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Saturday, December 28, 2013

Ferocious, Weak and Crazy: The North Korean Strategy

By George Friedman
North Korea's state-run media reported Sunday that North Korean leader Kim Jong Un has ordered the country's top security officials to take "substantial and high-profile important state measures," which has been widely interpreted to mean that North Korea is planning its third nuclear test. Kim said the orders were retaliation for the U.S.-led push to tighten U.N. sanctions on Pyongyang following North Korea's missile test in October. A few days before Kim's statement emerged, the North Koreans said future tests would target the United States, which North Korea regards as its key adversary along with Washington's tool, South Korea.
North Korea has been using the threat of tests and the tests themselves as weapons against its neighbors and the United States for years. On the surface, threatening to test weapons does not appear particularly sensible. If the test fails, you look weak. If it succeeds, you look dangerous without actually having a deliverable weapon. And the closer you come to having a weapon, the more likely someone is to attack you so you don't succeed in actually getting one. Developing a weapon in absolute secret would seem to make more sense. When the weapon is ready, you display it, and you have something solid to threaten enemies with.
North Korea, of course, has been doing this for years and doing it successfully, so what appears absurd on the surface quite obviously isn't. On the contrary, it has proved to be a very effective maneuver. North Korea is estimated to have a gross domestic product of about $28 billion, about the same as Latvia or Turkmenistan. Yet it has maneuvered itself into a situation where the United States, Japan, China, Russia and South Korea have sat down with it at the negotiating table in a bid to persuade it not to build weapons. Sometimes, the great powers give North Korea money and food to persuade it not to develop weapons. It sometimes agrees to a halt, but then resumes its nuclear activities. It never completes a weapon, but it frequently threatens to test one. And when it carries out such tests, it claims its tests are directed at the United States and South Korea, as if the test itself were a threat.
There is brilliance in North Korea's strategy. When the Soviet Union collapsed, North Korea was left in dire economic straits. There were reasonable expectations that its government would soon collapse, leading to the unification of the Korean Peninsula. Naturally, the goal of the North Korean government was regime survival, so it was terrified that outside powers would invade or support an uprising against it. It needed a strategy that would dissuade anyone from trying that. Being weak in every sense, this wasn't going to be easy, but the North Koreans developed a strategy that we described more than 10 years ago as ferocious, weak and crazy. North Korea has pursued this course since the 1990s, and the latest manifestation of this strategy was on display last week. The strategy has worked marvelously and is still working.

A Three-Part Strategy

First, the North Koreans positioned themselves as ferocious by appearing to have, or to be on the verge of having, devastating power. Second, they positioned themselves as being weak such that no matter how ferocious they are, there would be no point in pushing them because they are going to collapse anyway. And third, they positioned themselves as crazy, meaning pushing them would be dangerous since they were liable to engage in the greatest risks imaginable at the slightest provocation.
In the beginning, Pyongyang's ability to appear ferocious was limited to the North Korean army's power to shell Seoul. It had massed artillery along the border and could theoretically devastate the southern capital, assuming the North had enough ammunition, its artillery worked and air power didn't lay waste to its massed artillery. The point was not that it was going to level Seoul but that it had the ability to do so. There were benefits to outsiders in destabilizing the northern regime, but Pyongyang's ferocity -- uncertain though its capabilities were -- was enough to dissuade South Korea and its allies from trying to undermine the regime. Its later move to develop missiles and nuclear weapons followed from the strategy of ferocity -- since nothing was worth a nuclear war, enraging the regime by trying to undermine it wasn't worth the risk.
Many nations have tried to play the ferocity game, but the North Koreans added a brilliant and subtle twist to it: being weak. The North Koreans advertised the weakness of their economy, particularly its food insecurity, by various means. This was not done overtly, but by allowing glimpses of its weakness. Given the weakness of its economy and the difficulty of life in North Korea, there was no need to risk trying to undermine the North. It would collapse from its own defects.
This was a double inoculation. The North Koreans' ferocity with weapons whose effectiveness might be questionable, but still pose an unquantifiable threat, caused its enemies to tread carefully. Why risk unleashing its ferocity when its weakness would bring it down? Indeed, a constant debate among Western analysts over the North's power versus its weakness combines to paralyze policymakers.
The North Koreans added a third layer to perfect all of this. They portrayed themselves as crazy, working to appear unpredictable, given to extravagant threats and seeming to welcome a war. Sometimes, they reaffirmed they were crazy via steps like sinking South Korean ships for no apparent reason. As in poker, so with the North: You can play against many sorts of players, from those who truly understand the odds to those who are just playing for fun, but never, ever play poker against a nut. He is totally unpredictable, can't be gamed, and if you play with his head you don't know what will happen.  
So long as the North Koreans remained ferocious, weak and crazy, the best thing to do was not irritate them too much and not to worry what kind of government they had. But being weak and crazy was the easy part for the North; maintaining its appearance of ferocity was more challenging. Not only did the North Koreans have to keep increasing their ferocity, they had to avoid increasing it so much that it overpowered the deterrent effect of their weakness and craziness.  

A Cautious Nuclear Program

Hence, we have North Korea's eternal nuclear program. It never quite produces a weapon, but no one can be sure whether a weapon might be produced. Due to widespread perceptions that the North Koreans are crazy, it is widely believed they might rush to complete their weapon and go to war at the slightest provocation. The result is the United States, Russia, China, Japan and South Korea holding meetings with North Korea to try to persuade it not to do something crazy.
Interestingly, North Korea never does anything significant and dangerous, or at least not dangerous enough to break the pattern. Since the Korean War, North Korea has carefully calculated its actions, timing them to avoid any move that could force a major reaction. We see this caution built into its nuclear program. After more than a decade of very public ferocity, the North Koreans have not come close to a deliverable weapon. But since if you upset them, they just might, the best bet has been to tread lightly and see if you can gently persuade them not to do something insane.
The North's positioning is superb: Minimal risky action sufficient to lend credibility to its ferocity and craziness plus endless rhetorical threats maneuvers North Korea into being a major global threat in the eyes of the great powers. Having won themselves this position, the North Koreans are not about to risk it, even if a 20-something leader is hurling threats.

