Return to Winter: Russia, China, and the New Cold War Against America (19 page)

“The targets are U.S. banks, with the victims dispersed across various U.S. cities,” the McAfee report said. “Thus this group will likely remain focused on U.S. banks and making fraudulent transactions.”
⁸³
The plan was ingenious in its conception. Botmasters would co-opt a banking process with which millions of Americans are familiar—authentication of account activity. The hackers would use “phone flooding” equipment to prevent banks from confirming the legitimacy
of wire transfers with customers; the banks wouldn’t be able to reach them because the phone lines would be blocked. The hackers would call the banks on their own, claiming to be the accountholders, and verify the transactions.
⁸⁴

The malware could also clone victims’ computers, allowing the hackers to set up a “virtual machine” in Russia with all of the same user cookies, software configurations, and the like. To the U.S.-based bank, transactions coming from that computer would appear to be happening in the U.S. and authorized by its actual U.S.-based customer.
⁸⁵

McAfee’s exposure of Project Blitzkrieg may have caused vorVzakone to call off his attack or to move further underground. “Too hot, too much media attention,” he wrote in one of his final messages. If he’s gone, it’s likely only temporarily. And, as with Red October, the same nagging question goes unanswered: Whom does he work for?

It might also be noted in closing that in Russia, as in China, a high premium is placed on developing computer skills among the young—much more so than in the United States. We simply don’t train the way they do, as the results of the International Collegiate Programming Contest, held in St. Petersburg in 2013, showed. Russian IT University earned a perfect score, and seven of the top 10 finishers were former Warsaw Pact universities. Schools in Taiwan, Japan, and China rounded out the top 10. Only three U.S. schools cracked the top 20.
⁸⁶

CONCLUSION: WHAT TO DO?

When it comes to cyber security, the myopia in U.S. policy comes down to three core points: First, so far, we are more focused on offensive operations than defensive; second, we have not come to terms with the structural disadvantage an open society faces in this struggle; and third, our inability, or unwillingness, to confront the Axis, China in
particular, is bound up with the same deficiencies that afflict our overall posture—namely, a preference for wishful thinking over acknowledgement of reality.

“The attackers are ahead of the defenders in cyber space,” Deputy Defense Secretary William Lynn warned in 2011. “The technology for intrusions is far ahead of the technology for defenses, and we need to catch up.”
⁸⁷
Mike McConnell agrees: “All the offensive cyber capability the U.S. can muster won’t matter if no one is defending the nation from cyber attack.”
⁸⁸

While the U.S. offensive capability is probably unmatched at present, the defensive dimension remains dangerously weak. Washington’s current cyber-command structure is mostly set up to defend the Pentagon and perhaps some government agencies, but not the private-sector infrastructure that makes our economy go. The question of security in this area has grown up largely within the military; but neither the Pentagon nor Homeland Security is currently geared to defend civilian infrastructure.
⁸⁹
Though Washington has created a Cyber Command, no overarching body is assigning responsibility and coordinating efforts to plug the gaps. Thus, ramping up our offensive capabilities even further is in many ways beside the point. Until the U.S. figures out the defensive end of this, we remain hugely, even shockingly, vulnerable.

Of course, it’s much harder for an open society to seal itself up against the kinds of assaults now being directed against U.S. networks. And “U.S. agencies and private companies have a lot more information that’s worth stealing,” as
Forbes
put it.
⁹⁰
For our adversaries, the target is both vulnerable and valuable. There is no question that the U.S. faces an uphill battle in the cyber war, especially considering that our adversaries don’t operate under the same constraints we expect our government to observe.

Pervasive in its manifestation and devastating in its effects, cyber war is also cheap to launch—a huge differentiator from the doomsday nuclear attacks we worried about during the Cold War or, more recently, even modest terrorist plots, which require some kind of funding and operational coordination. Not so here.

“It costs about 4 cents per machine,” said Bill Woodcock of Packet Clearing House, which tracks Internet traffic. “You could fund an entire cyber-warfare campaign for the cost of replacing a tank tread, so you would be foolish not to.”
⁹¹
So they’re cheap, devastating, and, as we’ve also seen, difficult to track and prove—what’s not to like?

