National Security

Gray Matter

How to fight Chinese cyber attacks without starting a cold war.

The Chinese People's Liberation Army has been systematically stealing technology worth billions of dollars from countless American companies in many industries. Is this news?

Not to American intelligence agencies. Not even to anyone else who's been paying attention. But publicly available evidence is new and fascinatingly detailed, as the recent report from the private forensics firm Mandiant showed. The hidden story here is that the private sector can perform first-class intelligence collection and analysis that a few years ago could have been done only by a nation-state. Meanwhile, our own government is keeping mum -- tangled in World War II-era rules about classified information and fearful of disrupting relations with a nation that owns huge amounts of our national debt.

If we're waiting until China decides to "play fair," we're in for a long wait. China won't play fair with us any more than Western powers played fair with China when we carved it up into concessions in the 19th century and imposed Western law on Chinese territory. This is realpolitik. China's intelligence services will continue to steal Western technology unless the price of that behavior becomes too high.

We're in a strategic trap that's partly economic and partly in our heads. We tend to think strategic relationships are governed by an on/off toggle switch between peace and war. When things go wrong, this crude dichotomy condemns us to think we have only two choices: Call in the lawyers, or call in an air strike. In fact, international relations are messy and fluid. We sometimes have serious disputes with allies, and we sometimes find common ground with adversaries. Permanent alliances have begun to seem less than permanent. When adversaries get aggressive with one another, there is a wide gray space between war and peace. The Cold War with the Soviet Union took place largely in that gray space, and it was often nasty.

But we are not in a cold war with China and don't wish to be. During the Cold War, we did not trade with the Soviet bloc, and travel across the Iron Curtain was virtually nil. When the Soviet Union went bankrupt, we cheered. In contrast, U.S.-China trade is vast, travel is free, and China bankrolls our appalling national debt. If China went bankrupt, we'd have a depression, not a celebration. War talk of any kind, even cold war talk, is therefore rash. We are dealing with a very rough competitor -- but not an enemy.

It's always easier to see one's own vulnerabilities than the other side's. China cannot bring the United States to its knees without doing worse to itself. A depression in the United States would cause crippling hardship, but economic collapse in China would not only create widespread hardship, it would threaten the future of the Chinese Communist Party. If we are over a barrel, so are they. But China understands our appetite for its markets, so it's willing to take risks with the relationship. So far we haven't made its risks seem very risky.

To change that, the United States will have to play more aggressively in the gray space, both openly and not-so-openly. On the open side, we should begin imposing visa and financial restrictions on a select set of actors and their families. If we can prove particular companies have benefited from stolen technology -- that's difficult, but we should devote more resources to it -- let's ban their products or impose heavy import duties and encourage our allies to do the same.

Legislation pending in the House would push the government to provide more classified information to the private sector, or at least to the companies that own the vertebrae of the telecommunications backbone. Less well known is the reluctance of private firms to share information about network threats among themselves. Sometimes the reluctance arises from perceived competitive advantage. But that explanation cannot possibly apply to every firm in an industry, and even the most secure firms would be better off if they were privy to industry-wide information about emerging cyberthreats. The House bill would protect companies that act in good faith to protect their networks or share threat information, and it contains strong privacy protections. Passing this bill should be a no-brainer, but the civil liberties lobby has consistently opposed it. Their opposition is a replay of that lobby's defense of the pre-9/11 "wall" that prevented the criminal side of the Justice Department from knowing what the intelligence side of the department knew and vice versa. Artificial legal barriers that prevent the flow of threat information to agencies and companies that need it cannot be defended. It's time to pass the House bill.

The name for the not-so-open side is covert action -- carefully calibrated and decidedly unfriendly steps to raise the price to China of its wholesale economic espionage. Speculating openly about actions intended to be covert would be decidedly unhelpful, so I'll say only: This sphere of action demands serious consideration. But this is no time for chest-thumping. Frozen relations between the United States and China would be costly; war would be a strategic disaster for both sides. America's strategic goal must remain China's peaceful integration into international institutions and expanded trade while maintaining our strategic position in the western Pacific.

In the Cold War, the United States and Soviet Union took years to understand each other's strategic behavior and reach tacit agreement on how to escalate and de-escalate tensions before they led to war, and even then we came terribly close to conflagration. Similar understandings do not yet exist in cyberspace, but they can emerge only through carefully considered action and reaction, much of it out of public view. Those who say the threat is hyped must now confront the evidence. Inaction on our part will make the situation worse. American and other Western businesses are being stripped of their intellectual property. It's time we defended ourselves.


