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The Secret Back Channels to Putin

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Add sanctions. Remove sanctions. Amend sanctions. Call the old-timers, try anything. Why? Putin is on the rocks financially but remains defiant. Why is the White House attempting to reset relations again? Could it be that Russia has more clandestine missions planned that includes the Baltic States or Europe?

(Reuters) – Russian President Vladimir Putin said in a televised New Year’s address on Wednesday that the “return home” of Ukraine’s Crimea peninsula to Moscow’s control would forever remain an important chapter in Russia’s history.

Putin is facing the biggest challenge of his 15-year rule as the Russian economy is sliding sharply into recession, hurt by Western sanctions over the Ukraine crisis and falling prices for oil, Russia’s chief export.

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Inside Obama’s Secret Outreach to Russia

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President Barack Obama’s administration has been working behind the scenes for months to forge a new working relationship with Russia, despite the fact that Russian President Vladimir Putin has shown little interest in repairing relations with Washington or halting his aggression in neighboring Ukraine.

This month, Obama’s National Security Council finished an extensive and comprehensive review of U.S policy toward Russia that included dozens of meetings and input from the State Department, Defense Department and several other agencies, according to three senior administration officials. At the end of the sometimes-contentious process, Obama made a decision to continue to look for ways to work with Russia on a host of bilateral and international issues while also offering Putin a way out of the stalemate over the crisis in Ukraine.

“I don’t think that anybody at this point is under the impression that a wholesale reset of our relationship is possible at this time, but we might as well test out what they are actually willing to do,” a senior administration official told me. “Our theory of this all along has been, let’s see what’s there. Regardless of the likelihood of success.”

Leading the charge has been Secretary of State John Kerry. This fall, Kerry even proposed going to Moscow and meeting with Putin directly. The negotiations over Kerry’s trip got to the point of scheduling, but ultimately were scuttled because there was little prospect of demonstrable progress.

In a separate attempt at outreach, the White House turned to an old friend of Putin’s for help. The White House called on former Secretary of State Henry Kissinger to discuss having him call Putin directly, according to two officials. It’s unclear whether Kissinger actually made the call. The White House and Kissinger both refused to comment for this column.

Kerry has been the point man on dealing with Russia because his close relationship with Russian Foreign Minister Sergei Lavrov represents the last remaining functional diplomatic channel between Washington and Moscow. They meet often, often without any staff members present, and talk on the phone regularly. Obama and Putin, on the other hand, are known to have an intense dislike for each other and very rarely speak.

In several conversations with Lavrov, Kerry has floated an offer to Russia that would pave the way for a partial release of some of the most onerous economic sanctions. Kerry’s conditions included Russia adhering to September’s Minsk agreement and ceasing direct military support for the Ukrainian separatists. The issue of Crimea would be set aside for the time being, and some of the initial sanctions that were put in place after Crimea’s annexation would be kept in place.

“We are willing to isolate the issues of Donetsk and Luhansk from the issue of Crimea,” another senior administration official told me, naming two regions in Eastern Ukraine under separatist control. “If there was a settlement on Donetsk and Luhansk, there could be a removal of some sanctions while maintaining sanctions with regard to Crimea. That represents a way forward for Putin.”

Meanwhile, Kerry has been proposing increased U.S.-Russian cooperation on a wide range of international issues. Earlier this month, he invited Lavrov to a last-minute diplomatic confab in Rome to discuss the the Israeli-Palestinian conflict.

After one meeting with Lavrov in Paris in October, Kerry announced that he had discussed potential U.S.-Russian cooperation on Afghanistan, Iran, North Korea, Syria and Yemen. But the apparent warming was overshadowed by Lavrov’s quick denial of Kerry’s claim that Russia had agreed to assist in the U.S.-led coalition against Islamic State in Iraq.

Kerry has seemed more enthusiastic about mending ties with Russia than Obama himself. After the president gave a blistering critique of Russian behavior in a major United Nations speech, saying that “Russian aggression in Europe recalls the days when large nations trampled small ones in pursuit of territorial ambition,” Kerry urged Lavrov to ignore his boss’s remarks, according to Lavrov. “Kerry said we have so many serious things to discuss that of course that was unfortunate, let’s not focus on that,” Lavrov told Russian reporters.

State Department officials insist that Kerry is clear-eyed about the challenges of trying to work with Russia, but that he believes there is no other responsible option than to see what can be accomplished.

“Secretary Kerry is not advocating internally or with Russia for a reset in the relationship, and in fact in meetings he has taken a strong and at times skeptical stance,” one senior State Department official told me. “As the nation’s chief diplomat he is simply always exploring ways to make relationships more productive.”

There is also a belief among many both inside the State Department and the White House that sanctions are working. The Russian economy is tanking, albeit due largely to collapsing oil prices and not targeted punishments. One senior administration official argued that absent the sanctions, Putin might have been even more aggressive in Ukraine. Moreover, this official said, the sanctions need time to work and might yet prove to have greater effect on Putin’s decision-making in the months ahead: “We’ll see how they feel as their economy continues to deteriorate and the Ukrainian economy refuses to collapse.”

If the Russians are getting ready to cave, they aren’t showing it. Putin remains defiant and Russian military assistance to the Ukrainian rebels continues. The Russian leadership has been rejecting Kerry’s overtures both in public and private. Diplomatic sources said that Lavrov has refused to even discuss Kerry’s conditions for partial easing of sanctions. And Putin has made a hobby of bashing the U.S. in public remarks.

To many of the administration’s critics, especially Republicans on Capitol Hill, pursuing engagement with Moscow is based on naivety and wishful thinking.

