fambroseevans-pritchard%2F100021331%2Fchinese-perma-growth-at-risk-as-leninists-tighten-politburo-grip%2F]
> ITEM 9: WALL STREET JOURNAL: Parsing China’s New Politburo. The dynamics of the > Chinese system matter more.
> http://online.wsj.com/article/SB10001424127887324556304578120351592692378.html?mod=WSJ_Opinion_LEFTTopBucket
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.as9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424127887324556304578120351592692378.html%3Fmod%3DWSJ_Opinion_LEFTTopBucket] > ITEM 10: BLOOMBERG: China’s Bad Loans Rise for Fourth Quarter as Economy Slows
> http://www.bloomberg.com/news/2012-11-15/china-banks-bad-loans-rise-for-fourth-quarter-as-economy-slows.html
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.es9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2012-11-15%2Fchina-banks-bad-loans-rise-for-fourth-quarter-as-economy-slows.html] > ITEM 11: Parris Chang: China’s power behind the throne
> http://www.taipeitimes.com/News/editorials/archives/2012/11/08/2003547145 [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.fs9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.taipeitimes.com%2FNews%2Feditorials%2Farchives%2F2012%2F11%2F08%2F2003547145] > ITEM 12: ASIASENTINELT.COM: Hong Kong and the Gold Trade
> http://asiasentinel.com/index.php?option=com_content&task=view&id=4970&Itemid=224
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.gs9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fasiasentinel.com%2Findex.php%3Foption%3Dcom_content%26task%3Dview%26id%3D4970%26Itemid%3D224] > FULL TEXTS
> ITEM 1a: Ellen Nakashima: Obama signs secret directive to help thwart cyberattacks
> http://www.washingtonpost.com/world/national-security/obama-signs-secret-cybersecurity-directive-allowing-more-aggressive-military-role/2012/11/14/7bf51512-2cde-11e2-9ac2-1c61452669c3_story.html?hpid=z3
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.tr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.washingtonpost.com%2Fworld%2Fnational-security%2Fobama-signs-secret-cybersecurity-directive-allowing-more-aggressive-military-role%2F2012%2F11%2F14%2F7bf51512-2cde-11e2-9ac2-1c61452669c3_story.html%3Fhpid%3Dz3] > Wednesday, November 14, 10:27 AM
> President Obama has signed a secret directive that effectively enables the military
> to act more aggressively to thwart cyberattacks on the nation’s web of government > and private computer networks.
> Presidential Policy Directive 20 establishes a broad and strict set of standards
> to guide the operations of federal agencies in confronting threats in cyberspace,
> according to several U.S. officials who have seen the classified document and are > not authorized to speak on the record. The president signed it in mid-October.
> The new directive is the most extensive White House effort to date to wrestle with
> what constitutes an “offensive” and a “defensive” action in the rapidly evolving
> world of cyberwar and cyberterrorism, where an attack can be launched in milliseconds
> by unknown assailants utilizing a circuitous route. For the first time, the directive
> explicitly makes a distinction between network defense and cyber operations to guide
> officials charged with making often rapid decisions when confronted with threats.
> The policy also lays out a process to vet any operations outside government and
> defense networks and ensure that U.S. citizens’ and foreign allies’ data and privacy > are protected and international laws of war are followed.
> “What it does, really for the first time, is it explicitly talks about how we will
> use cyber operations,” a senior administration official said. “Network defense is
> what you’re doing inside your own networks. Cyber operations is stuff outside that
> space, and recognizing that you could be doing that for what might be called defensive > purposes.”
> The new policy, which updates a 2004 presidential directive, is part of a wider
> push by the Obama administration to confront the growing cyberthreat, which officials > warn may overtake terrorism as the most significant threat to the country.
> “It should enable people to arrive at more effective decisions,” said a second senior > administration official. “In that sense, it’s an enormous step forward.”
> Legislation to protect private networks from attack by setting security standards
> and promoting voluntary information sharing is pending on the Hill, and the White > House is also is drafting an executive order along those lines.
> James A. Lewis, a cyber expert at the Center for Strategic and International Studies,
> welcomed the new directive as bolstering the government’s capability to defend against
> “destructive scenarios,” such as those that Defense Secretary Leon E. Panetta recently > outlined in a speech on cybersecurity.
> “It’s clear we’re not going to be a bystander anymore to cyber attacks,” said Lewis.
> The Pentagon now is expected to finalize new rules of engagement that would guide
> commanders when and how the military can go outside government networks to prevent > a cyberattack that could cause significant destruction or casualties.
> The presidential directive attempts to settle years of debate among government agencies
> about who is authorized to take what sorts of actions in cyberspace and with what > level of permission.
> An example of a defensive cyber operation that once would have been considered an
> offensive act, for instance, might include stopping a computer attack by severing > the link between an overseas server and a targeted domestic computer.
> “That was seen as something that was aggressive,” said one defense official, “particularly
> by some at the State Department” who often are wary of actions that might infringe
> on other countries’ sovereignty and undermine U.S. advocacy of Internet freedom.
> Intelligence agencies are wary of operations that may inhibit intelligence collection.
> The Pentagon, meanwhile, has defined cyberspace as another military domain – joining > air, land, sea and space – and wants flexibility to operate in that realm.
> But cyber operations, the officials stressed, are not an isolated tool. Rather,
> they are an integral part of the coordinated national security effort that includes > diplomatic, economic and traditional military measures.
> Offensive cyber actions, outside of war zones, would still require a higher level > of scrutiny from relevant agencies and generally White House permission.
> The effort to grapple with these questions dates back to the 1990s but has intensified > as cyber tools and weapons become ever more sophisticated.
> One of those tools was Stuxnet, a computer virus jointly developed by the United
> States and Israel that damaged nearly 1,000 centrifuges at an Iranian nuclear plant
> in 2010. If an adversary should turn a similar virus against U.S. computer systems,
> whether public or private, the government needs to be ready to preempt or respond, > officials have said.
> Since the creation of the military’s Cyber Command in 2010, its head, Gen. Keith
> Alexander, has forcefully argued that his hundreds of cyberwarriors at Fort Meade
> should be given greater latitude to stop or prevent attacks. One such cyber-ops > tactic could be tricking malware by sending it “sleep” commands.
> Alexander has put a particularly high priority on defending the nation’s private
> sector computer systems that control critical functions such as making trains run, > electricity flow and water pure.
> But repeated efforts by officials to ensure Cyber Command has that flexibility have
> met with resistance – sometimes from within the Pentagon itself – over concerns
> that enabling the military to move too freely outside its own networks could pose
> unacceptable risks. A major concern has always been concern that an action may have > a harmful unintended consequence, such as shutting down a hospital generator.
> Officials say they expect the directive will spur more nuanced debate over how to
> respond to cyber incidents. That might include a cyberattack that wipes data from
> tens of thousands of computers in a major industrial company, disrupting business > operations, but doesn’t blow up a plant or kill people.
> The new policy makes clear that the government will turn first to law enforcement
> or traditional network defense techniques before asking military cyber units for > help or pursuing other alternatives, senior administration officials said.
> “We always want to be taking the least action necessary to mitigate the threat,”
> said one of the senior administration officials. “We don’t want to have more consequences > than we intend.”
> ITEM 2a: WALL STREET JOURNAL: Supercomputer Ranking Offers Clues About Chips, China
> http://blogs.wsj.com/chinarealtime/2012/11/14/supercomputer-ranking-offers-clues-about-chips-china/?mod=WSJ_Opinion_LatestHeadlines
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.ur9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fblogs.wsj.com%2Fchinarealtime%2F2012%2F11%2F14%2Fsupercomputer-ranking-offers-clues-about-chips-china%2F%3Fmod%3DWSJ_Opinion_LatestHeadlines] > November 14, 2012, 12:06 PM HKT
> If doubts lingered about a major shift in supercomputer technology, the latest ranking
> Monday of the 500 largest scientific systems should dispel them-as well as any fears > that China might claim a lead in the field anytime soon.
> The latest Top500 list-compiled twice a year based on results of standard speed
> tests-anoints a machine called Titan at Oak Ridge National Laboratory as the speediest
> on the planet. This wasn’t too much of a surprise based on the lab’s recent comments > about the system.
> But the Titan’s ascendance nevertheless is a milestone for efforts to popularize
> system designs that use two varieties of chips to get computing work done faster.