Democracy Lab

Political Tremors in the Caucasus

There’s a distinct whiff of desire for political change wafting through the Caucasus.

How do you renovate a house when people are shaking the foundations? This is the question facing Vladimir Putin's Russia as well as the three countries of the South Caucasus: Armenia, Azerbaijan and Georgia. In each place, apparently secure governing regimes have faced or are facing revived forms of public protest.

Each of these countries experienced mass political turbulence in the 1990s, but for years it looked as though people had lost faith in public engagement and were content to tolerate any ruler who guaranteed a modicum of stability. That is no longer the case: After a period of dormancy, politics is back.

In Georgia, President Mikheil Saakashvili surrendered most of his powers when last October's election unexpectedly went against him -- although he is continuing the political fight within the system. Now the country under the spotlight is tiny Armenia. The country held a presidential election on February 18 in which serving president Serzh Sargsyan was elected to a new five-year term. An easy victory for Sargsyan appeared pre-ordained as two other presumed rivals dropped out of the race. But in the last two weeks of the campaign, opposition candidate Raffi Hovannisian, independent Armenia's first foreign minister, surged forward.

On polling day, Sargsyan was declared the winner with 59 percent of the vote. Hovannisian was given an official vote of around 37 percent and declared to have won the poll in the country's second and third cities, Gyumri and Vanadzor.

In effect, the country's many discontented have woken up -- but too late to make a difference on the election itself. Had the campaign lasted two weeks longer it is quite possible that Hovannisian's momentum would have carried him into a second round run-off.

As it is, world leaders, including President Obama, have now congratulated Sargsyan on his victory. The State Department characterized the election as "generally well-administered and characterized by a respect for fundamental freedoms, including those of assembly and expression."

Armenia's problem was not so much election day as the playing field itself: A media heavily controlled by the government, local officials serving the narrow ruling elite rather than the state as such. The head of the OSCE election observer mission, Heidi Tagliavini, picked up on this when she commented on "the blurring of the distinction between the state and the ruling party."

Raffi Hovannisian is a decent man, unsullied by the corrupt practices of post-Soviet politics. But he is also a California-born outsider whom few imagined could be president of Armenia. Evidently, he has mobilized a protest vote that is bigger than himself.

Hovannisian himself has not recognized the result, and he has been surprisingly effective at organizing mass rallies across the country. But it is hard to see how he can prevail in the short term against a president who now has international legitimacy and controls all the levers of power in Armenia.

Over the longer term, however, the president has a problem. Opinion surveys show high levels of discontent in Armenia about corruption, poverty, and abuse of power. This manifests itself in mediocre economic performance and a continuing brain-drain from emigration. Sargsyan is a man of consensus who likes at least to listen to his opponents. If he does not want a very long and bumpy second term, he must now think about what steps he can take that will meet the population's discontents half-way -- while he knows that tinkering with the system may end up undermining his own authority.

As president of a nation whose compatriots are scattered across the world, Sargsyan also faces the challenge of continued competition with the Armenian diaspora. The websites of the two main diaspora organizations in the United States, the Armenian Assembly and the ANCA, are conspicuously silent about the once-in-five-years election in their homeland. A popular U.S. Armenian singer, Serj Tankian, wrote a public letter to Sargsyan in which he said that "the avalanche of people suffering under your rule due to corruption and injustice is tipping the scale for us all."

If there is a lesson from Caucasian politics over the past year, it is that public opinion is not a monolith but a wave. A mood of discontent can build momentum suddenly, as if from nowhere. An incumbent commands loyalty by default, but once his power trembles, he can be swept away. This is what happened in Georgia last fall, but did not quite happen in Russia or in Armenia (where a month before polling day Hovannisian was scoring only 10 percent in the polls).

Azerbaijan is by far the wealthiest of the three South Caucasus states. It has increased international standing and is currently a non-permanent member of the U.N. Security Council. It is also the least democratic of the three countries: Systemic opposition to President Ilham Aliev has all but disappeared in the past decade.