“It’s a strategy worthy in the finest tradition of Neville Chamberlain,” incoming Senate Armed Services Chairman John McCain told me. “I think the Russians are doing fine. Meanwhile, what price has Vladimir Putin paid? Very little.”

The legislative branch has also been active on Russia this year, but its efforts run counter to the administration’s policy and sometimes have the indirect effect of putting more roadblocks in front of the Obama-Kerry push to find a way forward.

On Dec. 18, Obama reluctantly signed a bill authorizing new Russia sanctions and military aid to Ukraine that was overwhelmingly passed by Congress. Afterward, the White House awkwardly said that the legislation did not signify any change in policy.

And this week, the State Department sanctioned four more Russian officials, but not over Ukraine. The officials were added to a list of human rights violators under the Sergei Magnitsky Act of 2012, named after the anti-corruption lawyer who died in a Russian prison. In response, the Russian foreign ministry issued a statement saying that the Magnitsky Act sanctions “place in question the prospects for bilateral cooperation in resolving the situation surrounding the Iranian nuclear program, the Syrian crisis, and other acute international issues.”

These latest punishments show that it may be impossible to de-link the problems in the bilateral relationship from the opportunities, as the Obama administration wants to do. They also show that there will always be chances for those in Washington and Moscow who want to stoke the tensions to do so, jeopardizing any progress.

Some experts believe that any plan to warm U.S.-Russian relations is unlikely to succeed because it doesn’t have the full support of either president.

“It’s very clear that between the Putin Kremlin and the Obama White House there is a very bad chemistry. Its not a question of simply distrust, it’s a question of intense dislike between the two leaders,” said Dimitri Simes, president of the Center for the National Interest.

Also, some experts feel, placing the diplomacy in the Kerry-Lavrov channel dooms its outcome, because the Russians know that Kerry himself has no power to make major decisions and Lavrov has to be careful not to be seen as cozying up to the U.S.

“The more Kerry creates a perception he has a special relationship with Lavrov, the more he puts Lavrov in a difficult position with officials in his own capital, starting with Putin,” said Simes. “It’s clear that when Kerry deals with Lavrov and hopes that because they have overlapping interests, that would allow cooperation where useful, that is not a model of relationship that Putin is prepared to accept.”

Obama has made it clear that in his last two years in office he is prepared to make big moves on foreign policy even if they face political or legislative opposition, such as normalizing relations with Cuba or pursuing a nuclear deal with Iran. But when it comes to Russia, he is unwilling to place his own credibility behind any outreach to his nemesis Putin.

The administration’s cautious engagement with Moscow is logical: Why not seek a balance in a complicated and important bilateral relationship? But by choosing a middle ground between conciliation and confrontation — not being generous enough to entice Russia’s cooperation yet not being tough enough to stop Putin’s aggression in Eastern Europe — Obama’s policy risks failing on both fronts.

 

Diplomatic Suicide, Iran Celebrates

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WASHINGTON (AP) — While President Barack Obama hasn’t ruled out the possibility of reopening a U.S. Embassy in Iran, Republicans say the Senate will vote within weeks on a bill to impose more sanctions on Tehran over its nuclear program.

Obama was asked in an NPR interview broadcast on Monday whether he could envision opening an embassy there during his final two years in office.

“I never say never,” Obama said, adding that U.S. ties with Tehran must be restored in steps.

Washington and its partners are hoping to clinch a deal with Iran by July that would set long-term limits on Iran’s enrichment of uranium and other activity that could produce material for use in nuclear weapons. Iran says its program is solely for energy production and medical research purposes. It has agreed to some restrictions in exchange for billions of dollars in relief from U.S. economic sanctions.

Then…..

Iran Is Getting Away With Murder

Achieving a nuclear deal with Tehran is hugely important. But stopping Iran from slaughtering innocent Syrians is a worthy goal.

In an interview in late 2006, I asked then-Senator Barack Obama to talk about the challenges to rational deterrence theory posed by the behavior of rogue states. “Whatever you want to say about the Soviets,” Obama answered, “they were essentially conservative. The North Korean regime and the Iranians are driven more by ideology and fantasy.”

Earlier this year, I asked Obama the following question: “What is more dangerous: Sunni extremism or Shia extremism?”

His answer was revealing, suggestive of an important change in the way he has come to view the Iranian regime. He started by saying, as would be expected, “I’m not big on extremism generally.” And then he argued—in part by omission—that he finds the principal proponent of Shiite extremism, the regime in Tehran, more rational, and more malleable, than the main promoters of Sunni radicalism.

“I don’t think you’ll get me to choose on those two issues,” he said. “What I’ll say is that if you look at Iranian behavior, they are strategic, and they’re not impulsive. They have a worldview, and they see their interests, and they respond to costs and benefits. And that isn’t to say that they aren’t a theocracy that embraces all kinds of ideas that I find abhorrent, but they’re not North Korea. They are a large, powerful country that sees itself as an important player on the world stage, and I do not think has a suicide wish, and can respond to incentives. And that’s the reason why they came to the table on sanctions.”

Since becoming president, Obama has made the argument that Iran could be induced, cajoled, and pressured into compromise, a view that has been proven provisionally, partially, correct: Sanctions, plus Obama’s repeated (and, to my mind, at least, credible) threat of military action, convinced Iran to temporarily halt many aspects of its nuclear program in exchange for limited sanctions relief. But Obama and his international partners have been less successful at bringing Iran to permanent denuclearization.

