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10:00 AM ET, Thursday, January 18, 2024

Daily national security briefings aren’t just for the president anymore. The Cipher Brief uses AI partnered with human analysis and expert perspective to keep you up-to-date on national security news from around the world. 

Here’s what’s happening now:

THE TOP STORIES

U.S. Navy carries out new round of strikes against Houthis in Yemen.

Congress remains deadlocked on Ukraine aid after White House meeting

ISW analysis says Putin trying to destabilize Baltic nations to weaken NATO

Ukraine cites “new phase” of conflict as it targets Russian oil terminal in new drone attack

THE ISRAEL HAMAS WAR

U.S. Navy carries out new round of strikes against Houthis in Yemen. U.S. Central Command said yesterday that the Navy launched a fourth round of strikes against Houthis in Yemen within a week, targeting about a dozen sites that housed 14 missiles that “presented an imminent threat to merchant vessels” in the Red Sea. Head of Central Command Gen. Michael Kurilla said the U.S. will continue to take actions against Houthi militants to safeguard shipping and protect “our people.” Pentagon spokesman Gen. Patrick Ryder said U.S. strikes have degraded the Houthis’ capability, but that “we would not be surprised” to see the Houthis continue trying to conduct retaliatory strikes. A Pentagon official said that about one-fourth of the Houthi arsenal has been destroyed by the U.S. strikes.  Washington Post Reuters CNN The Guardian CBS Bloomberg Wall Street Journal

Third commercial ship in a week struck by a drone near Yemen.  U.S. Central Command said a drone launched from Houthi-controlled territory in Yemen struck the M/V Genco Picardy, a U.S.-owned and Marshall Islands-flagged shipping vessel, in the Gulf of Aden yesterday, the third such incident in three days. The United Kingdom Maritime Trade Organizations (UKMTO) said the strike caused a fire that was extinguished, and that the crew was safe and the ship continued toward its port of call. The Indian Navy said today it had rescued the 22-member crew, including nine Indians.  Bloomberg Associated Press Reuters Reuters

U.S. re-lists Houthis as specially designated terrorists.  On Wednesday the U.S. put the Houthis back on its list of ‘specially designated global terrorists’, a move that will see a renewed round of sanctions on the group.  This comes amid a spike in violence in the Red Sea, and ongoing attacks on commercial shipping.  These attacks are having a negative impact on global shipping and are playing out against a backdrop of rising tensions between the U.S., the Houthis and Iran.  U.S. officials say the sanctions will be designed to limit the impact to Yemen’s 32 million people, who are already among the world’s poorest and suffer from severe shortages of food and other supplies due to the years-long war between Yemen’s Houthis and Saudi Arabia.  Aid officials worry that the new sanctions will add complexity to what has been described as one of the world’s worst ongoing humanitarian crises.  Associated Press Reuters Deutsche Welle 

Suez canal traffic drops to lowest since 2021 blockage. Commercial ship transits through the Suez Canal have reached their lowest level since the crisis caused by the Ever Given ship, which became stranded and blocked the canal nearly three years ago, signaling the impact of recent attacks on vessels in the Red Sea. The seven-day moving average of daily Suez crossings by bulk cargo ships, container carriers, and tankers has fallen to 49, down from a peak of 83 in late June 2023. This decline has resulted in increased traffic passing through the longer and costlier route around the Cape of Good Hope near the southern tip of Africa.  Bloomberg

Hezbollah rejected US overtures, still open to diplomacy to avoid wider war.  Hezbollah has rejected recent U.S.-led diplomatic efforts to de-escalate tensions with Israel as “unrealistic” but sources close to the group say that it remains open to continued negotiations.  U.S. envoy Amos Hochstein has been leading talks aimed at restoring security between Israel and Hezbollah.  Iran-backed Hezbollah says it will continue firing rockets at Israeli targets until a full ceasefire is implemented in Gaza but that the group remains “ready to listen” and remain open to preventing the violence with Israel from increasing. Reuters

Iran foreign minister: Attacks on Israel stop when Gaza war ends.  “An end to the genocide in Gaza will lead to an end of military actions and crises in the region," Iranian Foreign Minister HosseinAmirabdollahian said at the World Economic Forum in Davos."The security of the Red Sea is tied to the developments in Gaza, and everyone will suffer if Israel's crimes in Gaza do not stop ... All the (resistance) fronts will remain active." Reuters

Jordan says Israeli shelling damages Gaza field hospital, IDF rejects accusation.  Jordan said on Wednesday that its largest field hospital in southern Gaza’s Khan Younis was badly damaged by Israeli shelling, but the Israeli Defense Forces denied the claim and posted aerial pictures showing all the tents intact. The IDF said Israeli forces did not attack the hospital but were engaged in a gun battle with Hamas operatives nearby. The IDF said there are claims that a member of the medical staff was wounded as a result of the shooting, but that it was not possible to verify whether the injury was inflicted by Israeli troops. The IDF also said that it has coordinated with “the relevant parties” in advance of continued operations near the hospital.  Times of Israel Reuters

ANALYSIS — Israel, under pressure to scale back intensity of war, pulls thousands of troops from Gaza. Israel withdrew thousands of troops from Gaza, transitioning to a more surgical phase in its conflict with Hamas, following U.S. pressure. This move allows Israel to deploy forces to other areas, such as the West Bank, where tensions have escalated since the Gaza invasion. However, it also raises concerns among Israeli officials that it could leave the country vulnerable to renewed militant activity. Israel currently has three divisions fighting in Gaza, with one in the north, center, and south of the strip. Analysts say the withdrawal of one division may undermine Israel's ultimate goal of eradicating Hamas and comes as the U.S. works to minimize civilian casualties in Gaza and is in talks with the Palestinian Authority to work towards a peaceful resolution.  Wall Street Journal 

