U.S. Ends Cold War Missile Treaty, With Aim of Countering China

U.S. officials say that the treaty tied their hands on China and that Russia was not complying with it.
By David E. Sanger and Edward Wong

Military vehicles carrying ballistic missiles through Tiananmen Square during a military parade in Beijing in 2015. The first deployments of new American missiles would likely be intended to counter China.

WASHINGTON — The United States on Friday terminated a major treaty of the Cold War, the Intermediate Nuclear Forces agreement, and it is already planning to start testing a new class of missiles later this summer.
But the new missiles are unlikely to be deployed to counter the treaty’s other nuclear power, Russia, which the United States has said for years was in violation of the accord. 

Instead, the first deployments are intended to counter China, which has amassed an imposing missile arsenal and is now seen as a much more formidable strategic rival than Russia.
The moves by Washington have elicited concern that the United States may be on the precipice of a new arms race, especially because the one major remaining arms control treaty with Russia, a far larger one called New START, appears on life support, unlikely to be renewed when it expires in less than two years.
At a moment when the potential for nuclear confrontations with North Korea and Iran is rising, the American decision to abandon the 32-year-old treaty has prompted new worries in China.

The resurgence of nuclear geopolitics was evident in the Democratic debate on Tuesday night, when presidential hopefuls grappled with whether the United States should renounce “first use” of nuclear weapons in any future conflict.

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On Feb 2nd, 2019 the U.S. gave Russia six months to return to compliance with the Intermediate-Range Nuclear Forces Treaty. Russia refused, so the treaty ends today. The U.S. will not remain party to a treaty when others violate it. Russia bears sole responsibility.
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Barack Obama considered terminating the treaty when Moscow was first accused of violating its terms. 

On Thursday, just as his aides were confirming the American withdrawal and blaming Russia for the breakdown, President Trump told reporters that Russia “would like to do something on a nuclear treaty” and added later, “So would I.” 

But he appeared to be discussing a broader treaty that would involve China — which has said it has no intention of negotiating a limit on its arsenal.
In fact, the administration has argued that China is one reason Mr. Trump decided to exit the I.N.F. treaty. 

Most experts now assess that China has the most advanced conventional missile arsenal in the world, based throughout the mainland. 

When the treaty went into effect in 1987, China’s missile fleet was judged so rudimentary that it was not even a consideration.
Today hundreds of missiles in southeast China are within range of Taiwan, the self-governing democratic island supported by the United States. 

Missiles at other sites can hit Japan and India, and there are Chinese missiles that can strike the United States territory of Guam and other potential targets in what American strategists call the second-island chain.
“Unilateral constraint was a losing proposition: China developed the world’s foremost force of missiles precisely within the ranges that I.N.F. would prohibit,” said Andrew Erickson, a professor of strategy at the United States Naval War College. 

“So this increasingly antiquated treaty had no future.”
Until now, the Trump administration has held off on testing new missiles that would violate the treaty; under its terms, even testing is prohibited. 

But that stricture lifts on Friday, and the first test of new American intermediate-range missiles is likely to begin within weeks, according to American officials familiar with the Pentagon’s plans.
The first, perhaps as early as this month, is expected to be a test of a version of a common, sea-launched cruise missile, the Tomahawk. 

It would be modified to be fired from the ground. (The treaty prohibited intermediate-range ground-launched missiles, but not missiles launched from ships or airplanes.) 

If successful, officials say, the first ground-launched cruise missiles could be deployed within 18 months or so — if the United States can find a country willing to house them.
That would be followed by a test of a new mobile, ground-launched ballistic missile with a range of 1,800 to 2,500 miles, before the end of the year. 

But that would be an entirely new missile, and it is not likely to be deployed for another five years or so — meaning the very end of the Trump presidency, if he is re-elected.
But the question is where to deploy them. 

“I don’t think the Europeans want to host them,” Gary Samore, the director of the Crown Center for Middle East Studies at Brandeis University and the chief nuclear strategist at the National Security Council under Obama, said on Thursday. 

In Asia, he noted, the two countries where it would make most sense to deploy the missiles would be Japan and South Korea, though any move to put the missiles there could infuriate China.
“The real question is where and whether or not there would be pushback,” said Bonnie S. Glaser, a senior adviser for Asia at the Center for Strategic and International Studies. 

“The most obvious place is someplace in Japan.”
Mr. Samore noted that the fate of New START, which governs the strategic weapons the United States and Russia have deployed, “is much more important than I.N.F.” 

Senior military officials agree, but have added that once the I.N.F. treaty dies, it is hard to imagine a negotiation to renew New START, which expires in February 2021, right after the next presidential inauguration.
Even if it is renewed, Mr. Samore noted that in coming years, the source of strategic instability may not come just from nuclear weapons but also “from space weapons, artificial intelligence and cyber — and there we have no restraints.”
But it is China’s rocket forces that have focused the attention of the Pentagon and the Trump administration. 