A long-term, verifiable arrangement that keeps Iran perpetually a year or more from nuclear breakout is surpassingly important for the national security of the United States (as Obama noted in this interview); for the health and safety of America’s friends in the Middle East; and for the cause of nuclear nonproliferation in the world’s most volatile and dangerous region. Over the past year, the two sides of international nuclear negotiations have apparently moved somewhat closer to each other, and when the second round of talks came to an end without achieving a deal, both sides agreed that yet another negotiation extension was in order. As Iran and its interlocutors move into what stands to be the fateful year for these negotiations, a credible deal does not look to be achievable; so far, at least, the Iranians seem unwilling to make the truly creative concessions necessary to meet the West’s minimum requirements.

Especially if a deal is ultimately proven to be unachievable, another question will arise: Is the price the U.S. has paid to reach this elusive deal too high? An admirable aspect of Obama’s foreign-policy making is his ability to coolly focus on core issues to the exclusion of what he considers to be extraneous matters. This is also, however, a non-admirable aspect of his policymaking, in particular when the subject at hand is Iran’s role in supporting the killer Assad regime in Syria.

Obama seems to believe that a nuclear deal is, in a way, like Casaubon‘s key to all mythologies: Many good things, he believes, could flow from a nuclear compromise. In an interview last week with NPR’s Steve Inskeep, the president suggested that a nuclear agreement would help Iran become “a very successful regional power that was also abiding by international norms and international rules.” This, he said, “would be good for everybody. That would be good for the United States, that would be good for the region, and most of all, it would be good for the Iranian people.”

This is a wonderful notion, the idea that the end of Iran’s isolation could lead it to moderate its more extreme impulses. But there isn’t much in the way of proof to suggest that Iran’s rulers are looking to join an international order whose norms are defined by the United States and its allies. In fact, there is proof of something quite opposite: Iran seems as interested as ever in becoming a regional hegemon, on its own terms. And its supreme leader, and his closest confidants, have made it clear, over and over again, that he is not interested in normalizing relations with the United States.

Across the greater Middle East, Iran’s efforts to extend its influence have been blunt and brutal: It supports Shiite insurrections in Yemen and Bahrain; it attempts to manipulate Lebanese politics through its Beirut-based proxy, Hezbollah; it intervenes in Gaza and against the already-fading hope for a two-state solution to the Israeli-Arab crisis; and certainly its unceasing threats to eradicate a fellow member-state of the United Nations, Israel, suggest that Iran’s supreme leader, Ayatollah Ali Khamenei, has a vision for Iran that differs from Obama’s.

But nothing underscores the Iranian regime’s imperialistic, hegemonic nature more than its support for the Assad regime in Damascus. Without Iran’s assistance, Assad would have fallen a long time ago. The death toll in Syria is more than 200,000; half of Syria’s population has been displaced. These dark achievements of the Assad regime would not have been possible without Iran. Thousands of Hezbollah and Iranian Revolutionary Guard Corps troops and advisers, plus Iranian weaponry, have made all the difference for Assad. As a recent study by the Middle East Institute states:

It is no longer accurate to describe the war in Syria as a conflict between Syrian rebels on the one hand and Bashar al-Assad’s regime forces “supported” by the Iranian Revolutionary Guards (IRG), Hezbollah, and Iraqi militias on the other. Most major battles in Syria—along the frontlines of regime-held areas—are now being directed and fought by the IRG and Hezbollah, along with other non-Syrian Shi‘i militias, with Assad forces in a supportive or secondary role. …

One result of this heavy Iranian involvement in the war in Syria has been a change in the nature of the relationship between the Syrian and the Iranian regimes. From historically being mutually beneficial allies, the Iranian regime is now effectively the dominant force in regime-held areas of Syria, and can thus be legally considered an “occupying force,” with the responsibilities that accompany such a role.

There was no commensurate effort made by opponents of Assad to help those Syrians who were trying to overthrow him. President Obama called on Assad to go, but kept the U.S. on the sidelines through the first years of the Syrian civil war, for reasons he has explained in many places, including here.

Today, the U.S. and its allies are fighting in the Syrian theater, but they are fighting Assad’s putative enemies, the Sunni extremists of ISIS, not Assad and his Iranian allies. And yet ISIS is a derivative problem of a larger crisis: Without Assad—which is to say, without Iran—there would be no ISIS “caliphate” in Syria in the first place. The midwives of ISIS are Assad, Hezbollah chief Hassan Nasrallah, and Ayatollah Khamenei. 

If Assad had been overthrown early in the civil war, a more moderate, multi-confessional Syrian government could have plausibly emerged to take its place. The early rebels, who frightened the Assad regime to its core, were not seeking to build a cross-border caliphate on a foundation of medieval cruelty; they were simply seeking to remove Assad’s boot from their necks. As the Assad regime, with Iran’s invaluable help, recovered from the first blows of the rebellion, many Sunni Syrians, seeking help everywhere but finding it mainly among radicals, became radicalized themselves. This was an explicable, if not justifiable, reaction to the mortal threat posed by what they saw as a massed Shiite threat.

Earlier this year, in a conversation about the Obama administration’s Middle East strategy, Senator John McCain brought me up short when he criticized the president for launching attacks on a symptom of the Syrian civil war, ISIS, rather than its root cause. He told me that the U.S. should be battling the Assad regime at the same time it attacks Sunni terrorists. I asked him the following question: “Wouldn’t the generals say to you, ‘You want me to fight ISIS, and you want me to fight the guys who are fighting ISIS, at the same time? Why would we bomb guys who are bombing ISIS? That would turn this into a crazy standoff.’”

