6:00 PM ET, Wednesday, August 23, 2023
The Cipher Brief curates open source information from around the world that impacts national security. Here's a look at today's headlines, broken down by region of the world:
The Americas
Chinese Ambassador to U.S. Meets Commerce Secretary Raimondo. China’s ambassador to the U.S. Xie Feng met with U.S. Secretary of Commerce Gina Raimondo on Tuesday ahead of her trip to China next week. An embassy readout said that Xie demanded the U.S. “pay high attention” to China's view on commercial issues. However, he also said that he hopes Beijing and Washington can “overcome difficulties together in the same boat” and find more areas of cooperation to “shorten the negative list.” The U.S. commerce department said the two officials discussed “challenges faced by U.S. businesses and areas for potential cooperation.” The meeting came after the department lifted trade controls on several Chinese entities by removing them from its unverified list. U.S. National Security Advisor Jake Sullivan said Raimondo’s trip will deliver the message that Washington does not seek decoupling from China and wants to sustain an economic relationship with China but will act to protect its national security. South China Morning Post
U.S. Seeking Extension of Science Deal With China. The U.S. State Department said Washington is seeking a six-month extension of a landmark science and technology agreement with China so the two sides can conduct negotiations to “strengthen” the deal. The Science and Technology Agreement (STA) is set to expire on August 27. It was signed when the U.S. and China established diplomatic ties in 1979 and has been renewed about every five years. Some U.S. lawmakers say the deal should be scrapped over concerns about China’s growing military, industrial espionage and forced technology transfers. A group of Republican U.S. representatives have proposed a bill requiring congressional notification, security risk assessments, and adequate monitoring considerations for such deals with China and hope to have the measure become law before the STA is renewed. A department spokesperson said it is aware of challenges to the STA, which is why it is seeking a short-term extension of the deal to amend it. Reuters
U.S. Approves Sale of F-16 Search and Track Systems to Taiwan. The U.S. State Department approved a potential $500 million sale of infrared search and track systems to Taiwan for its F-16 fighter jets. The Pentagon said the proposed sale will improve Taiwan’s ability to “defend its airspace, provide regional security, and increase interoperability with the U.S.” The Pentagon also maintained that the sale “will not alter the basic military balance in the region.” China, which has called on the U.S. to stop selling arms to Taiwan, is likely to be angered by the proposed sale. Reuters US DoD DSCA
U.S. Expands Myanmar-Related Sanctions. The U.S. on Wednesday expanded its sanctions against Myanmar to include foreign companies and individuals helping the country’s military junta to obtain jet fuel. Myanmar’s military junta uses this jet fuel to launch airstrikes on its own people, according to the U.S. Treasury Department. New sanctions have been levied against three companies linked to two men, Shin Phyu Win and Zaw Min Tun, for their role in procuring jet fuel for the military. Undersecretary of the Treasury for Terrorism and Financial Intelligence, Brian Nelson, said the new sanctions help target an additional sector critical to the military regime and further deprive the regime of the resources used in oppressing its citizens. Reuters US Department of the Treasury
Western Europe
German Guarantees for Investments in China Significantly Drop. The German government has drastically lessened the volume of investment guarantees it has given to companies investing in China. A government document shows that Berlin has only issued 51.9 million euros ($56.26 million) in guarantees so far this year, less than a tenth of the $745.9 million euros in guarantees issued last year. China and Germany have had close trade ties, but slowing growth, concerns about Chinese theft of sensitive technologies, and the move to diversify supply chains beyond a single partner following Russia’s invasion of Ukraine have impacted the two countries’ commercial relationship. The German government capped the size of guarantees given to investors in a single country last November. The move aimed to diversify the government’s portfolio of risks and encourage companies to spread investments across multiple countries. Reuters
Top EU Lending Official Warns West Against Losing Trust of Developing Countries. Werner Hoyer, President of the European Investment Bank, is warning the West that it is at risk of losing the trust and confidence of developing countries due to efforts by China and Russia to push into emerging market nations. He highlighted talks at the BRICS summit in South Africa to build up the group’s New Development Bank as an alternative to traditional Western institutions as a sign of heightened competition. He also noted how many developing nations have taken a neutral stance towards the Ukraine war shows difficulties in maintaining confidence of the global south. Hoyer said Western lenders should increase support to developing countries in areas like energy transition, debt relief and healthcare to show emerging market partners that they are not being abandoned. Reuters
