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Thursday, May 25, 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:  

In the Americas

Microsoft, ‘Five Eyes’ Agencies Reveal Chinese Cyberespionage Campaign Targeting Guam.  Microsoft on Wednesday released details of Chinese malware implanted on computer systems on the U.S. territory of Guam, including guidance to targeted entities on how to detect and remove it.  Simultaneously, the “Five Eyes” intelligence alliance – the National Security Agency (NSA) and cybersecurity agencies in Australia, Britain, New Zealand, and Canada — issued a joint advisory citing the Microsoft findings and providing additional details on a “cluster” of Chinese cyber activity.  In February, Microsoft said it detected malicious code on telecommunications networks in Guam and in the U.S.  Microsoft confirmed that a Chinese hacking group, Volt Typhoon, was responsible for the cyber operation, which it said was conducted stealthily through home routers and Internet-connected devices that made detection more difficult.  Guam is home to large U.S. military facilities, as well as important Pacific commercial ports.  At the moment, cyberespionage appears to be the motivation for the intrusions.  The malware, however, could be used to carry out destructive attacks on systems.  CISA New York Times The Record BleepingComputer Reuters

U.S. State Department's Top China Official to Step Down.  Rick Waters, US Deputy Assistant Secretary of State for China and Taiwan, is stepping down from his role as the US State Department’s top China policy official on June 23.  According to a State Department spokesperson, Waters, who has headed the State Department’s new “China House,” will remain a member of the senior foreign service.  His departure is the latest in a series of changes of U.S. officials focused on China policy amid heightened tensions between Beijing and Washington.  These personnel changes come after reports that the State Department delayed human rights-related sanctions on China after the Chinese spy balloon incident.  Sources say Waters was involved in this move; he reportedly sent an email to his staff about the delay so the department could make a “symmetric and calibrated response” to the balloon to limit damage to US-China relations.  Bloomberg Reuters South China Morning Post

US House China Committee Recommends Action on Uighurs, Taiwan.  The US House of Representatives Select Committee on the Chinese Communist Party approved reports on Wednesday that call for actions against China alleged abuse of Uighurs and ethnic minorities in its Xinjiang region, along with moves aimed at deterring conflict in the Taiwan Strait.  Regarding Uighurs, the committee recommends imposing sanctions on Chinese technology companies linked to abuses against Uighurs and increasing controls on the import of products allegedly made using Uighur forced labor.  For Taiwan, the committee recommends improving combined training between the U.S. and Taiwanese militaries, accelerating the delivery of arms transfers to Taiwan that have already been approved, and strengthening US bases in the region near Taiwan.  The Taiwan policy recommendations are primarily aimed at guiding the annual National Defense Authorization Act, which Congress has begun to write.  NBC News Reuters

‘Thaw’ in US-China Relations Impeded by New Tensions.  While the U.S. has maintained it seeks to “thaw” fraught relations with China, new sources of tension are complicating this effort.  Most recently, the U.S. advance of trade talks with Taiwan and China’s ban on US-made memory chips in infrastructure projects have added to the many points of contention.  Beijing seems to be more skeptical of efforts to repair the relationship; Chinese foreign ministry spokesperson Mao Ning last week questioned the “sincerity” of the Biden administration's attempts at rapprochement, saying last week, “The U.S. says it wants to speak to the Chinese side while seeking to suppress China through all possible means.”  Heightened tensions come amid a dearth of high-level communication between the US and China, especially amongst military officials, which is complicating efforts to improve relations.  However, this may change as new efforts at engagement get underway: China just sent a new ambassador to Washington, and U.S. Commerce Secretary Gina Raimondo is set to meet Chinese Commerce Minister Wang Wentao this week. (Editor’s Note: Read more about the diplomatic dance the US and China are in as they work on managing relations here.) Politico The Cipher Brief