THE UKRAINE UPDATE

Ukraine hits targets in Russia during drone attack on oil terminal.  Ukraine reportedly launched a drone attack on an oil terminal in St. Petersburg, targeting Russia in what a Ukrainian military official described as a "new phase" of the conflict. While Reuters could not independently verify the statement, this move signifies Ukraine's efforts to strike back, including targeting locations deep inside Russia, nearly two years after Moscow's invasion of Ukraine. The attack highlights Ukraine's pursuit of longer-range attack drones to enhance its strike capabilities, as Russia regularly conducts long-range aerial attacks on Ukraine. Kyiv has previously used drones and missiles to target locations in Crimea, annexed by Russia in 2014.  Reuters

Ukraine employs FrankenSAM hybrid system for first time, intercepts Russian Shahed drone.  Ukraine’s Strategic Industries Minister Oleksandr Kamyshin said that Ukraine used the first hybrid air defense system under the joint U.S.-Ukraine FrankenSAM program.  Kamyshin said the system successfully intercepted an Iranian-made Shahed drone launched by Russia on Wednesday.  The joint project combines Soviet-era surface-to-air missiles with new U.S.-made missiles and radars.  Five systems developed under the program have been deployed.  Kyiv Independent

Fighting intensifies in Ukraine's east as Russia steps up offensive action.  Ukrainian artillery forces near the Russian-occupied city of Bakhmut are facing constant offensive assaults from Russian troops as fighting in the east intensifies. Ukrainian forces have shifted to a more defensive stance due to weather conditions, following a counteroffensive last year that failed to break through heavily defended Russian lines. The Ukrainian General Staff reported 98 combat clashes in the last 24 hours, with forces holding the line and inflicting losses on the Russian side. Ukrainian troops highlighted challenges such as foreign weapons not designed for harsh weather conditions, vehicles getting stuck, and shortages of ammunition and manpower. Ukrainian forces are calling for assistance to successfully counter Russian pressure and advance the front line.  Reuters

Russia shells Ukraine’s Kharkiv, killing 1.  Russian shelling of the town of Chuhuyev near the Ukrainian city of Kharkiv killed one person on Wednesday.  The attack came a day after Russian missiles hit a residential area in Kharkiv, injuring 17 people.  Russia’s defense ministry claimed that the Kharkiv strike targeted “foreign fighters” and that it killed over 60 people, mostly French mercenaries.  The ministry did not provide evidence for its claim.  Kyiv Independent Deutsche Welle Reuters

Russian claims air defenses intercepted Ukrainian drone near Moscow.  Moscow Mayor Sergey Sobyanin said on Wednesday that Russian air defenses downed a drone in the Podolsk district of Moscow Oblast, causing no casualties.  The Russian Ministry of Defense reported that a Ukrainian drone was intercepted over the Leningrad region early on Thursday.  Kyiv Independent

ANALYSIS — The impact of Ukraine shooting down a Russian spy plane.  The Ukrainian military’s claim that it downed a Russian military A-50 surveillance plane over the Sea of Azov and damaged an Il-22M bomber would mark a significant success for Ukraine, showcasing its ability to use limited resources effectively, which is important for garnering continued support from the West. It would be the first time Ukraine has downed an A-50 plane, equipped with sophisticated radar systems.  Experts say that such a loss may lead Russia to withdraw reconnaissance aircraft, providing tactical advantages for Ukraine in certain areas.  Ukraine has not said how it attacked the planes, but analysts say Patriot air defense systems may have been used, underscoring the importance of Western military aid.  Deutsche Welle

Former NATO chief: Democrats should compromise with Republicans to secure Ukraine aid.  Former NATO Secretary General Anders Fogh Rasmussen urged U.S. Democrats to negotiate with Republicans and find a compromise on aid for Ukraine, emphasizing that a Russian victory would ultimately weaken the U.S. Senate Republicans previously blocked $61.4 billion in aid for Ukraine over border security measures, leading to an impasse. Democrats, including President Joe Biden, have signaled their willingness to make concessions on border issues to secure Ukraine aid. Rasmussen suggested that accommodating Republicans on border issues and passing a spending bill addressing Ukraine, Taiwan, and Israel would be beneficial for Democrats, especially in an election year.  Kyiv Independent 

German lawmakers reject measure to send Taurus missiles to Ukraine.  German lawmakers on Wednesday rejected a proposal from the center-right opposition Christian Democrats which included language on delivering Taurus long-range cruise missiles to Ukraine. Defense Committee Chair Marie-Agnes Strack-Zimmermann criticized the Christian Democrats for using a "partisan tactic" in tying the non-binding Taurus proposal to a debate on the state of the Bundeswehr, leading to an expected no vote. The final decision on Taurus deliveries rests with German Chancellor Olaf Scholz, who has been hesitant despite deliveries of similar weapons by France, the UK, and the US to Ukraine. French President Emmanuel Macron announced an aid package for Ukraine on Tuesday that includes 40 SCALP-EG cruise missiles, which are similar to Taurus.  Politico