Central and Eastern Europe
Prigozhin Reportedly Killed in Plane Crash. Russian authorities report that Wagner Group head Yevgeny Prigozhin was on board a private plane that crashed in Russia. Russia’s emergency ministry said the plane was traveling between Moscow and St. Petersburg and crashed in the Tver region, killing all 10 passengers. Rosaviatsia, Russia’s aviation agency, said Prigozhin’s name was on a passenger list for the jet. The agency said Wagner commander Dmitry Utkin’s name was also on the passenger list. The Wagner-linked Telegram channel Grey Zone reported earlier that the plane was downed by air defenses in Tver region. BBC Reuters Al Jazeera CNN
Zelensky Says Ukraine Will Push Russia Out of Crimea. Ukrainian President Volodymyr Zelensky vowed on Wednesday that Ukraine will end Russia’s occupation of Crimea and all other parts of his country. Speaking at an international conference on Crimea, Zelensky pledged that Crimea and other Russian-held Ukrainian territory will be “de-occupied.” He added that Crimea is critical to global food and social stability given its location in the Black Sea, through which Ukrainian grain exports flowed before Russia’s invasion. Zelensky did not set a time frame for the liberation of Crimea, only saying that Ukrainian troops continue to push forward with their counteroffensive. Zelensky did announce that several companies have signed a document pledging to invest in Crimea after Ukraine regains control of the territory, including Ryanair, Vodafone, Nokia and EPAM. Russia seized and annexed Crimea in 2014. Most countries have not recognized Russia’s annexation of Crimea. Reuters Ukrinform
Russia Says Ukrainian Drone Attack Killed Three in Belgorod. Vyacheslav Gladkov, the governor of Russia’s Belgorod region, said a Ukrainian drone attack killed three people in the border region on Wednesday. Gladkov said the people were killed when a Ukrainian drone dropped shrapnel grenades in the village of Lava. He added that 10 districts and villages across Belgorod have been hit by Ukrainian artillery fire and drone attacks in the last 24 hours. CNN
Russian Authorities Request Extension of Detention of Jailed WSJ Reporter. Russia’s Federal Security Service (FSB) requested on Wednesday to extend the pretrial detention of Wall Street Journal reporter Evan Gershkovich. Gershkovich was detained on March 29 on charges of espionage. Gershkovich has denied wrongdoing and the U.S. deems him wrongfully detained. His pretrial detention was set to expire on August 30. A Moscow district court will hold a hearing to consider the FSB’s application for an extension. Wall Street Journal
Asia and Oceania
North Korea Reportedly Launches Space Rocket. South Korea’s military says that North Korea launched an apparent space rocket on Thursday. The launch triggered emergency warnings in Okinawa which Japan lifted after the missile traveled towards the Pacific Ocean. Japanese Chief Cabinet Secretary Hirokazu Matsuno said the launch threatened regional security and that Tokyo would lodge a protest with Pyongyang. North Korea previously said it would launch a satellite between August 24-31. Pyongyang attempted to launch a reconnaissance satellite in May, but that launch failed with the booster and payload falling into the sea. Reuters
Philippines Resupplies Troops in South China Sea. The Philippines conducted a resupply mission to troops at the second Thomas Shoal in the disputed Spratly Islands on Tuesday, following recent attempts by Chinese vessels to harass or block its mission. A spokesman for the Chinese Coast Guard stated that the Philippine ships had been issued a stern warning over the mission, but because they did not ferry “illegal construction materials,” a “temporary special arrangement” was reached to allow them to deliver food and other essential items to Filipino troops stationed on a grounded warship on the shoal. Analysts say the shift from the earlier interceptions of past resupply vessels suggests Beijing does not seek to further escalate tensions in the region to avoid further distancing itself from its Southeast Asian neighbors, especially as China is negotiating a South China Sea code of conduct with ASEAN. One analyst added that China may also be realizing that the government of Philippine President Ferdinand Marcos Jr. may be more willing to escalate tensions to the international stage than his predecessor Rodrigo Duterte, who had closer ties with Beijing. South China Morning Post
Indonesia Buys 24 Black Hawk Helicopters from Lockheed Martin. Indonesia’s defense ministry announced that it has signed a deal to buy 24 Sikorsky S-70M Black Hawk GFA-type transport helicopters from Lockheed Martin. The defense ministry has not announced a value for the deal. The prime minister of defense mentioned the deal for the helicopters, which Lockheed Martin said are commonly used to “deliver and extract troops,” was intended to strengthen the Indonesian military. The purchase followed other moves by Indonesia to overhaul its military air fleet. Reuters
Middle East and Northern Africa
Lebanon Military Helicopter Crash Kills Two. A Lebanese air force helicopter crashed during a training exercise on Wednesday, killing two Lebanese military personnel and injuring another. The Lebanese army said the cause of the crash, which occurred in the mountainous Hammana area east of Beirut, was not immediately known. Reuters Al Jazeera