We are on different terrain here, where no rules exist to guide us. Richard Clarke and others compare it with the first decade after the atomic bomb, when American and then Soviet scientists built these weapons of enormous destructiveness, but before politicians or strategists devised ways of thinking about them rationally: how to control them, deter their use, or limit their damage if a war couldn’t be avoided.
⁹²
That’s where we are today. And as with the Cold War, our task in devising rules is made ten times more difficult when the parties who need to help set such standards are our adversaries.

Finally, there is the issue of our overall posture toward the cyber threat. The Obama administration lacks a coherent, overarching vision of how to confront the cyber threat at its multiple levels—as we saw when Obama failed to counter Xi’s rebuffs at the Sunnylands summit. Obama’s unwavering commitment to “good faith” negotiation over coercive diplomacy sends a message of weakness. The White House’s “tough” statements are thin gruel; even the
New York Times
sees through them. The Obama-defending paper of record pointed out that the president, after declaring that “we know foreign countries and companies swipe our corporate secrets,” refused to identify which countries he meant. He even added: “Our enemies are also seeking the ability to sabotage
our power grid, our financial institutions, and our air-traffic-control systems.”
⁹³

What an extraordinary admission to make, without a long and elaborate outline of ongoing or planned measures against such an adversary. The
Times
article went on to discuss the difficulty of identifying China as an enemy when the country is our banker and when, indeed, innumerable U.S. companies do business with Beijing and would quickly resent such a combative stance. The irony is that many of those companies suffer constantly from the very cyber shenanigans that are at issue.

Here, then, we can reemphasize the overarching theme of this book: that we confront a relentless enemy; that we have, to date, dared not call him an enemy and confront him openly; and that we must soon overcome our reluctance to do so. This is as true in the area of cyber warfare as it is in any other—and perhaps more so.

CHAPTER 4

Military Supremacy: America’s Fading Edge

“Beijing’s military buildup—its defense spending has more than doubled since 2006, and its armed forces now include nearly 1.5 million service members, according to Chinese officials—is driven by a sense that it needs to prepare for a possible showdown in the Pacific with the world’s remaining superpower.”

—
TIME
, JUNE 2013
¹

“The Russian armed forces need to be of a new quality, and that quality has to manifest itself in everything: combat preparedness, military planning, and military science. We are faced with the considerable task of creating a new look for the armed forces.”

—
VLADIMIR PUTIN, OCTOBER 2003
²

“The readiness of our Armed Forces is at a tipping point. We are on the brink of creating a hollow force due to an unprecedented convergence of budget considerations and legislation that could require the Department [of Defense] to retain more forces than requested while underfunding that force’s readiness.”

—
LETTER FROM JOINT CHIEFS OF STAFF TO SENATOR CARL LEVIN, CHAIRMAN OF THE COMMITTEE ON ARMED FORCES, JANUARY 2013
³

“Countries that are winning do not have to close their embassies in 19 countries. This is a statement of impotence and incompetence on a grand scale, an admission that the United States cannot even defend its own embassies.”

—
NEWT GINGRICH, AUGUST 2013
⁴

O
riginating from Vladivostok, the home port of Russia’s Pacific Fleet, the armada moved in “ceremonial formation” through the Sea of Japan in July 2013. It stopped periodically for live firing drills and exercises in air defense, antisubmarine warfare, and surface warfare. The Russian fleet included a Kilo-class submarine as well as the guided-missile cruiser
Varyag
, which the
New York Times
described as “the flagship of its Pacific Fleet.”
⁵

But the Russians weren’t traveling alone.

The armada was a joint one, and the partner was China, in what Beijing described as the largest military exercises that it had ever undertaken with another country. The Chinese fleet sent seven warships to the exercise, including missile frigates equipped with antisubmarine capabilities and a guided-missile destroyer outfitted with Aegis-quality radars that can guide weapons to enemy targets. Ding Yiping, deputy commander of the Chinese navy, said that the joint naval drills had been a complete success.
⁶

“This is our strongest lineup ever in a joint naval drill,” said the Chinese fleet commander, Major General Yang Junfei.
⁷
For Yang, the main goal of the exercises was to build “strategic trust” between the Russian and Chinese navies.
⁸
“This shows unprecedented good relations between China and Russia,” said Wang Ning, director of the Center for Russian studies at the Shanghai International Studies University. “It shows that the two countries will support each other on the global scale.”
⁹

In Cold War days, military cooperation between Moscow and Beijing would have caused panic in Washington. But while the Axis countries are moving aggressively, jointly and apart, to rebuild and modernize their military might, the United States is pulling back—politically, financially, strategically—from its leading position in the world. We are on a course of retreat that, combined with the determined efforts of our adversaries to catch up, could lead to calamity.

