Ukraine, Snowden, and SIGINT proliferation

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OK, so what do EU chief diplomat Catherine Ashton, US assistant secretary of state Victoria Nuland, Estonian foreign minister Urmas Paet, Russian ambassador to Eritrea Sergei Bakharev, and his colleague in Zimbabwe Igor Chubarev all have in common? They’ve all had their mobile phone calls intercepted and leaked onto the web.

The first three, well, Russia, obviously. The bizarrely distant ambassadors are presumably a gesture by the US to demonstrate the reach of the NSA. At least that is what you might have said a few years ago. But we live in an age of intelligence proliferation today.

If you want to intercept GSM calls these days, you need a USRP, a few hundred dollars’ worth, and copies of GNU Radio, OpenBTS, and a few other open-source software packages, all of which are entirely free. Osmocom will be useful too, also free. A couple of £15 Motorola C115 phones. And of course a laptop. (If you just want to listen to voicemail, well, call Glenn Mulcaire.)

The same computational abundance that made it possible for the NSA and friends to overreach so spectacularly has also brought capability that not so long ago was reserved to them within the power of hayseed cops, nonstate groups, and competent individuals with a few hundred bucks. It didn’t have to be the Russians; it could have been Yanuk’s cops, or freelance anti-Maidan activists, or even rebels hoping to force the EU to act. It’s now probably easier to intercept real traffic and edit the recording before leaking it than it is to fake the whole thing.

You’d think people would take more care – someone should point the EU SITCEN at the Blackphone project at least – but then I learned something interesting. The State Department, after all, has all the secure communications it needs, but they have the problem that they are not secure against the boss, and fairly often it is necessary to say things you don’t want to send back to Washington. It’s a fascinating lesson.

In the other direction, here’s a detailed discussion of the Mexican Zetas’ radio network, although sadly lacking in technical content.

In general, we should expect much more of this.

This interacts with the whole Snowden affair in complicated ways. There’s a reassuring story (well, for some people) that says: Look, the silly Europeans and journalists and such have run into the Russians now. It’s like the Cold War. I’m young again!

Of course, it’s actually true that NATO member states near the borders are worried and are asking urgently for the alliance’s forces to be seen more often. But we shouldn’t be fooled that the case is now closed. Those same states are also exposed to information security threats, and the NSA (and friends) interference with major security infrastructure projects has exposed them further. It has also harmed the degree of confidence their allies can offer them. It’s in the nature of the technology that once you create an exploit, you can’t guarantee others won’t find it.

This also matters for less macro-scale politics. Back in 2007, I played a minor role in Dan Hardie’s campaign to get the British Army’s Iraqi employees landed in the UK. This involved communicating with people in places like Syria who were under varying degrees of threat, and Dan asked me for advice. At the time, you could be reasonably confident in Skype’s encryption and its distributed architecture, and that’s what we used. It had the huge advantage that it was utterly uncontroversial software that anyone might have, and that didn’t require us to distribute code or key material securely. I gave quite a bit of thought to this, in case it became necessary, and never arrived at any solution I found even close to convincing myself, let alone anyone else.

Today, thanks to the subversion of Skype, I would have to come up with some sort of scheme to deploy one of the hardened messaging apps, probably circumventing censorship en route, generate keys, and get them deployed and configured. Granted, most of the users would have a smartphone or netbook or tablet with them rather than using untrusted public machines, but on the other hand, potential interceptors are so much more aware of the possibilities now I think I might not try. In the current case, this activist in Belarus appears to have had his Skype calls intercepted.

This is a pity. Eli Lake reckons the US won’t share satellite imagery with Ukraine, but I’m not sure of the sourcing and I keep seeing US diplomats tweeting overhead photos. Do they need to, though? Proliferation cuts both ways. As I was saying with Dr Strauss, advice on working with the new tool set might be as good or better. Like this. Or this:

There’s a better photo here – the ones with the bubble under the nose are the Mi-24 attack helicopters.