Germany says it delivered vehicles and tank ammunition to Ukraine.  The German government said on Wednesday that it delivered Leopard 1 tank ammunition, 16 Zetros tanker trucks, eight armored personnel carriers, five border protection vehicles, 50 mobile satellite terminals, 25 Heidrun reconnaissance drones, and other equipment to Ukraine.  Berlin said it also plans to send 15 Gepard anti-aircraft guns to bolster Ukrainian air defenses.  Kyiv Independent

Bulgaria has yet to send Ukraine pledged armored vehicles.  Bulgaria has not yet sent Ukraine the 100 armored vehicles that were approved by the Bulgarian parliament in December, citing shipping costs as the reason for the delay. Bulgaria's parliament had approved two tranches of military aid to Ukraine, including the delivery of the armored vehicles, which overrode a veto by President Rumen Radev. While Bulgaria has provided Ukraine with aid in the past, pro-Russian sentiment remains prevalent in the country, with many Bulgarians preferring a position of neutrality regarding Russia's war against Ukraine. However, support for Ukraine has increased as the conflict has continued. Kyiv Independent 

Ukraine Energy company DTEK calls for continued private capital flows to Ukraine.  DTEK, Ukraine's largest private energy company, urged the international community to increase private funds for Ukraine's economy during the World Economic Forum (WEF) in Davos. Ukraine's economy has been recovering slowly after the crash following Russia's full-scale invasion in 2022. President Volodymyr Zelensky and DTEK CEO Maksym Timchenko emphasized the need for foreign investment to strengthen Ukraine's economy. DTEK and other participants at the WEF released a 12-point manifesto outlining steps to revitalize Ukraine's economy, targeting international financial institutions, foreign governments, Ukraine's government, and domestic businesses.  Kyiv Independent 

West warns of limits to seizing $300 billion in Russian assets to aid Ukraine.  Western officials at Davos expressed openness to the idea of confiscating $300 billion of Russian assets to support Ukraine. Ukrainian However, legal complexities, concerns about precedent, and potential impacts on the global financial system are significant hurdles. U.S. Treasury Secretary Janet Yellen is exploring seizure options based on international law, but there are concerns about the impact on reserves and storing assets in dollars or euros. Belgian Prime Minister Alexander De Croo supports asset confiscation but emphasized the need for a clear mechanism. Tax on the frozen assets is estimated to be about 1.7 billion euros in 2024. Russia warns that any confiscation of assets goes against free market principles and could lead to reciprocal actions.  Reuters Associated Press

No risk of default for holders of Russian bonds with seizure of assets, sources say.  Sources from credit agencies Moody’s and S&P Global say that countries holding Russian sovereign bonds are not considered at risk of default if Western countries confiscate Russian assets to aid Ukraine. Russia was declared in default of bond obligations in June 2022 after Western sanctions prevented repayment of investors.  Sources say Russia’s central bank believes a similar argument could be used against Western countries holding Russian bonds if seizure of assets prevents repayment.  However, sources said default is not likely since payments could be made through an intermediary to bond holders.  Reuters Kyiv Independent 

ANALYSIS — Putin and Zelensky are both hugging friends closer. Ukraine's President Volodymyr Zelensky sought support from global business and political elites at the World Economic Forum in Davos, while Russian President Vladimir Putin hosted North Korea's foreign minister amid allegations of Pyongyang supplying Russia with artillery shells and missiles for the conflict in Ukraine. Over $100 billion in military aid and financial support for Ukraine from the US and EU remains frozen due to political disputes, which Putin believes is turning the war in his favor. However, economic pressures and uncertain support from other countries may hinder Putin's goals, and as the war continues some analysts suggest that the chances that it will end up in a brutal stalemate will increase. Bloomberg 

Estonia says Ukraine allies must outspend Russia to win.  Estonian Prime Minister Kaja Kallas has called for NATO members and other allies to contribute 0.25% of their GDP to Ukraine's war effort, raising at least €120 billion ($131 billion) annually to support the country in its conflict with Russia. Kallas believes this funding would help turn the tide of the war in Ukraine's favor and provide a sustainable source of financial support. With over $100 billion in US and EU funding currently held up due to political disputes, Ukraine is in dire need of financial assistance. Kallas aims to put a price tag on Ukraine's war effort and rally support from allies to ensure Ukraine's security and stability.  Bloomberg 

ELSEWHERE IN THE WORLD

The Americas

Congress remains deadlocked on Ukraine aid after White House meeting.  In a tense meeting with President Biden, House GOP hardliners refused to budge from their refusal to fund more military assistance for Ukraine until the administration agrees to tougher measures to stop migrants from flooding the Southwest border.“The president discussed the strategic consequences of inaction for Ukraine, the United States and the world,” a White House statement said. “He was clear: Congress’s continued failure to act endangers the United States’ national security, the NATO Alliance and the rest of the free world.”  Speaker Mike Johnson, apparently unimpressed, dug in.  "We must have change at the border," he said. House Republicans "understand the necessity about Ukraine funding," he added, but the "status quo is unacceptable." An immigration deal limiting migrants’ ability to claim asylum at the southern border in exchange for aid for Ukraine and Israel is reportedly being crafted in the Senate   New York TimesWashington Post  Politico  Reuters Bloomberg Wall Street Journal