McCain answered: “Our ultimate job is not only to defeat ISIS but to give the Syrian people the opportunity to prevail as well. … If we do this right, if we do the right kind of training and equipping of the Free Syrian Army, plus air strikes, plus taking out Bashar Assad’s air assets, we could reverse the battlefield equation.”

There is even less reason to believe today that the Free Syrian Army, such as it is, is capable of fighting the Assad regime (and ISIS) effectively. So at this late stage, McCain’s policy prescriptions may be unrealistic. But his diagnosis of the core problem seems tragically accurate.

“I don’t think ISIS would exist if Bashar al-Assad had been removed two or three years ago,” McCain told me when we revisited the question earlier this month. “He was on his way out until the Iranians brought in 5,000 Hezbollah fighters, and the Iranian Revolutionary Guard Corps came in, to train Assad’s troops and provide them with weapons, including the barrel bombs, which are horrible weapons of war.”

McCain argues that the Obama administration has avoided confronting Assad in part for fear that doing so would alienate Assad’s patrons in Tehran, the same men who are in charge of the nuclear file. “The whole theory hinges on a major breakthrough in the nuclear talks, that once they get their deal, Iran will stop funding Hamas, stop supporting Hezbollah, stop destabilizing Yemen, that they’ll join us in fighting extremism. So they have to get a nuclear deal at all costs, and not do anything in Syria. This is just so farfetched it’s delusional.”

I wouldn’t go so far as to call proponents of this theory delusional, but let’s say that they are not approaching the issue of leverage in an effective way. Gary Samore, a former Obama administration official who was in charge of the National Security Council’s Iran nuclear file, told me this month that he would use Iran’s deep exposure in Syria to U.S. advantage.

“Confronting Iran forcefully in Syria and Iraq increases chances for a nuclear deal because Iran will only meet our nuclear demands if it feels weak and vulnerable,” Samore wrote in an email. “Conversely, Iran’s sense that it is winning in Syria and that it is indispensable in Iraq decreases chances for a nuclear because the Supreme Leader won’t make nuclear concessions if he feels strong and ascendant.”

Is it likely that Obama will move toward a policy of containing Iran in Syria, and away from his more accommodationist stance? Arab states that count Iran as an enemy and the U.S. as a friend have asked him repeatedly over the past two years to treat Iran as a root cause of the Syrian catastrophe. But Obama appears focused solely on achieving a nuclear deal with Iran, in part because he seems to believe that Iran is ready to play the part of rational and constructive actor, rather than extremist would-be hegemon. I hope he’s right, and I hope he achieves a strong nuclear deal, but I worry that he is empowering an Iranian government that isn’t about to change in any constructive way. In the meantime, the Iranian regime continues to get away, quite literally, with murder.

Then there is the economic outlook for the Middle East and Iran and the tribal sects.

Likewise in Iraq, which like Iran has a Shiite majority, Tehran’s consolidated influence since the U.S. troop withdrawal in 2011 has contributed to sectarian polarization and left the government dependent on Iranian-backed militias to fight the Sunni extremist group Islamic State.

With Iran’s economy crippled by the double whammy of international sanctions and falling oil prices, Syria and Iraq will become even more of a burden in 2015.

In the end, Mr. Khamenei’s two big projects could merge into one during 2015 or diverge. A nuclear deal with world powers could open the door to further cooperation with the U.S. in Iraq and Syria. But failure to strike such a deal could spark new tensions on all fronts between Iran and the international community.

Global Financial Outlook 2015~Grim

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What is the financial outlook for 2015? Not good as the monetary experts have created a study group in the United States to examine conditions, causes and solutions.

The Federal Reserve deliberately keeps quiet about how it measures lenders’ performance during downturns, to prevent banks from finding loopholes in the process that would allow them to take more risk, senior regulators have said publicly. It has given banks a little more information recently, but many executives still gripe about the tests.

“You put something in and one year it’s okay and the next year they say ‘no,’ and you’re scratching your head,” said one bank executive. The executive, like others that spoke to Reuters, spoke about the stress tests on the condition of anonymity.

A few years ago, banks might have hesitated to share information with rivals about how they measure risk and how they communicate with the Federal Reserve. Their willingness to talk to competitors about these issues underscores just how exasperated they are with the process. Meanwhile, banks in Europe are failing stress tests as Italy suffered the worst count: nine of the country’s 21 banks examined failed the test. Italy is Europe’s fourth-largest economy.

Greece and Cyprus, southern European countries that required international bailouts, were next. In each country, three of four banks examined did not pass muster.

Five of the Italian banks and one Greek bank have since covered their shortfalls.

Only one of the 25 major banks in Germany, Europe’s strongest economy, failed the test, but it has since raised sufficient capital.

Greece is the indicator for Europe as Greece has undergone the most strenuous financial retooling program in the last few years and yet it is not enough. Banks are all interconnected given the quiet bailouts globally through the International Monetary Fund and associated global banks. So what about Greece?

Greece’s threat to the European economic recovery

It is difficult to exaggerate the importance of the Greek government’s failure today to secure sufficient votes in parliament to choose a new president for the country. Since such a failure not only forces Greece to hold snap elections by the end of January, which could see the coming to power of a radical left-wing government. It also raises the real possibility that Greece will be forced to exit the Euro in 2015 that would be a major blow to the prospects of a meaningful European economic recovery.

On the basis of current electoral polls, the Syriza Party, headed by Alexis Tsipras, should win the parliamentary elections now scheduled for January 25. Judging by Syriza’s consistent electoral promises, if elected one must expect that Syriza will roll back the austerity policies imposed on Greece by the IMF, the ECB, and the European Union (the so-called “troika”). Syriza must also be expected to reverse many of Greece’s recent structural reforms in the labor market and in the area of privatization policy. In addition, it will more than likely insist on substantial official debt relief from the ECB, the IMF, and its European partners.