No-one who reads this has any voice in the decision, but whether Insider Guy, Intelligence/Administrative Guy, or [name redacted, yes, seriously] gets the GCHQ top job is far less important than whether we decide to free the CESG security wing of the organisation and bring it back to London.

Quick debate point

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An EU debate point. Martin Schulz just pointed to the German government’s scrappage bonus as an example of “protecting the hard core of German industry, automotive production, by keeping the people there” that justified an increase in sovereign debt. The reference to “keeping the people there” also implies he was thinking of kurzarbeit.

A coalition for Schulz?

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Jean-Claude Juncker and Martin Schulz are debating, live on France24. Glued, of course. As someone has already said on Twitter, Schulz speaks better French than Juncker. JCJ has also said that Gerhard Schröder “introduced budget discipline in Germany”. Schröder got let off for breaking the stability pact!

Anyway, we were blogging about the European Parliament getting more partisan and at the same time, more powerful. Under a deal between the political parties, they’ve agreed to veto any candidate put forward by the governments that they don’t like. This move means, paradoxically, that the side who wins the elections might be able to name the commission president.

Last week, the parliament passed a version of the latest lot of telecoms regulations that requires intra-European roaming charges to disappear by the end of 2015, makes various changes regarding how telecoms services can be marketed, and introduces quite strong net neutrality language. This included a definition of “specialised services” that basically rules out the idea of reclassifying, say, Netflix or YouTube as a specialised service carrying a fee for preferential delivery. (There’s also some dull technical stuff about spectrum management that only people like me care about.) ETNO, the European telco lobby, had been relying on the specialised services clause to kill the net neutrality element, so this bit is crucial to the whole thing.

My point, though, is that the amendments in question, numbers 234 to 236, were introduced jointly by the Socialists, the Liberals, the Greens, and the extreme-left group. It looks like the Right chose to fold when they realised they couldn’t get rid of the amendments, as the package passed by 534 votes to 25.

This starts to look like a transition from the permacoalition between the conservatives and the socialists to an alliance between the parties of the broadest possible Left. Something similar is going on in Germany, where Der Tagesspiegel has a good discussion of how a group of SPD, Green, and Left Party politicians are putting connections in place for a potential future coalition.

Right on schedule

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Last night, I noted that staged takeovers of local government buildings in eastern Ukraine are

one of the shoes that everyone keeping track of the crisis has been expecting to drop (Odessa and the region that was known in the 19th century as “New Russia” is another).

This morning, Radio Liberty/Radio Free Europe reports:

RFE/RL’s Ukrainian Service quotes local media as saying around 100 pro-Russians attempting to surround a government administration building in the southern city of Mykolaiv were thwarted after police moved in late last night. There were several injuries in the ensuing clashes, which also pitted the pro-Moscow ranks against members of a pro-Ukrainian group. (From their liveblog 0923, 8 April 2014. Here’s the original report in Ukrainian.)

Mykolaiv is a city of about a half million people, a major shipbuilding center about halfway between the Crimea and Odessa, along the main road between the two.


View Larger Map

Let’s hope the police and local authorities in Kherson are equally loyal to Ukraine, and equally alert.

Odessa, of course, is the real prize of the southwest, and not just for the nightlife or the film nostalgia. Odessa is also just a good day’s bicycle ride from breakaway Transnistria. These lands were conquered by the Russian Empire in the late 18th century, somewhat after the American Revolution broke but before the French. The Crimean Khanate had left them sparsely settled, and homesteading in “New Russia,” as the region was known, was a major development of the 19th century. Before World War II, it was a significant area of Jewish settlement. In short, the pretexts are there, if Russian forces want to meddle.

The second act of Ukraine’s test has only just begun.

Stress test

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Reports from eastern Ukraine that pro-Russia (perhaps one should write pro-Putin or pro-annexation) protesters have seized local government buildings in Donetsk, Kharkiv and Luhansk. The protesters in Kharkiv seem to have been driven back. In Luhansk, they seized weapons from a local arsenal and set up barriers in the main streets; Ukrainian police have sealed off access to the town. (As well they might. Parts of Luhansk are less than 10km from the Russian border.)