Blinken signals more U.S.-China engagement despite differences.  U.S. Secretary of State Antony Blinken said on Wednesday that there will be more engagement between Washington and Beijing this year despite continued “differences” in their relationship.  Speaking at the World Economic Forum in Davos, Blinken said this engagement will facilitate direct engagement on differences to ensure there is “no misunderstanding,” as well as foster cooperation in areas of mutual interest.  Blinken’s comments came after White House national security advisor Jake Sullivan said on Tuesday that despite U.S.-China competition “across multiple dimensions,” Washington is seeking to manage competition and increase communication to reduce miscalculation.  South China Morning Post

Pentagon updates space classification policy to improve information sharing.  The Pentagon has updated its classification policy for space programs, aiming to reduce information-sharing restrictions that impede collaboration with allies, industry partners, and other agencies. The policy, which is classified, addresses the special access program (SAP) security designation, which often restricts information sharing. The updates apply "minimum classifications" to programs and review whether they should be managed at the SAP level or under a less restrictive designation, allowing for improved collaboration and information sharing.  C4ISRNET 

The Air Force One shadow fleet.  The U.S. Air Force operates a secret fleet of four Boeing 757s, known as the shadow fleet, which follows Air Force One after takeoff. These planes are used to transport the president to locations with shorter runways that cannot accommodate the larger Boeing 747s commonly associated with Air Force One. The mission and existence of these planes are generally understood, but many details, such as the cost, acquisition details, and taxpayer expenses, remain unknown. The planes were likely purchased secondhand in 2009, according to their registration numbers, and have connections to L3Harris Technologies, a company specializing in modifying commercial planes with advanced military communication systems. The planes are part of the Presidential Airlift Group and are based at Joint Base Andrews, Maryland. The performance and communication capabilities of the shadow fleet remain unclear, but they serve a similar role to Air Force One in specific circumstances. The secrecy surrounding these planes contrasts with the more publicized acquisition of the new 747s intended to replace the aging VC-25 jets used for Air Force One.  Defense One

Organized crime prosecutor assassinated in Ecuador.  Cesar Suarez, who was investigating a dramatic attack on a public television channel last week, was shot dead yesterday  (Wednesday) on his way to a court hearing in Guayaquil.  After armed men stormed the TV station, which was broadcast live, President Daniel Noboa declared a 60-day state of emergency, including a nighttime curfew, and designated 22 criminal groups as terrorist organizations.  Associated Press Bloomberg Reuters CNN

Guatemalan ex-president Alejandro Giammattei can’t enter the U.S. The State Department said Giammattei has been barred because of "his  involvement in significant corruption." State said the U.S. had “credible information indicating that Giammattei  accepted bribes” and his corruption “undermined the rule of law and government transparency.” The U.S. has strongly backed his successor, Bernardo Arevalo, who was sworn in Monday. Reuters Wall Street Journal

Asia and Oceania

Taiwan reports first major Chinese military activity post-election.  Taiwan’s defense ministry detected 18 Chinese air force planes engaging in "joint combat readiness patrols" with Chinese warships around Taiwan on Wednesday. This marks the first large-scale Chinese military activity around Taiwan since the island’s election. Eleven of the detected aircraft crossed the Taiwan Strait's unofficial median line. Taiwan’s defense ministry said it deployed its own forces to monitor the activity and reaffirmed its commitment to strengthening self-defense capabilities.  China’s defense ministry did not immediately comment on the situation.  Experts and officials say China is likely to increase military pressure on Taiwan ahead of independence-leaning President-elect Lai Ching-te’s inauguration in May.  Reuters The Japan Times 

Taiwan’s remaining Pacific Island allies pledge support after Nauru shift.  After Nauru cut diplomatic ties with Taiwan, Taipei’s remaining Pacific Island allies pledged their support, emphasizing strong ties and commitment to promoting democratic principles and respecting the sovereignty of all countries. The move by Nauru reduced Taiwan's diplomatic footprint in the region to three countries.  Two of these remaining allies, Marshall Islands and Palau, have long standing defense and funding compacts with the U.S., which is facing increased competition with China for security and economic influence in the region.  Reuters 

ANALYSIS- How the Ukraine War Is Aiding North Korea’s Illicit-Arms Business.  Recent assessments from Washington, Seoul, and Kyiv indicate that Russian forces have used short-range ballistic missiles provided by North Korea in Ukraine. North Korea has reportedly supplied Moscow with dozens of these missiles, including the KN-23 and KN-24 models. The use of these missiles by Russia in Ukraine is seen as a significant endorsement of North Korea's weapons sales, which some analysts say had lagged in recent years. It also highlights the potential reliability of North Korean missile systems. This development may open new proliferation opportunities for North Korea, as global militarization increases demand for arms from nations without access to legitimate arms sales channels.  Wall Street Journal 

Chinese lab mapped Covid-19 virus weeks before Beijing publicized data, documents show.  Chinese researchers reportedly isolated and mapped the virus that causes COVID-19 in late December 2019, at least two weeks before China officially shared details of the virus with the world, according to documents obtained by a U.S. House committee. The documents indicate that a Chinese researcher uploaded the virus's sequence to a U.S. government-run database on December 28, 2019, when Chinese authorities were still claiming that the disease outbreak in Wuhan was caused by a viral pneumonia “of unknown cause.” This discovery raises questions about China's early knowledge of the virus and the world's understanding of the pandemic's origin. The additional two weeks could have been crucial for international efforts to combat the virus. The information does not provide clarity on whether COVID-19 originated from an infected animal or a lab leak.  The origins of COVID-19 have been a key point of tension in the U.S.-China relationship.  Wall Street Journal