The prospect of a Syriza government taking office is already sending shudders through the Greek financial markets and is undermining confidence in the still very depressed Greek economy. One must expect that the election of Syriza will put Greece on a collision course with both the troika and the German government. Since it is difficult to see how the troika and  the German government can accede to Greece’s request for either debt relief or for additional budgetary financing at a time that Greece’s economic policy would be going in a direction clearly unacceptable to its European partners. For its part, it is difficult to see how Syriza can quickly make a policy U-turn from a position that it has been consistently espousing these past few years.

To be sure, a month in Greek politics is a long time and Syriza is by no means assured of electoral victory. However, it would seem that even in the best case scenario of a New Democracy win, it would fall well short of the votes needed for forming a majority government. With a deeply divided PASOK Party highly likely to be decimated in the elections, New Democracy will have difficulty in forming a stable coalition government. It is also likely that in the election campaign, New Democracy will emphasize that if re-elected it too will take a tough line with the troika, from which line it will be difficult to withdraw after the elections.

Greece’s already battered economy can ill-afford a prolonged period of political uncertainty, and much less a radical government, especially without the backstop of a troika financial support program. For not only does Greece have substantial official debt amortization payments to make in 2015 — it is also vulnerable to a run on its bank deposits. This would especially appear to be the case in light of the recent Cypriot experience, where Cyprus’s official international lenders insisted on a large write-down of bank deposits in return for their financial support to the country. Without a troika program in place, Greek banks would not be in the position to access the European Central Bank’s rediscount window in the event of a bank run that would almost certainly lead to the further collapse of the Greek economy.

European optimists argue that, unlike in 2010, any spillovers now from a Greek crisis to the rest of the Eurozone would be limited. However, in so doing they overlook Europe’s very poor economic and political fundamentals, which make the Eurozone all too susceptible to renewed contagion from the Greek crisis intensifying. After all, Europe is on the cusp of yet another economic recession and of a prolonged period of Japanese-style price deflation. Meanwhile, its economic periphery remains highly indebted and throughout Europe support for its political elite is crumbling at a time that parties on the extreme-left and the extreme-right of the political spectrum appear to be on the march.

The Cyber Panic Begins: FBI, DHS and Defense

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Update:  On his last press conference of the year, Barack Obama said that Sony made a mistake by surrendering to the threats posed by the hacks and Barack said he wished that the leadership of Sony has spoken to him personally. Well the truth is, Sony DID call the White House and explained the matter in detail to Obama’s senior staff. Obama lied.

FBI Director James Comey gave an intense interview about cyber war and the risks to America. The single most important job of government is to keep the homeland safe and to ensure national defense and national security. You can bet that real events and the depth of the cyber damage to America is not being told. So how bad could it be? That answer is left up to us. Yet the FBI did publish a statement on the Sony investigation.

FBI Beefs Up Amid Explosion of Cybercrime

Cybercrime is one of the priorities for the FBI, which has 13,260 special agents across the country, according to the agency.

Comey said he sees a “tremendous amount of cyberespionage going on — the Chinese being prominent among them, looking to steal our intellectual property.”

“I see a whole lot of hacktivists, I see a whole lot of international criminal gangs, very sophisticated thieves,” he said. “I see people hurting kids, tons of pedophiles, an explosion of child pornography.”

Cybercrime is one of the priorities for the FBI, which has 13,260 special agents across the country, including on Oahu, Maui and Hawaii island, according to the agency. The FBI had an $8.3 billion budget in fiscal 2014.

Forget the Sony Hack, This Could Be the Biggest Cyber Attack of 2015

By Patrick Tucker

On Friday, the FBI officially named North Korea as the party responsible for a cyber attack and email theft against Sony Pictures. The Sony hack saw many studio executives’ sensitive and embarrassing emails leaked online. The hackers threatened to attack theaters on the opening day of the offending film, “The Interview,” and Sony pulled the plug on the movie, effectively censoring a major Hollywood studio.

The end of “The Interview” is not the end of the world. Technology journalists were quick to point out that, even though the cyber attack could be attributable to a nation state actor, it wasn’t particularly sophisticated. Ars Technica’s Sean Gallagher likened it to a “software pipe bomb.” The fallout, of course, was limited. And while President Barack Obama vowed to respond to the attack, he also said it was a mistake for Sony to back down.

“I think all of us have to anticipate occasionally there are going to be breaches like this. They’re going to be costly. They’re going to be serious. We take them with the utmost seriousness. But we can’t start changing our patterns of behavior any more than we stop going to a football game because there might be the possibility of a terrorist attack; any more than Boston didn’t run its marathon this year because of the possibility that somebody might try to cause harm. So, let’s not get into that — that way of doing business,” he said at a White House briefing on Friday.

But according to cyber-security professionals, the Sony hack may be a prelude to a cyber attack on United States infrastructure that could occur in 2015, as a result of a very different, self-inflicted document dump from the Department of Homeland Security in July.

Important training video.  

2015: The Year of Aurora?

Here’s the background: On July 3, DHS, which plays “key role” in responding to cyber-attacks on the nation, replied to a Freedom of Information Act (FOIA) request on a malware attack on Google called “Operation Aurora.”

Unfortunately, as Threatpost writer Dennis Fisher reports, DHS officials made a grave error in their response. DHS released more than 800 pages of documents related not to Operation Aurora but rather the Aurora Project, a 2007 research effort led by Idaho National Laboratory demonstrating how easy it was to hack elements in power and water systems.