In Donetsk, they have seized an administration building, proclaimed a “People’s Republic of Donetsk,” called for a referendum on sovereignty on May 11, and asked for Russian troops to come as “temporary peacekeepers.” Temporary until another annexation treaty could be printed out, one presumes.

Here is how the Russian Foreign Ministry reacted to these developments:

“If the irresponsible attitude toward the fate of the country, the fate of their own people, on behalf of the political forces that call themselves the Ukrainian government were to continue, Ukraine would inevitably face ever new difficulties and crises,” ministry spokesman Aleksandr Lukashevich said today. “Enough finger-pointing at Russia — blaming it for all the troubles of today’s Ukraine. The Ukrainian people need to hear from Kyiv clear answers to all questions. It is time to listen to these legitimate demands.” (As reported by the Radio Free Europe live blog at 1911 today, Kyiv time.)

Key phrases to note: “the political forces that call themselves the Ukrainian government” and “legitimate demands.” With these words, Moscow is again signalling that it does not recognize the interim Ukrainian government as legitimate. The Kremlin still regards Viktor Yanukovych as president of Ukraine, never mind that he now has about as much chance of holding that office as I do. As for “legitimate demands,” if you — as a government — consider someone who last won 4% of the vote the legitimate spokesperson of a region (as Russia did with Crimea), that is a very elastic reading of the word “legitimate.”

(As I write, the channel “Kharkov antimaidan” on ustream.tv is broadcasting live from the square in front of the administrative building in Kharkiv. It’s about 30 minutes past midnight, local time, and a great many people are milling about on the square. My Russian is not good enough to follow the narration of the POV broadcaster. Sometimes living in the future, as we do now, seems surreal.)

This is one of the shoes that everyone keeping track of the crisis has been expecting to drop (Odessa and the region that was known in the 19th century as “New Russia” is another). Not quite a month ago, I wrote that if Crimea was the Anschluss, the Kharkiv, Donetsk and eastern Ukraine are the Sudetenland.

Here’s my checklist from last month:

Some real tension, ((check)) mostly trumped up and stage-managed confrontations ((check)). Pleas for “protection” from some parts of a particular nationality to the outside power ((check)). Not fooling anyone ((check)). In contrast to then, Kiev would try to defend the frontier region militarily.

So that’s where we are now.

Ukraine’s acting president canceled a visit to Lithuania and described the eastern Ukraine occupations and unrests as “the second wave in Russia’s special operation against Ukraine.” US Secretary of State John Kerry told Russian Foreign Minister Sergei Lavrov that the actions did not appear “spontaneous.” The White House has suggested there is “strong evidence” that some of the pro-Moscow protesters “were paid and not local residents.” The Moscow Times reminds readers that ethnic Ukrainians account for 56.9% of the population in the Donetsk region, 70.7% in the Kharkiv region and 58% in the Luhansk region. (Caveats about ethnic identification in that part of the world duly noted.)

This is a very serious stress test both for Ukraine’s interim government — and don’t forget, they are preparing for a presidential election in less than two months — and for the European state system as it is presently constituted.

How much of a revisionist power has Putin’s Russia become? That’s the most important question hanging over Europe right now, and precious few people know the answer. If indeed anyone at all knows.

The pretexts are all there. Will the Russian government and armed forces take them up and further dismantle a European state?

Buy Me Some Peanuts and Cracker Jacks

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Once upon a time, there was a lovely newspaper known as the International Herald Tribune. Each year on baseball’s opening day, the paper would publish its late sports editor Dick Roraback’s poem recalling what it was like to be Over Here when the season was starting Over There.

Its language is sliding toward the archaic, its references even more so — although while Forbes and Griffith have been gone for decades, the Nats are back and playing their 10th season — but since the international edition of the New York Times (the Hairy Trib’s successor) won’t be putting any rhymes on its sports page today, we might as well.