The China Angle and the Iranian Pupil

There is, however, a somewhat more interesting dimension emerging. Over the years, the United States, Japan and South Korea have looked to the Chinese to intercede and persuade the North Koreans not to do anything rash. This diplomatic pattern has established itself so firmly that we wonder what the actual Chinese role is in all this. China is currently engaged in territorial disputes with U.S. allies in the South and East China seas. Whether anyone would or could go to war over islands in these waters is dubious, but the situation is still worth noting.
The Chinese and the Japanese have been particularly hostile toward one another in recent weeks in terms of rhetoric and moving their ships around. A crisis in North Korea, particularly one in which the North tested a nuclear weapon, would inevitably initiate the diplomatic dance whereby the Americans and Japanese ask the Chinese to intercede with the North Koreans. The Chinese would oblige. This is not a great effort for them, since having detonated a nuclear device, the North isn't interested in doing much more. In fact, Pyongyang will be drawing on the test's proverbial fallout for some time. The Chinese are calling in no chits with the North Koreans, and the Americans and Japanese -- terribly afraid of what the ferocious, weak, crazy North Koreans will do next -- will be grateful to China for defusing the "crisis." And who could be so churlish as to raise issues on trade or minor islands when China has used its power to force North Korea to step down?
It is impossible for us to know what the Chinese are thinking, and we have no overt basis for assuming the Chinese and North Koreans are collaborating, but we do note that China has taken an increasing interest in stabilizing North Korea. For its part, North Korea has tended to stage these crises -- and their subsequent Chinese interventions -- at quite useful times for Beijing.
It should also be noted that other countries have learned the ferocious, weak, crazy maneuver from North Korea. Iran is the best pupil. It has convincingly portrayed itself as ferocious via its nuclear program, endlessly and quite publicly pursuing its program without ever quite succeeding. It is also persistently seen as weak, perpetually facing economic crises and wrathful mobs of iPod-wielding youths. Whether Iran can play the weakness card as skillfully as North Korea remains unclear -- Iran just doesn't have the famines North Korea has.
Additionally, Iran's rhetoric at times can certainly be considered crazy: Tehran has carefully cultivated perceptions that it would wage nuclear war even if this meant the death of all Iranians. Like North Korea, Iran also has managed to retain its form of government and its national sovereignty. Endless predictions of the fall of the Islamic republic to a rising generation have proved false.
I do not mean to appear to be criticizing the "ferocious, weak and crazy" strategy. When you are playing a weak hand, such a strategy can yield demonstrable benefits. It preserves regimes, centers one as a major international player and can wring concessions out of major powers. It can be pushed too far, however, when the fear of ferocity and craziness undermines the solace your opponents find in your weakness.
Diplomacy is the art of nations achieving their ends without resorting to war. It is particularly important for small, isolated nations to survive without going to war. As in many things, the paradox of appearing willing to go to war in spite of all rational calculations can be the foundation for avoiding war. It is a sound strategy, and for North Korea and Iran, for the time being at least, it has worked


Read more: Ferocious, Weak and Crazy: The North Korean Strategy | Stratfor
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Israel's Water Challenge

Israel's Water Challenge
Filters at the Ashkelon seawater reverse osmosis plant south of Tel Aviv in 2008. (DAVID BUIMOVITCH/AFP/Getty Images)

Summary

Israel's successful efforts to increase water security will lessen one of the country's geographical constraints. But new sources of water are more energy intensive, and this could increase Israel's short-term dependence on energy imports unless domestic energy sources are successfully developed.

Analysis

While Israel enjoys relative national security compared to its neighbors, which are struggling with internal fragmentation, this will probably change eventually. Because concerted military efforts have been required in the past to secure water resources, Israel has had a strong incentive to develop technological solutions to improve water security. Additional domestic water resources -- including increasing desalination capacity and continued efforts to recycle water -- allow Israel to mitigate one of its inherent geographic constraints.
Israel has substantially increased its capacity to desalinize water over the last decade. The arid country of roughly 8 million already has a number of desalination plants -- including the Sorek plant, the world's largest desalination plant of its kind, which became fully operational in October. Israel has plans to increase total desalination capacity through 2020 such that it approaches the estimated annual amount of internally generated natural water resources.

Naturally Occurring Water

Israel's total annual internal renewable natural sources of fresh water stand at 0.75 billion cubic meters. It has roughly 265 cubic meters per year of water per person available. This is well below the U.N. definition of water poverty, which is anything below 1,000 cubic meters per person per year.
For groundwater, Israel relies on two main aquifers: the Coastal Aquifer and the Mountain Aquifer (which is further divided into subaquifers). Both also lie under the Palestinian territory -- in Gaza and the West Bank, respectively. 


