December 3, 2014

The Dangerous Allure of Advanced Technology

The Dangerous Allure of Advanced Technology
“Offset strategies” is a topic currently being discussed in defense circles, the premise being that the U.S. has adopted various approaches to offset an advantage held by an opponent. According to this argument, the U.S. has pursued two previous offset strategies since World War II. The first emerged in the 1950s centered on nuclear weapons and associated operational concepts (like AirLand Battle in the 1980s) to offset the Soviet Union’s numerical advantage in conventional forces. The second focused on highly networked forces leveraging guided weapons such that U.S. forces, exploiting modern information-sharing technologies, would be far more effective than any enemy in coordinated, precision attacks—see the enemy first at great range, orient the force more rapidly to gain positional advantage, strike from long range with great precision, and win before the enemy really ever had a chance to get his act together. Operation Desert Storm is the textbook example. This second offset strategy arose in the mid-1990s as network-centric warfare and has evolved in various ways since then. Current discussions debate what a third offset strategy might be, with most focusing on cyber; next-generation precision weapons; directed energy (e.g., lasers); stealth (reducing the detectable signature of platforms/forces); and unmanned systems.

Ben FitzGerald, director of the Technology and National Security Program at the Center for a New American Security, has published a short essay titled “When Superiority Goes Wrong: Science Fiction and Offset Strategies,” raising justifiable concerns about this approach to the next offset strategy. (The Arthur C. Clarke story mentioned by FitzGerald can be found here. It is quite short, well worth the time to read, and all the more amazing in that Clarke wrote it in 1951!) Underscoring FitzGerald’s concern is the troubling pattern seen in the approach taken by the military services to field new weapon systems: leap-ahead/revolutionary/game-changing capabilities are sought, system/platform complexity increases, technology challenges arise, costs increase, and delays extend…all leading to fewer numbers fielded and much later than initially planned.

The result is a technologically advanced force that is quite small in size, thus having difficulty massing in sufficient numbers in more than one place at a time. A quick review of major defense programs from the past few decades illustrates the problem—B-2 bombers: 132 planned, 21 fielded; F-22 fighters: 650 planned, 183 fielded; DDG-1000 cruisers: 32 planned, 3 fielded; Littoral Combat Ship (LCS): 55 planned, the objective has dropped to 32 and is likely to be far fewer; Expeditionary Fighting Vehicle (EFV): 1013 planned, 0 fielded. A similar list was recently compiled by Stephen Rodriguez in his article “Top 10 Failed Defense Programs of the RMA Era.”

One could argue (and many do) that the answer to this lies in defense acquisition reform, but this has proven to be just as alluring and problematic as obtaining a magically advanced force. As documented by J. Ronald Fox in Defense Acquisition Reform, 1960–2009: An Elusive Goal:
From 1960 through 2009, more than twenty-seven major studies of defense acquisition were commissioned by presidents, Congress, secretaries of defense, government agencies, studies and analyses organizations, and universities…[arriving] at most of the same findings [and] recommendations…. [Major] defense programs still require more than fifteen years to deliver less capability than planned, often at two to three times the initial cost.
While Fox catalogs numerous reasons for this, arguably the most central is the military’s fixation on advanced technology as the solution to America’s security problems. Is technology important? Of course it is. But advanced capabilities should not be pursued to the detriment of fielding a force of sufficient capacity to serve U.S. national security interests—yet that is the path our defense community habitually travels.

Secretary of Defense Chuck Hagel has proposed to continue this approach in searching for a third offset strategy, as outlined here and here. A concern is that the U.S. defense establishment will remain fixated on early commitment to unproven technologies at the expense of readiness and capacity for operations. As we have noted previously here and here, the defense budget is in disarray and this Administration’s approach to security affairs is dangerously detached from America’s security interests.

In an era of problematic budgets, a better strategy would be to invest scarce resources in maintaining a force that is ready and large enough to serve U.S. security interests while delaying commitment to new technologies until they have been proven to be low risk and affordable enough to field in sufficient numbers. A third offset strategy should focus more on experimentation, new operational concepts, and education and training of the force and less so on premature commitment to unproven, extraordinarily expensive systems. As FitzGerald observes,
The United States relies on technical superiority to maintain its military advantage. But this technical superiority requires humans to generate the right strategies, design and build the right technologies, devise concepts of operations, and train forces to operate the technology to achieve strategic and tactical objectives.… However, we cannot ever let the hubris evident in Superiority lead us to defeat due to, as the narrator assesses, “…the inferior science of our enemies.”