> While most supercomputers still lean heavily on the PC-style x86 microprocessors
> sold by Intel and Advanced Micro Devices AMD +5.03%, more specialized chips are
> also being added to achieve greater leaps in performance within a reasonable power > budget.
> Titan, an upgrade of a Cray system called Jaguar, adds new AMD chips but gets most
> of its speed from a new Nvidia NVDA -0.71% chip family that is based on the technology
> used to provide sophisticated graphics in videogames. Nvidia on Monday is providing
> the first details of the new Tesla chips, the K20 and K20X, which the company says > are three times faster than prior-generation products.
> In all, 62 systems on the latest Top500 list use some sort of additional accelerator > or coprocessor chip, up from 58 systems in the list released six months ago.
> Not until the eighth position on the list do we find a system in China. That machine,
> the Tianhe-1A, set off considerable hand-wringing among some researchers about threats
> to U.S. dominance when it took the No. 1 spot on the list in November 2010. But
> there seems to have been little progress since then; while machines like Sequoia
> and Titan have set new records, the Tianhe-1A is the only Chinese system in the > Top Ten.
> To be sure, China still ranks No. 2 in terms of the number of supercomputers installed,
> no small feat. But the country’s 72 systems falls far short of the 251 running in
> the United States, while Japan-which operates the No. 3 machine-remains ahead of
> China in terms of the aggregate performance of the systems in use. Germany, in > fact, placed two machines ahead of the Tianhe-1A-both supplied by IBM.
> Among system makers, IBM and Hewlett-Packard HPQ -2.01% remain No. 1 and No. 2 in
> the field. Cray, which takes its name from the late supercomputer designer Seymour
> Cray, has a much smaller number of systems. But Titan allowed the company to increase > its share of the Top500 total performance to 17.4% from 8.8%.
> The Top500 list, which is marking its 20th anniversary this month, is compiled by
> researchers Hans Meuer of the University of Mannheim, Germany; Erich Strohmaier
> and Horst Simon of Lawrence Berkeley National Laboratory; and Jack Dongarra of the > University of Tennessee, Knoxville.
> ITEM 3a: David Perera: Last attempt at Senate cybersecurity bill fails http://www.fiercegovernmentit.com/story/last-attempt-senate-cybersecurity-bill-fails/2012-11-15?utm_medium=nl&utm_source=internal
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.vr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.fiercegovernmentit.com%2Fstory%2Flast-attempt-senate-cybersecurity-bill-fails%2F2012-11-15%3Futm_medium%3Dnl%26utm_source%3Dinternal] > November 15, 2012
> A last attempt this Congress to pass a cybersecurity bill in the Senate failed Nov.
> 14 when less than a supermajority of lawmakers voted to invoke cloture, a necessary
> step before the bill can come to the floor. Lawmakers voted 51-47 for cloture, but
> with Republican senators voting against, consideration of a cybersecurity measure
> will likely have to wait until a bill can be reintroduced following the Jan. 3 convening > of the 113th Congress.
> At immediate issue Nov. 14 was the number of amendments senators would be able to
> propose. “We are seeking like five amendments,” said Sen. John McCain (R-Ariz.),
> sponsor of a rival bill (S. 3342) and champion of a comparatively smaller role
> for the federal government in overseeing the security of critical infrastructure > networked systems.
> Bill co-sponsor Sen. Joe Lieberman (I-Conn.) said Senate Majority Leader Harry Reid
> (D-Nev.) would be willing to allow amendments. “He said that if we invoke cloture
> tonight, he will allow a finite number of amendments,” Lieberman said. “So I would
> ask my colleagues, give it a chance, and let’s vote for cloture. I am sure Senator
> Reid will allow five amendments,” he added right before the motion came up for vote.
> Lieberman didn’t run for re-election and had hoped to secure passage of his bill > before his term runs out.
> Congressional inaction has already spurred the Obama administration to consider
> issuing a cybersecurity executive order that would mandate a role for the federal
> government in critical infrastructure protection. On Oct. 25, Homeland Security > Secretary Janet Napolitano said President Obama had yet to review it.
> However, the Washington Post reports that Obama has already signed in mid-October
> a secret directive that establishes guidelines for defensive and offensive cyber > operations.
> ITEM 4a: Greg Miller, Ellen Nakashima: FBI investigation of Broadwell reveals bureau’s
> comprehensive access to electronic communications http://www.washingtonpost.com/world/national-security/fbi-investigation-of-broadwell-reveals-bureaus-comprehensive-access-to-electronic-communications/2012/11/17/5f27d636-3012-11e2-9f50-0308e1e75445_story.html?hpid=z1
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.wr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.washingtonpost.com%2Fworld%2Fnational-security%2Ffbi-investigation-of-broadwell-reveals-bureaus-comprehensive-access-to-electronic-communications%2F2012%2F11%2F17%2F5f27d636-3012-11e2-9f50-0308e1e75445_story.html%3Fhpid%3Dz1]
> FBI investigation of Broadwell reveals bureau’s comprehensive access to electronic > communications
> Saturday, November 17, 7:57 PM
> The FBI started its case in June with a collection of five e-mails, a few hundred > kilobytes of data at most.
> By the time the probe exploded into public view earlier this month, the FBI was
> sitting on a mountain of data containing the private communications – and intimate
> secrets – of a CIA director and a U.S. war commander. What the bureau didn’t have > – and apparently still doesn’t – is evidence of a crime.
> How that happened and what it means for privacy and national security are questions
> that have induced shudders in Washington and a queasy new understanding of the FBI’s > comprehensive access to the digital trails left by even top officials.
> FBI and Justice Department officials have vigorously defended their handling of
> the case. “What we did was conduct the investigation the way we normally conduct
> a criminal investigation,” Attorney General Eric H. Holder Jr. said Thursday. “We > follow the facts.”
> But in this case, the trail cut across a seemingly vast territory with no clear
> indication of the boundaries, if any, that the FBI imposed on itself. The thrust
> of the investigation changed direction repeatedly and expanded dramatically in > scope.
> A criminal inquiry into e-mail harassment morphed into a national security probe
> of whether CIA Director David H. Petraeus and the secrets he guarded were at risk.
> After uncovering an extramarital affair, investigators shifted to the question of > whether Petraeus was guilty of a security breach.
> When none of those paths bore results, investigators settled on the single target
> they are scrutinizing now: Paula Broadwell, the retired general’s biographer and
> mistress, and what she was doing with a cache of classified but apparently inconsequential > files.
> On Capitol Hill, the case has drawn references to the era of J. Edgar Hoover, the
> founding director of the FBI, who was notorious for digging up dirt on Washington’s > elite long before the invention of e-mail and the Internet.
> “The expansive data that is available electronically now means that when you’re
> looking for one thing, the chances of finding a whole host of other things is exponentially
> greater,” said Rep. Adam B. Schiff (D-­Calif.), a member of the House intelligence > committee and a former federal prosecutor.
> In this case, Schiff said, the probe may have caused more harm than it uncovered.
> “It’s very possible that the most significant damage done to national security was > the loss of General Petraeus himself,” Schiff said.
> Not the usual boundaries
> The investigation’s profile has called attention to what legal and privacy experts
> say are the difficulties of applying constraints meant for gathering physical evidence > to online detective work.
> Law enforcement officers conducting a legal search have always been able to pursue
> evidence of other crimes sitting in “plain view.” Investigators with a warrant to
> search a house for drugs can seize evidence of another crime, such as bombmaking. > But the warrant does not allow them to barge into the house next door.
> But what are the comparable boundaries online? Does a warrant to search an e-mail
> account expose the communications of anyone who exchanged messages with the target?
> FBI investigation of Broadwell reveals bureau’s comprehensive access to electronic > communications
> Similarly, FBI agents monitoring wiretaps have always been obligated to put down
> their headphones when the conversation is clearly not about a criminal enterprise.
> It’s known as minimization, a process followed by intelligence and law enforcement > agencies to protect the privacy of innocent people.
> “It’s harder to do with e-mails, because unlike a phone, you can’t just turn it
> off once you figure out the conversation didn’t relate to what you’re investigating,”
> said Michael DuBose, a former chief of the Justice Department’s Computer Crime and
> Intellectual Property Section who now handles cyber-investigations for Kroll Advisory > Solutions.