Canada, Saudi Arabia Normalize Diplomatic Relations.  Canada and Saudi Arabia announced Thursday that they will restore full diplomatic relations after nearly five years of downgraded ties.  The move was reportedly prompted by discussions between Canadian Prime Minister Justin Trudeau and Saudi Crown Prince Mohammed bin Salman at the Asia-Pacific Economic Cooperation (APEC) forum in November.  The break in diplomatic ties started in 2018 when Canada criticized Saudi Arabia for its arrest of women’s rights activists, which the kingdom said was a breach of its sovereignty.  The dispute eventually led to the expulsion of the Canadian ambassador in Riyadh.  The normalization of diplomatic relations follows Saudi Arabia’s recent rapprochement with Iran and Syria, as well as its efforts to position itself as a mediator in the Sudan conflict.  Al Jazeera Financial Times Reuters Government of Canada

GAO Says DOE Yet to Fully Implement Measures Against ‘Insider Threats.’  The Government Accountability Office (GAO) is warning that the Department of Energy (DOE), which handles U.S. nuclear weapons safety, has not implemented all required measures aimed at countering “insider threats.”  According to a GAO report, the DOE has not implemented seven out of 26 required measures to address potential threats from employees and others in the department.  The watchdog specifically recommends that the DOE better integrate relevant offices to fully implement these measures and also notes that the department has not “identified and assessed” resources needed to do so.  The DOE has said it maintains programs to deal with insider threats but will also take up the GAO’s recommendations.  The Hill

Western Europe

German Economy in Recession.  The German economy has entered a technical recession, according to economic officials.  According to data released on Thursday, Germany’s GDP shrunk by 0.3% in the first quarter of 2023, following a decline of 0.5% in the fourth quarter of 2022 – two successive quarters of contraction.  The recession is largely due to inflationary pressures leading to a drop in household spending, along with German manufacturing being hit by weak demand for goods.  The focus is now on whether the German economy can recover in the second half of the year.  Bloomberg Deutsche Welle Reuters 

Norway to Help Training of Ukrainian Pilots on F-16s.  Norwegian Defense Minister Bjoern Arild Gram announced Wednesday that Norway will support training of Ukrainian pilots on F-16 fighter jets.  Gram did not say if Norway will transfer any of its F-16s to Ukraine.  The development follows US endorsement of training for Ukrainian pilots on F-16s and reassurances from Kyiv that it will not send the jets into Russian territory.  Reuters RFE/RL

Central and Eastern Europe

Unmanned Ukraine Vessels Attack Russian Warship Protecting Black Sea Pipelines.  The Russian Defense Ministry reported on Wednesday that the Russian warship Ivan Hurs, which had been guarding the TurkStream and Blue Stream pipelines in the Black Sea, was attacked by three unmanned Ukrainian speedboats. The Defence Ministry said that all the attack crafts were destroyed and that the Ivan Hurs “continues to fulfill its tasks.” The incident comes one week after Russia agreed to extend the Black Sea grain deal, which facilitates the export of grain from Ukrainian ports. There was no immediate comment from Ukraine on the incident.  Reuters

U.S. Officials Say Ukraine Likely Behind Kremlin Drone Attack.  U.S. officials say they increasingly believe that Ukraine was behind the drone attack on the Kremlin earlier this month, according to media reports.  The reports cite sources who say that intercepted communications show that both Russian and Ukrainian officials are speculating that Ukrainian special operations forces may have conducted the attack.  US intelligence officials are reportedly still not certain what Ukrainian unit could have been behind the incident or if Ukrainian President Volodymyr Zelensky would have been involved in such an operation.  Moscow has repeatedly blamed Ukraine for the drone attack, while Kyiv has denied involvement.  Ukraine has consistently said it is not involved in attacks in Russian territory, as Kyiv’s Western allies urge against such actions.  CNN The Hill

Russian Hypersonic Missile Scientist to Go on Trial Next Week.  The first of three Russian hypersonic missile scientists arrested on suspicion of treason will go on trial on June 1. The scientist, Anatoly Maslov, was arrested last November in the Siberian city of Novosibirsk.  He and the other two scientists are all part of the Khristianovich Institute of Theoretical and Applied Mechanics (ITAM).  Maslov’s case is marked “top secret” and, like his two colleagues, will be handled behind closed doors. Maslov and another scientist are reportedly accused of passing secrets to China.  Reuters

