Report

U.S. Intel Sources: Russian Invasion of Eastern Ukraine Increasingly Likely

American intelligence agencies have told Obama administration officials and key congressional staffers that there is mounting evidence that Russia is putting the pieces in place for an invasion of eastern Ukraine, and that the possibility of an imminent assault cannot be ruled out, according to people with direct knowledge of the matter.

The numbers of troops near Russia's border with Ukraine have been steadily increasing since Russian forces conquered Crimea in February. And near Ukraine's eastern border, troops are reportedly being supplied with food and medical supplies, which they would need in the event of further operations -- a development that U.S. intelligence agencies have noted with alarm. On Capitol Hill, U.S. spy agencies have given Congress increasingly dire assessments of the Russian activity and indicated that the likelihood of an invasion is rapidly growing, according to a participant in the discussions who spoke on the condition of anonymity to discuss classified information.

Still, the intelligence officials have been careful not to offer a definitive conclusion that Moscow will invade or to predict the precise timing of a Russian military operation in Ukraine. Assessing the intentions of Russian President Vladimir Putin has been hampered by the fact that the U.S. has alarmingly little in the way of signals intelligence, or intercepted communications, that would indicate that he had decided to invade or when a strike was scheduled to start, one official said. Despite the tens of billions of dollars given to the intelligence community each year, the United States also has no real-time video footage coming from drones in the region and is relying largely on still photos from satellites, another official said.

Further Russian aggression against Ukraine has seemed a distinct possibility since forces stormed into Crimea and took control of the peninsula and then moved to seize Ukrainian military bases in the region, facing practically no resistance. U.S. officials have become increasingly concerned about a potential domino effect in the region should Russian actions against NATO member countries force the alliance to enter the conflict.

"Our concern is that Russia won't stop [in Crimea]," NATO Secretary-General Anders Fogh Rasmussen told Foreign Policy in an interview last week. "There is a clear risk that Russia will go beyond Crimea and the next goal will be the eastern provinces of Ukraine." President Barack Obama has used a trip to Europe this week to warn Putin in increasingly strong language not to invade eastern Ukraine.

Independent reporting from the region bolsters the intelligence community's assessment that Russia was assembling the necessary troops and military resources to invade if Putin gives the order.

On Thursday, Voice of America reported that the Russian military had established a field hospital in the Bryansk region, about 20 kilometers from the Russia-Ukraine border, and that train cars have been arriving near the border with troop supplies. That could mean that Russian forces are just settling in for a long stay -- troops in the field need to be fed, clothed, and tended to when they get sick -- without preparing a strike.

However, two officials said that the intelligence warnings have taken on a more alarming tone in part because the CIA failed to predict Putin's Crimea invasion. At the time, some in the intelligence agencies had determined that Russian forces had no intention of invading Ukraine, despite a massive buildup of troops along the border. That missed call has chastened U.S. intelligence analysts and forced them to reassess their judgments about Putin, one official said.

How the spy agencies failed to predict the Crimean invasion has been a subject of considerable debate in recent weeks. Some officials have claimed that leaks about classified intelligence-gathering methods had given the Russians a roadmap for evading America's surveillance nets. A spokesperson for the Office of the Director of National Intelligence said this week that U.S. adversaries "have 'gone to school' on the leaks of how the United States collects foreign intelligence," referring to disclosures by the former National Security Agency contractor Edward Snowden.

But other current and former officials dismissed the suggestion that Snowden's leaks had helped Russian military forces. One U.S. intelligence official, who asked not to be identified when discussing ongoing operations, said that the Russians practiced superb operational security in the runup to the Crimea invasion, and suggested that the reason so little traffic had been intercepted was because Russian forces were smart enough not to discuss their plans over radios and cell phones, channels that could be spied on by the Americans.

"It looks like the Russians learned from Osama bin Laden and used couriers," said Joel Harding, a former military intelligence officer who worked for the Army's intelligence command and has experience in surveillance operations. "They held access to those with a need to know and exercised strict discipline in communications security. That is the best professionalism I've seen from them ever."

If U.S. intelligence agencies underestimated the skill of their Russian adversaries, they seem determined not to repeat that mistake.