> Some federal prosecutors have sought to establish a “wall” whereby one set of agents
> conducts a first review of material, disclosing to the investigating agents only
> what is relevant. But Michael Sussmann, a former federal prosecutor who consults
> on electronic surveillance issues, said he thinks “that’s the exception rather than > the rule.”
> It’s unclear whether the FBI made any attempt to minimize its intrusion into the
> e-mails exchanged by Broadwell and Petraeus, both of whom are married, that provided > a gaping view into their adulterous relationship.
> Many details surrounding the case remain unclear. The FBI declined to respond to
> a list of questions submitted by The Washington Post on its handling of personal
> information in the course of the Petraeus investigation. The bureau also declined
> to discuss even the broad guidelines for safeguarding the privacy of ordinary citizens > whose e-mails might surface in similarly inadvertent fashion.
> The scope of the issue is considerable, because the exploding use of e-mail has
> created a new and potent investigative resource for the FBI and other law enforcement
> agencies. Law enforcement demands for e-mail and other electronic communications
> from providers such as Google, Comcast and Yahoo are so routine that the companies
> employ teams of analysts to sort through thousands of requests a month. Very few > are turned down.
> Wide access to accounts
> Although the Petraeus-Broadwell investigation ensnared high-ranking officials and
> had potential national security implications, the way the FBI assembled evidence > in the case was not extraordinary, according to several experts.
> The probe was triggered when a Florida socialite with ties to Petraeus and Gen.
> John R. Allen, the U.S. military commander in Afghanistan, went to the FBI in June > with menacing e-mails from an anonymous sender.
> Schiff and others have questioned why the FBI even initiated the case. Law enforcement
> officials have explained that they were concerned because the earliest e-mails indicated
> that the sender had access to details of the personal schedules of Petraeus and > Allen.
> The FBI’s first pile of data came from Jill Kelley, who got to know Petraeus and
> Allen when she worked as an unofficial social liaison at the military base in Tampa > where both men were assigned.
> In early summer, Kelley received several anonymous e-mails warning her to stay away
> from Allen and Petraeus. Kelley was alarmed and turned over her computer to the > FBI; she may also have allowed access to her e-mail accounts.
> The e-mails were eventually traced to Broadwell, who thought that Kelley was a threat
> to her relationship with Petraeus, law enforcement officials said. But the trail > to Broadwell was convoluted.
> Broadwell reportedly tried to cover her tracks by using as many as four anonymous
> e-mail accounts and sending the messages from computers in business centers at hotels
> where she was staying while on a nationwide tour promoting her biography of Petraeus.
> According to some accounts, the FBI traced the e-mails to those hotels, then examined > registries for names of guests who were checked in at the time.
> Once Broadwell was identified, FBI agents would have gone to Internet service providers
> with warrants for access to her accounts. Experts said companies typically comply
> by sending discs that contain a sender’s entire collection of accounts, enabling
> the FBI to search the inbox, draft messages and even deleted correspondence not > yet fully erased.
> “You’re asking them for e-mails relevant to the investigation, but as a practical
> matter, they let you look at everything,” said a former federal prosecutor who,
> like many interviewed for this article, spoke on the condition on anonymity because > the FBI inquiry is continuing.
> FBI agents can then roam through every corner of the account as if it were their > own.
> The capability to scour e-mail accounts has expanded the bureau’s investigative
> power dramatically, even in crimes previously seen as difficult to prosecute. For
> example, officials said, the ability to reconstruct communications between reporters
> and their sources helps explain why the Obama administration has been able to bring > more leak prosecutions than all of its predecessors combined.
> E-mail searches vary in scope and technique, from scanning contents for key words
> “to literally going through and opening every file and looking at what it says,” > a former Justice Department official said.
> Law enforcement officials said the FBI never sought access to Allen’s computer or
> accounts. It’s unclear whether it did so with Petraeus. But through Kelley and Broadwell,
> the bureau had amassed an enormous amount of data on the two men – including sexually
> explicit e-mails between Petraeus and Broadwell and questionable communications > between Allen and Kelley.
> Petraeus and Broadwell had tried to conceal their communications by typing drafts
> of messages, hitting “save” but not “send,” and then sharing passwords that provided
> access to the drafts. But experts said that ruse would have posed no obstacle for > the FBI, because agents had full access to the e-mail accounts.
> As they pore over data, FBI agents are not supposed to search for key words unrelated
> to the warrant under which the data were obtained. But if they are simply reading > through document after document, they can pursue new leads that surface.
> “Most times, if you found evidence of a second crime, you would stop and go back
> and get a second warrant” to avoid a courtroom fight over admissibility of evidence,
> a former prosecutor said. But in practical terms, there is no limit on the number > of investigations that access to an e-mail account may spawn. > ‘Because of who it was’
> There is nothing illegal about the Petraeus-Broadwell affair under federal law.
> Were it not for Petraeus’s prominent position, the probe might have ended with no
> consequence. But because of his job – and the concern that intelligence officers
> caught in compromising positions could be susceptible to blackmail – the probe > wasn’t shut down.
> “If this had all started involving someone who was not the director of the CIA,
> they would have ignored it,” said David Sobel, senior counsel for the Electronic
> Frontier Foundation, a privacy group. “A bell went off because of who it was.”
> That consideration triggered a cascade of additional quandaries for the Justice
> Department, including whether and when to notify Congress and the White House. The
> FBI finally did so on election night, Nov. 6, when Deputy Director Sean Joyce called > Petraeus’s boss, Director of National Intelligence James R. Clapper Jr. > After being confronted by Clapper, Petraeus agreed to resign.
> President Obama said last week that there was “no evidence at this point, from what
> I’ve seen, that classified information was disclosed that in any way would have > had a negative impact on our national security.”
> But the data assembled on Allen and Petraeus continue to reverberate. The FBI turned
> over its stockpile of material on Allen – said to contain as many as 30,000 pages
> of e-mail transcripts – to the Defense Department, prompting the Pentagon inspector > general to start an investigation.
> The CIA has also launched an inspector general investigation into Petraeus and his
> 14-month tenure at the agency, seeking to determine, among other things, whether > he used the perks of the position to enable his affair with Broadwell.
> If it follows its own protocols, the FBI will hold on to the data for decades. Former
> officials said the bureau retains records for 20 years for closed criminal investigations, > and 30 years for closed national security probes.
> ITEM 5a: Adam Levin: How the SEC Almost Shut Down Wall Street: Computers owned by
> the Securities and Exchange Commission Trading and Markets division were brought
> by SEC staffers to a hacker convention. http://abcnews.go.com/Business/sec-shut-wall-street/story?id=17730628#.UKvi6DUh9PI
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.yr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fabcnews.go.com%2FBusiness%2Fsec-shut-wall-street%2Fstory%3Fid%3D17730628%23.UKvi6DUh9PI] > Nov. 18, 2012
> Here’s a fun fact: Hackers, just like bankers, real estate agents and collectors
> of Star Trek memorabilia, attend conferences. Even better: they play games at the
> conferences. One of the games they play has attendees aggressively competing to
> access any device in the hall, thereby demonstrating prowess in obtaining sensitive
> information. The goal is to exploit any vulnerability, or crack that which is perceived
> to be impenetrable, and share details for both educational purposes and bragging
> rights. This is the kind of thing you’d expect at a Black Hat hacker conference
> and why people with sensitive information on computers probably shouldn’t bring
> them to the party. Especially employees of the Securities and Exchange Commission
> Trading and Markets division. And they really shouldn’t have brought their computers > with them. Except they did. Yes. This really happened.
> Computers owned by the Securities and Exchange Commission Trading and Markets division
> were brought by SEC staffers to a hacker convention. They contained unencrypted,
> step-by-step instructions to shut down our financial trading system. Essentially: > A Hacker’s Guide to our Financial Universe.
> Consider for a moment the kind of information that was hanging out in these computers, > according to a recent Reuters story:
> How the computers and networks inside massive stock exchanges including NASDAQ and > the New York Stock Exchange are linked together.
> How, in the event of a terrorist attack or natural disaster, what are the specific
> steps required to shut down the entire American stock exchange system, and how, > after the disaster, we safely turn those systems back on.
> What specific security measures have the exchanges implemented to secure their systems > against accidental data breaches and determined hackers.