December 2, 2014

On the Firing of Chuck Hagel

Thought you might find the below opinion piece from Jed Babbin of interest. Like Babbin, I think discussion of who succeeds Chuck Hagel is of academic interest, at best, because there is no indication that any of the conditions leading to Hagel’s departure will change. Thus, any replacement will experience the same frustrations and have as little impact on foreign policy, national security, national defense matters as did Hagel. 
I had a hand in drafting this piece last week following the announcement of Hagel’s resignation (firing), in which we provided our own perspective on the topic and made some suggestions about things the Administration can do to improve its ability to handle national security matters. Among the material left on the cutting-room floor during the editing process was this:
“As noted by former Secretary Bob Gates, the National Security Council Staff was composed of approximately 50 people when he worked for President George H. W. Bush; under President Barack Obama, the NSC has exploded to over 350. Former Secretaries Gates and Leon Panetta have both commented on the stifling level of micromanagement exerted by the White House over the execution of actions necessary to implement defense policies and to achieve security objectives aboard. Their frustration was compounded by their inability to penetrate the small, inner-circle of advisers that dominate policy formulation in the White House, an obstacle that confounded President Obama’s first National Security Adviser, General James L. Jones, and reportedly has plagued Secretary Hagel, too…

Cabinet officers are appointed by the President to lead and manage their respective departments, advise the President on policies pertaining to their area of responsibility then implement those policies as directed. If Secretary Hagel was being fired for incompetence in doing this, it would be warranted. But he isn’t. In fact, Hagel was actually successful in implementing the President’s policy to manage the decline of America’s military to levels of capacity and readiness not seen since prior to World War II. In doing so, however, he discovered first-hand the repercussions of such mismanagement when, in consultation with his senior military advisers, he was unable to provide effective options to accomplish the President’s stated objective of destroying ISIS. The President wanted a Secretary who would carry out policies that he had little influence in formulating; sought to manage the Secretary’s implementation of those policies with a staff operating outside of the Secretary’s control; then fired him when impossible-to-achieve results never materialized.”
As has been noted by many commentators over the past week, to include the NY Times (though see this interesting comment here), Washington Post, and other left-leaning/usually pro-Obama outlets, the Administration’s policy formulation, implementation, and management practices are at the heart of the problem…not any particular Secretary of Defense. When it comes to finding a replacement, this problematic process/management issue and the nature of the Obama presidency will preclude appointment of an ‘effective’ SECDEF. Any competent candidate acceptable to a Democratic administration will decline in order to remain viable for a prospective Hillary Clinton administration. Any candidate who might actually want to have an impact will decline knowing full well the insular nature and micromanagement style of the President’s inner-circle that they won’t be able to penetrate. No Republican-affiliated individual would be asked to serve since Obama has already had two Secretaries write tell-all books and the third was increasingly at public odds with the Administration’s defense/security policies; accordingly, priority will be placed on loyalty to the Administration over competence as a SECDEF. Given the delay in gaining Senate confirmation, any new Secretary would have little more than 18 months to accomplish anything and I believe it is usually the case that a waning Administration becomes more tired, more insular, and less likely to change habits…thus any new Secretary will have less chance of making any meaningful changes.

In short, anyone nominated for the position will be selected for loyalty, low-risk to embarrass or argue with the Administration, willing to operate under the thumb of Obama’s inner-circle of advisers and an intrusive national security council staff, and no prospect for future employment in a follow-on Administration.

The American Spectator


Mediocrity by design is how the White House wants it.

By Jed Babbin – 12.1.14

You will hear a lot between now and when Congress convenes in January about how urgent it is that Defense Secretary Chuck Hagel’s replacement be confirmed by the Senate. The president will nominate someone and then shrug his shoulders at the wars in Afghanistan and Iraq, noting that things aren’t going well, and asking, “What do you expect? The Republicans are to blame because they haven’t confirmed the new defense secretary.”

It will all be baloney, of course, because we know that the secretary of defense’s job has been neutered by Obama’s White House team and it will remain so as long as he’s president.

Unintended Consequences of Cheap Oil

A concise story about the dependence of some countries on high oil prices. In general, we are quite happy when the price of energy drops. It is usually good for the average consumer since everything we buy is affected by the price of energy to produce things and move them to market. The higher the price of energy, the less disposable income the average person has with which to buy groceries, pay for housing, get to and from work, and all the rest. That said, some people and the economies of some entire countries are dependent on the revenue generated from the sale of oil.  When things go bad for them, trouble usually results.

While reading the article, I was reminded of a couple of related graphics I’d seen a few weeks ago, pasted below. As is usually the case, pictures help make sense of statistics provided in text. 