Azerbaijan is also insecure. In part that is because of an unenviable geopolitical situation. Iran to the south is an intensely unfriendly neighbor. Relations with Russia have fluctuated since the end of the USSR and are now in a new downturn, following a row over the Russian-operated Gabala radar station, where Aliev has essentially evicted the Russians after Moscow refused to meet his demands for higher rent. To the west is the unresolved conflict with Armenia, which has left one seventh of the country's de jure territory under Armenian enemy control for almost 20 years.

Its newfound wealth also comes almost exclusively from oil and gas. This is leading to a problem that Putin encounters in Russia, as some segments of the population no longer seem prepared to accept the bargain of "we give you higher standards of living, you let us rule the country unchallenged."

The last few months in Azerbaijan have seen a series of protests by shopkeepers, the families of conscript soldiers, and citizens in the town of Ismayili, who are angry at their mayor. An exiled university rector released sensational tapes alleging corruption and the selling of parliamentary seats. Two opposition leaders, Tofiq Yaqublu and Ilgar Mammadov, were arrested. A venerable writer, Akram Aylisli, who had dared to publish a novel in Russia that described the sufferings of Armenians, was publicly vilified, threatened, and stripped of his state awards.

Azerbaijani opposition websites talk all this up this in dramatic terms, as though the ruling elite is in agony. That seems rather premature. The protests were fragmented and the mainstream opposition parties remain quite marginal. President Aliev sacked some of the officials under fire.

The trouble does, however, suggest that Aliev cannot expect a fully smooth ride to a third term in office in October's presidential election. He faces the challenge of Sargysan writ large: Can he tinker with the existing power structure and curb its most abusive elements without weakening the very structure itself.

As they look at Georgia, many Armenians, Azerbaijanis, and Russians see a bad advertisement for democracy. Last October, the Georgians held a historic election in which for the first time a governing party lost and handed over peacefully to the opposition, the Georgian Dream coalition led by billionaire Bidzina Ivanishvili. Since then the country has been enduring a painful "cohabitation" between Ivanishvili's government and President Mikheil Saakashvili until the latter steps down in October. Every day brings political melodrama of some kind: mutual recrimination, constitutional haggling, demarches to foreign visitors, arrests of former officials, and even a fight on the street as the president was preparing to give a speech.

On the inside, the mood in the country is not as turbulent as that would suggest. There is a lot of continuity in lower levels of government. The impressive new justice minister, Tea Tsulukiani, told me that she has retained 98 percent of the staff she inherited from her predecessor. Besides, Saakashvili's United National Movement elite had become aloof, unaccountable, and increasingly abusive, and Georgians were ready for a change. The new government has not got a good grip on many issues and the economy has been performing badly. But a change of power is enabling it to correct many unaddressed problems, such as a very punitive judicial system, hidden monopolies, or the state of agriculture.

Georgia has the same structural deficiency as its post-Soviet neighbors: a chronic lack of checks and balances. Here Ivanishvili has been dealt a weak hand. But if his government avoids some major pitfalls, Georgia can still be a success story.

On some issues, Ivanishvili can do well by doing nothing. For example, it will be positive if his government does not interfere in Georgia's television channels, which have been offering a much more diverse diet of news since the elections. If Ivanishvili follows through on his plans to overhaul local government, create 300 municipalities, and establish genuine regional democracy in Georgia, that will strike a heavy blow against patriarchal government from Tbilisi.

The biggest test of Georgia's fragile democracy will come in October with the presidential election. The new president will still be head of state but with diminished powers. Nonetheless, he (or, less likely, she) will be a counterweight to the prime minister. Ivanishvili's choice of candidate -- a strong, independent individual or a less prominent figure -- will be another indicator of the health of Georgian democracy. Ivanishvili has already rebuked an early favorite (especially in Western capitals), Defense Minister Irakli Alasania, by stripping him of his other job as deputy prime minister, after he showed signs of excessive independence. Some of Ivanishvili's supporters are also suggesting a retrograde step, a system in which the president is elected not by the public but by parliament.

Georgian politics is certainly chaotic and dramatic, but the alternative is surely worse. It is better to see disputes fought out in parliament or on television than on the streets. The country seems to be struggling to achieve Nassim Taleb's concept of "anti-fragility," adaptability to change. As neighboring leaders look down at the apparently more stable ground beneath their feet, they should consider that most of Georgia's challenges may still be ahead of them.

Photo by TOFIK BABAYEV/AFP/Getty Images