Six Drones Shot Down in Occupied Crimea.  The Russian-backed head of Crimea, Sergei Aksyonov, said Thursday that air defenses on the occupied peninsula shot down six drones overnight. He said that there were no casualties in the attack.  Reuters

Asia and Oceania

China Reportedly Negotiating Arms Deals With Saudi Arabia, Egypt.  China is reportedly negotiating major arms deals with Saudi Arabia and Egypt.  Beirut-based intelligence service Tactical Report says that Saudi Arabian Military Industries (SAMI) is in talks to buy weapons including reconnaissance drones and air defense systems from China North Industries Group Corporation (Norinco), a Chinese state-owned defense company.  Sources say weapons that SAMI is considering to purchase include several types of unmanned aerial vehicles and the HQ-17AE short-range air defense (SHORAD) system. Sources also say the deal may be fully financed in Chinese yuan.  In a separate report, Tactical Report says that Egypt is in talks to purchase Chengdu J-10C multirole fighter jets from China.  Negotiations for these sales add to recent efforts by countries to diversify weapons supplies to lessen dependence on US and Russian arms.  South China Morning Post

China’s Xi, Russian PM Sign Economic Pacts.  Russian Prime Minister Mikhail Mishustin capped his visit to China with meetings with Chinese President Xi Jinping and Premier Li Qiang.  The officials signed several economic agreements, including memorandums of understanding on boosting trade investment, increasing Russian agricultural exports to China, and facilitating sports cooperation.  When meeting Mishustin, Xi said that Beijing will support Moscow’s core interests and that he hopes Sino-Russian cooperation will remain strong and help economic development throughout the Eurasia region.  Mishustin said that Russia will work with China to “promote multi polarization” and said at a separate meeting with Li that Sino-Russian ties are “at an all-time high.”  Mishustin is the highest-ranking Russian official to visit China since the start of the Ukraine war.  His visit comes as Moscow seeks to boost economic ties with Beijing to counter effects from Western sanctions.  While China has positioned itself as neutral in the Ukraine war and says it is making efforts to help find a peaceful resolution to the conflict, Beijing has also refused to condemn Russia’s invasion of Ukraine and continues to maintain strong ties with Moscow.  Reuters South China Morning Post Wall Street Journal

China Installs Buoys in Disputed Waters Around Spratly Islands.  China has positioned three floating buoys in disputed waters around the Spratly Islands in the South China Sea. The Chinese Ministry of Transport claimed Wednesday that China installed the buoys – which are near Whitsun Reef, Irving Reef, and Gaven Reef – to “ensure the safety of navigation and maritime operations.”  The Philippines made similar deployments of buoys around the Spratlys two weeks ago to assert sovereignty over the area.  The installation of buoys comes amid heightened tensions over territorial disputes in the region, as well as efforts by China and ASEAN to negotiate a South China Sea code of conduct.  South China Morning Post

South Korea, US Hold Live-Fire Drills Near North Korean Border.  The South Korean and U.S. militaries held large live-fire drills near the border with North Korea on Thursday, kicking off a series of live-fire exercises through mid-June to mark the 70th anniversary of the US-South Korean military alliance. The South Korean Defense Ministry said the latest drills simulated artillery and air strikes on front-line North Korean military assets and precision-guided attacks meant to “completely annihilate” a North Korean attack.  The ministry added that Seoul will work to establish “peace through overwhelming strength” to deter and counter North Korean threats.  Pyongyang did not immediately comment on the latest drills. Associated Press

Guam Hit by Category 4 Typhoon, Carrier Group Deployed to Assist Recovery.  The US Navy has deployed the USS Nimitz carrier strike group from southern Japan to aid in recovery efforts in Guam, after the island was hit by the destructive Category 4 Typhoon Mawar on Thursday. The aircraft carrier strike group will most likely arrive in Guam in three to four days. The storm, which the National Weather Service reports is the strongest to hit Guam in many years, knocked out power and internet across the territory, making it hard to assess the damages, though US Indo-Pacific Command reportedly moved Navy ships stationed at Guam out to sea and sent military aircraft off the island or stored them in hangars.  President Joe Biden has approved a declaration of emergency for Guam.  The Hill Associated Press 