The Russian-Chinese armada took sail partly in response to two interconnected challenges: first, the Obama administration’s so-called Asian pivot, in which the Americans would reallocate focus and resources, military and otherwise, from Afghanistan, Europe, and the Middle East to Asia and the Pacific area; second, the dispute between China and Japan over the Diaoyu (in China)—or Senkaku (in Japan)—Islands. Knowing that more American resources would soon be arriving in the Pacific, Beijing picked a strategic time to let Washington know that China would not be sailing alone. Given that the strength of the U.S.-Japan alliance is too imposing for either Axis country to challenge on its own, approaching Japan in tandem made sense. A Russian-language version of a Chinese news portal essentially conceded that one of the exercise’s purposes was to put pressure on Japan and the U.S.
¹⁰
It already may have paid dividends, considering the Americans’ lackluster support for Japan in the fall of 2013 over the contested islands. (Russia also has a Pacific-island dispute with Japan, over what Moscow calls the Kurils and Tokyo calls the Northern Territories.)

The joint exercises were only the latest reminder of Russian-Chinese cooperation in a host of areas. What makes their growing military cooperation especially alarming is not only the facts and figures substantiating it—which we’ll get to below—but also that it comes as the United States is in the middle of a massive military retrenchment. Since the end of the Cold War, the United States has enjoyed military superiority over all other nations—and not just in relation to each nation considered on its own. As many have pointed out for years, the U.S. spends more on defense than the rest of the world combined. This remains the case, but the margins are waning, and the Axis nations are catching up. Vladimir Putin has undertaken a top-to-bottom reconstruction of the Russian armed forces, while the Chinese spend something like six times more on their military than they did just 10 years ago.

Moreover, China and Russia (now the world’s second- and third-highest military spenders) have something else that the United States lacks: strategy and the will to put it into practice. Both nations have taken dramatic steps in the last decade to improve their ability to contest American control of the high seas, and not only in the Pacific.
¹¹
The Chinese aim to be the preeminent power in their coastal region, while the Russians are looking to restore the naval capabilities of the Soviet Union.

Contrast this with what we see on the American side. It’s true that the U.S., through its “Asian pivot,” has conceded that it needs to contain China to some degree. Some agree with that outlook; others find it a misplaced Cold War analogy. Either way, it is bound to fail in the absence of a coherent American strategic objective, one not likely to be realized, in any case, given the recent deep cuts to Pentagon spending.

As China and Russia beef up, Congress is set to cut nearly $1 trillion from the defense budget over the next 10 years.
¹²
Defense Secretary Chuck Hagel has said that these cuts will put American national security at “much greater risk.”
¹³
Brookings foreign policy commentator Robert Kagan commented at a recent Council on Foreign Relations meeting that there is no justification for the heavy cuts to the defense budget.
¹⁴
While the full brunt of those cuts is a ways off, the military is already taking it on the chin thanks to the cuts negotiated during the sequestration of January 2013. That’s what prompted Hagel’s warning and also his decision to launch an internal study on both the short-term and long-term effects of spending cuts. What he and others have found so far is alarming: impaired combat-troop readiness; inability to modernize equipment and weapons and technology systems; and the need, potentially, to slash as many as five of the Air Force’s tactical aircraft squadrons. Former Defense Secretary Leon Panetta warns that the effects of sequestration alone will leave
the United States with our smallest ground fighting force since 1940, the smallest naval fleet since 1915, and the “smallest tactical fighter force in the history of the Air Force.”
¹⁵

The U.S. government shutdown in the fall of 2013 didn’t help matters. “A week won’t make a significant difference,” said one Army officer. “Two weeks and you might start to see readiness issues.” The shutdown lasted 16 days, causing extensive cancellation of reserve training, the cutoff of some veterans’ benefits, and uncertainty about the status of some categories of military pay, including incentive compensation for troops serving in Afghanistan.
¹⁶

So, yes, the United States remains the world’s preeminent military power, retains an extraordinary advantage in military spending and capability, and begins from a position of strength—but we are decimating budgets with no clear goal, let alone a clear understanding of what we face on the other side of the cuts. Meanwhile, the Russians and Chinese have clear plans and strategies, and their military budgets reflect this. Our rivals are back in the game in a big way. They make no bones that America is the primary enemy. We show no such clarity in our thinking about them.