Sub Saharan Africa
South Africa Says BRICS Agrees on Expansion. South Africa’s foreign minister Naledi Pandor said on a state-run radio station that BRICS leaders meeting in Johannesburg have “agreed on the matter of expansion” of the bloc. She said the leaders have adopted a document that “sets out guidelines and principles, processes for considering countries that wish to become members of BRICS.” The prospect of enlarging BRICS has topped the agenda of the South Africa summit. BRICS members have had some divisions over the future of the bloc, with China and Russia seeking to build it as a counterweight to the West, while Brazil’s President Luiz Inacio Lula da Silva said it should not rival the U.S. or Group of Seven economies. Over 40 countries have expressed interest in joining BRICS, and 22 have formally requested admission. Deutsche Welle Reuters
Cyber and Tech
China Rejects U.S. ASAT Missile Ban Proposal as ‘Fake Arms Control’. A Chinese Foreign Ministry spokesperson described a U.S. proposal to ban destructive testing of anti-satellite (ASAT) missiles as advocacy for “fake arms control.” The spokesperson, Wang Wenbin, accused the U.S. of deception, saying the ASAT test ban “sets no substantial limit to US military forces in outer space” and seeks to “maintain and enlarge its unilateral military superiority by means of multilateral commitments.” Wang said U.S. policy has “publicly declared space to be a frontier of war,” leading it to develop space-related military forces and to build a “space military alliance.” Meanwhile, the EU last week announced plans to support the U.S. proposal to prohibit destructive ASAT tests, a move that comes in advance of a meeting next week of a UN working group on reducing space threats. The EU said its endorsement of the U.S. proposal stemmed from its concern for “preventing damage to the outer space environment” and contributing to further measures to prevent a space-based arms race. China and Russia, permanent members of the UN Security Council, have both expressed opposition to the U.S. proposal. South China Morning Post
Industry Group Says Huawei Assembling ‘Shadow Network’ of Chip Producers in China. An international semiconductor industry association based in Washington has warned of efforts by China’s Huawei Technologies company to assemble a “secret” network of semiconductor manufacturing facilities that could help evade U.S. sanctions and advance Beijing’s technological goals. Huawei, whose products are blacklisted by the U.S. and other allied countries, is receiving $30 billion from the Chinese government for its entry into the chip production sector. The company, according to the Semiconductor Industry Association (SIA), has acquired two existing chip facilities and is building three others. The SIA cautioned that Huawei may be acquiring chip manufacturing assets under the names of other companies, allowing it to circumvent U.S. Commerce Department restrictions on the purchase of U.S. chipmaking equipment. The department’s Bureau of Industry and Security told Bloomberg that it is monitoring the situation and will take action if necessary. The bureau previously blacklisted a number of Chinese companies, including two that the SIA claims are part of the Huawei network — Fujian Jinhua Integrated Circuit Co. and Pengxinwei IC Manufacturing Co. Huawei and other companies that the SIA identified as participants in the “shadow network” did not respond to requests for comment. BloombergReuters
Deep Flaws in Russian Space Program Underlie Lunar Landing Crash. Russia’s failed lunar landing on Sunday revealed “massive challenges” facing the country’s space program. Observers point to the loss of key technologies due to the erosion of Russia’s industrial base along with Western sanctions, a substantial brain drain, and corruption as factors undermining Moscow’s ambitions for the space sector. Yuri Borisov, chief of the Roscosmos state space corporation, attributed the Luna-25 crash on the moon’s south pole to a lack of expertise stemming from the long hiatus in lunar research. “The link between generations has been cut,” he said. The specific cause for the crash, Borisov said, was a prolonged firing of the spacecraft’s thruster beyond the planned 84 seconds. Vitaly Egorov, a well-known blogger on the Russian space program, suggested that Roscosmos may have neglected warnings about equipment deficiencies in order to be the first to land on the lunar south pole. Space experts note that even before Western sanctions choked off the supply of microchips and other technologies to Russia, substandard components had contributed to failure of a Russian probe to Mars in 2011, which investigators traced to the use of cheap commercial microchips that were unfit for the space environment. Despite the setback, Roscosmos’ Borisov said, “I hope that the next missions … will be successful,” adding that the space agency will intensify work on future moon missions, including one planned for 2027. C4ISRNet