Oops.

The Aurora Project exposed a vulnerability common to many electrical generators, water pumps and other pieces of infrastructure, wherein an attacker remotely opens and closes key circuit breakers, throwing the machine’s rotating parts out of synchronization causing parts of the system to break down.

In 2007, in an effort to caste light on the vulnerability that was common to many electrical components, researchers from Idaho National Lab staged an Aurora attack live on CNN. The video is below.

How widespread is the Aurora vulnerability? In this 2013 article for Power Magazine:

“The Aurora vulnerability affects much more than rotating equipment inside power plants. It affects nearly every electricity system worldwide and potentially any rotating equipment—whether it generates power or is essential to an industrial or commercial facility.”

The article was written by Michael Swearingen, then manager for regulatory policy for Tri-County Electric Cooperative (now retired), Steven Brunasso, a technology operations manager for a municipal electric utility, Booz Allen Hamilton critical infrastructure specialist Dennis Huber and Joe Weiss, a managing partner for Applied Control Solutions.

Weiss today is a Defense Department subcontractor working with the Navy’s Mission Assurance Division. His specific focus is fixing Aurora vulnerabilities. He calls DHS’s error “breathtaking.”

The vast majority of the 800 or so pages are of no consequence, says Weiss, but a small number contain information that could be extremely useful to someone looking to perpetrate an attack. “Three of their slides constitute a hit list of critical infrastructure. They tell you by name which [Pacific Gas and Electric] substations you could use to destroy parts of grid. They give the name of all the large pumping stations in California.”

The publicly available documents that DHS released do indeed contain the names and physical locations of specific Pacific Gas and Electric Substations that may be vulnerable to attack.

Defense One shared the documents with Jeffrey Carr, CEO of the cyber-security firm Taia Global and the author of Inside Cyber Warfare: Mapping the Cyber Underworld. “I’d agree…This release certainly didn’t help make our critical infrastructure any safer and for certain types of attackers, this information could save them some time in their pre-attack planning,” he said.

Perpetrating an Aurora attack is not easy, but it becomes much easier the more knowledge a would-be attacker has on the specific equipment they may want to target.

How easy is it to launch an Aurora attack?

In this 2011 paper for the Protective Relay Engineers’ 64th Annual Conference, Mark Zeller, a service provider with Schweitzer Engineering Laborites lays out—broadly—the information an attacker would have to have to execute a successful Aurora attack. “The perpetrator must have knowledge of the local power system, know and understand the power system interconnections, initiate the attack under vulnerable system load and impedance conditions and select a breaker capable of opening and closing quickly enough to operate within the vulnerability window.”

“Assuming the attack is initiated via remote electronic access, the perpetrator needs to understand and violate the electronic media, find a communications link that is not encrypted or is unknown to the operator, ensure no access alarm is sent to the operators, know all passwords, or enter a system that has no authentication.”

That sounds like a lot of hurdles to jump over. But utilities commonly rely on publicly available equipment and common communication protocols (DNP, Modbus, IEC 60870-5-103, IEC 61850, Telnet, QUIC4/QUIN, and Cooper 2179) to handle links between different parts their systems. It makes equipment easier to run, maintain, repair and replace. But in that convenience lies vulnerability.

In their Power Magazine article, the authors point out that “compromising any of these protocols would allow the malicious party to control these systems outside utility operations.”

Defense One reached out to DHS to ask them if they saw any risk in the accidental document dump. A DHS official wrote back with this response: “As part of a recent Freedom of Information Act (FOIA) request related to Operation Aurora, the Department of Homeland Security (DHS) National Programs and Protection Directorate provided several previously released documents to the requestor. It appears that those documents may not have been specifically what the requestor was seeking; however, the documents were thoroughly reviewed for sensitive or classified information prior to their release to ensure that critical infrastructure security would not be compromised.”

Weiss calls the response “nonsense.”

The risk posed by DHS accidental document release may be large, as Weiss argues, or nonexistent, as DHS would have you believe. But even if it’s the latter, Aurora vulnerabilities remain a key concern.

Perry Pederson, who was the director of Control Systems Security Program at DHS in 2007 when the Aurora vulnerability was first exposed, said as much in a blog post in July after the vulnerability was discovered. He doesn’t lay blame at the feet of DHS. But his words echo those of Weiss in their urgency.

“Fast forward to 2014. What have we learned about the protection of critical cyber-physical assets? Based on various open source media reports in just the first half of 2014, we don’t seem to be learning how to defend at the same rate as others are learning to breach.”

Aurora vs. the Sony Hack

In many ways the Aurora vulnerability is a much harder problem to defend against than the Sony hack, simply because there is no obvious incentive for any utility operator to take any of the relatively simple costs necessary to defend against it. And they are simple. Weiss says that a commonly available device installed on vulnerable equipment could effectively solve the problem, making it impossible to make the moving parts spin out of synchronization. There are two devices on the market iGR-933 rotating equipment isolation device (REID) and an SEL 751A, that purport to shield equipment from “out-of-phase” states.

To his knowledge, Weiss says, Pacific Gas and Electric has not installed any of them anywhere, even though the Defense Department will actually give them away to utility companies that want them, simply because DOD has an interest in making sure that bases don’t have to rely on backup power and water in the event of a blackout. “DOD bought several of the iGR-933, they bought them to give them away to utilities with critical substations,” Weiss said. “Even though DOD was trying to give them away, they couldn’t give them to any of the utilities because any facility they put them in would become a ‘critical facility’ and the facility would be open to NERC–CIP audits.”