Israel's surface water is concentrated mainly in the north and east of the country. Israel is part of the Jordan River system, which also includes Syria, Lebanon, Jordan and the West Bank. The major rivers in the upper part of the basin include the Hasbani, Banias and the Dan rivers. These rivers converge to form the Jordan River near the border of Israel, Lebanon and Syria before flowing into the Sea of Galilee. Downstream, the Jordan River is further fed by the major tributaries of the Yarmouk and Zarqa rivers.
Crucially, more than half of Israel's total natural water originates outside its borders: 310 million cubic meters come from Lebanon, 375 million cubic meters come from Syria and 345 million cubic meters originate in the West Bank. All the countries in this arid region compete for the limited resources of the basin. The Palestinian Authority has between 51 cubic meters per person and 333 cubic meters per person per year depending on location, while Syria and Lebanon receive water from additional river systems and operate at 882 cubic meters per year per person and 1,259 cubic meters per year per person, respectively. Jordan has 161 cubic meters per year per person.
Allocations of water from transboundary river systems are often disputed. The last basin-wide allocation scheme for the Jordan River system came in 1955 with the Jordan Valley Unified Water Plan (also known as the Johnston Plan, named after the American ambassador involved in negotiations). By allocating water based primarily on agricultural demand, the plan offered a compromise between participating nations. However, because many of the Arab states did not want to recognize Israel, the plan was never ratified. Attitudes toward cooperative distribution strategies continued to sour during the construction of Israel's National Water Carrier, which diverted water from the Sea of Galilee to other points in Israel. However, Jordan and Israel have used the Unified Plan as the basis for subsequent negotiations. 
As one of the downstream riparian nations in the basin, protecting Israel's northern borders is essential to maintaining control of surface water resources. Maintaining control of the Golan Heights not only gives Israel a military advantage in dealing with adversaries to the north, it also helps to guarantee access to the Sea of Galilee.
Israel historically has demonstrated a willingness to use military force to guarantee access to water resources. In 1964, Syria, with the support of the Arab League, began devising plans to divert the Banias River, threatening roughly 10 percent of Israel's water supply at the time. From 1965-1967, Israel launched attacks to destroy the diversion projects under construction in an effort to maintain access to the water source.
Water rights and distribution parameters were included in the 1994 peace treaty between Israel and Jordan. The Oslo II agreement in 1995 between Israel and the Palestinian National Authority also outlined parameters for water cooperation in the West Bank, but in practice, joint management has often failed and the Palestinian population remains heavily dependent on Israel for access to water. 
These treaties also did not remove Israel's imperative to ensure continued access to water resources, nor its willingness to threaten military action to ensure it. In 2002, villages in southern Lebanon installed small pumping stations and irrigation pipelines on the Hasbani River. Ariel Sharon, Israeli prime minister at the time, claimed these actions constituted a "case for war" and threated military action. While no action was taken, the posturing illustrates Israel's wariness of upstream water management schemes. 

Expanding Sources of Water: Conservation and Desalination

The foundations of Israel's current water infrastructure system were laid in the 1950s and 1960s, when Israel faced a more volatile security situation. Subsequent decades saw further development of the efficient use of water and the development of alternative sources. As a result, Israel has expanded internal water resources without expanding its physical borders, helping mitigate the risk of international confrontations over water.
To the same end, Israel has also developed a highly organized water management system, effectively integrating the whole country. An early project known as the National Water Carrier, which comprises a series of canals, pipelines and pumping stations, moves water from the Sea of Galilee in the comparatively water-rich north to areas of higher demand and greater need in the central and southern zones. 

Israel is also a pioneer and global leader in water-efficient irrigation technology. Because agriculture remains the largest water consumer in the country, efficient use in this sector is necessary for continued sustainable water management. In addition to the irrigation technology, by effectively treating roughly 400 million cubic meters of wastewater, using it mostly to irrigate crops, Israel further reduces pressure on water resources.

Although Israel has used desalination technology on a smaller scale since the 1960s, the push for a substantial increase in desalination capacity began only after a major drought in 1998-1999. Several droughts over the course of the last 15 years drove home the vulnerability of Israel's water supply. Meanwhile, the overuse of groundwater resources, especially of the Coastal Aquifer, is degrading the quality of the water.

Israel currently consumes just under 2 billion cubic meters of water per year, and while water management has the ability to improve the efficiency of water usage, increasing populations in the region will continue to pressure these limited resources. These factors combined have pushed Israel toward desalination.

When the Sorek plant became fully operational in October, Israel gained 150 million cubic meters per year of desalination capacity. Total seawater desalination capacity is expected to reach 600 million cubic meters per year by 2015 and could reach 750 million cubic meters per year by 2020. The production cost of desalinized water depends on the plant, but averages $0.65 per cubic meter, with the new Sorek plant costing roughly $0.50 per cubic meter. This is compared to $0.15-$0.45 for water from natural sources. Advances in the technology that Israel uses, including technologies that improve the energy efficiency of the plants, have helped drive the costs down compared to previous desalination technology. But desalinated water remains far more energy-intensive than naturally sourced water, and it increases demands for power on the national electricity grid and from independent natural gas generators.

Short-Term Dependence on Imported Energy

Because Israel has traditionally been an energy importer, increasing reliance on an energy-intensive water resource could in turn increase Israel's dependence on energy-exporting nations. Natural gas will likely be the predominant fuel used to produce desalinated water. The Israeli electrical grid is projected to shift further toward natural gas and away from coal in the coming years, while the desalination plants often independently employ natural gas generators.

The total fuel required will vary based both on the type of desalination plant, as well as the type of power generation. Even with newer, more efficient equipment, the operation of more than 500 million cubic meters of desalination capacity could require more than 100 million cubic meters of natural gas or the equivalent energy from some other fuel sources to produce the additional power necessary to run the plants.  

Israel had previously been an importer of natural gas, but the total volume of imports has declined in recent years. As of August 2013, imports were only accounting for 13 percent of total consumption. Furthermore, offshore discoveries in the eastern Mediterranean, including the Leviathan fields projected to come online as early as 2016, mean Israel has the potential to become a natural gas exporter. While there are many political and technical constraints surrounding the development and subsequent use of these fields, increased levels of domestic energy production could reduce dependence on foreign partners in terms of energy. This is especially important as Israel pursues a strategy of relying on more energy-intensive water resources.

Outlook

Israel traditionally requires a third-party sponsor to survive. And even with the added desalination capacity, Israel may still need to use water from external sources. But it has successfully adjusted to the environment and better insulated itself from its neighbors, complementing an established military superiority. And this could provide additional maneuverability in future negotiations.

Israel is momentarily in a secure strategic position. Syria will likely remain in a state of civil war for an extended period, and Lebanon remains fragile and fragmented. Israel maintains a working relationship with other neighbors, such as the Hashemite regime in Jordan, as well as Fatah and the Palestinian National Authority and the Egyptian military. This status quo seems unlikely to change in the short term. But although Israel is in a relatively stable position, it knows how mercurial the surrounding region is and will likely still behave proactively around national security issues.