The countries mentioned have sought to appease their populations with substantial subsidies made possible by petro-wealth. If that pool of money dries up, their populations will become restive and troublesome…or so goes the argument.  While hydraulic fracturing (fracking) of U.S. oil shale has dramatically shifted America’s energy position to our favor, it has other potential consequences that could be quite destabilizing in other regions. No, it's not our responsibility to keep single-commodity countries afloat; just something to think about especially as it highlights the inter-dependencies of a global economy and why we tend to get sucked-into regions when things go bad.

Oil at $40 Possible as Market Transforms Caracas to Iran 

By Gregory Viscusi, Tara Patel and Simon Kennedy Dec 1, 2014 4:53 AM ET
Oil’s decline is proving to be the worst since the collapse of the financial system in 2008 and threatening to have the same global impact of falling prices three decades ago that led to the Mexican debt crisis and the end of the Soviet Union.
Russia, the world’s largest producer, can no longer rely on the same oil revenues to rescue an economy suffering from European and U.S. sanctions. Iran, also reeling from similar sanctions, will need to reduce subsidies that have partly insulated its growing population. Nigeria, fighting an Islamic insurgency, and Venezuela, crippled by failing political and economic policies, also rank among the biggest losers from the decision by the Organization of Petroleum Exporting Countries last week to let the force of the market determine what some experts say will be the first free-fall in decades.
“This is a big shock in Caracas, it’s a shock in Tehran, it’s a shock in Abuja,” Daniel Yergin, vice chairman of Englewood, Colorado-based consultant IHS Inc. and author of a Pulitzer Prize-winning history of oil, told Bloomberg Radio. “There’s a change in psychology. There’s going to be a higher degree of uncertainty.”
A world already unsettled by Russian-inspired insurrection in Ukraine to the onslaught of Islamic State in the Middle East is about be roiled further as crude prices plunge. Global energy markets have been upended by an unprecedented North American oil boom brought on by hydraulic fracturing, the process of blasting shale rocks to release oil and gas. 

Cheap Gasoline 

Few expected the extent or speed of the U.S. oil resurgence. As wildcatters unlocked new energy supplies, some oil exporters abroad failed to invest in diversifying their economies. Coddled by years of $100 crude, governments instead spent that windfall subsidizing everything from 5 cents-per-gallon gasoline to cheap housing that kept a growing population of underemployed citizens content.
Those handouts are now at risk. 
“If the governments aren’t able to spend to keep the kids off the streets they will go back to the streets, and we could start to see political disruption and upheaval,” said Paul Stevens, distinguished fellow for energy, environment and resources at Chatham House in London, a U.K. policy group. “The majority of members of OPEC need well over $100 a barrel to balance their budgets. If they start cutting expenditure, this is likely to cause problems.”

Costs as Benchmark 

Oil has dropped 38 percent this year and, in theory, production can continue to flow until prices fall below the day-to-day costs at existing wells. Stevens said some U.S. shale producers may break even at $40 a barrel or less. The International Energy Agency estimates most drilling in the Bakken formation -- the shale producers that OPEC seeks to drive out of business -- return cash at $42 a barrel.
Canadian Natural Resources Ltd. Chairman Murray Edwards said crude may sink as low as $30 a barrel before rebounding to stabilize at $70 to $75 a barrel, the Financial Post reported.
“Right now we’re seeing a price shock coming out of the meeting and it will be a couple of weeks until we see where the price really falls,” said Yergin. Officials “have to figure out where the new price range is, and that’s the drama that’s going to play out in the weeks ahead.”
Brent crude was down $1.40 at $68.75 as of 9:14 a.m. in London, while New York oil lost $1.47 to $64.68. Brent is now at its lowest since the financial crisis -- when it bottomed around $36.

Not All Suffer 

To be sure, not all oil producers are suffering. The International Monetary Fund in October assessed the oil price different governments needed to balance their budgets. At one end were Kuwait, Qatar and the United Arab Emirates, which can break even with oil at about $70 a barrel. At the other extreme: Iran needs $136, and Venezuela and Nigeria $120. Russia can manage at $101 a barrel, the IMF said.
“Saudi Arabia, U.A.E. and Qatar can live with relatively lower oil prices for a while, but this isn’t the case for Iran, Iraq, Nigeria, Venezuela, Algeria and Angola,” said Marie-Claire Aoun, director of the energy center at the French Institute for International Relations in Paris. “Strong demographic pressure is feeding their energy and budgetary requirements. The price of crude is paramount for their economies because they have failed to diversify.”
Brent crude is poised for the biggest annual decline since 2008 after OPEC last week rejected calls for production cuts that would address a global glut.
Like this year’s decline, oil’s crash in the 1980s was brought on by a Saudi-led decision to defend its market share, sending crude to about $12 a barrel.