Middle East and Northern Africa

Iran Says Successfully Test-Launched Ballistic Missile.  Iranian Defense Minister Mohammadreza Ashtiani announced Thursday that Iran has successfully test-launched an upgraded version of its Khoramshahr 4 ballistic missile.  The new missile, named the “Kheibar”, reportedly has a range of 2,000 kilometers (1,243 miles) and can carry a 1,500-kilogram (3,300-pound) warhead.  The launch came days after the chief of Israel’s armed forces said military “action” against Iran to counter its nuclear program is possible.  Reuters

Russia Gold Transiting Through UAE, China, Turkey.  Russian gold is increasingly transiting through the UAE and other non-traditional countries as Western sanctions have blocked previously used routes.  According to Russian customs records, between February 24, 2022 to March 3 this year, two Emirati companies – Temis Luxury Middle East and Transguard – each imported around 15 tonnes of Russian gold valued at over $800 million.  Other companies handled additional shipments in the UAE that totaled to dozens more tonnes.  In Hong Kong, Chinese logistics company Vpower Finance Security handled the shipment of 20.5 tonnes of gold worth $1.2 billion over the last year.  And other companies have made shipments through Turkey. The report on the continued trade of Russian gold shows that Moscow is continuing to find partners that will help it work around Western sanctions.  Reuters

Sub Saharan Africa

Fighting Continues in Sudan Amid Ceasefire.  Sporadic fighting between Sudan’s army and the paramilitary Rapid Support Forces (RSF) is continuing, putting a weeks-long ceasefire aimed at facilitating humanitarian aid access in Sudan at risk.  Clashes were reported in the capital Khartoum, and there are reports of continued militia attacks in the western region of Darfur.  Only a small amount of food and medical aid has made its way to areas in need as bureaucratic obstacles and continued security issues hamper distribution.  Reuters

Cyber and Tech

Biden Nominates Air Force General as Next NSA, Cyber Command Leader.  Lt. Gen. Timothy Haugh has been nominated by President Biden to serve the “dual hat” role as the next commander of U.S. Cyber Command and director of the National Security Agency (NSA), succeeding Gen. Paul Nakasone.  Haugh currently serves as deputy commander at Cyber Command and is a veteran of the Pentagon’s cyber mission.  He has served previously as commander of Sixteenth Air Force (Air Force information warfare) as well as director of Cyber Command’s Cyber National Mission Force and as its director of intelligence.  A possible delay in the nomination going forward is presented by Sen. Tommy Tuberville’s blockage of senior military officer promotions because of the Pentagon’s support for the ability of military personnel to travel to states that allow abortion services.  In his current position as Cyber Command deputy, Haugh has focused on development of the Joint Cyber Warfighting Architecture (JCWA) to manage the command’s capabilities, platforms and programs.  DefenseScoop Politico Wall Street Journal   

Chinese Cyberespionage Campaign Sought Details on Kenya’s Loan Repayment Plans.  According to cybersecurity researchers, key Kenyan government organizations were targeted by Chinese hackers in attempts to uncover information on Nairobi’s plans to repay Beijing loans.  The cyberespionage campaign is described as “a widespread, years-long series of digital intrusions against key ministries and state institutions.”  Kenya is a leading participant in China’s “Belt and Road Initiative” and has acquired $9 billion in Chinese loans to build and upgrade transportation infrastructure, including railroads, ports and highways.  A cyber analyst provided documents to Reuters indicating that Chinese cyber intrusions were directed at the office of Kenya's president as well as various ministries and the country’s counter-terrorism center.  A Chinese Foreign Ministry statement said it was unaware of the reported cyberespionage activities.  China’s embassy in London said the charges were “baseless.”  Reuters