Israel's proactive solution to ensuring water security is to develop additional domestic resources. Though this will require more imported energy in the short term, the continued development of domestic energy resources could act as a counter-balance, even as water resources become more energy-intensive.



Israel's Water Challenge is republished with permission of Stratfor

Read more: Israel's Water Challenge | Stratfor
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Top 5 Trends That Will Shape 2014

From French troops going into Mali and North Korea threatening to bomb the United States, to Hugo Chavez’s death, the Egyptian president's ouster, and Russia’s smart move to “save the world” from another U.S.-Middle Eastern war – 2013 was a very eventful year, and its effects will continue to be felt around the world.

Top 5 Trends That Will Shape 2014
  • An enduring detente between Iran and the United States
  • The rise of nationalist and extremist parties in Europe
  • Russia and Germany bargain over Central/Eastern Europe and energy policy
  • China's return to strongman politics
  • Domestic turmoil and economic stress in India and Turkey

The United States will attempt to balance power in the Middle East through its strategic negotiations with Iran; the rise of nationalist and euroskeptic parties will be felt in this upcoming year’s elections; the Chinese president will continue to consolidate more power under himself. Barely missing the list but still notable: the end of the FARC insurgency in Colombia, escalating violence in Nigeria, and Mexico's return to political gridlock.

To Know More, Click HERE.

Sunday, December 22, 2013

UAE Halts BAE's Typhoon Fighter Bid

By Bill Sweetman william.sweetman@aviationweek.com, 
Jen DiMascio jen.dimascio@aviationweek.com


Credit: BAE Systems

The U.K., which has hoped to sell Eurofighter Typhoons to the UAE, has learned that any potential deal is at least on hold.

“The UAE have advised that they have elected not to proceed with these proposals at this time,” says a note to prime contractor BAE Systems’s investors. The U.K. had been negotiating with UAE for the sale of about 60 aircraft, with Prime Minister David Cameron traveling to the Dubai air show in the hopes of lobbying for BAE’s bid to sell the fighter jets.

In addition to the Typhoon, Dassault’s Rafale and Boeing’s F-18 Super Hornet are contending for the UAE’s fighter contract. The news comes one day after Brazil announced it would purchase 36 Saab Gripens.

The move cannot be anything except bad news for Typhoon, which in the last two years has been defeated by the Rafale in India, the F-15 and then the F-35 in Korea, the F-35 in Japan and the Gripen in Switzerland. Typhoon is still a candidate in Qatar, which has increased its requirement to as many as 72 aircraft, and is in the running for a 30-aircraft order in Denmark (against Gripen, Super Hornet and F-35).

Whether the decision indicates that a UAE Rafale buy is close is unclear. According to French press reports, the country’s defense minister, Jean-Yves Le Drian, said on Dec. 18 — before the BAE announcement was made public — that there would be “results soon” concerning both a contract for Rafale in India and sales in the Gulf.

Reports that UAE is moving toward requesting the F-35 Joint Strike Fighter may be premature, however, because of political sensitivity and the power of Israel’s lobbyists in Washington. Earlier this year, the UAE was even denied the AGM-158 stealth cruise missile, a much lower-tech system than JSF, and was instead offered the AGM-84H Standoff Land Attack Missile - Expanded Response weapon.

But while the UAE procurement is little more than a two-horse race between the Typhoon and the Dassault Rafale, in nearby Qatar the government raised the stakes and increased the planned size of its future fighter buy to as many as 72 aircraft, compared with its current fleet of 12 Mirage 2000s.

Qatari evaluation teams are understood to have flown the Typhoon, Rafale, and Super Hornet along with other competitors, but few details of the program have been released. It could have a major effect on the fighter scene because a Boeing deal would rescue the F/A-18E/F line. Absent further orders, the line will start to shut down in March. Kuwait also has a requirement for new fighters to replace its legacy F/A-18C/D Hornets, but a decision may not come before 2015.

Saturday, December 21, 2013

Major computer security firm RSA took $10 mln from NSA to weaken encryption - report

RSA SecureID electronic keys (Reuters / Michael Caronna)
RSA SecureID electronic keys (Reuters / Michael Caronna)

The National Security Agency arranged a clandestine US$10 million contract with computer security power RSA that allowed the spy agency to embed encryption software it could use to infiltrate the company’s widely used products, Reuters reported.
Revelations provided by former NSA contractor Edward Snowden and first reported in September showed that the NSA created and perpetuated a corruptible formula that was ultimately a “back door” into encryption products.
Reuters later reported RSA became the lead distributor of the formula, installing it into a software tool known as BSAFE that is widely used to boost security in personal computers and other products.
Unknown then was the $10 million deal that set the NSA’s formula as the default method for the security measure - in which random numbers are generated on a key for access to a product - in BSAFE, according to Reuters’ sources. Though the sum of money for the deal seems low, it represented over a third of revenue the relevant division at RSA had made the previous year, according to security filings.
RSA was previously known for its crusading fights to protect computer security and privacy in the face of government interests, as it played a major role in blocking an effort by the NSA in the 1990s to require a special chip that would have enabled surveillance on many computer and communication products.
Following the September disclosure, RSA, now a subsidiary of computer storage company EMC Corp, privately warned thousands of its customers to immediately discontinue using all versions of company's BSAFE toolkit and Data Protection Manager (DPM), both using Dual_EC_DRNG (Dual Elliptic Curve Deterministic Random Bit Generator) encryption algorithm to protect sensitive data.
RSA and EMC would not comment to Reuters about the alleged deal, but RSA said in a statement:"RSA always acts in the best interest of its customers and under no circumstances does RSA design or enable any back doors in our products. Decisions about the features and functionality of RSA products are our own."
The NSA declined to comment.
Most of the dozen current and former RSA employees interviewed by Reuters cited the company’s move away from strictly providing cryptography products as a reason the ill-advised deal was made. Though several also said government officials deceived RSA by portraying the corrupt formula as secure.
"They did not show their true hand," said one source that knew of the NSA deal.