China, Iran sign policing pledge.  China and Iran have signed a memorandum of understanding to strengthen collaboration on counterterrorism, combating transnational crime, and building law enforcement capacity.  Wang Xiaohong, China’s security minister, and Iranian police chief Ahmad Reza Radan signed the memorandum on “law enforcement cooperation” in Beijing on Tuesday.  The content of the memorandum was not released.  Radan expressed Iran's willingness to cooperate on potential technology for the two countries' police forces during his visit, which included a tour of China’s public security ministry's technology center.  The agreement follows a similar deal between Iran and Russia last year that likewise focused on expanding security and law enforcement cooperation.  South China Morning Post

China, Philippines agree to better manage disputes in South China Sea.  China and the Philippines have agreed to enhance maritime communication and increase talks to manage issues in the South China Sea. The eighth meeting of the China-Philippines Bilateral Consultation Mechanism on the South China Sea saw discussions on maintaining maritime peace and stability, emphasizing that the South China Sea dispute does not define the two countries’ entire bilateral relationship. Both sides agreed to deal with incidents diplomatically, manage maritime conflicts through friendly consultations, and properly handle maritime emergencies, particularly around the Second Thomas Shoal. Recent confrontations in disputed waters were addressed, with both sides affirming the commitment to dialogue and practical maritime cooperation to create stable, favorable conditions.  Reuters South China Morning Post

Philippines seeks resource exploration amid tensions with China.  The Philippines is building defense alliances with the U.S. and other security partners to bolster its capacity for resource exploration in the South China Sea. Defense Secretary Gilberto Teodoro Jr. said resource exploration is “part of the package” of the Philippines’ strategy to defend its territorial integrity and sovereignty. Teodoro said Manila will not allow joint exploration that does not recognize the Philippines’ right to exclusively exploit resources in disputed waters. His comments suggest that resource exploration may be the next flash point in the South China Sea.  Beijing has cautioned Manila against forming alliances that infringe on its lawful rights and interests in the waterway.  Bloomberg

U.S. and Chinese officials meeting in Beijing for financial talks.  U.S. Treasury officials are meeting Chinese counterparts in Beijing on Thursday and Friday for financial talks.  An official said the discussions are the latest round of “financial working group” talks started last year and will cover issues like financial stability, capital markets, and narcotics and terrorism funding.  Sources say the talks may also cover China’s domestic economic performance and the potential impact of China’s growth slowdown on the region’s economic outlook.  Bloomberg

China emphasizes Taiwan issue as it marks 45th anniversary of relations with U.S.  China's ambassador to the United States, Xie Feng, delivered a speech marking the 45th anniversary of US-China relations, emphasizing the sensitivity of the Taiwan issue and stating that "there is but one China and Taiwan is part of China." The ceremony celebrated the past four and a half decades without conflict, but Xie warned that much work needed to be done on Taiwan and other issues to ensure this track record continued. U.S. officials responded by urging communication and diplomacy to manage differences in areas like the South China Sea and the Taiwan Strait. The celebration took place at a sensitive time in bilateral relations, following Taiwan's recent election and ahead of a U.S. presidential election that could shape Washington’s China policy.  South China Morning Post

ANALYSIS — U.S. tariffs on Chinese imports may increase.  Analysts suggest that Washington is likely to increase tariffs on Chinese imports in 2024, despite opposition from Beijing and US businesses. The slow economic recovery of China from the Covid-19 pandemic, leading to overcapacity and a need to export more, is cited as one reason for potential tariff increases. However, a lengthy legislative process and lack of consensus in the US Congress may delay the final enactment of new tariffs. The idea of increasing tariffs is unpopular with the US business community, which seeks to remove Trump-era tariffs. Any announcement of trade bills or import duties investigations could have a chilling effect on bilateral trade and investment.The average US tariffs on imports from China remain elevated at 19.3%, and there are 247 anti-dumping and countervailing duty measures in place. In 2023, China's exports to the US experienced their deepest decline in almost three decades, falling by 13.1%. The focus of US-China economic competition may shift to electric vehicles, with concerns about the entire value chain and US reliance on Chinese-made lithium batteries.  South China Morning Post

Macron urges de-escalating tensions with China, backs ‘de-risking.’  French President Emmanuel Macron, addressing the World Economic Forum in Davos, called for a de-escalation of tension between China and the United States. Macron also backed a "de-risking strategy" over a "decoupling strategy" when approaching relations with China.  He asserted that de-risking is accepted by China and offers a fair way to cooperate while preventing excessive dependence on Beijing for critical parts of the value chain. Macron added that the EU must maintain autonomy critical for preserving jobs, promoting growth, and having a voice in the world.  South China Morning Post

China tells Japan cooperation on economic modernization possible despite differences.  During a meeting with a Japanese delegation, Liu Jinsong, Director General of the Chinese foreign ministry’s Asian affairs department, emphasized that China and Japan could complement each other in economic modernization despite their differences. Liu urged bilateral ties not to be confined to a single issue and suggested that both countries should work together to address global challenges such as climate change. The Japanese delegation, led by Sotaro Ozaki, Director of the Japanese ministry’s international economy division, expressed the need for continued dialogue to push forward bilateral ties. The relationship between China and Japan has faced strains over diplomatic disputes, including issues related to Taiwan and Fukushima wastewater discharge.  South China Morning Post