Russia Vulnerable 

“Russia in particular seems vulnerable,” said Allan von Mehren, chief analyst at Danske Banke A/S in Copenhagen. “A big decline in the oil price in 1997-98 was one factor causing pressure that eventually led to Russian default in August 1998.”
VTB Group, Russia’s second-largest bank, OAO Gazprombank, its third-largest lender, and Russian Agricultural Bank are already seeking government aid to replenish capital after sanctions cut them off from international financial markets. Now with sputtering economic growth, they also face a rise in bad loans.
Oil and gas provide 68 percent of Russia’s exports and 50 percent of its federal budget. Russia has already lost almost $90 billion of its currency reserves this year, equal to 4.5 percent of its economy, as it tried to prevent the ruble from tumbling after Western countries imposed sanctions to punish Russian meddling in Ukraine. The ruble is down 35 percent against the dollar since June.

This Will Pass 

While the country’s economy minister and some oil executives have warned of tough times ahead, President Vladimir Putin is sanguine, suggesting falling oil won’t force him to meet Western demands that he curb his country’s interference in Ukraine.
“Winter is coming and I am sure the market will come into balance again in the first quarter or toward the middle of next year,” he said Nov. 28 in Sochi.
Even before the price tumble, Iran’s oil exports were already crumbling because of sanctions imposed over its nuclear program. Production is at a 20-year low, exports have fallen by half since early 2012 to 1 million barrels a day, and the rial has plummeted 80 percent on the black market, says the IMF. 
Lower oil may increase the pain on Iran’s population, though it may be insufficient to push its leaders to accept an end to the nuclear program, which they insist is peaceful.

‘Already Losing’ 

“The oil price decline is not a game changer for Iran,” said Suzanne Maloney, senior fellow at the Brookings Institution, a Washington-based research organization, who specializes on Iran. “The Iranians were already losing so many billions of dollars because of the sanctions that the oil price decline is just icing on the cake.” 
While oil’s decline wrenches oil-rich nations that squandered the profits from recent high prices, the world economy overall may benefit. The Organization for Economic Cooperation and Development estimates a $20 drop in price adds 0.4 percentage point to growth of its members after two years. By knocking down inflation by 0.5 point over the same period, cheaper oil could also persuade central banks to either keep interest rates low or even add stimulus.
Energy accounts for 10 percent to 12 percent of consumer spending in European countries such as France and Germany, HSBC Holdings Plc said.

Nigerian Woes 

As developed oil-importing nations benefit, some of the world’s poorest suffer. Nigeria’s authorities, which rely on oil for 75 percent of government revenue, have tightened monetary policy, devalued the naira and plan to cut public spending by 6 percent next year. Oil and gas account for 35 percent of Nigeria’s economic output and 90 percent of its exports, according to OPEC.
“The current drop in oil prices poses stark challenges for Nigeria’s external and fiscal accounts and puts heavy pressure on the exchange rate,” Oliver Masetti, an economist at Deutsche Bank AG, said in a report this month. “If oil prices remain at their current lows, Nigeria will face tough choices.”
Even before oil’s rout, Venezuela was teetering. 
The nation is running a budget deficit of 16 percent of gross domestic product, partly because much of its declining oil production is sold domestically at subsidized prices. Oil is 95 percent of exports and 25 percent of GDP, OPEC says.
“Venezuela already qualifies for fiscal chaos,” Yergin said. 

Venezuelan Rioting 

The country was paralyzed by deadly riots earlier this year after police repressed protests about spiraling inflation, shortages of consumer goods and worsening crime.
“The dire state of the economy is likely to trigger renewed social unrest, while it seems that the government is running out of hard currency,” Capital Economics, a London research firm, wrote in a Nov. 28 report.
Declining oil may force the government to take steps to avoid a default including devaluing the currency, cutting imports, raising domestic energy prices and cutting subsidies shipments to poorer countries in the region, according to Francisco Rodriguez, an economist at Bank of America Merrill Lynch.
“Though all these entail difficult choices, default is not an appealing alternative,” he said. “Were Venezuela to default, bondholders would almost surely move to attach the country’s refineries and oil shipments abroad.”
China Bailout? 
In an address on state television Nov. 28, President Nicolas Maduro said Venezuela would maintain social spending while pledging to form a commission to identify unnecessary spending to cut. He also said he was sending the economy minister to China to discuss development projects.
Mexico shows how an oil nation can build new industries and avoid relying on one commodity. Falling crude demand and prices in the early 1980s helped send the nation into a debt crisis.
Oil’s share of Mexico’s exports fell to 13 percent in 2013 from 38 percent in 1990, even as total exports more than quadrupled. Electronics and cars now account for a greater share of the country’s shipments. Though oil still accounts for 32 percent of government revenue, the Mexican government has based its 2015 budget on an average price of $79 a barrel.