EU, Google Commit to Voluntary ‘AI Pact’ in Advance of New EU Legislation.  EU and Google have announced plans to develop a “voluntary” agreement to govern AI development in advance of formal European rules still under development.  Thierry Breton, the EU’s commissioner for the internal market, made the announcement after meeting earlier with Google CEO Sundar Pichai.  Breton said the two sides agreed they could not afford to wait until Europe’s AI regulation is finalized, opting instead to work jointly “with all AI developers to already develop an AI pact on a voluntary basis ahead of the legal deadline.”  Breton’s office issued a memo indicating that the EU wants the interim “AI Pact” to involve “all major European and non-European AI actors on a voluntary basis.”  Separately, EU Commissioner for Competition Margrethe Vestager also met the Google CEO and later tweeted their agreement that in light of the speed of AI advances “we need voluntary agreement on universal rules for AI now."  Reuters TechCrunch

China Voices ‘Serious Concerns’ over Chip Gear Restrictions During Dutch Minister Visit.  Speaking at a joint press conference on the occasion of the visit to Beijing by the Netherlands foreign minister, Chinese Foreign Minister Qin Gang expressed “serious concerns” over Dutch restrictions on the export of advanced lithography equipment used in the production of next-generation processor chips.  Qin urged his counterpart to “jointly protect the normal trade order” between the two nations in the interest of stability for global industrial and supply chains.  For his part, Dutch Foreign Minister Wopke Hoekstra said he has listened to China’s concerns, adding “this is typically an issue where we will continue our dialogue.”  Qin also criticized a recent report by a Dutch intelligence agency that China poses “the greatest threat” to the Netherlands economic security.  Defending China’s role in the world, Qin said that “what China exports are opportunities rather than crises, what it brings is insurance rather than risks.”  Associated Press South China Morning Post

Iranian Hackers May Be Behind ‘Watering Hole’ Attacks on Israeli Transport Websites.  An Israeli cybersecurity firm reports that several websites for shipping and logistics firms have been hacked to extract information about users.  The origin of the attacks is unclear, but researchers project “with low confidence” that Tortoiseshell, a hacker group linked to the Iranian government, may be responsible.  So-called watering hole hacking tactics were employed against eight Israeli websites, including a cargo shipping company and a logistics firm.  Watering hole attacks embed malicious code in a website that is activated when users visit the site.  It is a hacking ploy reportedly used to target platforms frequently visited by government officials or corporate leaders.  Malicious Javascript was used in the recent attacks to extract user IP addresses, screen resolution and the preferred computer language of the site visitor.  The Record

Chinese Cyber Agency Warns of Governance, Ethical Issues from Tech Advances.  China’s cyberspace agency has issued a warning in its latest annual report on the country’s digital economy that innovations like generative AI pose a “serious challenge” to governance and pose ethical issues concerning privacy and abuse of leading-edge technologies.  The Cyberspace Administration of China (CAC) said that a variety of potential threats accompany the development of ChatGPT-like applications as well as the emergence of quantum technologies and the next iteration of the Internet, Web3.  Last month the CAC issued draft rules requiring firms that provide generative AI services to block false information and prevent infringements on personal privacy and intellectual property.  The CAC report also raised the prospect for supply chain disruptions in what it called a "battle over core technologies," a likely reference to U.S.-China competition.  The CAC added that China is pursuing self-sufficiency in advanced semiconductor and chip design and manufacture.  South China Morning Post

North Korean Hackers Continue Cyberespionage Campaign Against Activists, Defectors.  Researchers from SentinelOne report that Kimsuky, a North Korean state-backed hacking group, is deploying new custom malware to conduct surveillance and data extraction operations.  According to SentinelOne, the ongoing campaign using RandomQuery malware is aimed at information services, human rights organizations, and North Korean defectors.  The Kimsuky malware distribution through reconnaissance campaigns “enable subsequent attacks,” the SentinelOne researchers noted.  Kimsuky’s cyberespionage efforts have used other types of malware, including the data stealer FlowerPower, which also operates as a channel for planting remote access trojan software.  Researchers note that Kimsuky attacks begin with phishing emails masquerading as messages from Daily NK, a Seoul-based online publication covering North Korean affairs.  If an attached Microsoft html file is opened, the malware harvests system metadata, runs processes, installs applications, and extracts files for transmission to a command-and-control server.  HackerNews

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