RSA’s advocacy for security

RSA’s history as pioneers of trusted cryptography goes back to the 1970s. Their encryption tools have been licensed by many major technology companies, which have used RSA products to secure hundreds of millions of personal computers around the world. Their core technology - public key cryptography - uses two keys rather than one to publicly encode messages, then privately reveal them.
Even in the earliest days of RSA’s existence, it quarreled with US intelligence entities that worried the dual-key format would block government access. As RSA’s products became more widespread, the contention rose. In the 1990s, the Clinton administration pushed the Clipper Chip, a mandatory piece of hardware in phones and computers that would have enabled officials to supersede encryption without a warrant. RSA led a campaign to block the Clipper Chip, arguing products so easily surveilled would cripple overseas sales of US tech products.
The White House then moved to advocating stronger export controls to keep top cryptography in the US, yet RSA again persuaded the industry to oppose the effort. The export restrictions were eventually discarded.

A new era

But the attacks of September 11, 2001, flipped some of the power dynamics. In addition, many top engineers of the old fights against the government left the company, and BSAFE was becoming an increasingly smaller share of the company’s revenue.
"When I joined there were 10 people in the labs, and we were fighting the NSA," said Victor Chan, an top RSA engineer before he left in 2005. "It became a very different company later on."
By 2006, RSA was considered a prime government partner in the fight against overseas hackers.
New RSA Chief Executive Art Coviello, who declined an interview request with Reuters, signed on to adopt an algorithm called Dual Elliptic Curve - designed by the NSA - even before the formula was approved for government use. RSA’s use of the algorithm actually helped the NSA win approval with the National Institutes of Standards and Technology, which oversees government tech product usage.
RSA’s contract made Dual Elliptic Curve the default formula for producing random numbers in the company’s encryption tools. Former employees said given company business leaders approved the deal rather than technologists, no alarms were raised.
"The labs group had played a very intricate role at BSAFE, and they were basically gone," said labs veteran Michael Wenocur, who left RSA in 1999.
Though it privately urged customers to stop using the Dual Elliptic Curve following the September revelations, RSA has been publicly quiet about its relationship with the NSA.
The RSA deal again implicates a key strategy the NSA employs for enhanced surveillance, as shown by Snowden’s leaked documents: the weakening of security tools as a result of the agency’s “commercial relationships” with security and tech companies.
A review board established by the White House to investigate the NSA’s controversial surveillance operations said this week it believes the NSA should make changes to spying protocol, including measures that have usurped cryptography.
Among the recommendations, the panel called for the US government to "fully support and not undermine efforts to create encryption standards," and "not in any way subvert, undermine, weaken or make vulnerable generally available commercial software."

Brazil Selects Gripen For F-X2 Requirement

By Anthony Osborne tony.osborne@aviationweek.com, Bill Sweetman 



The Brazilian government has selected the Saab JAS 39E Gripen for its F-X2 next generation fighter requirement.

Brasilia has taken more than 12 years to decide on the new fighter, with the selection finally coming on Dec. 18. The Brazilian air force will receive 36 Gripens in the new Gripen E configuration, which has also been ordered by the Swedish air force and selected by the Swiss air force.

Brazil’s defense ministry said that the Gripen was the least costly contender and also met the country’s requirement for sufficient technology transfer to ensure that Brazil’s ability to operate the aircraft would depend as little as possible on continued support from the supplier.

The total value of the deal is estimated at $4.5 billion including initial support and spares, training, flight simulators, technology transfer and industrial cooperation. The contract is expected to be finalized by December 2014, with the first aircraft to arrive 48 months later. The contract is to be complete by 2023.

There are two known major factors behind the timing of the deal. The Brazilian air force short-listed the Dassault Rafale, Boeing Super Hornet and Gripen in 2008, received firm offers in October 2009 and submitted its analysis and recommendations in January 2010. Since then, the final decision has remained at the presidential level — Dilma Rousseff succeeding Luiz Inácio Lula da Silva Lula in 2011 — and competitors have repeatedly been asked to extend their bids, a process that was reaching its practical limit.

The other factor is the aging of Brazil’s fighter inventory. The air force retired its Mirage 2000s this year and has increased flying hours on its modernized Northrop F-5EM/FM in compensation. It has also acquired 11 ex-Jordanian F-5s which are being upgraded to the EM/FM configuration. But these aircraft will be retired by 2025 and the remaining Alenia/Embraer A-1Ms will be out of service in 2023.

Major contractors on the Gripen include General Electric, with the F414 engine, and Selex-ES, which provides the Raven ES-05 radar, Skyward-G infrared search and track system, and identification friend-or-foe equipment. The panoramic cockpit displays will come from Elbit’s Brazilian subsidiary, AEL Sistemas.

The decision comes on the same day that Sweden’s defense materiel agency, FMV, signed a 16.4 billion Swedish Krona ($2.51 billion) production deal with Saab to modify 60 JAS 39 Gripen C fighters to the Gripen E standard.

Deliveries of the modified aircraft will begin in 2018. The production order is the third contract in a framework set up between the FMV and Saab to develop the Gripen E upgrade announced in February. The last Swedish aircraft will be delivered in 2026.