At the Pentagon, there remains confidence in the assurances provided to Defense Secretary Chuck Hagel from Russian Defense Minister Sergey Shoygu that the Russian troops amassing on the border with Ukraine were there only for exercises.

"[Shoygu] told me that they had no intention of crossing the border into Ukraine," Hagel said at the Pentagon this week. But standing beside Hagel in the Pentagon briefing room was U.K. Secretary of State for Defense Philip Hammond, who noted that he thinks Putin alone seems to be driving all the decision-making, and wondered aloud if Shoygu was as trusted a Putin aide and called into question the assurances he is providing the international community.

"Other Russian players, including Minister Shoygu, may express views, but it's a moot point, and we cannot know, we do not know to what extent all of those people are really inside the inner circle in which President Putin is planning this exercise," Hammond said.

On Thursday Pentagon press secretary Rear Adm. John Kirby said "there's no light" between Hagel and Hammond on the issue of trusting Shoygu, saying only that the Pentagon is watching it all very closely -- and hoping Shoygu keeps his word. "I'd say we don't have a full knowledge of their intent," he said. "But regardless of the intent, it does nothing to de-escalate the tension in Ukraine, it does nothing to improve the stability in that part of the world."

Gordon Lubold contributed reporting.

AFP

Report

Unfair Trade

The United States just won a big trade battle with China over materials used in iPhones and missiles, but it might be a Pyrrhic victory.

The World Trade Organization ruled Wednesday that China broke trade rules by limiting the export of rare-earth metals in recent years, handing a victory to the United States, Japan, and other countries that have long accused Beijing of giving Chinese firms a powerful advantage over their foreign rivals by hoarding minerals essential to the manufacture of smartphones, solar panels, and batteries for hybrid and electric cars.

In making formal a ruling that was first hinted at last fall, the WTO brushed aside China's claims that environmental concerns had forced it to restrict the sales of materials such as lithium and tungsten. The ruling will cheer lawmakers and free-trade advocates in the United States, who have for years warned that China's decision to keep many of the minerals for itself was threatening American businesses and national security by raising manufacturing costs and imperiling access to materials vital to the defense industry.

But the WTO ruling, by slapping down limits on raw-material exports, could also have profound implications for the debate over whether or not to export part of the U.S. energy bounty. That's because the WTO said that countries can't limit exports just to ensure preferential access to raw materials for domestic industries.

At issue is China's dominance in the mining, processing, and export of a class of minerals known as rare earths, which are used in everything from computer monitors to missile guidance systems. China controls more than 85 percent of the global market, down from 97 percent a few years ago.

Once a relatively obscure, if not geologically rare, group of minerals with exotic names such as neodymium and yttrium, rare earths became increasingly important in recent years due to the massive growth of consumer electronics, advanced defense applications, and clean-energy products.  Each advanced wind turbine today, for example, uses about 650 kilograms of neodymium; the roller-coaster in supply and demand for neodymium has sent prices skyrocketing and reeling in recent years.

The WTO ruled today on complaints filed by the United States, European Union, and Japan in 2012. The complaints alleged that Chinese export duties and export quotas amounted to unfair trading practices by essentially subsidizing Chinese manufacturers at the expense of American, European, and Japanese rivals. China had argued that it was entitled, under WTO rules, to limit the production and export of rare earths on environmental grounds and in order to preserve a limited resource.

Not so, said the WTO, which ruled that "China's export quotas were designed to achieve industrial policy goals rather than conservation."

China's Ministry of Commerce, in a statement emailed to a variety of Western news organizations, said it was "currently assessing the panel report and will follow the WTO dispute settlement procedures to settle this dispute." According to WTO rules, Beijing has 60 days to decide if it wants to proceed with an appeal.

The Obama administration, by contrast, was quick to cheer the ruling. Michael Froman, the U.S. trade representative, said Washington "will continue to defend American manufacturers and workers, especially when it comes to leveling the playing field and ensuring that American manufacturers can get the materials they need at a fair market price."