Australia rejects China’s denial of responsibility for sonar incident.  Australia rejected comments by China's ambassador, Xiao Qian, deflecting blame from China’s navy for an incident in which Australian military divers were injured by sonar near Japan in November. Xiao said a Chinese navy ship did not use its sonar while Australian divers were in the water, but a Japanese vessel may have been responsible. Prime Minister Anthony Albanese said he was “not swayed” by Xiao’s argument, reaffirming his previous assertion that a Chinese warship's sonar was used dangerously during the incident and caused the injuries to the divers.  Reuters ABC 

Europe

ISW analysis says Putin trying to destabilize Baltic nations to weaken NATO.   Russian President Vladimir Putin is setting conditions for potential escalations in the Baltic countries as part of alleged efforts to weaken NATO, according to an assessment by the Institute for the Study of War (ISW). While there is no indication of an imminent Russian attack on the Baltics, the ISW suggests Putin may be preparing information conditions for future aggressive actions under the pretext of protecting "compatriots abroad,” referencing ethnic Russians and Russian speakers in Baltic states. Putin stated on Monday that Latvia and other Baltic countries were affecting Russian security by "throwing Russians abroad,” likely referring to measures like changes to Latvian immigration law that have led to the deportation of at least 985 Russian citizens who failed to apply for new residence permits by deadlines.  Institute for the Study of War Kyiv Independent 

NATO official warns West: Be ready for ‘anything’.  NATO's military committee chair, Rob Bauer, urged member countries to be prepared for war and "expect the unexpected." He emphasized the need for a warfighting transformation within NATO, focusing on effectiveness, readiness, and public-private cooperation. Bauer called for increased exercises, industry partnerships, and troops on high alert. He emphasized the shift from a predictable era to one where anything can happen at any time. While NATO countries have boosted defense spending and arms contracts in response to Russia's invasion of Ukraine, there's a need for further military steps to ensure collective defense. Bauer warned of a shifting global power landscape and a dangerous world.  Politico Deutsche Welle

Lithuania warns against U.S. withdrawal from Europe.  Lithuanian Foreign Minister Gabrielius Landsbergis expressed concerns about a potential US withdrawal from Europe amid Russian aggression, stating that it would be a "nightmare scenario." He emphasized the importance of the transatlantic connection for global stability and highlighted worries about the US commitment to Europe's security, especially with the prospect of Donald Trump returning to the White House. Landsbergis also criticized the ongoing US debate over aid for Ukraine, urging a comprehensive understanding of the dangers posed by Russia's actions and emphasizing the need for collective defense efforts within NATO.  Bloomberg

NATO accession ‘not a priority’ for Sweden, Hungary says.  An aide to Hungary's prime minister, Gergely Gulyas, has stated that Sweden has not taken steps to boost confidence in its NATO membership suitability and has given the impression that joining the alliance is not a priority for the country. Sweden applied to join NATO in May 2022, but the accession process has been held up by Turkey and Hungary. The Hungarian parliament has not ratified the accession, citing no threat to Sweden's security and alleging undue Swedish accusations of eroding democracy in Hungary. Gulyas suggested that Sweden's foreign minister or prime minister should engage with Budapest to address concerns about Sweden's NATO accession.  Hungary’s parliament is on winter break and will resume work in mid-February.  Reuters

Russian police violently disperse thousands of protestors in Baimak, in Russia’s southern Ural Mountains. The rare demonstration was triggered by a four-year sentence for a popular local activist, Fail Alsynov,charged with inciting hatred for promoting the Bashkir language and culture. Politico AP Bloomberg

Navalny, from prison, says Putin's Russia “will collapse and crumble.”  In a message on social media posted by his followers, jailed Russian opposition leader Alexei Navalny said, “Putin's state is not viable. One day we will look at his place and he won't be there."  Reuters

An antiwar candidate challenges Putin.  Or does he?  Most Russian opponents of Putin’s war on Ukraine go into exile, if they’re lucky, or into prison or out a window if they’re not.  The Wall Street Journal profiles Boris Nadezhdin, a small-town councilor who has spoken out against the war in Ukraine and may get on the ballot for Russia’s upcoming election, challenging president Vladimir Putin. He says Putin has taken Russia backwards.  But if he’s allowed to run, many Russians will dismiss him as a fake, fielded by the Kremlin to pretend they are making a democratic choice. Who is Nadezhdin really? WSJ tries to find out. Wall Street Journal

Sweden presses Iran for unlawfully detained Swedes.  Sweden has summoned the Iranian chargé d’affaires to demand the immediate release of several Swedish citizens held in Iran.  Among them, Swedish national Johan Floderus, a European Union employee imprisoned since April 2022 on charges of spying for Israel.  Reuters

UK foreign secretary David Cameron meets Iran’s foreign minister on the margins of Davos.  Cameron condemned Iran's attack on Erbil in northern Iraq.  Iran’s missiles killed UK-Iraqi dual national Karam Mikhael, British officials said.  Reuters

Spain buys Rheinmetall ammunition.  The Spanish government has awarded Rheinmetall Expal Munitions, based in Dusseldorf, a multimillion-dollar contract for 120mm munitions and 155mm artillery shells that are likely destined for Ukraine. The order comes as defense officials throughout Europe are pushing their arms industries to increase production to alleviate supply chain problems that have left Ukraine desperate for arms. Defense News