> Sophisticated algorithms or complex malware were not required to crash the world’s
> largest exchanges (and with them the world economy). No need for security clearance. > A common thief could have hit the lottery with these babies.
> The fact that S.E.C. employees brought Wall Street’s blueprints to a Black Hat hackers’
> conference is both terrifyingly dumb and dumbfounding, despite the fact it appears,
> according to Reuters, that no data was breached. Nevertheless, it is hard to conceive
> of a less secure venue than this get-together where computer security experts and > government intelligence leaders swap notes with all stripes of cyber-ninjas.
> With the sensitive information purportedly contained on these hard drives, even
> a run-of-the-mill hacker arguably could possess the foundational knowledge to potentially
> shut down Wall Street like he was flipping off a light switch. Yet there it was
> at a convention center overflowing with hackers, brought by public servants whose
> job is to secure the American financial system from natural and man-made disasters. > Imagine the value of that data on the black market?
> Let’s be clear about this. The Trading and Markets Division of the S.E.C. is responsible
> for monitoring compliance with “Automation Review Policies,” a set of voluntary
> but crucial rules regarding security measures and business continuity plans for
> how the various stock exchanges will respond to disasters. And yet there they were, > courting disaster.
> While taking the core of our financial markets on a cross-country joyride, did these
> supposed security experts ever happen to leave their computers in their vehicles,
> as did an employee at the Kennedy Space Center, whose NASA-issued laptop was stolen
> from his car in March? Was any of the sensitive data ever disseminated by mistake,
> as when the Veterans Administration emailed the names and Social Security numbers > of at least 2,257 veterans to Ancestry.com?
> Nobody really knows. The Reuters story is based upon an as-yet-unreleased report
> by the S.E.C.’s inspector general. However, security issues have surfaced before.
> According to a report issued by agency’s inspector general in 2010 the S.E.C.’s
> Office of Information Technology had repeatedly failed to encrypt data on mobile > devices.
> Again, so far there is no evidence that any of the data was accessed by hackers
> or spies, according to Reuters’ inside sources. That’s the good news. However, I
> submit for your consideration that the good news was made possible by dumb luck.
> So, how many times must we endure the colossally negligent acts of people who are
> supposedly protecting our sensitive data, yet do the exact opposite? How long will
> we sit idly by as bureaucrats expose all manner of sensitive data — personal, corporate,
> scientific — to the designs of the ill-intentioned and the vagaries of chance?
> Is it individual execution failure, or systemic breakdown? To my mind, it’s the
> latter. I believe that we are staring down the missile tube of a nuclear sub, the
> launch sequence has begun and without taking firm measures to stop the snap count, > “Cyber-geddon” is imminent. I am hardly alone.
> We need a comprehensive national cyber-security policy today that establishes how
> government entities and private suppliers of critical infrastructure protect our
> data from breach and attack. Such a policy must not lock organizations into any
> particular tool or technology, since the rate of technical innovation among both > hackers and those who pursue them only continues to accelerate.
> Rather, a successful cyber-security policy must set forth our expectations for how
> organizations safeguard data. That will include encryption, obviously, with staggered
> layers of sophistication applied to increasingly important types of data; hard and
> fast rules regarding data creep, preventing companies and government agencies from
> gathering more information than is required to complete the goal immediately at
> hand; and guidelines for how long organizations can keep data before being required
> to destroy it. Since none of these goals can be met overnight, each must include
> a series of guideposts to assure that companies and government agencies stay on > track.
> [Related Article: 94 Million Exposed: The Government’s Epic Fail on Privacy]
> Finally, whatever cyber-security policy we devise must provide for severe punishments
> for those who break the rules. Yes, I mean prison time. Unlike some other types
> of white collar crime, willful or accidental leakage of sensitive data to unauthorized
> parties can endanger lives, as when an identity thief with a rare blood type accesses
> medical services using someone else’s personally identifiable information, or crimes > are committed in the name of an innocent victim.
> As this latest S.E.C. “incident” makes clear, it can also endanger our entire way
> of life. If hackers ever managed to steal one of these laptops or gain unauthorized
> access to the data contained on the hard drives, they not only could have shut down
> America’s largest stock exchanges, they also could have thwarted emergency efforts
> to bring those exchange systems back online, perhaps indefinitely. How many billions
> of dollars would that have cost in lost trading revenue, failed contracts, life > savings, erosion of investor confidence and/or simple, utter chaos?
> We dodged a bullet this time. And, while (as far as we know) these unencrypted laptops
> containing the blueprints of the American financial system were not stolen or hacked,
> our good fortune is only a matter of luck. Inevitably, it will run out someday.
> Maybe the bad guys will devise the ultimate super-sophisticated mega-hack that steals
> all our Social Security and bank account numbers with a single keystroke. Or maybe
> our misfortune will turn into a hacker’s good fortune, and the laptop or mobile
> device they steal from or compromise at a convention hall contains the ultimate > how-to manual for crushing the capitalist system as we know it.
> Enough with bullet-dodging, my friends. We need to design and implement a comprehensive > cyber-security policy now. If we fail, the next bullet could be a headshot.
> Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience
> as former director of the New Jersey Division of Consumer Affairs gives him unique
> insight into consumer privacy, legislation and financial advocacy. He is a nationally > recognized expert on identity theft and credit.
> ITEM 6a: Tara Patel: Total Sells Nigeria Oil Field to Sinopec for $2.5 Billion
> http://www.bloomberg.com/news/2012-11-19/total-sells-nigeria-oil-field-to-sinopec-for-2-5-billion.html
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.zr9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2012-11-19%2Ftotal-sells-nigeria-oil-field-to-sinopec-for-2-5-billion.html] > Nov 19, 2012 9:10 AM ET
> Total SA (FP), France’s largest oil company, sold its 20 percent stake in an offshore
> Nigerian field to China Petrochemical Corp. for about $2.5 billion as part of an > asset-disposal program.
> The OML 138 block includes the Usan field, which started output in February, Paris-based
> Total said today in a statement. The asset accounts for about 10 percent of Total’s > Nigerian production, which averaged 287,000 barrels a day last year.
> The sale is part of Total’s plans to complete $15 billion to $20 billion of asset
> disposals from 2012 to 2014. China’s state-backed energy companies are seeking new
> oil and gas reserves abroad to feed the world’s second-largest economy, especially
> from regions like Africa where government scrutiny is lighter than in North America > or Europe.
> The sale of a minority stake in the Nigerian block is in line with Total’s policy
> of actively managing its portfolio, Yves-Louis Darricarrere, head of exploration > and production, said in today’s statement.
> The Usan field production, whose ramp up was slower than expected, could reach 140,000
> barrels a day by the end of the year, Chief Financial Officer Patrick de la Chevardiere
> said in July. The French company had said it was expecting a peak rate of 180,000 > barrels a day.
> Total rose as much as 2 percent and was trading 70 cents higher at 37.67 euros as > of 3:05 p.m. in Paris.
> Total is also searching for a buyer for its southwestern French natural gas network
> known as TIGF. Current disposals could bring Total about halfway to its target, > de la Chevardiere said last month.
> Maurel Interest
> Beijing-based Sinopec Group has also approached the French oil firm Etablissements
> Maurel et Prom (MAU), which operates in Gabon, about an acquisition, people familiar > with the matter said this month.
> Sinopec’s reserves of crude oil declined from 3.3 billion barrels in 2007 to 2.8
> billion barrels at the end of last year, enough for nine years of production at
> 2011 levels, according to data compiled by Bloomberg. Its parent, China Petrochemical,
> said in January that it will seek to produce 50 million metric tons of crude a year > overseas by 2015. Last year, foreign production was 23 million tons.
> The Nigerian National Petroleum Corp. is the OML 138 concession holder. Chevron
> Petroleum Nigeria Ltd. has 30 percent, as does Esso E&P Nigeria (Offshore East) > Ltd. Nexen Petroleum Nigeria Ltd. has 20 percent.
> ITEM 7a: John Garnaut: National Socialism with Chinese Characteristics. Meet He
> Di, the insider trying to save the Chinese Communist Party from itself. http://www.foreignpolicy.com/articles/2012/11/15/national_socialism_with_chinese_characteristics?page=full
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.8r9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.foreignpolicy.com%2Farticles%2F2012%2F11%2F15%2Fnational_socialism_with_chinese_characteristics%3Fpage%3Dfull] > NOVEMBER 15, 2012
> BEIJING – Two years ago, one of China’s most successful investment bankers broke
> away from his meetings in Berlin to explore a special exhibit that had caught his
> eye: “Hitler and the Germans: Nation and Crime.” In the basement of the German History
> Museum, He Di watched crowds uneasily coming to terms with how their ancestors had
> embraced the Nazi promise of “advancement, prosperity and the reinstatement of former
> national grandeur,” as the curators wrote in their introduction to the exhibit.