In 2017, Adm. Harry B. Harris Jr., then the head of United States Pacific Command, said in congressional testimony that the People’s Liberation Army Rocket Force controls the “largest and most diverse missile force in the world, with an inventory of more than 2,000 ballistic and cruise missiles.” 

He pointed out that the United States capability lagged because of its adherence to the treaty with Russia, and that if China were a signatory, 95 percent of its missiles would be in violation.
But deploying a counterforce to Taiwan would be too provocative, officials say, and Japan may have hesitations: Prime Minister Shinzo Abe would have to consider the blow that would result to relations between Beijing and Tokyo, which have been improving.
China’s fury at deployment of American ground-based missiles in an Asian nation probably would be even greater than its reaction in 2016 and 2017 to plans to install an American antimissile system in South Korea.
For more than a year after the announcement of the deployment, Beijing denounced the move and called for a wide boycott of products from South Korea, whose companies then suffered. 

The Americans began deploying the system, commonly known as THAAD, in March 2017, and Beijing did not relent on its actions against South Korea until that October. 

Communist Party leaders feared the United States was laying the groundwork for an expansive antimissile system across Asia.
Chinese officials have also balked at any attempt to limit their missiles with a new treaty, arguing that the nuclear arsenals of the United States and Russia are much larger and deadlier.
“The Trump idea of a trilateral arms control agreement is not realistic,” Mr. Samore said. 

“The Chinese are not going to codify an inferior number of weapons compared to the United States and Russia. And Russia and the U.S. won’t give China equal status.”

America Pushes Allies to Fight Huawei in New Arms Race With China

Whichever country dominates 5G will gain an economic, intelligence and military edge for much of this century

By David E. Sanger, Julian E. Barnes, Raymond Zhong and Marc Santora

Huawei’s offices in Warsaw. Polish officials recently came under pressure from the United States to bar Huawei from building its 5G communications network.

Jeremy Hunt, the British foreign minister, arrived in Washington last week for a whirlwind of meetings dominated by a critical question: Should Britain risk its relationship with Beijing and agree to the Trump administration’s request to ban Huawei, China’s leading telecommunications producer, from building its next-generation computer and phone networks?
Britain is not the only American ally feeling the heat.

In Poland, officials are also under pressure from the United States to bar Huawei from building its fifth generation, or 5G, network. 

Trump officials suggested that future deployments of American troops — including the prospect of a permanent base labeled “Fort Trump” — could hinge on Poland’s decision.
And a delegation of American officials showed up last spring in Germany, where most of Europe’s giant fiber-optic lines connect and Huawei wants to build the switches that make the system hum. Their message: Any economic benefit of using cheaper Chinese telecom equipment is outweighed by the security threat to the NATO alliance.
Over the past year, the United States has embarked on a stealthy global campaign to prevent Huawei and other Chinese firms from participating in the most dramatic remaking of the plumbing that controls the internet since it sputtered into being, in pieces, 35 years ago.
The administration contends that the world is engaged in a new arms race — one that involves technology, rather than conventional weaponry, but poses just as much danger to America’s national security.
In an age when the most powerful weapons, short of nuclear arms, are cyber-controlled, whichever country dominates 5G will gain an economic, intelligence and military edge for much of this century.

The transition to 5G — already beginning in prototype systems in cities from Dallas to Atlanta — is likely to be more revolutionary than evolutionary. 

What consumers will notice first is that the network is faster — data should download almost instantly, even over cellphone networks.
It is the first network built to serve the sensors, robots, autonomous vehicles and other devices that will continuously feed each other vast amounts of data, allowing factories, construction sites and even whole cities to be run with less moment-to-moment human intervention. 

It will also enable greater use of virtual reality and artificial intelligence tools.
But what is good for consumers is also good for intelligence services and cyberattackers. 

The 5G system is a physical network of switches and routers. 

But it is more reliant on layers of complex software that are far more adaptable, and constantly updating, in ways invisible to users — much as an iPhone automatically updates while charging overnight. 

That means whoever controls the networks controls the information flow — and is able to change, reroute or copy data without users’ knowledge.
In interviews with current and former senior American government officials, intelligence officers and top telecommunications executives, it is clear that the potential of 5G has created a zero-sum calculus in the Trump White House — a conviction that there must be a single winner in this arms race, and the loser must be banished. 

For months, the White House has been drafting an executive order, expected in the coming weeks, that would effectively ban United States companies from using Chinese-origin equipment in critical telecommunications networks. 

That goes far beyond the existing rules, which ban such equipment only from government networks.
Nervousness about Chinese technology has long existed in the United States, fueled by the fear that the Chinese could insert a “back door” into telecom and computing networks that would allow Chinese security services to intercept military, government and corporate communications. 

