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Sanctions on Russia: the Hidden Cost for the EU

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A huge poster of a sleek airliner touching down on the runway greets visitors in the arrivals foyer, with the message Dobro Pozhalovat, welcome in Russian, printed in Cyrillic in large capital letters. But this isn’t an airport in Russia, nor in a city of the Commonwealth of Independent States (CIS, the heir to the former USSR), and neither in a neighbouring state with a Russian-speaking minority. It is in the airport of Prague, capital of the Czech Republic, an EU member state, and a major transport hub in the middle of Europe with rail and road links to German, Polish and Austrian cities. The poster, and all the other signs in Cyrillic which dot the terminal, send a clear signal: Russian visitors, and the business they bring, are welcome.

Russian investment has been flowing into the Czech Republic, in the form of property investments, finance and digital services, as they have in many other parts of the EU. Despite the fanfare connected with the recent opening of a gas pipeline supplying China, the EU is Russia’s economic partner of choice, according to Eurostat, with business with the single market accounting for over 40% of total trade. Economic interdependence has been growing between the two, reaching an unprecedented peak in 2012. In Germany, for example, exports to Russia made 3.4% of total exports in 2013.

And it’s not only oil and Gas which Russia exports to the EU and the rest of the world. The olive-green signs of one of Russia’s leading lenders, Sberbank, are a common sight across Prague as well as other European capitals. Sberbank and its rival bank VEB also have a presence in Austria, Cyprus, Slovakia, Hungary, Germany and France. Tourism is on the up too: on the streets of central Milan it is extraordinarily common to see menus and information displays in Russian as well as English and Italian. Milan has become a fashionable destination for Russian tourists, and the local tourist industry is desperately trying to exploit this rare area of growth, a boon for the cash-strapped Italian economy in these years of austerity and anaemic economic performance.

Back in the motherland, European companies, from German manufacturers to Italian fashion brands to British retailers, have been quick to establishing themselves in the Russian market, exploiting its rapidly growing middle-class with its hunger for Western consumer goods. The local beer market is largely in the hands of local subsidiaries of the Danish brewery group Carlsberg, which generates almost a third of its global profits from Russia. And, of course, there is the cooperation in the energy sector too. BP has a large share in the Russian Oil giant. Rosneft, which in turn recycles profits back to Britain,

These are all reasons why the introduction of tough economic sanctions in summer by the EU and the US as a response to the Russian intervention in the Ukrainian crisis represent a novelty for European and international diplomacy. Previously, ‘rogue’ states who were targeted by sanctions tended to be poor, underdeveloped basket cases, with close to insignificant trade links with the EU, which mostly went one way. This time, it’s different: the sanctioned country is not an isolated economic backwater, but a leading emerging market, a global economic player, a member of the G-20 with important industries (and of course, a former superpower). This is frontier territory, an unprecedented situation for the international sanction regime which is still in its infancy, and can generate unexpected consequences for the EU and the west.

First of all, Russia has the capacity to retaliate: it showed it earlier this year, when it unleashed its regulatory claws on the two leading card payment operators, Visa and Mastercard, guilty of cutting services without warning to Russian customers following the first threats of sanctions by the US. The two multinationals had no choice but to comply with the tough new regulations if they wanted to continue servicing the Russian market, agreeing to set up processing centres on the soil of the Russian federation and to pay service charges and hefty fines if things went wrong again.

Then, there are the economic costs of lost business for European companies in Russia: the Carlsberg group, for example, has been hit hard due to its exposure to the Russian market, and has had to issue a profits warning. The EU has come under pressure from sectors of the business community to relent on some of the sanctions. The Council, at the time of issuing the sanctions, has made exceptions for European branches of Sberbank which can continue to trade under normal conditions on the territory of the member states they are already established in. The minister responsible for EU affairs, Andrew Lidington, admitted the costs to UK and European business of the sanctions imposed on Russia. Speaking to the BBC, he said, “There is undoubtedly a cost to us and I don’t think anybody from the prime minister down has pretended otherwise, just as there is for German companies, French companies, Italian companies, [and] American companies, whose governments have also introduced sanctions.”