> He, vice-chairman of investment banking at the Swiss firm UBS, found the exhibition
> so enthralling, and so disturbing for the parallels he saw with back home, that > he spent three days absorbing everything on Nazi history that he could find.
> “I saw exactly how Hitler combined populism and nationalism to support Nazism,”
> He told me in an interview in Beijing. “That’s why the neighboring countries worry
> about China’s situation. All these things we also worry about.” On returning to
> China he sharpened the mission statement at the think tank he founded in 2007 and > redoubled its ideological crusade.
> He’s Boyuan Foundation exists almost entirely under the radar, but is probably the
> most ambitious, radical, and consequential think tank in China. After helping bring
> the Chinese economy into the arena of global capital through his work at UBS, He
> now aspires to enable Chinese people to live in a world of what he and his ideological
> allies call “universal values”: liberty, democracy, and free markets. While the
> foundation advises government institutions, including leaders at the banking and
> financial regulators, its core mission is to “achieve a societal consensus” around
> the universal values that it believes underpin a modern economic, political and > social system.
> “This is the transition from a traditional to a modern society,” He says.
> The challenge for Boyuan is that “universal values” clash with the ideology of the
> Communist Party, which holds itself above those values. “Boyuan is like the salons
> that initiated and incubated the governing ideas of the French revolution,” says
> David Kelly, research director at a Beijing advisory group who has been mapping
> China’s intellectual landscape. “They explicitly want to bring the liberal enlightenment > to China.”
> The 65-year-old He is at the forefront of an ideological war that is playing out
> in the background of this week’s epic leadership transition, where current Chinese
> President Hu Jintao officially yielded power to Xi Jinping. At one pole of this
> contest of ideas are He’s universal values; at the other, the revolutionary ideology
> of the party’s patriarch, Mao Zedong. This battle for China’s future plays into
> the decade-long factional struggle between Hu and his recently resurgent predecessor,
> Jiang Zemin. Jiang’s ideological disposition has evolved in chameleon fashion but
> in recent years he has hinted that if the party remains inflexibly beholden to Mao
> Zedong-era thought and Soviet-era institutions then it faces a risk of Soviet-style > collapse.
> When He Di stepped down as chairman of UBS China in 2008 — after leading the investment
> banking capital raising charts for four straight years — UBS gave him an office,
> a secretary, and a salary with no minimum work requirements. He continued to find
> UBS lucrative deals, capable princelings to hire (such as the son of former Vice
> Premier Li Ruihuan) and introductions to wealthy private banking clients. The Swiss
> bank also gave him $5 million to inject into Boyuan, just weeks before the 2008
> global financial crisis, without any strings attached except the appointment of
> a UBS representative on his board, according to Boyuan representatives. He tipped
> in $1 million of his own as he redeployed his resources to build a platform for
> ideas. “One day I picked up the phone and called potential board members.” he said. > “I called 6 or 7 ministers or vice ministers, without any hesitation.”
> Boyuan’s Beijing headquarters is an elegantly renovated courtyard home on the north
> side of the city. Behind He’s desk is a wall of books on history, philosophy, and
> reform. Over a simple lunch of braised vegetables and endless cups of tea, he told
> me how his commitment to liberal values is rooted in a strand of Communist Party
> tradition that flourished in the 1980s and has since been subordinated but not
> entirely vanquished. “My grandfather and father were all fighting to establish not
> dictatorship, not feudalism, but so that people at the grassroots could enjoy a
> good life.” He’s grandfather was a vice-minister in the Kuomingtang government that
> ruled China until the Communists defeated it in 1949; he was beaten to death during > the Cultural Revolution.
> He’s father was an influential agricultural minister in the reformist 1980s, a talented
> agricultural scientist respected for his integrity who helped guide China’s peasants
> to shed the communal owning of land. This was China’s moment of enlightenment, He
> says, where the revolutionary veterans respected the judgment of peasants and entrepreneurs
> alike to choose what to plant, what to make, and how to take it to market. The trick,
> as any laissez-faire bureaucrat knows, was simply to get out of the way. “At that
> time, the top leaders really understand the concept of so-called ‘universal values,’
> which means human rights and allowing the people freedom to choose what they want,”
> says He. “They respected the abilities of the people, reflecting a universal value > not necessarily coming from the West but based on human beings basic needs.”
> He had originally intended the Boyuan Foundation to be a retirement pursuit, a project
> of collective self-enlightenment with close childhood friends. His worries grew
> as he watched a fellow princeling, Bo Xilai, breathe new life into the spirit of
> Mao and whip up a popular frenzy in Chongqing, the inland mega-city Bo governed.
> As he watched Chinese citizens embrace modernity and the party-state slide back
> toward the revolutionary ideology of his childhood, his ambitions turned from supporting > China’s modern evolution to saving it.
> When He returned to Beijing after his visit to Berlin in late 2010, he discovered
> that renowned scholars had been investigating those same parallels, even if they
> could not publicize their work. Shanghai historian Xu Jilin had traced China’s
> leftward turn (leftists in China are the more conservative, jingoistic faction)
> to the 1999 U.S. bombing of the Chinese Embassy in Yugoslavia which grew into a
> “nationalist cyclone,” a moment when China’s rising pride, power, and the political
> phenomenon of Bo Xilai started to gain momentum. “Statist thinking is gaining ground
> in the mainstream ideology of officialdom, and may even be practiced on a large-scale
> in some regions of “singing Red songs and striking hard at crime,” Xu said in a
> recent talk delivered to the Boyuan Foundation. “The history of Germany and Japan
> in the 1930s shows that if statism fulfils its potential, it will lead the entire > nation into catastrophe.”
> Xu’s antidote is right out of the Boyuan mission statement: “What a strong state
> needs most is democratic institutions, a sound constitution and the rule of law > to prevent power from doing evil.”
> “If you test how many Chinese people really want to return to Mao’s period, to become > North Korea, I don’t believe it’s 1 percent of them” he said.
> He’s adversaries — which to a limited degree really do believe China should return
> to a Maoist era — are skeptical of private capital, appalled by rampant corruption,
> and antagonistic towards what they see as dangerous Western values. These adversaries,
> whose heroes include the fallen political star Bo Xilai and the politically wounded
> corruption-fighting general Liu Yuan, have a term for everything that He Di’s Boyuan
> represents: “The Western Hostile Forces.” Luckily, He has the chips to play in such > a high-stakes game.
> Besides his own princeling roots, which protect him from the state, He has the backing
> of his foundation’s chairman Qin Xiao, who held a ministerial-level position as
> chairman of one of China’s top state-owned financial conglomerates. Boyuan’s directors
> include Brent Scowcroft, the former U.S. national security advisor. The Boyuan steering
> committee includes the publisher of the path-breaking investigative magazine Caijing,
> a son of one of the most important generals of the revolution (Chen Yi), and a group
> of officials who, between them, manage the largest accumulation of financial assets > in the history of global capital.
> He’s childhood friends who have worked closely with Boyuan include the governor
> of the People’s Bank of China, Zhou Xiaochuan, and Wang Qishan, the financial-system
> czar who is set to enter the Politburo Standing Committee, China’s top decision
> making body, this week. They, along with several other princelings who have risen
> to the top of Chinese finance, became close friends, ironically, when they were
> red guards, fighting “capitalist roaders” in Mao’s Cultural Revolution in the late > 1960s.
> Many of the protagonists at Boyuan have levers of the state at their disposal, and
> are organizing and challenging the party line in ways that would lead ordinary citizens
> to be branded as dissidents. Further in the organization’s background, offering
> clandestine support, are members of some of China’s most powerful families — including
> former security chief Qiao Shi, former premier Zhu Rongji, and former president > Jiang Zemin.