And Chinese cyberintrusions of American companies and government entities have occurred daily, including by hackers working on behalf of China’s Ministry of State Security.
But the concern has taken on more urgency as countries around the world begin deciding which equipment providers will build their 5G networks.
American officials say the old process of looking for “back doors” in equipment and software made by Chinese companies is the wrong approach, as is searching for ties between specific executives and the Chinese government. 

The bigger issue is the increasingly authoritarian nature of the Chinese government, the fading line between independent business and the state and new laws that will give Beijing the power to look into and take over networks that companies like Huawei have helped build and maintain.
“It’s important to remember that Chinese company relationships with the Chinese government aren’t like private sector company relationships with governments in the West,” said William R. Evanina, the director of America’s National Counterintelligence and Security Center. 

“China’s 2017 National Intelligence Law requires Chinese companies to support, provide assistance and cooperate in China’s national intelligence work, wherever they operate.”
The White House’s focus on Huawei coincides with the Trump administration’s broader crackdown on China, which has involved sweeping tariffs on Chinese goods, investment restrictions and the indictments of several Chinese nationals accused of hacking and cyberespionage. 

President Trump has accused China of “ripping off our country” and plotting to grow stronger at America’s expense.
President Trump’s views have prompted some countries to question whether America’s campaign is really about national security or if it is aimed at preventing China from gaining a competitive edge.
Administration officials see little distinction in those goals.
“President Trump has identified overcoming this economic problem as critical, not simply to right the balance economically, to make China play by the rules everybody else plays by, but to prevent an imbalance in political/military power in the future as well,” John R. Bolton, President Trump’s national security adviser, told The Washington Times on Friday. 

“The two aspects are very closely tied together in his mind.”
The administration is warning allies that the next six months are critical. 

Countries are beginning to auction off radio spectrum for new, 5G cellphone networks and decide on multibillion-dollar contracts to build the underlying switching systems. 

This past week, the Federal Communications Commission announced that it had concluded its first high-band 5G spectrum auction.
The Chinese government sees this moment as its chance to wire the world — especially European, Asian and African nations that find themselves increasingly beholden to Chinese economic power.
“This will be almost more important than electricity,” said Chris Lane, a telecom analyst in Hong Kong for Sanford C. Bernstein. 

“Everything will be connected, and the central nervous system of these smart cities will be your 5G network.”

Both the United States and China believe that whichever country dominates 5G will gain an economic, intelligence and military edge for much of this century.

A New Red Scare

American officials whisper that classified reports implicate Huawei in Chinese espionage but have produced none publicly. 

Others familiar with the secret case against the company say there is just a heightened concern about the firm’s rising technological dominance and the new Chinese laws that require Huawei to submit to requests from Beijing.

Australia last year banned Huawei and another Chinese manufacturer, ZTE, from supplying 5G equipment. 

Other nations are wrestling with whether to follow suit and risk inflaming China, which could hamper their access to the growing Chinese market and deprive them of cheaper Huawei products.
Government officials in places like Britain note that Huawei has already invested heavily in older-style networks.

And they argue that Huawei isn’t going away — it will run the networks of half the world, or more, and will have to be connected, in some way, to the networks of the United States and its allies.
Yet BT Group, the British telecom giant, has plans to rip out part of Huawei’s existing network. 

The company says that was part of its plans after acquiring a firm that used existing Huawei equipment; American officials say it came after Britain’s intelligence services warned of growing risks. 

And Vodafone Group, which is based in London, said on Friday that it would temporarily stop buying Huawei equipment for parts of its 5G network.
Nations have watched warily as China has retaliated against countries that cross it. 

In December, Canada arrested a top Huawei executive, Meng Wanzhou, at the request of the United States. 

Meng, who is Ren’s daughter, has been accused of defrauding banks to help Huawei’s business evade sanctions against Iran. 

Since her arrest, China has detained two Canadian citizens and sentenced to death a third Canadian, who had previously been given 15 years in prison for drug smuggling.
“Europe is fascinating because they have to take sides,” said Philippe Le Corre, nonresident senior fellow at the Carnegie Endowment for International Peace. 

“They are in the middle. All these governments, they need to make decisions. Huawei is everywhere.”

A Huawei store in Warsaw. This month, the Polish government made two high-profile espionage arrests, including an employee of Huawei.

Growing Suspicions
This month, the Polish government made two high-profile espionage arrests: a former intelligence official, Piotr Durbajlo, and Wang Weijing, an employee of Huawei. 

The arrests are the strongest evidence so far that links Huawei with spying activities.
Wang has been accused of working for Chinese intelligence agencies, said a top former Polish intelligence official. 

Wang was the handler of Durbajlo, who has helped the Chinese penetrate the Polish government’s most secure communications network.
The case was a prime example of how the Chinese government plants intelligence operatives inside Huawei’s vast global network. 