Ethnic Serbs in Kosovo hold petition drive seeking to oust ethnic Albanian mayors.  Ethnic Serbs in northern Kosovo initiated a signature drive to oust four ethnic Albanian mayors elected last year. The effort, supported by those seeking new municipal elections, requires signatures from at least 20% of eligible voters. The new drive aims to address constitutional rules for a potential redo of the elections, which were boycotted by ethnic Serbs and led to clashes with Kosovo police, causing an increase in tensions between Serbia and Kosovo.  Kosovo President Vjosa Osmani emphasized respecting citizens' rights without ethnic distinctions, while Western powers push for a normalization agreement between Serbia and Kosovo.  Associated Press 

Middle East 

Pakistan launches retaliatory strikes against militants in Iran.  Pakistan launched killer drones and rockets against Baloch militants in Iran on Thursday, in retaliation for Iranian strikes against another militant group in Pakistani territory. The Pakistani military said the “precision strikes” targeted bases used by the Baloch Liberation Front (BLD) and associated Baloch Liberation Army.  Iranian media said the Pakistani strike hit a village in the Sistan-Baluchistan province that borders Pakistan, killing at least nine people.  Tehran said civilians were killed in the attack and summoned Pakistan’s charge d’affires in protest.  The Pakistani strikes appeared to be retaliatory attacks for Iranian strikes allegedly targeting Jaish al Adl (JAA) bases in Pakistan on Tuesday.  Isalmabad called the attack a breach of its sovereignty.  Tensions in the area have been on the rise.  In a separate incident, Colonel Hossein-Ali Javdanfar, an officer of Iran’s elite Revolutionary Guard Corps, was shot dead on Wednesday in Sistan-Baluchistan.  Iranian media said the killing was a “terrorist” attack, and some sites blamed Jaish al-Adl.  Reuters New York Times  BBC Reuters Al Arabiya Reuters Associated Press Bloomberg Wall Street Journal Washington Post

Suspected Jordan airstrikes kill 10 in Syria.  Suspected Jordanian airstrikes on southern Syria killed 10 people on Thursday, according to local Syrian media and the Syrian Observatory for Human Rights.  The attack reportedly hit the town of Arman in the southern province of Suwayda, near the border with Jordan.  Jordan’s military has intensified its campaign against drug dealers in recent weeks after clashes with pro-Iranian militias on the border with Syria.  Reuters

Iraq’s prime minister says U.S.-led coalition in Iraq should go. Prime Minister Mohammed al-Sudani told the Wall Street Journal that U.S. actions supporting Israel in its war in Gaza have strained Iraq’s relations with Washington, namely concerning the U.S.-led military coalition in Iraq. “We believe the justifications for the international coalition have ended,” Sudani said. He said U.S. military advisors could remain if a new bilateral relationship could be worked out and he didn’t set a deadline for dismantling the coalition, created in 2014 to help Iraqi forces defeat Islamic State militants. Sudani complained that the West had turned a blind eye to the plight of the Palestinians before Hamas’ Oct. 7 attacks, and the U.S. must now exert more pressure on Israeli Prime Minister Benjamin Netanyahu to end what he called a genocide. Wall Street Journal

Iraqi, Saudi foreign ministers discuss Iran’s missile strike on Erbil.  Iran claimed the strike on the Iraqi Kurdistan capital targeted an Israeli spy base. Iraqi and Kurdish officials said it killed civilians, including a prominent Kurdish businessman.  Reuters 

Africa

Somalia rejects dialogue with Ethiopia over Somaliland port deal.  Somalia rejected discussions with Ethiopia over Addis Ababa's agreement to lease a port in the breakaway region of Somaliland. Somalia has threatened to go to war to prevent the deal, which calls for Ethiopia to recognize Somaliland’s independence.  The African Union has called for restraint and “meaningful dialogue,” but Somalia has said there is no space for mediation unless Ethiopia withdraws from the deal.  Heads of state from IGAD met to find a peaceful solution, but Ethiopia did not send a delegation. The Arab League called the deal "a clear violation of international law” in a statement that was rejected by Ethiopia.  Reuters

THE CYBER AND TECH RUNDOWN

FBI, CISA warn Chinese-made drones pose data theft risk to critical infrastructure.  The FBI and CISA warned Wednesday that Chinese-manufactured drones programmed to steal data  pose “significant risk” to critical infrastructure.  The two agencies provided updated guidance to organizations on enhancing network defenses against malicious data collection.  The alert notes that changes in Chinese law establish “expanded legal grounds” for Beijing to access data held by Chinese companies.  A bipartisan Senate group last year appealed to CISA to reexamine the security risks represented by the proliferation of Chinese-made drones in the U.S.  Brian Harrell, a former CISA official, noted that “China has moved to capitalize on the miniaturization movement and the demand for compact, economical, high-performance drones.”   A statement from the FBI’s Cyber Division explained that the widespread use of Chinese drones in the U.S. is a threat to “our nation’s key sectors” due to the risk of “unauthorized access to systems and data.”  The Record CyberScoop