Wednesday, December 18, 2013

Ukraine: On the Edge of Empires

Editor's Note: The following Geopolitical Weekly originally ran in November 2010 as part of our Geopolitical Journey series. We repost it today as Ukraine's position between Europe and Russia puts it in the spotlight.
By George Friedman
The name "Ukraine" literally translates as "on the edge." It is a country on the edge of other countries, sometimes part of one, sometimes part of another and more frequently divided. In the 17th and 18th centuries, it was divided between Russia, Poland and the Ottoman Empire. In the 19th century, it was divided between Russia and Austria-Hungary. And in the 20th century, save for a short period of independence after World War I, it became part of the Soviet Union. Ukraine has been on the edge of empires for centuries.
My father was born in Ukraine in 1912, in a town in the Carpathians now called Uzhgorod. It was part of Austria-Hungary when he was born, and by the time he was 10 the border had moved a few miles east, so his family moved a few miles west. My father claimed to speak seven languages (Hungarian, Romanian, Slovak, Polish, Ukrainian, Russian and Yiddish). As a child, I was deeply impressed by his learning. It was only later that I discovered that his linguistic skills extended only to such phrases as "What do you want for that scrawny chicken?" and "Please don't shoot."
He could indeed make himself understood in such non-trivial matters in all these languages. Consider the reason: Uzhgorod today is on the Slovakian border, about 30 miles from Poland, 15 miles from Hungary and 50 miles from Romania. When my father was growing up, the borders moved constantly, and knowing these languages mattered. You were never sure what you'd be a citizen or subject of next or who would be aiming a rifle at you.
My father lived on the edge until the Germans came in 1941 and swept everything before them, and then until the Soviets returned in 1944 and swept everything before them. He was one of tens of millions who lived or died on the edge, and perhaps nowhere was there as much suffering from living on the edge than in Ukraine. Ukraine was caught between Stalin and Hitler, between planned famines and outright slaughter, to be relieved only by the grinding misery of post-Stalin communism. No European country suffered as much in the 20th century as Ukraine. From 1914 until 1945, Ukraine was as close to hell as one can reach in this life.

Asking to be Ruled

Ukraine was, oddly enough, shaped by Norsemen, who swept down and set up trading posts, eventually ruling over some local populations. According to early histories, the native tribes made the following invitation: "Our land is great and rich, but there is no law in it. Come to rule and reign over us." This is debated, as Anne Reid, author of the excellent "Borderland: Journey through the History of Ukraine," points out. But it really doesn't matter, since they came as merchants rather than conquerors, creating a city, Kiev, at the point where the extraordinarily wide Dnieper River narrows.
Still, few historians doubt that some offer of this type was made. I can imagine inhabitants of what became Ukraine making such an offer in ways I can't imagine in other places. The flat country is made for internal conflict and dissension, and the hunger for a foreigner to come and stabilize a rich land is not always far from Ukrainians' thoughts. Out of this grew the Kievan Rus, the precursor of modern Ukraine, Russia and Belarus. There are endless arguments over whether Ukraine created Russia or vice versa. Suffice it to say, they developed together. That is more important than who did what to whom.
Consider the way they are said to have chosen their religion. Volodymyr, a pagan ruler, decided that he needed a modern religion. He considered Islam and rejected it because he wanted to drink. He considered Catholicism and rejected it because he had lots of concubines he didn't want to give up. He finally decided on Orthodox Christianity, which struck him as both beautiful and flexible. As Reid points out, there were profound consequences: "By choosing Christianity rather than Islam, Volodymyr cast Rus' ambitions forever in Europe rather than Asia, and by taking Christianity from Byzantium rather than Rome he bound the future Russians, Ukrainians and Belarusians together in Orthodoxy, fatally dividing them from their Catholic neighbors the Poles." I suspect that while Volodymyr liked his drink and his women, he was most concerned with finding a balance between powers and chose Byzantium to create space for Ukraine.

Ukraine, Europe and Russia

Ukraine is on the edge again today, trying to find space. It is on the edge of Russia and on the edge of Europe, its old position. What makes this position unique is that Ukraine is independent and has been so for 18 years. This is the longest period of Ukrainian independence in centuries. What is most striking about the Ukrainians is that, while they appear to value their independence, the internal debate seems to focus in part on what foreign entity they should be aligned with. People in the west want to be part of the European Union. People in the east want to be closer to the Russians. The Ukrainians want to remain independent but not simply independent.
It makes for an asymmetric relationship. Many Ukrainians want to join the European Union, which as a whole is ambivalent at best about Ukraine. On the other hand, Ukraine matters as much to the Russians as it does to Ukrainians, just as it always has. Ukraine is as important to Russian national security as Scotland is to England or Texas is to the United States. In the hands of an enemy, these places would pose an existential threat to all three countries. Therefore, rumors to the contrary, neither Scotland nor Texas is going anywhere. Nor is Ukraine, if Russia has anything to do with it. And this reality shapes the core of Ukrainian life. In a fundamental sense, geography has imposed limits on Ukrainian national sovereignty and therefore on the lives of Ukrainians.
From a purely strategic standpoint, Ukraine is Russia's soft underbelly. Dominated by Russia, Ukraine anchors Russian power in the Carpathians. These mountains are not impossible to penetrate, but they can't be penetrated easily. If Ukraine is under the influence or control of a Western power, Russia's (and Belarus') southern flank is wide open along an arc running from the Polish border east almost to Volgograd then south to the Sea of Azov, a distance of more than 1,000 miles, more than 700 of which lie along Russia proper. There are few natural barriers.
For Russia, Ukraine is a matter of fundamental national security. For a Western power, Ukraine is of value only if that power is planning to engage and defeat Russia, as the Germans tried to do in World War II. At the moment, given that no one in Europe or in the United States is thinking of engaging Russia militarily, Ukraine is not an essential asset. But from the Russian point of view it is fundamental, regardless of what anyone is thinking of at the moment. In 1932, Germany was a basket case; by 1941, it had conquered the European continent and was deep into Russia. One thing the Russians have learned in a long and painful history is to never plan based on what others are capable of doing or thinking at the moment. And given that, the future of Ukraine is never a casual matter for them.
It goes beyond this, of course. Ukraine controls Russia's access to the Black Sea and therefore to the Mediterranean. The ports of Odessa and Sevastopol provide both military and commercial access for exports, particularly from southern Russia. It is also a critical pipeline route for sending energy to Europe, a commercial and a strategic requirement for Russia, since energy has become a primary lever for influencing and controlling other countries, including Ukraine.
This is why the Orange Revolution in Ukraine in 2004 was critical in transforming Russia's view of the West and its relationship to Ukraine. Following the breakup of the Soviet Union, Ukraine had a series of governments that remained aligned with Russia. In the 2004 presidential election, the seemingly pro-Russian candidate, Viktor Yanukovich, emerged the winner in an election that many claimed was fraudulent. Crowds took to the streets and forced Yanukovich's resignation, and he was replaced by a pro-Western coalition.
The Russians charged that the peaceful uprising was engineered by Western intelligence agencies, particularly the CIA and MI6, which funneled money into pro-Western NGOs and political parties. Whether this was an intelligence operation or a fairly open activity, there is no question that American and European money poured into Ukraine. And whether it came from warm-hearted reformers or steely eyed CIA operatives didn't matter in the least to Vladimir Putin. He saw it as an attempt to encircle and crush the Russian Federation.
Putin spent the next six years working to reverse the outcome, operating both openly and covertly to split the coalition and to create a pro-Russian governmentIn the 2010 elections, Yanukovich returned to power, and from the Russian point of view, the danger was averted. A lot of things went into this reversal. The United States was absorbed in Iraq and Afghanistan and couldn't engage Russia in a battle for Ukraine. The Germans drew close to the Russians after the 2008 crisis. Russian oligarchs had close financial and political ties with Ukrainian oligarchs who influenced the election. There is a large pro-Russian faction in Ukraine that genuinely wants the country to be linked to Russia. And there was deep disappointment in the West's unwillingness to help Ukraine substantially.