Those operatives have access to overseas communications networks and conduct espionage that the affected companies are not aware of, the official said.
Wang’s lawyer, Bartlomiej Jankowski, says his client has been caught up in a geopolitical tug of war between the United States and China.
American and British officials had already grown concerned about Huawei’s abilities after cybersecurity experts, combing through the company’s source code to look for back doors, determined that Huawei could remotely access and control networks from the company’s Shenzhen headquarters.
On careful examination, the code that Huawei had installed in its network-control software did not appear to be malicious. 

Nor was it hidden. 

It appeared to be part of a system to update remote networks and diagnose trouble. 

But it could also route traffic around corporate data centers — where firms monitor and control their networks — and its mere existence is now cited as evidence that hackers and Chinese intelligence use Huawei equipment to penetrate millions of networks.
Chinese telecommunications companies have also hijacked parts of the internet, rerouting basic traffic from the United States and Canada to China.
One academic paper, co-written by Chris C. Demchak, a Naval War College professor, outlined how traffic from Canada meant for South Korea was redirected to China for six months. 

That 2016 attack has been repeated and provides opportunity for espionage.
Last year, AT&T and Verizon stopped selling Huawei phones in their stores after Huawei begin equipping the devices with its own sets of computer chips — rather than relying on American or European manufacturers. 

The National Security Agency quietly raised alarms that with Huawei supplying its own parts, the Chinese company would control every major element of its networks. 

The N.S.A. feared it would no longer be able to rely on American and European providers to warn of any evidence of malware, spying or other covert action.

An assembly line at Huawei’s cellphone plant in Dongguan, China. The company has already surpassed Apple as the world’s second biggest cellphone provider.

The Rise of Huawei
In three decades, Huawei has transformed itself from a small reseller of low-end phone equipment into a global giant with a dominant position in one of the crucial technologies of the new century.
Last year, Huawei edged out Apple as the second-biggest provider of cellphones around the world. Richard Yu, who heads the company’s consumer business, said in Beijing several days ago that “even without the U.S. market we will be No. 1 in the world,” by the end of this year or sometime in 2020.
The company was founded in 1987 by Ren, a former People’s Liberation Army engineer who has become one of China’s most successful entrepreneurs.
The company started through imitation and theft of American technology. 

Cisco Systems sued Huawei in 2003, saying it had illegally copied the American company’s source code. 

The two companies settled out of court.
Huawei opened research centers (including one in California) and built alliances with leading universities around the world. 

Last year, it generated $100 billion in revenue, twice as much as Cisco and significantly more than IBM. 

Its ability to deliver well-made equipment at a lower cost than Western firms drove once-dominant players like Motorola and Lucent out of the telecom-equipment industry.
While American officials refuse to discuss it, the government snooping was a two-way street. 

As early as 2010, the N.S.A. secretly broke into Huawei’s headquarters, in an operation code-named “Shotgiant,” a discovery revealed by Edward J. Snowden, the former N.S.A. contractor now living in exile in Moscow.
Documents show that the N.S.A. was looking to prove that Huawei was controlled by the People’s Liberation Army — and that Ren never really left the powerful army unit. 

But the Snowden documents also show that the N.S.A. had another goal: to better understand Huawei’s technology and look for potential back doors. 

This way, when the company sold equipment to American adversaries, the N.S.A. would be able to target those nations’ computer and telephone networks to conduct surveillance and, if necessary, offensive cyberoperations.

President Trump met with Andrzej Duda, his Polish counterpart, last year. Mr. Duda has suggested that the United States build a $2 billion base and training area, which Mr. Duda only half-jokingly called “Fort Trump.”

A Global Campaign
After an uproar in 2013 about Huawei’s growing dominance in Britain, the country’s powerful Intelligence and Security Committee, a parliamentary body, argued for banning Huawei, partly because of Chinese cyberattacks aimed at the British government. 

It was overruled, but Britain created a system to require that Huawei make its hardware and source code available to GCHQ, the country’s famous code-breaking agency.
In July, Britain’s National Cyber Security Center for the first time said publicly that questions about Huawei’s current practices and the complexity and dynamism of the new 5G networks meant it would be difficult to find vulnerabilities.
At roughly the same time, the N.S.A., at a series of classified meetings with telecommunications executives, had to decide whether to let Huawei bid for parts of the American 5G networks. 

AT&T and Verizon argued there was value in letting Huawei set up a “test bed” in the United States since it would have to reveal the source code for its networking software. 