> He traces China’s spiritual and policy drift to 2003, the year in which the team
> of then President Jiang and Premier Zhu entrusted the party and government apparatus
> to their successors Hu and Wen Jiabao. He says the administration moved away from
> “opening and reform” — former leader Deng Xiaoping’s policy of bringing China in
> line with the rest of the world — and the resulting vacuum was filled with counterproductive
> criticism of privatization and reform. Leaders are isolated from their mid-level
> officials, each bureaucracy is siloed from the next, and there is no framework
> to mediate their interests or debate the wider merits of any particular proposal,
> he says. And once they started back down the old road of central planning, high-ranking
> officials grew addicted to the power it brought them. “The current leaders have
> really disappointed because I don’t know what they believe,” says He. “They were
> educated by the party, the old doctrines of Marxism, yet they lack growth experiences
> at the grassroots. They are really engineers who still want to enjoy the dividends > from the previous generation leadership.”
> He believes in China’s ability transform itself but knows it might not happen easily.
> He thinks Mao was an aberration who hurt his family’s 100-year quest to bring China
> into modernity. Mao saw peasants and workers as an undifferentiated mass to be organized
> and mobilized, but not respected — a man who represents China’s past and used communism
> instead of Confucianism as his doctrine of control. “Mao called himself Qin Shihuang
> plus Stalin,” He said, referring to China’s first emperor. “He used revolution to > repackage China’s despotic tradition and crown himself emperor.”
> When Deng and his successors committed to the market they also committed to the
> values that underpinned it, He says, including the ideal of law. Hu, by contrast,
> eviscerated the integrity of the individual, and his administration’s combination
> of extreme nationalism, extreme populism, and state capitalism means that history > can repeat itself, He warns.
> And that’s why the Nazi exhibit scared him so.
> John Garnaut is China correspondent for the Sydney Morning Herald and The Age, where
> a version of this article appears. He is the author of the just published e-book > The Rise and Fall of the House of Bo.
> ITEM 8a: Ambrose Evans-Pritchard: Chinese perma-growth at risk as Leninists tighten
> Politburo grip http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100021331/chinese-perma-growth-at-risk-as-leninists-tighten-politburo-grip/
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.7r9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fblogs.telegraph.co.uk%2Ffinance%2Fambroseevans-pritchard%2F100021331%2Fchinese-perma-growth-at-risk-as-leninists-tighten-politburo-grip%2F] > November 15th, 2012
> As expected, hardliners have won the power-struggle at the top of China’s Communist
> Party, or at least they have won the latest round judging by the line-up of the > Politburo’s Standing Committee this morning.
> This is beginning to look like a shocker for the world economy, with big implications > for global growth, trade, oil and commodity demand, investment flows, etc.
> Two key reformers were shut out of the seven-man Standing Committee: Guangzhou party > chief Wang Yang and the head of the national party organisation Li Yuanchao.
> Wang Qishan – the torchbearer of economic modernisation – did make it onto the committee > but will be in charge of fighting graft, not fighting dinosaurs.
> The North-Korea trained Zhang Dejiang – a champion of the state-owned behemoths > – has risen further to prominence.
> There is a growing risk – though only a risk – that China will hit the “invisible
> glass ceiling” that lies in wait for catch-up economies that rely too long on cheap
> labour and imported know-how, failing to make the crucial switch to a different > kind of model before it is too late.
> It is not easy to make the leap to self-sustaining growth on the creative frontier. > No country has achieved it with a fully authoritarian system.
> The outcome of the 18th Party Congress – the biggest change in Communist cadres
> since the Revolution in 1949, with 70pc of top jobs up for grabs – has shortened
> the odds that China will make the change in time. One starts to see the grim prospect
> that the country could grow old before it gets rich, which is not good for the world.
> The main thrust of this orthodox revival in Beijing is of course political, not
> economic. China’s leadership have watched the Soviet collapse, the revolutions of
> central Asia, and now the Arab Spring, and they don’t like what they see. The press > will be kept on a tight leash. Dissent will be checked.
> Every member of the Standing Committee lived through the Cultural Revolution. Incoming
> president Xi Jinping spent seven years of his youth banished to labour duty in a
> remote Shaanxi village, much of it living in a cave. These are fresh wounds. We
> can all understand why the Communist Party dares not throw the country open to > volatile forces. Stability is precious too.
> The triumph of hardliners – and it is only a partial triumph – does not automatically
> preclude China from jumping to the next economic level. Yet there are surely implications
> if the party now clings to Leninist Capitalism, choosing not to follow Korea, Taiwan, > Singapore towards a much more open system.
> Mark Williams from Capital Economics says the glass is still half-full.
> This is not the Standing Committee that reformers might have hoped for but neither
> should it be a cause for despair. Most senior officials in China now seem to agree > on the need for economic policy reform.
> Let us hope so, but this does not look to me like a leadership ready to jettison
> Deng Xiaoping’s growth model – the export-led, mercantilist, top-down model of > the last 30 years, nurtured behind a protective currency wall.
> This Politburo is unlikely to heed the advice of the World Bank and China’s Development
> Research Centre, which have together called for a second economic revolution to > lift per capita income to levels in the West.
> Incoming premier Li Keqiang vowed “unwavering support” for the findings of these
> two bodies earlier this year, but it is far from clear that he will be able to
> deliver on his plans. He will be hemmed in by Leninists, those most known for having
> championed state-owned giants (SOEs) in their own regions to drive development and > fund patronage.
> This is not good news. The World Bank/DRC report – the Bible of China’s reformers
> – said the SOEs are the essence of the problem. A quarter lose money; their productivity
> growth-rate is two-thirds less than that of private firms; they gobble up available > credit, forcing the private sector to go to the dark side at great risk. > I have written about this before but just to recap, the report said:
> “China has reached another turning point in its development path when a second strategic, > and no less fundamental, shift is called for.”
> “The forces supporting China’s continued rapid progress are gradually fading. The
> government’s dominance in key sectors, while earlier an advantage, is in the future > likely to act as a constraint on creativity,” it said.
> “The role of the private sector is critical because innovation at the technology
> frontier is quite different in nature from catching up technologically. It is not > something that can be achieved through government planning.”
> The World Bank’s pitch is that China is not doomed to fall into the “middle income
> trap”. The decisions it makes over the next five years or so will decide the outcome > either way.
> But the line-up as the Standing Committee walked onto the dais this morning should
> be a cold douche for BRICs romantics and believers in Confucian perma-growth in
> the West. Will these men really get a grip on a credit-driven economy that has become
> ever more unbalanced – with investment reaching a world record 49pc of GDP, and
> consumption falling from a very low 48pc to just 36pc over the last twelve years?
> The danger for China – and the for rest of us hoping that China will pull our economies
> out of their post-bubble swamp – is that the US Conference Board will be proved > right with its dire warnings this week.
> The Board said China’s growth will fall to 5.5pc through the middle of this decade
> as the ageing crunch hits, and then fall to 3.7pc from 2019-2025. The compoud effects > of this would be enormous.
> All those predictions that China would vault into the stratosphere by the middle
> of the century – leaving America in the dust – would come to be seen as charmingly > naive.
> So we watch, nervously, waiting for further clues. China has everything to play > for, and everything to lose.
> ITEM 9a: WALL STREET JOURNAL: Parsing China’s New Politburo. The dynamics of the
> Chinese system matter more. http://online.wsj.com/article/SB10001424127887324556304578120351592692378.html?mod=WSJ_Opinion_LEFTTopBucket
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.as9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424127887324556304578120351592692378.html%3Fmod%3DWSJ_Opinion_LEFTTopBucket] > November 15, 2012, 11:29 a.m. ET
> The seven men who embody the Chinese Communist Party’s “fifth generation” of leadership
> revealed themselves to the world Thursday morning. Standing on numbers stencilled
> on the carpet to denote their position in the hierarchy, they submitted to a few
> potted questions from the media and then retired behind the screen, leaving China > watchers to speculate about what the lineup means for future policy.
> The consensus is that the hardliners defeated reformers, and political liberalization
> is unlikely. While there is some basis for this assessment, it’s important to remember
> that the experts are wrong all the time. Outgoing leader Hu Jintao was heralded
> as a potential political reformer when he came to power in 2002, but his term has
> seen an increase in political repression and a slowdown in economic liberalization.
> It is clear that new Party General Secretary Xi Jinping will have an easier time
> consolidating power than Mr. Hu did. For that he can thank his mentor, former General
> Secretary Jiang Zemin, who helped place members of their faction in key positions.