The White House might want to hold off on the champagne, though. The trade organization ruled that countries cannot restrict the export of globally-important commodities, especially if that involves a deliberate policy of making life easier for domestic firms that rely on those materials while disadvantaging foreign rivals.

In the Chinese rare earths case, the WTO found that "the overall effect of the foreign and domestic restrictions is to encourage domestic extraction and secure preferential use of those materials by Chinese manufacturers," in apparent violation of Article XX(g) of the 1994 General Agreement on Tariffs and Trade, the precursor to the trade organization. That could be a double-edged sword for the U.S.

Substitute "natural gas" for rare earth minerals, and "U.S. manufacturers" for Chinese manufacturers, and Washington's could find itself subject to trade complaints of its own, and with a weakened ability to go after trading partners that break the rules.

Under current U.S. law, companies seeking to export natural gas to countries with which the United States does not have a free trade agreement require several layers of government approval, a cumbersome and time-consuming process that limits the potential scope of gas exports. Manufacturers who benefit from cheap and abundant supplies of natural gas at home, notably Dow Chemical, have lobbied against exports.

Michael Levi, an energy expert at the Council on Foreign Relations, pointed to the Chinese trade dispute to underscore that export restrictions fall afoul of the United States' traditional free-trade stance.

"In the last two years, the United States has challenged Chinese restrictions on raw materials exports at the WTO," he told a House foreign affairs panel examining the geopolitical implications of U.S. energy exports. "If the United States were to block exports, or restrict them only to friends or NATO allies, that would undermine its ability to challenge other countries' restrictions and to uphold a global, open trading system."

The current dispute dates back to 2008, when China first started limiting the amount of rare earth minerals that it exported. Between 2007 and 2011, China's rare earth exports fell in half, from about 60,000 metric tons to about 30,000 tons. At times, the restrictions were particularly targeted: During a dispute with Japan, China halted all rare-earth exports for a few months in the fall of 2010.

The export restrictions shined a spotlight on advanced economies' reliance on a handful of imported minerals vital for critical sectors -- and raised fears that Chinese dominance could undermine U.S. industry and defense. The irony was acute: Until the 1980s, the United States was the largest producer of rare earths, but environmental concerns and slumping mineral prices kneecapped the domestic industry just as China's production of rare earths was picking up speed. Studies in recent years, such as a major one by the Center for a New American Security, have warned about the country's reliance on a handful of critical minerals. The Pentagon's own studies downplay the supply threat for rare earth minerals, but do acknowledge the need to bolster stockpiles of other vital raw materials.

Alarmed by China's market dominance and restrictive trade behavior, lawmakers in recent years have introduced a spate of bills that would jumpstart critical mineral production and stockpiling in the United States. Last fall, the Senate introduced a critical minerals bill meant to unify a scattered governmental approach to critical minerals and make it easier to mine for rare earth ores.

Sen. Lisa Murkowski (R-Alaska), one of the co-sponsors of the Senate bill, applauded the ruling but urged greater U.S. production of rare earth minerals. "We can file trade complaint after trade complaint, but there is no substitute for the steps that we know we must take to reconstitute our own domestic supply chain," she said.

Chinese behavior, and the fear it has sparked, has already done more to undermine its dominance than the WTO decision likely will. While China dominates the current production of rare earths, global reserves are spread more widely. New mining projects coming online in the U.S., Australia, Canada, Brazil, and other countries in Asia could soon erode China's current position. Japan earlier this year announced a massive rare earth find on the sea floor that could supply hundreds of years of domestic needs. New finds in Greenland could potentially yield one-quarter of global supplies.

Molycorp, a U.S. firm, is one of the most ambitious players, having invested in recent years to refurbish the Mountain Pass mine in California that was once the mainstay of U.S. rare earth production. Molycorp is also trying to build capacity to turn rare earth ores into the higher value, finished products such as permanent magnets, which are actually used in advanced manufacturing.

At the same time, some industries have responded to the threat by seeking alternatives for the materials dominated by Beijing. One manufacturer specifically touts its neodymium-free wind turbines. And energy researchers are working on new types of magnets for wind-turbine generators that could increase efficiency and lower costs while reducing reliance on Chinese-dominated minerals.

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