Allowing Huawei to bid would also drive the price of building the networks down, they argued.
The director of the N.S.A. at the time, Adm. Michael S. Rogers, never approved the move and Huawei was blocked.
In July 2018, with these decisions swirling, Britain, the United States and other members of the “Five Eyes” intelligence-sharing alliance met for their annual meeting in Halifax, Nova Scotia, where Chinese telecommunications companies, Huawei and 5G networks were at the top of the agenda. They decided on joint action to try to block the company from building new networks in the West.
American officials are trying to make clear with allies around the world that the war with China is not just about trade but a battle to protect the national security of the world’s leading democracies and key NATO members.
On Tuesday, the heads of American intelligence agencies will appear before the Senate to deliver their annual threat assessment, and they are expected to cite 5G investments by Chinese telecom companies, including Huawei, as a threat.
In Poland, the message has quietly been delivered that countries that use Chinese telecommunications networks would be unsafe for American troops.
That has gotten Poland’s attention, given that its president, Andrzej Duda, visited the White House in September and presented a plan to build a $2 billion base and training area, which Mr. Duda only half-jokingly called “Fort Trump.”
Col. Grzegorz Malecki, now retired, who was the head of the Foreign Intelligence Agency in Poland, said it was understandable that the United States would want to avoid potentially compromising its troops.
“And control over the 5G network is such a potentially dangerous tool,” said Mr. Malecki, now board president of the Institute of Security and Strategy. 

“From Poland’s perspective, securing this troop presence outweighs all other concerns.”

Chinese Aggressions

The Arms Race In East Asia
By Peter Pham

A South Korean soldier stands behind a machine gun aboard a tank during a military exercise near the border in Paju, South Korea, on Wednesday, Nov. 29, 2017.
China’s increasingly assertive attitude in the South China Sea has its neighbors worried.
Vietnam, Japan and other countries that claim parts of the region are all expanding their defense spending in an attempt to keep up with, what they perceive as, an increased threat from the regional superpower.
As a result, U.S. defense and aerospace companies have done very well recently, with record international sales in 2016. Asia-Pacific was the second largest destination of U.S. weapons, just after Europe.
The trend has continued into 2017, with South Korea announcing last September that it would spend an extra 4% on defense, hitting a record US$36.5 billion.
December then saw Japan’s Prime Minister Shinzo Abe signing an unprecedented defense budget of US$43.6 billion, indicating that his government was not going to continue its normally modest military stance in the face of a more aggressive China and North Korea.
Taiwan is taking things even further, increasing its defense spending by 50% in 2018.
The cash windfall to the U.S. defense industry is not only coming from foreign governments. 

The U.S. State Department itself asked for US$1.5 billion for the “Pivot to Asia” we covered last week, spending the money on securing U.S. partnerships and maintaining access to important trade routes.

2016 also saw Obama announcing the end of the embargo on U.S. arms sales to Vietnam. 

Along with effectively creating a new market for the U.S. defense industry, it also sent the message that the U.S. is strongly committed to countering China’s increased assertiveness in the South China Sea by providing arms to the nations that it has territorial disputes with.
While Vietnam spends relatively less on defense than other nations in the area, it still accounts for 8% of its GDP (US$4.4 billion) and is growing. 

According to the Stockholm International Peace Research Institute, it has expanded by more than 400% since 2005, when the nation spent just US$1 billion on its military.
We’re now going to take a look at what these increases in state defense budgets mean for investors and the companies that are set to benefit from this increased geopolitical tension.

China
As we explored in a previous post, six countries claim part or practically all of the South China Sea. Each of these countries, bar Brunei, has placed troops or military installations on a minimum of one of the disputed landmasses. 

With diplomacy seemingly reaching a stalemate, defense and arms spending has boomed.
China is a clear leader in this arms race, with a stunning expansion in military spending witnessed since the turn of millennium. 

The regional giant will have doubled its defense budget in only a decade, hitting an enormous US$233 billion by 2020.

To grasp just how much money that is, it’s more than the whole GDP of Vietnam, and nearly the same as the US$250 billion the entire Asia Pacific region combined will spend on arms in 2020. 

That being said, it is also still three times less than the U.S. defense budget.
There is a simple reason China is spending so much on its military: it has serious aspirations to be a global superpower that can counter U.S. influence and curb its ability to affect regional politics and conflicts. 

The main arena where this contest will be either won or lost is the South China Sea.

Taiwan
Taiwan has plenty of reasons to fear the rising power of China. 

The biggest threat for the island nation is not China projecting its power in the region, but the prospect of a blockade that could severely hurt its heavily trade-dependent economy.
Taiwan is also not recognized as a sovereign country by China, which essentially views it as part of its own territory.
This situation was thrust into the spotlight in late 2016 when Taiwanese president Tsai Ing-wen made a congratulatory phone call to Donald Trump after his election. 

It was a clear snub to China, which was enraged at the sudden breach of a decades-old protocol, and added to the tension that has led Taiwan to increase its defense spending to 3% of its GDP (or US$11.6 billion) in 2018.
As we’ve written before, war (or at least the threat of it) can be good for growth, and this increase will likely boost Taiwan’s economy, which has been predicted to expand by 1.9 percent in 2017).
It’s even better news for Taiwan’s defense industry, with a few local companies well placed to profit from the boost. 