> Mr. Hu has also agreed to hand over to Mr. Xi the chairmanship of the Central Military
> Commission, which controls the People’s Liberation Army. Mr. Jiang only gave up > this post in 2004, and then reluctantly.
> The Party is spinning all this as part of its institutionalization of the mechanisms
> for selecting new leaders, which will make its rule more stable. But this year the
> facade of stability was smashed when rising star Bo Xilai was removed from his posts
> and his wife convicted of murder. Mr. Bo has been accused of corruption, but his
> real crime was an attempt to use populist rhetoric and policies to force his way > into the Politburo Standing Committee.
> That threat to the dull but stable leadership system set up by the last paramount
> leader Deng Xiaoping looks to have been averted. But another may be brewing in the > form of Mr. Xi’s early dominance.
> Deng elevated Mr. Jiang to Party chief after the 1989 Tiananmen massacre, and he
> also picked Mr. Hu as his successor. This put in place two centers of power that
> balanced each other to some degree and also sought consensus. But Mr. Jiang has
> now succeeded in putting in place his protege Mr. Xi, and he may have so packed
> the new Politburo with his own men that Mr. Hu’s faction goes into terminal decline.
> Some expect Mr. Xi’s dominance to be positive in the short term, as he will be freer
> to pursue economic reforms not seen since Mr. Jiang’s time. But politically it could
> have several negative effects. Mr. Xi’s power would be largely unchecked, creating
> a danger of greater adventurism and corruption. Those within the Party who are not
> his favorites might look for more unconventional ways to move ahead, like Mr. Bo.
> In short, the institutional dynamics of the Chinese system bear watching more closely
> than does the professed ideology of Politburo members. Westerners have a tendency
> to pin their hopes for change on supposed liberals, like Mr. Hu in 2002. Yet the
> top officials come up through a system that jealously guards the Party’s prerogatives > and they are united in opposing democratization.
> That much was clear from this week’s anachronistic, stage-managed Party Congress.
> In the provinces, pressure is building from the grass roots for greater participation
> in government, and some officials are experimenting with new ways to deal with social
> unrest. Change will come to China when the regime has reached an economic or political
> impasse as the Soviet Union did in the 1980s, and only then will Beijing find its > Gorbachev.
> ITEM 10a: BLOOMBERG: China’s Bad Loans Rise for Fourth Quarter as Economy Slows
> http://www.bloomberg.com/news/2012-11-15/china-banks-bad-loans-rise-for-fourth-quarter-as-economy-slows.html
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.es9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2012-11-15%2Fchina-banks-bad-loans-rise-for-fourth-quarter-as-economy-slows.html] > China’s Bad Loans Rise for Fourth Quarter as Economy Slows > By Bloomberg News – Nov 15, 2012 12:12 AM ET
> Chinese banks’ bad loans increased for a fourth straight quarter, the longest streak
> of deterioration since the data became available in 2004, highlighting pressures > on profit growth as the economy weakens.
> Non-performing loans rose by 22.4 billion yuan ($3.6 billion) in the three months
> ended Sept. 30, to 478.8 billion yuan, the China Banking Regulatory Commission said
> in a statement on its website today. Bad loans increased at all types of institutions,
> including the largest state-owned lenders, rural banks and foreign banks, the regulator > said.
> China’s banking system is grappling with rising defaults and weaker loan demand
> after economic growth decelerated for a seventh quarter. Combined net income growth
> at the nation’s 3,800 lenders slowed to 14 percent in the third quarter from 23 > percent in the second, the regulator said today.
> “We expect banks’ bad loans to climb mildly for another quarter because borrowers
> normally face a liquidity squeeze before year end,” said Xie Jiyong, a Shanghai-based
> analyst at Capital Securities Corp. (6005) “The trend will stabilize early next
> year if the economy starts to pick up and companies’ repayment ability improves.”
> Shares of Hong Kong-listed China banks are trading at an average 5.5 times their
> forecast profit for 2013, compared with 10 times for the benchmark Hang Seng Index. > Shares Decline
> Industrial & Commercial Bank of China Ltd., the world’s most profitable lender,
> fell 1 percent to HK$5.06 at 1:10 p.m., narrowing this year’s gain to 9.8 percent.
> China Construction Bank Corp. (939), the nation’s second largest, lost 1.4 percent, > while Agricultural Bank of China Ltd. (601288) declined 1.5 percent.
> Chinese commercial banks’ delinquent obligations may rise 10 percent this year and
> accelerate in 2013 if concern that inflation is rebounding leads authorities to
> tighten monetary policy, according to China Orient Asset Management Corp. The company
> is one of four state-owned asset managers established in 1999 to take over trillions > of yuan of bad loans from the country’s largest lenders.
> Non-performing loans, or those overdue for at least three months, accounted for
> 0.95 percent of banks’ total advances as of September, up from 0.94 percent in June, > according to the regulator.
> Chinese banks’ net interest margin, a measure of lending profitability, widened
> to 2.77 percent in the third quarter from 2.73 percent in the second, according
> to today’s statement. Their capital adequacy ratio rose to 13.03 percent as of Sept. > 30, from 12.91 percent in June.
> Banks extended 505.2 billion yuan of local-currency loans in October, down 14 percent
> from a year earlier, the central bank said this week. Weaker-than-forecast credit
> expansion may limit a rebound in economic growth as the ruling Communist party anoints > new leaders.
> ITEM 11a: Parris Chang: China’s power behind the throne http://www.taipeitimes.com/News/editorials/archives/2012/11/08/2003547145
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.fs9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fwww.taipeitimes.com%2FNews%2Feditorials%2Farchives%2F2012%2F11%2F08%2F2003547145] > -Thanks to Sol Sanders-
> November 8, 2012
> Most China-watchers would agree that the military’s growing political influence
> and the pluralization in Chinese leadership is one of the country’s most salient
> developments in the 21st century. Many have observed the steady expansion of the > military’s role in China’s foreign and security policy in the past decade.
> In addition to the People’s Liberation Army (PLA), organizations such as the economic
> and foreign trade ministries, state-owned enterprises specializing in arms sales
> and those responsible for the acquisition and management of energy (the powerful > “oil lobby”) are all active participants in the foreign policy process.
> These organizations possess enormous resources and their interests often differ
> from those of party/state organizations – such as the Chinese Communist Party’s
> (CCP) international department and the Ministry of Foreign Affairs – that normally > deal with China’s external relations.
> Consequently, party/state organizations no longer monopolize the making and execution
> of China’s foreign and security policies. Other leadership groups, such as the military-industrial
> complex and the oil lobby are able to advance their interests in the leadership > consensus-building process, thus affecting policy.
> Deng Xiaoping was China’s leader from the second half of 1977. His political comeback
> from the purges of the Cultural Revolution depended primarily on the staunch support
> of the PLA. He did not possess the uncontested power that Mao Zedong wielded, nor
> did he carry the title of party chairman or general secretary; his only key official > position was chairman of the CCP’s Central Military Commission (CMC).
> As Deng knew, “political power grows from the barrel of a gun,” and he understood
> the strategic importance of securing the PLA’s trust and support. He inducted PLA
> representatives into the party and state leadership bodies and after stepping down
> as chairman of the CMC in November 1989, he appointed then-CCP general secretary
> Jiang Zeming in his place. He also elevated his trusted aide, General Liu Huaqing,
> to vice chairmanship of the CMC and also to the Politburo Standing Committee – the
> first time since 1976 that a uniformed member of the PLA had stood on the elite > body.
> In 1993, Jiang announced that CMC vice chairman General Zhang Zhen and other CMC
> members would attend meetings of the Politburo Standing Committee as non-voting
> members. At Deng’s behest, the CCP’s Leadership Group on Taiwan Affairs has since > the mid-1990s included several PLA representatives.
> Coming after Deng, Jiang and Chinese President Hu Jintao lack his stature and authority.
> Hu, who has served as chairman of the CMC since September 2004, has had even less
> time and opportunity than his predecessor Jiang – who headed the CMC from 1989 to
> 2004 – to build a PLA support base. As such, Hu’s relations with the PLA are not
> close and are occasionally strained. Some PLA spokesmen have criticized him for
> being soft toward the US. There is a discernible tendency that under Hu, the PLA > is more outspoken and assertive on foreign and security policy.