Aurora is not a zero-day vulnerability, an attack that exploits an entirely new vector giving the victim “zero days” to figure out a patch. The problem is that there is no way to know that they are being implemented until someone, North Korea or someone else, chooses to exploit them.

Can North Korea pull of an Aurora vulnerability? Weiss says yes. “North Korea and Iran and are capable of doing things like this.”

Would such an attack constitute an act of cyber war? The answer is maybe. Speaking to reporters at the Pentagon on Friday, Pentagon Press Secretary Rear Adm. John Kirby said “I’m also not able to lay out in any specificity for you what would be or wouldn’t be an act of war in the cyber domain. It’s not like there’s a demarcation line that exists in some sort of fixed space on what is or isn’t. The cyber domain remains challenging, it remains very fluid. Part of the reason why it’s such a challenging domain for us is because there aren’t internationally accepted norms and protocols. And that’s something that we here in the Defense Department have been arguing for.”

Peter Singer, in conversation with Jason Koebler at Motherboard, says that the bar for actual military engagement against North Korea is a lot higher than hacking a major Hollywood movie studio.

“We didn’t go to war with North Korea when they murdered American soldiers in the 1970s with axes. We didn’t go to war with North Korea when they fired missiles over our allies. We didn’t go to war with North Korea when one of their ships torpedoed an alliance partner and killed some of their sailors. You’re going to tell me we’re now going to go to war because a Sony exec described Angelina Jolie as a diva? It’s not happening.”

Obama said Friday that there would be some sort of response to the hack, but declined to say what. “We have been working up a range of options. They will be presented to me. I will make a decision on those based on what I believe is proportional and appropriate to the nature of this crime,” he said.

Would infrastructure vandalism causing blackouts and water shutdowns constitute an act of war? The question may be moot. Before the United States can consider what sort of response is appropriate to cyber attacks, it must first be able to attribute them.

The FBI was able to finger North Korea for the hack after looking at the malware in the same way a forensics team looks for signs of a perpetrator at the scene of the crime. “Technical analysis of the data deletion malware used in this attack revealed links to other malware that the FBI knows North Korean actors previously developed. For example, there were similarities in specific lines of code, encryption algorithms, data deletion methods, and compromised networks,” according to the FBI statement.

An Aurora vulnerability attack, conversely, leaves no fingerprints except perhaps a single IP address. Unlike the Sony hack, it doesn’t require specially written malware to be uploaded into a system, Malware that could indicate the identity of the attacker, or at least his or her affiliation. Exploiting an Aurora attack is simply a matter of gaining access, remotely, possibly because equipment is still running on factory-installed passwords, and then turning off and on a switch.

“You’re using the substations against whatever’s connected to them. Aurora uses the substations as the attack vector. This is the electric grid being the attack vector,” said Weiss, who calls it “a very, very insidious” attack.

The degree to which we are safe from that eventuality depends entirely on how well utility companies have put in place safeguards. We may know the answer to that question in 2015.

 

U.S. Schools Courtesy of Gulen

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Anyone remember the Barack Obama famous Cairo speech? In April of 2009, Barack delivered a long message siding with Islam and opening the door for radicals to launch their agendas and local schools in America were included.

But setting the table for what is below is this: He is in the United States.

Turkey issues arrest warrant for cleric Gulen – state media

(Frank J.Gaffney Jr. The Wash.Times:11 Dec.2012)

It is a commonplace saying, but one that most of us ignore: If something sounds too good to be true, it probably is. This applies in spades to a proposal under active consideration by the school board in Virginia’s Loudoun County. It would use taxpayer funds to create a charter school to equip the children of that Washington exurb with enhanced skills in science, technology, engineering and mathematics disciplines. Ostensibly, they will thus be equipped to compete successfully in the fields expected to be at the cutting edge of tomorrow’s workplace.

What makes this initiative, dubbed the Loudoun Math and IT Academy, too good to be true? Let’s start with what is acknowledged about the proposed school.

The academy’s board is made up of a group of male Turkish expatriates. One of them, Fatih Kandil, was formerly the principal of the Chesapeake Science Point Public Charter School in Anne Arundel County, Md. Another is Ali Bicak, the board president of the Chesapeake Lighthouse Foundation, which owns Chesapeake Science Point and two other charter schools in Maryland. The Loudoun Math and IT Academy applicants expressly claim that Chesapeake Science Point will be the model for their school.

The taxpayers of Loudoun County and the school board elected to represent them should want no part of a school that seeks to emulate Chesapeake Science Point, let alone be run by the same people responsible for that publicly funded charter school. For one thing, Chesapeake Science Point has not proved to be the resounding academic success the applicants claim. It does not appear anywhere in the acclaimed U.S. News & World Report lists of high-performing schools in Maryland, let alone nationwide — even in the subsets of mathematics or charter schools.

What is more, according to public documents chronicling Anne Arundel County Public Schools’ dismal experience with Chesapeake Science Point, there is significant evidence of chronic violations of federal, state and local policies and regulations throughout its six years of operations, with little or inconsistent improvement, reflecting deficiencies in fiscal responsibility and organizational viability.

Why, one might ask, would applicants for a new charter school cite so deeply problematic an example as their proposed institution? This brings us to aspects of this proposal that are not acknowledged.

Chesapeake Science Point is just one of five controversial schools with which Mr. Kandil has been associated. He was previously the director at the Horizon Science Academy in Dayton, Ohio; the principal at the Wisconsin Career Academy in Milwaukee and at the Baltimore Information Technology Academy in Maryland; and one of the applicants in a failed bid to establish the First State Math and Science Academy in Delaware.