Aerospace Industrial Development (Taiwan Stock Exchange; ticker: 2634) builds aircraft for the Taiwanese Air Force, and CSBC Corp (Taiwan Stock Exchange; ticker: 2208) develops the submarines the country will need for countering an aggressive Chinese Navy.

Japan
Japan has recently made the headlines for having North Korean test missiles fired over its airspace. The rogue nation’s acquisition of nuclear weapons – and unpredictability of leader Kim Jong Un -- has forced Japan to revise its normally reserved approach to its military.
Defense Minister Tomomi Inada asked the state for US$44 billion in 2017 with the aim of strengthening Japan’s defensive capabilities, both in the face of an increasingly volatile North Korea and to match the huge increases in China’s spending. 

That was Japan’s biggest-ever defense budget and it looks to be expanding further in 2018.

The majority of that budget will be channeled to realizing two objectives: shoring up defenses on the Senkaku islands – which China also claims – and buying the latest U.S.-developed ballistic missile interceptors to counter North Korea’s growing threat.
Japan’s domestic arms industry has been reliant on its own state budget for decades, as its pacifist constitution prevented companies from selling weapons to foreign countries. 

That’s now changed, and Japanese companies can now sell to the country’s allies, presenting a huge potential for growth in that sector.

North and South Korea
If any country should be really worried about a nuclear North Korea, it’s South Korea. 

Even though open hostilities ended with the Armistice Agreement of 1953, the war between the two sides is still officially active. Both sides have since been engaged in a never-ending arms race to keep up with one another.
North Korea has been largely reliant on China – and previously the Soviet Union – for its conventional weapons, which are mostly outdated. However, it has counterbalanced this disadvantage with a massive amount of troops and an obsessive focus on building a nuclear arsenal.
The ‘hermit kingdom’ expends over 20% of its GDP on its offensive capabilities, which it views as imperative for its survival. 

And even though millions of its citizens living in abject poverty, it has ten times more troops per capita than the U.S.
Its southern neighbor has meanwhile attempted to counter this threat with a focus on cutting-edge technologies. 

At US$38.7 billion, the 2018 defense budget announced by President Moon Jae-in is the biggest ever.
The lion’s share of this will be spent on the ambitious and controversial “Kill Chain” strike and Korean Air and Missile Defense (KAMAD), which are intended to incapacitate North Korean attack capabilities and leadership, and to intercept any missiles it fires.
The North’s nuclear tests have also spurred the South to put in an order for advanced THAAD missile defense systems from the U.S.

ASEAN
The Association of South East Asian Nations (ASEAN) is an organization of countries that includes Vietnam, Indonesia, Cambodia and Thailand. Nations of this size typically don’t possess the capital or ability to run their own military industrial complex, and therefore need to import their military hardware.
Many ASEAN countries are also on the frontline of China’s recent push into the South China Sea, and their spending amongst foreign arms manufacturers has unsurprisingly gone up as a result.

While foreign defense companies have been having a bonanza from ASEAN country purchases, Japan and China have focused on increasing their ability to build their own arms at home.
Make the Most of War
Rising tensions in the South China Sea have led to a massive increase in defense spending. 

As old treaties and alliances that have safeguarded peace in the past become more fragile, profits at defense companies will continue to rise. 

While the situation may lead to war, it also presents big opportunities for investors who take the time to comprehend the complex politics of the region, and where governments are going to spend their cash.

As China Rises, Australia Asks Itself: Can It Rely on America?

The United States, under Donald Trump, cannot be relied on as a stable partner.
By JANE PERLEZ and DAMIEN CAVE

United States Marines marching in Darwin, Australia, this year on Anzac Day, a day of remembrance for veterans. The United States has long been Australia’s security guarantor. 

BEIJING — When the Australian government set out to write a new foreign policy paper, it faced hotly contested questions shaping the country’s future: Will China replace the United States as the dominant power in Asia? If so, how quickly?
The government’s answers came in a so-called white paper released last month by the administration of Prime Minister Malcolm Turnbull. 

For sure, China is challenging the United States in Asia, though in the end, it argues, America will prevail and Australia can count on its security guarantor of the past 70 years.
But a prominent defense strategist, Hugh White, has disputed that view, arguing in a new essay that China has arrived, the United States is fading and Australia must find a way to survive on its own.
The contrasting assessments have set off a debate in Australia about the durability of the American alliance and China’s intentions toward Australia.
The government tried to reassure the public that there was no need to make a choice between China, Australia’s biggest trade partner, and the United States, its security patron. 

Despite the America First policies of Donald Trump, who is unpopular in Australia, the United States of old would endure. 