Under the fold, “The Crack of the Bat.”
Continue reading →

Il faut sauver le soldat Juncker. Pourquoi, on ne sait pas

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What about some actual European politics? Jean Quatremer has an interesting story. He starts off with a joint profile of Martin Schulz and Jean-Claude Juncker – and I presume I’ve now lost 90 per cent of the readers – but then it gets interesting.

So, the political parties in the European Parliament decided back in 2011 to name top candidates at the elections, and then to treat the winner’s top candidate as the Parliament’s candidate for President of the European Commission. All parties did this except for the extreme right and the odd new group with the British Tories in, who decided not to name a top candidate. The Parliament doesn’t get to nominate the president, but it does have a veto. This now starts to look a lot like the Parliament getting to choose, as the parties have agreed to veto anyone, expect the top candidate who wins the election. You could even call it democracy, of a sort.

It seems that Angela Merkel, and the intergovernmental wing of the EU more widely, doesn’t like this much. It is, after all, an effort by the elected branch to take over more power. Although everyone claims to want a more democratic EU, nobody wants this to happen at the expense of their own power. So, there is a plan afoot.

Juncker, the continental chief conservative, would be appointed as president of the Council immediately, on polling day. Therefore, the Parliament wouldn’t have the chance to appoint him to the Commission, and the agreement between the parties would no longer be valid as there would no longer be a conservative chief candidate.

This might throw the whole issue open, and leave it to the freies Spiel der Kräfte as they say in German politics. Alternatively, it might leave the Commission to the Left. Merkel would keep some sense that the intergovernmental power controlled things, keep Juncker in yet another of his countless eurojobs, and get a German at the Commission, although she would have to tolerate a Social Democrat.

Schulz, for his part, is setting up a coalition of the very broadest Left to back him in the case that he either wins the elections, which is possible, or that Merkel has Juncker lifted out by helicopter. This means the end of the weird longstanding coalition between Socialists and Conservatives in Brussels. Told you there was something interesting in here.

That said, I can’t help thinking that the whole manoeuvre with Juncker is exactly the sort of thing that millions of Europeans hate about the EU. He has been something pompous in the EU for the whole of my life and I can’t think of anything he has achieved with it except for protecting the Luxembourg tax haven. Now the prospect of him losing an election is greeted with some scheme to give him yet another eurojob in pursuit of an institutional politics spat maybe 0.01% of Europeans could describe.

Over at the Open Europe Blog, a comment on a post about the AfD says:

The issue is that nowhere in Europe the combination between desillusioned voters and business oriented policies seem to be very appealing. It looks to be one or the other. There looks to be room for a more business oriented party in most countries.

The answer is, of course, that they’re disillusioned with the business-oriented policies and the Junckerist politics.

Price and quantity

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An upshot from the last post. Markets can adjust by price, or by quantity. Economics usually assumes that they do both simultaneously, although the maths usually doesn’t work that way. There is no reason I can think of to prefer either mode of adjustment a priori, but practical applications will usually show that one or the other would be better.

In the radical view that markets are institutions that are defined by the societies that create them, it is a very important question whether a new one (or an old one undergoing change) will tend to adjust price-first or quantity-first.

Still in search of requisite variety: UK housing edition

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The search for requisite variety goes on. At the moment, the big guessing game in British macroeconomics is “when does the Bank put up interest rates?” The following story suggests that this is beside the point.

The statement noted that mortgage loan demand like the mortgage loans from Five Star Bank was up 40% in the year to January, while surveys by the main mortgage lenders suggested prices were around 10% higher in February than a year earlier.

It said: “In a continuation of a longer-term trend, mortgages at loan-to-income ratios above four times accounted for a higher share of new mortgages in the third quarter of 2013 than at any time since the data series began in 2005. New mortgage lending at high loan-to-value ratios remained low by historical standards, though the number of mortgage products offering higher loan-to-value ratios had doubled over the previous six months.

“Given the increasing momentum, the FPC will remain vigilant to emerging vulnerabilities, will continue to monitor conditions closely and will take further proportionate and graduated action if warranted.”