> Major General Luo Yuan of the Academy of Military Science, an outspoken militant,
> has claimed that as China has grown stronger relative to the US it should proactively
> pursue its national interests. Other PLA spokesmen have also called for Beijing
> to take a stronger stance over the South China Sea disputes and US-South Korea-Japan
> military exercises. Some PLA strategists have also questioned Deng’s cautious, low-profile > foreign-relations approach as they consider it outdated in a changed world.
> In a speech made during his visit to Washington in May last year, Chief of General
> Staff General Chen Bingde accused the US of a lack of respect for China’s “core
> interests” and named “three major obstacles” that harm Sino-US relations: continued
> US arms sales to Taiwan, close-in US military and surveillance operations against
> China and a ban on the export of US high-tech goods to China. In the semi-annual
> Sino-US Strategic and Economic Dialogue, PLA participants tend to set the tone
> and speak for the Chinese delegation; they take a tougher stance not only on bilateral
> relations and the Taiwan issue, but also on regional issues such as North Korea > and sanctions against Iran and Syria.
> On the eve of the 17th Party Congress in October 2007, Hu convened a conference
> of CCP, PLA and government leaders and nominated his protege, then-Liaoning Province
> party chief Li Keqiang, to succeed him as party leader after the 18th Party Congress > this year, but his choice was vetoed.
> In a unprecedented “straw vote,” China’s leadership elites, especially the PLA leaders,
> opted for the election of Xi Jinping, then the party chief of Shanghai and the son
> of a revolutionary veteran, to succeed Hu. Xi was highly popular with most of China’s > power holders, but the overwhelming PLA support was decisive in his elevation.
> The 18th Party Congress started today, with the PLA expected to send 251 delegates
> – three times more than those from Henan, China’s most populous province – a very
> good measure of its political clout. Xi has maintained close relations with the
> PLA, and his public and informal remarks on China’s foreign policy and Sino-US relations > echo the tough line of the PLA.
> Has Xi been politically “hijacked?” Will he continue to follow the PLA’s hard line
> on foreign and security policy? Or, after he assumes the mantle of party general > secretary, can he rule and command “the gun?”
> This is an interesting and important question which cannot be answered with any
> certainty. A period of time must pass before it can be judged if Xi is truly in > power and capable of ruling and leading China.
> Parris Chang, professor emeritus of political science at Penn State University, > is chair professor of general studies at Toko University.
> ITEM 12a: ASIASENTINELT.COM: Hong Kong and the Gold Trade
> http://asiasentinel.com/index.php?option=com_content&task=view&id=4970&Itemid=224
> [http://r20.rs6.net/tn.jsp?t=849f5ilab.0.gs9l5ilab.wus7micab.3290&ts=S0837&p=http%3A%2F%2Fasiasentinel.com%2Findex.php%3Foption%3Dcom_content%26task%3Dview%26id%3D4970%26Itemid%3D224] > -Thanks to Ganesh Sahathevan-
> WEDNESDAY, 14 NOVEMBER 2012
> Hong Kong, sitting China’s on flank and on the route to India, appears to be the
> nexus for a huge amount of gold moving around the planet, with as much as 60 metric
> tons of the precious metal crossing through in some months, worth US$3.32 billion > at the current price per ounce.
> There is so much gold passing through the territory from as far away as Switzerland
> that, as Asia Sentinel reported on Nov. 12, in July the Israel-based Malca-Amit
> Global Ltd announced that it had opened a bullion storage facility at Hong Kong
> International Airport that is capable of holding 1,000 tonnes at any given time
> – 22 percent of the gold in the fabled US storage facility at Fort Knox, Kentucky.
> A company official declined to comment on either the direction in or out of gold > and other valuables shipments.
> The Malca-Amit official is not the only one. Gold is a subject that nobody really
> seems to want to talk about. The World Gold Council office in Hong Kong did not
> return a call requesting an interview. Officials from the Hong Kong Customs and > Excise Department also refused to be interviewed.
> Where the gold comes from and where it goes from all three sources is somewhat a
> mystery. Research-Works, a Shanghai-based research firm, said a relatively small
> amount of China’s gold, 74.2 tonnes in 2011 goes into industrial use, while consumer > demand – jewelry and investment, swallows some 780 tonnes annually.
> Chinese demand is an obvious factor, not just because of the country’s healthy economy,
> but because Mao Zedong banned gold sales in 1850 after the Communists came to power.
> That continued until 2003, when the market was liberalized and demand among the
> general public zoomed. Demand from consumers, investors and central bank is very > significant. A significant amount may go into building government stockpiles.
> Robert Broadfoot, founder and managing director of the Hong Kong-based Political
> and Economic Risk Consultancy, which specializes in advising mining companies,
> said in an interview that gold dealers themselves probably have little idea. One
> source said Chinese companies could be shipping the gold into Hong Kong for use
> as collateral with third-world companies in joint ventures. Broadfoot said Hong
> Kong has long been a transshipment point for illegal gold from all over Southeast > Asia, where borders are porous and customs officials are malleable.
> While Chinese companies appear to be looting the Philippines for gold and other
> minerals, much of it illegal, Filipino gold shipments into Hong Kong are dwarfed
> by two other countries – China itself and Switzerland. Mainland China reported
> exporting 29.8 metric tons of gold to the territory in July alone, worth HK$11.86
> billion. That was followed by Switzerland, with 28.1 tonnes worth HK$11.45 billion.
> Nonetheless, while the Philippines is third, the amount has skyrocketed. In the
> whole year of 2005 Philippine exports into the territory were worth HK$1.71 billion
> (US$220.6 million). In July 2012 alone, 3.48 tonnes of gold worth US$193.4 million
> were recorded as landing in Hong Kong. The figures are from the Hong Kong Merchandise > Trade Statistics.
> In any case, a full 60.66 tonnes of the metal were re-exported from Hong Kong to
> the mainland in the same month, an indication that nearly all of the gold that
> comes into the territory transships to the mainland. The totals include gold, plated
> with platinum, non-monetary unwrought or in semi-manufactured forms, or in powder > form.
> According to figures obtained from Chinese customs, the country takes in a massive
> amount of gold ore annually – nearly 195,000 tonnes of ores in nearly 2,000 shipments
> arriving at 59 Chinese ports in 2011. China’s domestic January-August gold production > rose 10.3 percent annually to 250 tonnes.
> Net gold imports from Hong Kong were 311.7 tonnes in the first eight months of 2012,
> up 266 percent annually, surpassing Chinese domestic production of 250 tonnes. Though
> still representing a steep increase, the year-on-year growth in net gold imports > has declined sharply since April, partly as China’s economy has cooled.
> That in fact may not be all of it. For instance, Indonesia has long been known to
> mine a vast amount of the metal illegally and to smuggle it out of the country.
> Yet none of the gold mined in Indonesia makes the list, either legally or illegally,
> in China or Hong Kong As an indication how beholden North Korea is to China, the
> isolated dictatorship is the biggest supplier of gold-bearing ore to China, producing
> 31 percent of the total imported, arriving in 1,441 shipments in 2011. Australia
> was ranked second, with 13 percent at 24,951 tonnes, followed by Tanzania at 24,618
> tons. Together the top three countries provide 56 percent of gold ore imports to > China.
> In August 2012, Thomas Reuters GFMS, a precious metals consultancy, reported that
> 56 percent of Philippine gold comes from small-scale miners and estimated that 90
> percent of it is smuggled out of the country. A Reuters news investigation found
> that much of the gold smuggled out of the country is headed for China, whether > through Hong Kong or through other Chinese ports.
> In the first nine months of 2012, a total of 2,542 shipments of imported gold ore
> – not pure gold — were declared at 59 ports in China, with a total shipment quantity
> of 170,883 tonnes. Sixteen shipments of that came from the Philippines, which is
> ranked 18th in overall quantity of imported gold ore under the “country of origin”
> category, or 1,028 tonnes in addition to the gold apparently transshipped through > Hong Kong.
> The Department of Environment and Natural Resources agreed with the assessment,
> saying the gold was being shipped out to China, Hong Kong and Malaysia. The overseas
> Chinese in all of the Southeast Asia countries have traditionally seen gold as a
> hedge against disaster. Legend has it that when Nguyen Van Thieu, the last president
> of South Vietnam, left the country, he had so much gold aboard his aircraft that > some of it had to be offloaded.

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