Australia would deal with the changing environment, it said, by working “harder to maximize our international influence.”
The arguments come against a backdrop of concerns over China’s growing influence in Australia. These include Chinese meddling in Australian universities and ethnically Chinese businessmen with connections to the government in Beijing giving generously to election campaigns.
Australia’s heavy reliance on iron ore and energy exports to China has long raised questions about the need to diversify its economy. 

However, dependence on China has only grown, as an influx of Chinese students and travelers now also helps to sustain the higher education and tourism industries.
Australia has tried to balance its growing economic dependence on China with its longstanding post-World War II security relationship with the United States.
But China’s assertive behavior in the South China Sea, and Trump’s decision to abandon the Trans-Pacific Partnership, the trade pact America once sought to lead, have rattled the underpinnings of Australia’s policies.

Australia’s leaders have gone beyond the white paper’s careful reassurances, openly declaring that Australia must confront the shifting power dynamics of the region.
Mr. Turnbull has called this the first time in Australia’s history that its dominant trading partner was not also its dominant security partner. 

He argued that the country should see this as an opportunity and not a risk, but his comments were also laced with uncertainty and concern.
“Now power is shifting, and the rules and institutions are under challenge,” he said. 

“The major players are testing their relationships with each other, while undergoing rapid change themselves.”
Foreign policy experts say the white paper’s assessment of American staying power does not reflect a growing consensus among many Australian policymakers that the United States, at least under its current leadership, cannot be relied on as a stable partner.
Michael Fullilove, executive director at the Lowy Institute for International Policy in Sydney, described what many Australians see as a fraying of the liberal international order because, he said, “Donald Trump is neither liberal in his inclinations nor orderly in his behavior.”
Many say it’s time for Australia to stop pretending about American intentions, and begin considering other options. 

This view has found one of its clearest and most strident voices in White, whose 27,000-word essay bluntly argues that Australia needs to wake up: The game is over and China has already won.
“We all underestimated China’s power and resolve and overestimated America’s,” wrote White, who worked on sensitive intelligence and military matters with the United States as a senior official at the Australian Defense Department. 

“Not only is America failing to remain the dominant power, it is failing to retain any substantial strategic role at all.”

Trump with Australian Prime Minister Malcolm Turnbull in New York this year. The Australian government says it can still count on American support. 

In reply to the government’s paper, Mr. White said Australia’s stance was unrealistic because it clung too much to the vestiges of a fading power that would not be able to stay ahead of China’s economic strength.
“The paper has an elegiac feel, the sense of a sunset,” he said in an interview.
The biggest splash came from Mr. White ’s recommendations for what Australia should do about an American retreat. 

Faced with Chinese efforts to impose its influence and different political values, he said Australia will have to do more to defend itself, including acquiring nuclear weapons.
China’s rise is likely to spark an arms race in the Asia-Pacific, with both Japan and South Korea likely to become nuclear powers within a couple of decades.
“And the logic that drives them has implications for others,” Mr. White said. 

Australia could remain a middle power by keeping only a small nuclear arsenal. 

“It might look something like Britain’s submarine-based nuclear force,” he wrote.
American officials have tried to counter such conclusions. 

During his visit to Sydney in April, Vice President Mike Pence told Australian business and government leaders that the United States remains Australia’s most vital economic partner, with American investment growing by 50 percent in the past three years.
Another sign that Washington may seek to reassure its Australian allies has been talk of the possible appointment of Adm. Harry B. Harris Jr., the United States commander in the Pacific, as the next ambassador to Australia. 

Some American officials have said they would welcome the move because it would send a message to China that the United States will not retreat.
Australian media have chimed in, calling Admiral Harris “China’s least favorite American.” 

Still, it’s far from clear whether that would be enough to offset the deep concerns here about Donald Trump.
Australia has also tried to hedge its bets by reaching out to other democracies in the region, particularly Japan and India. 

Citing concerns about China’s advance into the South China Sea, the government’s white paper backed the idea of joining India, Japan and the United States to promote a free and democratic Indo-Pacific region that could offset China.
In China, the Foreign Ministry took offense at the comments about the South China Sea, saying Australia had no business meddling. 

The state-run Global Times suggested China might retaliate with boycotts in tourism and higher education.
“Fortunately, the country is not that important and China can move its ties with Australia to a back seat and disregard its sensitivities,” the newspaper said.
In his essay, Mr. White warned that Beijing could use its growing naval power to ramp up pressure by contesting Australia’s claims to remote pieces of Australian territory, such as islands that it controls in the Antarctic, or by deploying forces to South Pacific neighbors, where China enjoys good relations.
Analysts sympathetic to the Turnbull government have pushed back, saying Mr. White’s essay paints an overly alarmist picture.
“While many of the trends in the region are concerning, White underestimates America’s stake in the region,” said Andrew Shearer, who was an adviser to former Prime Minister Tony Abbott. 