The current crisis cannot turn into a rerun of the Cold War, as has been suggested in some circles, because the economies involved are much more interlinked than before the fall of the Berlin wall.And yet, more sanctions are on the horizons. The current batch has proved incapable of moving the Russian Administration from pursuing its current goals in the Ukraine. Will the introduction of new, tougher sanctions, despite the adverse effects on Western economies as well as on Russia, be able to bring about a new course in foreign policy? With warnings from the Russian ministry of finance that the economy is projected to shrink by 0.8 % next year and the Rouble tumbling ever lower in foreign exchange markets, the economic arguments are there to suggest a change in Russia’s behaviour to be likely. Evidence suggests, however, that it’s not rational economic arguments that win the day in the Kremlin council rooms but visions of imperial grandeur.

Opinion

Is there such thing as cyberwar?

Alexandra Goman

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Two decades have passed after Arquilla and Ronfeldt in 1993 warned the public about an upcoming. They were also the first to introduce a concept of cyberwar and give an elaborated opinion. They referred to a conduct and preparation of military operations using information-related principles and also invoked a link between intelligence (the collection of information for political or military purpose) and cyber operations. Now, the scale of intelligence has significantly expanded.

Interestingly, before cyber appeared, there was a radio which was used for intelligence purposes and was weaponized later in the World War II. From that time on, electronic warfare became standard characteristics of a modern conflict. Despite this, there is a key difference between electronic warfare and a cyber one. Traditional electronic warfare aimed to guide, target, or protect weapons systems (Ibid., p. 24). In contrast, cyber makes today’s weapons and military systems smarter but also more vulnerable for an attack.

At the moment everyone still wonders what the whole idea of cyberwar means. There is no accepted interpretation or definition. Furthermore, many experts even say that such war does not even exist (or cannot be referred to the notion of “war”). Perhaps, it is due to the fact that a war in cyberspace has not yet happened. To make it clear, cyber capability has not actually killed anyone and a code has not been used as the use of force.

Similarly, the dangers of a nuclear bomb were recognized only after its use, the same goes to the notion of “nuclear war”. Although there have been many cyberattacks, none of them have been raised to the level of war because none of them, in fact, caused the level of damage which could be adhered to the level of a large-scale conflict.

Cyber warfare has derived from different aspects of conventional warfare and traditional definitions of war. It usually involves organized units within nation-state in offensive or defensive operations which are part of a war or a conflict.

In general, since cyber study is relatively new, there are many competing terms and definitions to explain cyber phenomenon. The following concepts – the revolution in military affairs, electronic warfare, information warfare, and cyber war – have been all offered to describe the new emerging area of conflict. Experts do not agree on any particular term, more often using different notions when talking about cyber issues. Nonetheless, it is vital to understand the facts of the 21st century similarly to the need that rose along with the invention of atomic reaction. A major concern now is no longer weapons of mass destruction, but weapons of mass disruption. (2009, p. 47).

One of the central elements to define a cyberwar, is that it has to meet the same criteria, applied to any other type of war. Vandalism or spying is an act of crime, but they do not start wars. So, assumingly, there has to be physical destruction and casualties in order to declare a war.

Therefore, a cyberwar should have real world damage similar to a conventional war. For this matter, it should probably take place in a digital world. What is not clear, however, is whether it should be fought exclusively in cyberspace or it can accompany a conventional attack too. This aspect is quite interesting, because cyberattacks can easily be used in combination with a kinetic attack and can multiply the force and power of the attacker.

In this case, it does not make sense to create a new term “cyberwar” as it falls down under the same definition of war. It is the same example when aerial bombings supported the attacks on the ground during the World War I, but in the end we called it a war, not a particular type of war. Consequently, cyber introduction resembles more a revolution in military affairs, rather that a new emerging type of warfare.

What is clear, though, is that the difference in definitions complicates the matters of regulating cyberspace and prevents achieving a common ground on cyber issues and/or developing new treaties and agreements between the states. So far there is no international agreement on the cyber principles, despite some attempts of the states to engage into negotiations (Budapest Conference on Cyberspace, the World Conference on International Telecommunications). There is, however, the Convention on Cybercrime, the first international agreement that addresses compute crime, adopted by the Council of Europe. Interestingly enough, Russia (as a part of the Council) neither signed nor ratified the agreement, whereas US (not part of the Council) recognized it and ratified it.