Israeli cyber expert describes scope, sophistication of Iran hacking efforts.  Gil Messing, an executive with the Israeli CheckPoint cybersecurity firm, notes in a wide-ranging interview with The Record that Iran-backed hacking campaigns against targets across the Middle East are increasing in sophistication and effectiveness.  Messing said that in the wake of Hamas’ October 7 attack, Iran’s cyberwarfare directed at Israel and its allies have been relentless.  The waves of cyber activity have featured data thefts and exposure, compromises of government networks, hacks of security monitoring equipment, and intensified disinformation campaigns.  Of the multiple Iranian threat actors, Messing noted the recent emergence of Cyber Toufan, who stood out by publishing a detailed description of their agenda and goals.  They announced explicitly that they were out to cripple Israel's economy, which they linked o specific actions in the war in Gaza.  Cyber Toufan also followed up successful breaches of computer systems with twice-daily releases of personal and organizational information they extracted.  Many Iranian threat actors, Messing said, are “imitating the Russian (hacking) methodology, but on a smaller scale.”  He explained that these tactics include proliferating disinformation, creating and directing hacktivist groups, and carrying out system compromises and exaggerating their impacts.  The Record

IBM, other experts say global business, governments unprepared for quantum upheaval.  An IBM executive projected a “cybersecurity Armageddon” triggered by upheavals introduced by quantum computers by the end of the decade.  Speaking at a panel discussion at the World Economic Forum in Davos, Ana Paula Assis, IBM general manager for Europe, Middle East, and Africa, said the capability of quantum computers to perform calculations in parallel rather than sequentially will render traditional encryption obsolete.  Assis said governments and business are not prepared for the cybersecurity turmoil that will ensue.  Another panelist, SandboxAQ CEO Jack Hidary, echoed Assis’ warning, noting that most “companies do not have a robust roadmap yet as to how they’re going to use AI and quantum together to solve core problems.”  Hidary estimated that banks will need eight to ten years to transition to post-quantum protocols even as scalable quantum computers become available by 2029 or 2030.  Hidary added that anything dependent on encryption, including e-commerce and online banking, is at risk.  Bloomberg

Hackers claim 5TB data haul from cyberattack on Taiwan semiconductor company.  Foxsemicon, one of Taiwan’s largest semiconductor producers, has been hit by a cyberattack attributed to the LockBit ransomware gang.  Hackers posted a message on the Foxsemicon website threatening to publish personal data of clients on their darknet website if a ransom is not paid.  The ransomware gang said they seized 5TB of company data.  A Foxsemicon statement noted that its website has recovered from a disruption and that an investigation is proceeding with security experts.  The company did not disclose any details on the demanded ransom and has not confirmed that  personal information of its customers or employees was leaked.  The Record

Indian Air Force targeted by data-extracting malware in phishing attack.  Elements of the Indian Air Force have been targets of a cyberespionage activity aiming to insert data-stealing malware on internal systems.  An unidentified threat actor sent phishing emails containing .zip files purportedly containing information about Su-30 fighter jets, which India agreed to purchase last year as part of its defense modernization.  Targets of the phishing effort were “Indian Air Force professionals,” according to the Cyble cybersecurity firm.  A variant of Go Stealer malware was used in the attack against a variety of browsers, with the capability of exfiltrating data using the Slack messaging app.  Researchers said the use of Slack would allow the threat actors to blend their malicious operations seamlessly into normal business traffic.  Cyble could not link the phishing attempts to a specific threat actor “due to the limited information available at the moment.”  The Indian Air Force has not responded to a request for comment.  The Record

OpenAI, Microsoft CEO’s discuss AI development, company relations at Davos – OpenAI CEO Sam Altman, interviewed in multiple venues during the World Economic Forum in Davos, said that he expects the company’s next model to “do a lot, lot more” while acknowledging that AI’s continued evolution will prompt some “uncomfortable” decisions.  Altman projects “quite a lot of individual customization” in future products that will generate different answers depending on user “value preferences” and even the country in which the application is used.  He commented, “we have to be somewhat uncomfortable as a tool builder with some of the uses of our tools."  In terms of coming benefits, Altman said AI tools eventually will "help vastly accelerate the rate of scientific discovery."  In a separate setting at Davos, Altman appeared with Microsoft CEO Satya Nadella to field questions about ties between the two companies and future directions.  Nadella said he expects that workers will become more productive and realize wage increases with the availability of AI tools. He likened AI to the explosion of PC usage around the world, describing this technology as a “magical moment” that he hopes the global community will “grab onto it.”  Altman and Nadella underscored the independence of OpenAI and Microsoft, comparing their relationship to Alphabet’s Google.  Altman commented, “you can look at the vertically integrated option and you can look at our partnership and you can decide which is more pro-competition.”  Axios Wall Street Journal

Microsoft: Iran’s black-hat hackers team goes after Western, Israeli Mideast experts.  Skilled hackers suspected of links to Iran’s Revolutionary Guard Corps are targeting prominent Middle East experts at universities and think tanks in the U.S., Europe, Israel and Gaza, according to Microsoft’s Threat Intelligence team.  The software giant warned in a blog that a group called Mint Sandstorm has used “bespoke phishing lures in an attempt to socially engineer targets into downloading malicious files.” The hackers used new tools Microsoft’s cybersecurity team hasn’t seen before. Microsoft says the hackers seem to be after Israeli’s tactics and strategy against Hamas and other inside information of interest to the Tehran regime’s leaders. One way they burrow into a victim’s system is by opening a “backdoor” that masquerades as Windows Media Player. “The ability to obtain and maintain remote access to a target’s system can enable Mint Sandstorm to conduct a range of activities that can adversely impact the confidentiality of a system,” Microsoft said.  The Record

The data cutoff for this product was 7:00 a.m. E.T.

Brad Christian, Ethan Masucol, Bruce Wilmot, Elaine Shannon, Ken Hughes, Katharine Campbell, Leighton Durham, Ryan Simons, and Tiffany Krueger contributed to this report.

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