Mr. White is “is premature in reaching the conclusion that Trump will acquiesce to Chinese supremacy, and that the United States is already withdrawing.”
Still, the essay performed a useful service, Mr. Shearer said, by drawing attention to the rapidly shifting balance of power in Asia and the need for a more coherent response by Washington.
Chinese analysts said by 2030 China will have won the geopolitical race.

“Everyone will then live under the shadow of Chinese power,” they said.

America does not get entirely short shrift from Mr. White. 

“It won’t be the dominant power in Asia,” he wrote, “but it will have both the means and the motive to exert some influence over China’s conduct — including in East Asia — through the global system in which it will play a key role.”

The Just War

Can Xi Jinping Survive a Nuclear Strike?

By Anthony Capaccio

U.S. intelligence agencies and the Pentagon’s Strategic Command are working on a new evaluation of whether the Russian and Chinese leadership could survive a nuclear strike and keep operating.
The new study, ordered by Congress before Trump took office, drew bipartisan support from members who harbor deep concern about China’s increasing military boldness and distrust of Russian President Vladimir Putin’s intentions.
While Trump has pledged to “greatly strengthen and expand” U.S. nuclear capabilities, he also has predicted he can make deals with Putin that may include reducing U.S. sanctions in return for future cuts in nuclear arsenals. 

The two leaders talked by phone for about an hour on Saturday.
Under the little-noticed provision in this year’s defense authorization measure, the Office of the Director of National Intelligence and the U.S. Strategic Command -- which plans and would execute nuclear strikes -- will evaluate the post-attack capabilities of the two nuclear powers. 

The law mandates a report on Russian and Chinese “leadership survivability, command and control and continuity of government programs.”
The review is to include “the location and description of above and underground facilities important to the political and military” leadership and which facilities various senior leaders “are expected to operate out of during crisis and wartime.”

U.S.’s Own Plans
The Strategic Command is also directed to “provide a detailed description” for “how leadership survivability” and “command and control” in Russia and China are factored into the U.S.’s own nuclear war planning. 

The directive was championed by Republican Representative Michael Turner of Ohio, a member of the House Armed Service Committee’s Strategic Forces panel.
“Our experts are drafting an appropriate response,” Navy Captain Brook DeWalt, a spokesman for the Strategic Command, said in an e-mail. 

While “it’s premature to pass along any details at this point, we can update you further at a later date.”
Trump has signaled support for upgrading the U.S. nuclear arsenal. 

In a memorandum on Friday, he ordered Defense Secretary James Mattis to “initiate a new Nuclear Posture Review to ensure that the United States nuclear deterrent is modern, robust, flexible, resilient, ready, and appropriately tailored to deter 21st-century threats and reassure our allies.”
The government already was planning what arms control advocates say may be a trillion-dollar modernization of the air-sea-land triad over 30 years starring in the mid-2020s when operations and support are included. 

Those plans were approved under Barack Obama.
“The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes,” Trump wrote in a Dec. 22 Twitter posting. 

Also in December, Mika Brzezinski, co-host of MSNBC’s ‘Morning Joe’ show, said Trump told her in a phone call: “Let it be an arms race. We will outmatch them at every pass and outlast them all.”
In addition, Trump and his national security team have vowed to confront China on issues from trade to its territorial claims in the South China Sea.

‘Doomsday Clock’
Last week, the Bulletin of the Atomic Scientists cited “nuclear volatility” along with climate change as reasons it has moved up its symbolic “Doomsday Clock” by 30 seconds to two and a half minutes to midnight, the closest to a potential global disaster since 1953.
Representative Turner said in an e-mail that the U.S. “must understand how China and Russia intend to fight a war and how their leadership will command and control a potential conflict. This knowledge is pivotal to our ability to deter the threat.”
Russia and China “have invested considerable effort and resources into understanding how we fight, including how to interfere with our leadership’s communication capabilities,” he said. 

“We must not ignore gaps in our understanding of key adversary capabilities.”
Targeting “leadership and relocation locations is part of long-standing U.S. strategy to make clear that potential enemy leaders understand they cannot win a nuclear war,” Franklin Miller, a former senior Pentagon official who served under seven defense secretaries and as the National Security Council’s senior director for defense policy and arms control, said in an interview.

Command Bunkers
Because such issues have been part of U.S. nuclear planning for decades, Turner is probably raising more specific issues he can’t talk about publicly, Hans Kristensen, director of the Nuclear Information Project at the Federation of American Scientists, said in an e-mail.
Nuclear leaders in Russia and China “plan to direct nuclear forces from inside command bunkers buried deeply beneath the earth or deeply inside mountains,” said Bruce Blair, a Princeton University research scholar on nuclear security policy and co-founder of Global Zero, a group devoted to eliminating nuclear weapons.
Turner’s statement implies that “deterring them requires U.S. strategic cruise missiles that can maneuver around the mountains to strike the bunkers from any angle,” Blair said.