Apart from these difficulties in defining cyberwar, there has been a hyperbolic use of the word itself, mostly by media and tabloids (e.g. The Washington Post, “We are at cyberwar and we are our own enemy”; The New York Times, “How to prevent Cyberwar”; Zdnet, “Cyberwar: a guide to the frightening future of online conflict”; Komsomolskaya Pravda, “Are we expecting the First World Cyberwar?” etc.). They do not usually give any concrete information but are eager to use this term and apply it randomly to different cases just because it sounds good.  All in all, uninformed public use of the word has enormously contributed into the heat surrounding cyber implications.

Futher, cyberattacks are too often discussed equivalently, regardless of its impact. In this sense, minor cases like ransomware or phishing might be raised to the level of an armed attack (especially if they affect multiple computers worldwide). Yet, these cases are good examples of cybercrime, and crime is not a war. When individuals engage into this type of activity, they do not engage in a war.  The same goes for espionage in cyberspace. Catching a spy on one’s territory will certainly put pressure on bilateral relations, but it would not start a war.

This exaggeration of cyberattacks can be explained through securitization theory. The notion offered by the Copenhagen Security School describes how a certain concept can be politicized and securitized to the extent that it becomes a threat to national security (See Buzan, 2006).

To conclude, it should be mentioned that there is no guidance for the conduct of “cyberwar”.  There are no internationally agreed definitions and, to that extent, the whole idea of cyberwar so far seems unrealistic. At this moment technology is not sophisticated enough to ensure a military conduct entirely in cyberspace. Besides, any cyberattack of such scale would presumably result in a physical destruction, which consequently might provoke a conventional retaliation attack. This, in result, would cause a war we know for years, so there is no need to introduce a particular type of war. On another note, using cyber operations to support a conventional war and/or conflict is the way to go, but in this case it is just a revolution and modernization in military affairs.

I would be interested to hear your opinion about that in the comments below.

For further information see:

1)    A movie “War Games” (1983)

2)    Arquilla, J. and Ronfeldt, D. (1993). The Cyberwar is Coming! RAND Corporation, [online] Available at: https://www.rand.org/pubs/reprints/RP223.html

3)    Cetron, M. J. and Davies, O. (2009). Ten critical trends for cyber security. The Futurist, 43(5), pp. 40–49.

4)    Stiennon, R. (2015). There Will Be Cyberwar: How The Move To Network-Centric War Fighting Has Set The Stage For Cyberwar. Michigan: IT-Harvest Press.

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Opinion

On the issue of cyber security of critical infrastructures

Alexandra Goman

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There is a lot of talk in regards to cyberattacks nowadays. A regular user worries about its data and tries to secure by all means necessary. Yet, no one really thinks whether the power plants or nuclear facilities are well secured. Everyone assumes that they should be secured.

The reality, however, differs. According to many reports of cyber security companies, there is an increased risk of cyberattacks, targeting SCADA and ICS. Supervisory Control and Data Acquisition (SCADA) is used for the systems that control physical equipment – power plants, oil and gas pipelines, they can also control or monitor processes such as heating or energy consumption. Along with Industrial Control Systems (ICS) they control critical elements of industrial automation processes. Exploiting vulnerabilities of critical infrastructures can lead to the consequences of unimaginable scale. (These types of attacks are actually used in a cyberwar scenarios and hypothetical military settings).

Source: Fortinet, 2015

There are many reasons why these systems are vulnerable for attacks. First of all, the main problem is that these systems have an old design; they were built before they were connected to any networks. They were later configured to connect via Ethernet, and that’s when they became a part of a larger infrastructure. The more advanced SCADA system is becoming, the more vulnerabilities are these to exploit. The updates should be regular and on time. Secondly, there is a lack of monitoring. New devices that are connected allow remote monitoring, but not all devices have the same reporting capabilities. There are also authentication issues (weak passwords, authentication process), however, this is supposed to restrict unauthorized access (See Common SCADA Threats and Vulnerabilities at Patriot Technologies, Inc. Online).

In these scenarios, there is no certainty to know what is going to backfire because of the complexity of communications and power networks. This is also called a cascading effect of attacks. Not knowing who is connected to who may cause major disruptions. The example of the US East Coast power blackout in 2003 proves this point (a failure in one element of the grid spreads across other electrical networks). However, given this, it is also complicated for an attacker to predict consequences, if an attack executed. This kind of attack can easily escalate into more serious conflict, so it might not be the best option for states to employ such methods.