Chinese Industry-University Project Leads to Ultra-Strong Carbon Fiber Breakthrough. A joint project by the Changsheng Technology company and Shenzhen University has led to the production of ultra-strong carbon fiber, a development that may allow China to overcome U.S. and Japanese export controls on carbon fiber manufacturing equipment. To this point, large-quantity domestic production of the strongest T1000 high-performance carbon fiber has been hampered by the bans on related equipment. The collaboration between the Changsheng firm and Shenzhen University has created a production line capable of output of almost 2,000 tons of the T1000 carbon fiber annually. Previously, China’s carbon fiber production had been limited primarily to T300 and T700 varieties, with the T1000 material produced at very low quantities. The high-tech material is essential for aerospace and defense applications, in addition to transportation, energy, and marine engineering uses. It is a key structural material in missiles, satellites and space stations, and naval ships benefit from its properties that contribute to low radar and magnetic field signatures. China’s People’s Daily newspaper reported this week that the Changsheng Technology production line has been validated by an expert committee, which found that more than 95 percent of its carbon fiber met quality standards. South China Morning Post
Germany Makes $1 Billion Funding Commitment to AI Research in Next Two Years. German research minister Bettina Stark-Watzinger on Wednesday announced that the government will double AI research funding to $1 billion over the next two years. Germany projects 150 new university AI labs along with the expansion of data centers and access to complex data sets for AI training and analysis. Despite being vastly outspent by the U.S. in the AI sector, Stark-Watzinger said AI talent could be drawn to Germany by Europe’s greater emphasis on data privacy and personal safety than other countries, and by the opportunity for cooperative projects within the EU. The research minister commented, "we have AI that is explainable, trustworthy and transparent. That's a competitive advantage." She noted also that the number of German AI startup firms doubled in 2023, although that places Germany only ninth in worldwide rankings. The government investment in AI occurs as Germany tries to recover from recession at the same time its auto and chemicals industries are challenged by electric-vehicle manufacturers and high energy costs. Reuters
FBI Links Recent Cryptocurrency Platform Thefts to North Korea’s Lazarus Group. The FBI said on Tuesday that North Korea’s Lazarus hacking group carried out three cyberattacks on cryptocurrency platforms in June that resulted in the theft of almost $200 million. On June 2, a Lazarus hack of the Atomic Wallet platform resulted in a $100 million loss, followed by two June 22 attacks on Alphapo and CoinsPaid that extracted $60 and $37 million, respectively. The FBI said North Korea is likely to attempt to “cash out the bitcoin worth more than $40 million dollars,” adding that its investigation “found the TraderTraitor-affiliated actors moved approximately 1,580 bitcoin from several cryptocurrency heists.” Lazarus and other North Korean hackers were responsible for $1.7 billion in cryptocurrency thefts in 2022, shattering previous records. The FBI said it will “continue to expose and combat the DPRK’s use of illicit activities — including cybercrime and virtual currency theft — to generate revenue for the regime.” The Record BleepingComputer
U.S. Charges Tornado Cash Founders Over Money Laundering. The U.S. on Wednesday indicted Roman Semenov and Roman Storm, co-founders of the now-banned virtual currency mixer Tornado Cash, for their involvement in the laundering of up to $1 billion in criminal proceedings on the platform. The charges against them, which include conspiracy to commit money laundering and sanctions violations, come one year after the U.S. Treasury banned Tornado Cash for allegedly supporting the North Korean cybercrime group Lazarus. The U.S. Attorney’s Office in New York said U.S. authorities arrested Storm, a naturalized U.S. citizen who lived in Washington state, while Semenov, a Russian national, has yet to be detained. Storm’s lawyer says he “disputes” engaging in any criminal activity, while Semenov’s lawyers did not immediately respond to requests for comment. U.S. officials say virtual currency “mixers,” which combine cryptocurrencies of multiple users to conceal the source and owners of funds, have been widely used by cybercriminals to hide their illicit gains. Reuters U.S. Department of the Treasury
China, Thailand, Laos Jointly Targeting Myanmar Cybercriminals. China, Thailand and Laos are working together to crack down on Myanmar-based cybercriminals. Chen Hai, China’s ambassador to Myanmar, released a joint statement with his Thai and Laotian counterparts calling for “stronger coordination” to take down the online gambling and fraud syndicates behind the malicious cyber activity. The statement from the ambassadors came days after security officials from China, Thailand and Laos announced a special cooperative mechanism to address human trafficking related to the cyber scams, which often target Chinese nationals. The cyber crime gangs reportedly lure targets with false promises of investments, jobs or love, and then detain victims and force them to work as online scammers. South China Morning Post
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