These schools have something in common besides their ties to the peripatetic Fatih Kandil. They have all been “inspired” by and in other ways are associated with Fethullah Gulen, a Turkish supremacist and imam with a cultlike following of up to 6 million Muslims in Turkey and elsewhere around the world. More to the point, Imam Gulen is the reclusive and highly autocratic leader of a global media, business, “interfaith dialogue” and education empire said to be worth many billions that is run from a compound in the Poconos.

This empire — including its roughly 135 charter schools in this country and another 1,000 abroad — and its adherents have come to be known as the Gulen Movement. Those associated with it, in this country at least, are assiduously secretive about their connections to Imam Gulen and his enterprise. For example, the Loudoun Math and IT Academy applicants, their spokeswoman and other apologists have repeatedly misled the Loudoun school board, claiming that these Turkish gentlemen and their proposed school have nothing to do with Imam Gulen.

There are several possible reasons for such professions. For one, the Gulen schools are reported to be under investigation by the FBI. A growing number of them — including Chesapeake Science Point — have also come under critical scrutiny from school boards and staff around the country. In some cases, they have actually lost their charters for, among other reasons, chronic financial and other mismanagement and outsourcing U.S. teachers’ jobs to Turks.

The decisive reason for the Gulenist lack of transparency, however, may be due to their movement’s goals and modus operandi. These appear aligned with those of another secretive international organization that also adheres to the Islamic doctrine known as Shariah and seeks to impose it worldwide — the Muslim Brotherhood. Both seek to accomplish this objective by stealth in what the Brotherhood calls “civilization jihad” and Imam Gulen’s movement describes as “jihad of the word.”

This practice enabled the Gulenists to help transform Turkey from a reliable, secular Muslim NATO ally to an Islamist state deeply hostile to the United States — one aligned with other Islamic supremacists, from Iran to the Muslim Brotherhood to Hamas to al Qaeda. Fethullah Gulen’s followers clearly don’t want us aware of the obvious dangers posed by their penetration of our educational system and influence over our kids.

The good news is that members of the Loudoun County school board have a code of conduct that reads in part: “I have a moral and civic obligation to the nation which can remain strong and free only so long as public schools in the United States of America are kept free and strong.” If the board members adhere to this duty, they will reject a seductive Loudoun Math and IT Academy proposal that is way too “good” to be true.

So what has happened since the launch of these schools around the country?

FBI raids Concept Schools in Illinois, 2 other states

The FBI and two other federal agencies conducted raids in Illinois and two other states at charter schools run by Des Plaines-based Concept Schools, FBI officials said Tuesday.

Search warrants were executed at 19 Concept schools in connection with an “ongoing white-collar crime matter,” said Vicki Anderson, a special agent in the Cleveland FBI office that’s leading the probe.

The U.S. Department of Education and the Federal Communications Commission also were involved in the June 4 raids, but officials said the warrants remain under seal, and they wouldn’t give any details about the investigation. 

The raids targeted Concept schools in Illinois — where Concept has three schools in Chicago and one in Peoria — as well as in Indiana and Ohio.

FBI RAIDS TURKISH GULEN CHARTER SCHOOL IN LA

Dec 14, 2013 by

fbi_raid“Finally FBI Raids Turkish Gulen Charter School in Louisiana”

by Donna Garner 12.13.13   

12.12.13 — To view the FBI raid of the Gulen charter school in East Baton Rouge, please go to the following link on WBRZ.com. The Gulen charter schools are tied to Fethullah Gulen who is an Islamist imam.  Kenilworth Science and Technology School is connected to the Pelican Foundation, Cosmos Foundation in Texas, Atlas Texas Construction and Trading (a Houston-based contractor), Harmony Charters in Texas, and to other Gulen/Turkish entities around the United States and Turkey:  http://www.wbrz.com/videos/fbi-raid-another-scandal-for-charter-school-company/   

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12.11.13 — To read the full story about the FBI raid on the Gulen charter school, please read further: “FBI Raid Another Scandal for Gulen Charter School Company”

http://www.wbrz.com/news/fbi-raid-another-scandal-for-charter-school-company/   

EXCERPTS FROM THIS ARTICLE:

BATON ROUGE- Wednesday evening’s FBI raid on a charter school in East Baton Rouge is the latest item in a list of scandals involving the organization that holds the charter for the Kenilworth Science and Technology School.

Pelican Educational Foundation runs the school [and also Abramson] and has ties to a family from Turkey. The organization lost its school in New Orleans amid allegations of sexual misconduct among students that prompted a state investigation on campuses in the Crescent City and in Baton Rouge. It has also faced lawsuits and allegations from teachers about bad learning environments.

“It was an atmosphere where there was a double standard,” one former teacher told WBRZ News 2 in an investigation into the school in EBR. Former teachers were not happy with how things were handled when they spoke with a station reporter two years ago.

No one was ever charged in the sex allegations a school spokesperson pointed out Wednesday as federal investigators moved through the campus collecting items, putting them in boxes and then loading them into a van.

…The school receives about $5,000,000 in local, state, and federal tax money. In 2012, the Pelican group was accused of improperly handling money by the Legislative Auditor. A report found about $8600 was improperly used to buy gifts for students who scored high on LEAP tests.

…About the same time as allegations and lawsuits began dealing with Pelican charter schools, a BESE member took an improper trip on behalf of another Turkish organization. Linda Johnson, who is no longer on BESE, was fined for breaking the law by the ethics board. She got an all expenses paid trip to Turkey.

Kenilworth Science and Technology School will be open Thursday.