Beyond the Orange Revolution

On the day we arrived in Kiev, two things were going on. First there were demonstrations under way protesting government tax policy. Second, Yanukovich was in Belgium for a summit with the European Union. Both of these things animated the pro-Western faction in Ukraine, a faction that remains fixated on the possibility that the Orange Revolution can be recreated and that Ukraine must enter the European Union. These two things are linked.
The demonstrations were linked to a shift in tax law that increased taxes on small-business owners. The main demonstration took place in a large square well-stocked with national flags and other banners. The sound systems in place were quite good. It was possible to hear the speeches clearly. When I pointed out to a pro-Western journalist that it seemed to be a well-funded and organized demonstration, I was assured that it wasn't well-organized at all. I have not been to other Ukrainian demonstrations but have been present at various other demonstrations around the world, and most of those were what some people in Texas call a "goat rodeo." I have never seen one of those, either, but I gather they aren't well-organized. This demonstration did not strike me as a goat rodeo.
This actually matters. There was some excitement among politically aware pro-Westerners that this demonstration could evolve into another Orange Revolution. Some demonstrators were camping out overnight, and there were some excited rumors that police were blocking buses filled with demonstrators and preventing them from getting to the demonstration. That would mean that the demonstration would have been bigger without police interference and that the government was worried about another uprising.
It just didn't seem that way to me. There were ample police in the side streets, but they were relaxed and not in riot gear. I was told that the police with riot gear were hidden in courtyards and elsewhere. I couldn't prove otherwise. But the demonstration struck me as too well-organized. Passionate and near-spontaneous demonstrations are more ragged, the crowds more restless and growing, and the police more tense. To me, as an outsider, it seemed more an attempt by organization leaders and politicians to generate a sense of political tension than a spontaneous event. But there was a modicum of hope among anti-government factions that this could be the start of something big. When pressed on the probabilities, I was told by one journalist that there was a 5 percent chance it could grow into an uprising.
My perception was that it was a tempest in a teapot. My perception was not completely correct. Yanukovich announced later in the week that the new tax law might not go into effect. He said that it would depend on parliamentary action that would not come for another week but he gave every indication that he would find a way to at least postpone it if not cancel it. Clearly, he did not regard the demonstrations as trivial. Regardless of whether he would finally bend to the demonstrators' wishes, he felt he needed to respond.