Threadneedle Street intends to oblige banks and building societies to carry out stringent stress tests later this year to see whether they would find themselves in trouble in the event of a slump in house prices or a sharp rise in interest rates.

Oh jesus here we go again

Yeah. Interestingly, most of the classic bubble pathologies are showing up – try this for size – but for the first time in my life, this seems to be accompanied by dread, not euphoria. Nobody is cheering.

These stress tests are interesting. First of all, the fact that the Bank needs to audit the banks to work out if it is actually possible to increase the policy rate without triggering a major bank failure is itself evidence that the situation I described in the original In Search of Requisite Variety post is coming to pass. The rest of the economy is more than lacklustre but the housing market is going ape again.

Secondly, the version of that story that appeared in the paper contained several paragraphs that don’t appear in the web version. For example:

Amid growing concern that the central London property market is already overheating, the Bank’s financial policy committee said that from June it wanted to have the powers to set the interest rate scenarios lenders would have to consider when granting home loans

Another quotes Brian Hilliard of Société Générale as saying:

Both of these metrics, loan-to-value and loan-to-income, appear in the list of potential future tools the committee could use. The FPC would probably move first on loan-to-income. The problem with controlling loan-to-value ratios is that it might be thought to run contrary to the idea of the government’s Help to Buy scheme

What’s going on here is that the Bank is seeking requisite variety. Specifically, they’re trying to create policy tools to address a housing bubble without imposing monetary contraction on the whole economy. Setting “the interest rate scenarios lenders must consider” and then auditing them should lead the lenders to turn down more applications for very large mortgages. Setting a limit in terms of loan-to-income would have a similar effect on mortgages applied for by borrowers who might struggle to repay them. Rather than changing the price of credit economy-wide, this would mean that some new applications would be credit-rationed.

This, of course, represents finance being re-regulated. In the de-regulation era, it was thought that the big issue was the overall price of credit, which a central bank could control. Its distribution among borrowers, sectors, and geography would find its own level. Brad DeLong’s Republic of the Central Bankers gets at this weird combination of enormous central-planning power vested in the Fed, and its restriction to hugely general and rough measures.

It was hoped that this represented a sensible compromise between the need for a stabilisation policy, and the avoidance of what was thought to be harmful bureaucracy. But another way of looking at the republic of the central bankers is that it is rather like Russia – it has a stash of nuclear weapons with which it can destroy the economy and that’s basically it. Precisely because its chief policy options are “Nobody notices” and “Blow everything up”, its day to day influence is often less than it imagines. It is also superbly, peerlessly unaccountable.

I am much in favour of re-creating a variety of policy responses. I am, though, worried that the regulatory power is being re-created in the unaccountable and often explicitly anti-democratic domain of the central bank. This is evidence, though, that the political system itself lacks requisite variety. Who do I vote for to re-regulate mortgage finance? As a result, the problem landed with the people who did have enough degrees of freedom to do something: the Bank.

Mark Carney agrees.

“This focus initially made sense since one of the greatest challenges for macroeconomic policy in the late 1970s and 1980s was the fight against inflation,” he said. “However, with time, a healthy focus became a dangerous distraction.”

He described the move by Brown in 1997 to give the Bank independence to set interest rates focusing on an inflation target as a “deconstruction of the old model of central banking”.

“In my view, while there were enormous innovations of enduring value during this period, the reductionist vision of a central bank’s role that was adopted around the world was fatally flawed,” Carney said in his Mais Lecture at the Cass Business School in London.

Territorial integrity

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The UN General Assembly declares the Crimean referendum invalid, 100-11.

Russia absorbing Crimea will be the first time since 1945 that a country other than Israel has taken over a part of a neighbouring state and formally annexed it, other than colonial outposts. Some people are maybe not appreciating what a break with international norms that is.

A few of those annexations of colonies were a lot more brutal affairs than Crimea: Ogaden, East Timor, Western Sahara. It’s still a very short list. Iraq and Kuwait was very briefly an exception and was supposed to once and for all end that sort of thing (and end history).