CHINA’S MILITARY BUILDUP

“China’s military spending has been rapidly spiraling upward, and the growing amounts are unnerving Beijing’s Asian neighbors and policy planners in the Pentagon, who are openly wary about the country’s long-term intentions,” reported the
Washington Post
in October 2012. That was, if anything, an understatement. In just seven years, China has more than doubled its defense spending, as Beijing takes unmistakable steps toward regional, and even global, superpower status. It’s an ongoing, aggressive campaign that leaves many uneasy, from the oceans and seas of the Far East to the power corridors of Washington.

The buildup is even more troubling for the fact that we don’t have an accurate picture of how much Beijing is spending, because so much of it is not available in transparent public records. Some spending, as the
Post
noted—such as the spending of the People’s Liberation Army on research and space exploration—seems to occur entirely off the books. Two facts are nonetheless clear: The Chinese spend more than they say they do, and they spend more than they ever have before.

By some projections, China is on course to surpass the United States in total military spending by 2035. Beijing’s publicly disclosed military spending of $106 billion in 2012 already makes China the second-largest military in the world after the United States, which spends roughly $700 billion annually.
¹⁷
Most Western analysts estimate that the real Chinese total is much greater. The Pentagon gives estimates in the range of $120 billion to $180 billion.
¹⁸
Figure 1
(below) provides both the PRC’s public figures and the (much higher) U.S. Department of Defense estimates.

Whatever the real figure, it’s all the more impressive given that its military outlays put China only at 11th among spenders as a proportion of GDP—in other words, the spending has lots of room to grow, especially given the robust Chinese economy. And China has learned the lesson of unsustainable defense expenditures from the USSR and thus refrained from committing too much of its economic wealth to the military. Still, the trajectory of Chinese spending has mirrored its robust economic growth. As recently as 2002, China spent only about $20 billion annually on defense. But from 2000 to 2011, it has averaged an 11.8 percent annual increase in officially disclosed military spending, according to Department of Defense estimates.
¹⁹

China’s military spending has had one overarching goal: to modernize and transform the People’s Liberation army and navy (and to a lesser extent, the PLA air force) through investment in high-technology equipment, hardware, and training. With a particular focus on the
development of long-range, high-precision strike capabilities that the U.S. has employed in Iraq and Afghanistan, China is developing its command, control, communication, computers, intelligence, surveillance, and reconnaissance abilities, along with other systems necessary to extend the effective reach of the People’s Liberation Army well beyond China’s borders.

The sweeping modernization program also includes investments in anti-ship ballistic and long-range cruise missiles capable of attacking U.S. aircraft carriers; air and missile defense; unmanned aerial vehicles; electromagnetic pulse weapons; a J-10 and J-11 fighter-jet fleet; an experimental stealth J-20 plane; new maritime-surveillance and targeting systems;
²⁰
and a growing space program, which includes China’s own satellite navigation network.

Figure 1: China’s Annual Real GDP and Military Budget Growth, 1996 to 2009
²¹
(subsequent increases of 9.4% in 2010, 12.9% in 2011, and 11.1% in 2012
²²
)

The impact of these investments is already being felt in the Western Pacific, where the People’s Liberation Army is engaged in a long-term program of naval, air, and missile modernization in order to allow it to undertake “anti-access/area denial” (or A2/AD) missions—any set of tactics or weapons that would deny an enemy from crossing or occupying an area of land, usually by destroying his military assets from a safe distance. What this means is that, in the event of an international incident in the Western Pacific—say, another Taiwan Straits crisis or a standoff over energy rights in the South or East China Seas—China would seek to deter the U.S. Navy from intervening or establishing control. We should note that China has not yet attained these capabilities. Truly effective A2/AD capability relies on systems such as highly accurate, long-range anti-ship ballistic missiles and significant aircraft-carrier forces, and China’s investments in these systems may be several years from making them fully operational. But Beijing is clearly putting tremendous resources into their completion.