Moreover, there is a risk to damage a critical infrastructure unintentionally. That is if a virus or worm did not intend to target SCADA but happen to spread there as well. The uncontrollability of the code may seriously impair the desire to use it, especially when it comes to nation-states. For instance, in 2003 a worm penetrated a private network of the US Davis-Besse Nuclear Power Station and disabled a safety monitoring system for 5 hours. In 2009, French fighter jets could not take off because they were infected with a virus.

Indeed, a scenario where an attacker gains access to a SCADA system and manipulates with the system, causing disruptions on a large-scale, might be hypothetical but it does not make it less possible in the future. However, the only known case so far, which affected an industrial control centre, is Stuxnet. It did not result in many deaths, yet it drew attention of the experts on the plausibility of future more sophisticated attacks. These potential upcoming attacks might cause the level of destruction, comparable to that of a conventional attack, therefore resulting in war.

Further reading:

Bradbury, D. (2012). SCADA: a Critical Vulnerability. Computer Fraud & Security, 4, p. 11-14.

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Opinion

Briefly about the Russian Political Discourse

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As you may have noticed, the recent international discourse has been rotating around Russia and its relations to other countries for a long time. Needless to say that after the events in Georgia/Ukraine, this discourse is far from friendly. Some even say that rhetoric of the Cold War has returned. What makes people abroad wonder is why Russia chooses to respond to its foreign partners in this particular way? Why is it the way it is?

To begin with, there are several reasons that shape Russian rhetoric. First of all, they are historical and cultural values. Russia sees itself as a defender of its rights and identity and someone who is not going to follow someone else’s rules. Back to the 13th century, the grand prince (rus. knyaz) Aleksander Nevsky only accepted submission  to the Golden Horde to protect the Russian culture and belief, therefore depriving the West of the opportunity to take over its territories.  This mentality still governs the minds of people. Today, current political rhetoric is doing the same by refusing the Western pressure and external interference into its business.

After the Golden Horde, Russia has managed to maintain its unity. Back then, the East saw the country to be an heir to the great Byzantine Empire. Meanwhile, the enormous size of the country was rather intimidating; and even more, when it started acquiring new territories (remember reaction to the situation with Crimea).

On the one hand, Moscow tries to present itself strong when it communicates with the Europe; on the other hand, the Western neighbours seem to use the same old-fashioned strategy to isolate the big neighbour. Since the time of Ivan the Terrible, no one really has wanted strong and stable Russia and there were steps before to prevent the unity of Eurasia.

The long history of Russia plays a big role in forming the modern mind of the citizen and current political rhetoric. Russian people and the government would not admit defeat and would do anything possible to prevail, even if it means to live in humble circumstances for some time (think of the continuous sanctions).

The tough policy of Peter the Great, the emperor of Russia, has brought the country to a new level in comparison to others. At that time already, all the international questions were only resolved with the help of Russia. In the following years, the power of the country kept growing only to solidify during the rule of Catherine the Great. The famous grand chancellor of Russia and the chief of foreign policy Bezborodko used to say, “I don’t know how it will be at your time, but at this time not a single gun is allowed to fire without our permission”[1]. Now, Russia tries to achieve similar influence.

The period after the World War II proved to be fruitful for the development of the European countries. While the US and USSR were competing, Europe was free from deciding on serious issues, so it could absorb and enjoy the time of quiet development.

Nonetheless, there has been a clear confrontation between the two ideologies, Nazism and Communism. Even though the USSR did not try to exterminate the nations, the scary ghost of the USSR keeps frightening the rest of the world. The impression of “evil USSR” flying over the international relations is still there and penetrates the minds of the people.

After the collapse of the USSR, there was a chance to promote peace and peaceful coexistence.  Russia has repeatedly expressed its interest in it, yet the Western partners have chosen another way:  NATO enlargement to the East (which is believed to be a broken promise).  Interestingly enough, George Kennan, the so-called creator of containment policy of Soviet expansion, considered the NATO expansion a tragic mistake.

All in all, abovementioned factors play a significant role in shaping the Russian political discourse. Cultural and historical values, national pride (and therefore negative feeling towards the Western sanctions) as well as the use of state symbols to unite the country are the most important rhetoric tools in the Russian language arsenal. Its constant and regular transmission through the media and other communication channels make this rhetoric influential and persuasive.

[1] [URL: http://www.istmira.com/istoriya-rossii-s-drevnejshix-vremen-do-nashix/290-kakovy-itogi-i-posledstviya-vneshnej-politiki.html] [дата обращения: 20.05.2016]

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