European Dreams

On the same day the demonstrations began, Yanukovich left for Brussels for talks about Ukraine entering the European Union. I had an opportunity to meet with an official of the Ministry of Foreign Affairs before he departed for Brussels as well. The official had also been with the ministry during the previous administration. He was a member of the group that had been part of the numerous programs run by the United States and Europe for turning Eastern Europeans into proponents of the West, and he was certainly that. My meeting with the official taught me one of two things: Either Yanukovich was not purging people ideologically or he wanted to keep a foot in the pro-EU camp.
From where I sat, as an American, the European Union appeared at best tarnished and at worst tottering. I had met in Istanbul with some European financial leaders who had in past discussions dismissed my negativism on the European Union as a lack of sophistication on my part. This time they were far less assured than ever before and were talking about the possibilities of the euro failing and other extreme outcomes. They had traveled quite a road in the past few years to have arrived at this point. But what was fascinating to me was that the Ukrainian Foreign Ministry official was not only unshaken by the Irish situation but also saw no connection between that and the EU appetite for Ukraine becoming a member. For him, one had nothing to do with the other.
The troubles the European Union was facing did not strike pro-EU Ukrainians as changing the basic game. There was no question in their mind that they wanted Ukraine in the European Union, nor was there any question in their mind that the barriers to entry were in the failure of the Ukrainians to measure up. The idea that EU expansion had suffered a fatal blow due to the Irish or Greek crises was genuinely inconceivable to them. The European Union was not going to undergo any structural changes. Nothing that was happening in the European Union impacted its attractiveness or its openness. It was all about Ukraine measuring up.
In many countries we have visited there has been a class difference for EU membership. The political and economic elites are enthusiastic, the lower classes much more restrained. In Ukraine, there is also a regional distinction. The eastern third of the country is heavily oriented toward Russia and not to the West. The western third is heavily oriented toward the West. The center of the country tilts toward the west but is divided. Linguistic division also falls along these lines, with the highest concentrations of native Ukrainian speakers living in the west and of Russian speakers in the east. This can be seen in the election returns in 2010 and before. Yanukovich dominated the east, Timoshenko the west, and the contested center tilted toward Timoshenko. But the support in the east for the Party of Regions and Yanukovich was overwhelming.
This division defines Ukrainian politics and foreign policy. Yanukovich is seen as having been elected to repudiate the Orange Revolution. Supporters of the Orange Revolution are vehement in their dislike of Yanukovich and believe that he is a Russian tool. Interestingly, this wasn't the view in Poland, where government officials and journalists suggested that Yanukovich was playing a more complex game and trying to balance Ukraine between Europe and the Russians.
Whatever Yanukovich intends, it is hard to see how you split the difference. Either you join the European Union or you don't. I suspect the view is that Yanukovich will try to join but will be rejected. He will therefore balance between the two groups. That is the only way he could split the difference. Certainly, NATO membership is off the table for him. But the European Union is a possibility.
I met with a group of young Ukrainian financial analysts and traders. They suggested that Ukraine be split into two countries, east and west. This is an idea with some currency inside and outside Ukraine. It certainly fits in with the Ukrainian tradition of being on the edge, of being split between Europe and Russia. The problem is that there is no clear geographical boundary that can be defined between the two parts, and the center of the country is itself divided.
Far more interesting than their geopolitical speculation was their fixation on Warsaw. Sitting in Kiev, the young analysts and traders knew everything imaginable about the IPO market, privatization and retirement system in Poland, the various plans and amounts available from those plans for private investment. It became clear that they were more interested in making money in Poland's markets than they were in the European Union, Ukrainian politics or what the Russians are thinking. They were young and they were traders and they knew who Gordon Gekko was, so this is not a sampling of Ukrainian life. But what was most interesting was how little talk there was of Ukrainian oligarchs compared to Warsaw markets. The oligarchs might have been way beyond them and therefore irrelevant, but it was Warsaw, not the European Union or the power structure, that got their juices flowing.
Many of these young financiers dreamed of leaving Ukraine. So did many of the students I met at a university. There were three themes they repeated. First, they wanted an independent Ukraine. Second, they wanted it to become part of the European Union. Third, they wanted to leave Ukraine and live their lives elsewhere. It struck me how little connection there was between their national hopes and their personal hopes. They were running on two different tracks. In the end, it boiled down to this: It takes generations to build a nation, and the early generations toil and suffer for what comes later. That is a bitter pill to swallow when you have the option of going elsewhere and living well for yourself now. The tension in Ukraine, at least among the European-oriented, appears to be between building Ukraine and building their own lives.

Sovereign in Spite of Itself

But these were members of Ukraine's Western-oriented class, which was created by the universities. The other part of Ukraine is in the industrial cities of the east. These people don't expect to leave Ukraine, but they do understand that their industries can't compete with Europe's. They know the Russians will buy what they produce, and they fear that European factories in western Ukraine would cost them their jobs. There is nostalgia for the Soviet Union here, not because they don't remember the horrors of Stalin but simply because the decadence of Leonid Brezhnev was so attractive to them compared to what came before or after.
Add to them the oligarchs. Not only do they permeate the Ukrainian economy and Ukrainian society but they also link Ukraine closely with the Russians. This is because the major Ukrainian oligarchs are tied to the Russians through complex economic and political arrangements. They are the frame of Ukraine. When I walked down a street with a journalist, he pointed to a beautiful but derelict building. He said that the super-wealthy buy these buildings for little money and hold them, since they pay no tax, retarding development. For the oligarchs, the European Union, with its rules and transparency, is a direct challenge, whereas their relation to Russia is part of their daily work.
The Russians are not, I think, trying to recreate the Russian empire. They want a sphere of influence, which is a very different thing. They do not want responsibility for Ukraine or other countries. They see that responsibility as having sapped Russian power. What they want is a sufficient degree of control over Ukraine to guarantee that potentially hostile forces don't gain control, particularly NATO or any follow-on entities. The Russians are content to allow Ukraine its internal sovereignty, so long as Ukraine does not become a threat to Russia and so long as gas pipelines running through Ukraine are under Russian control.
That is quite a lot to ask of a sovereign country. But Ukraine doesn't seem to be primarily concerned with maintaining more than the formal outlines of its sovereignty. What it is most concerned about is the choice between Europe and Russia. What is odd is that it is not clear that the European Union or Russia want Ukraine. The European Union is not about to take on another weakling. It has enough already. And Russia doesn't want the burden of governing Ukraine. It just doesn't want anyone controlling Ukraine to threaten Russia. Ukrainian sovereignty doesn't threaten anyone, so long as the borderland remains neutral.
That is what I found most interesting. Ukraine is independent, and I think it will stay independent. Its deepest problem is what to do with that independence, a plan it can formulate only in terms of someone else, in this case Europe or Russia. The great internal fight in Ukraine is not over how Ukraine will manage itself but whether it will be aligned with Europe or Russia. Unlike the 20th century, when the answer to the question of Ukrainian alignment caused wars to be fought, none will be fought now. Russia has what it wants from Ukraine, and Europe will not challenge that.
Ukraine has dreamed of sovereignty without ever truly confronting what it means. I mentioned to the financial analysts and traders that some of my children had served in the military. They were appalled at the idea. Why would someone choose to go into the military? I tried to explain their reasons, which did not have to do with wanting a good job. The gulf was too vast. They could not understand that national sovereignty and personal service cannot be divided. But then, as I said, most of them hoped to leave Ukraine.
Ukraine has its sovereignty. In some ways, I got the sense that it wants to give that sovereignty away, to find someone to take away the burden. It isn't clear, for once, that anyone is eager to take responsibility for Ukraine. I also did not get the sense that the Ukrainians had come to terms with what it meant to be sovereign. To many, Moscow and Warsaw are more real than Kiev.


Read more: Ukraine: On the Edge of Empires | Stratfor
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Sunday, December 15, 2013

C919 May Be Largely Limited To Chinese Market

By Bradley Perrett
Source: Aviation Week & Space Technology


Chances are rising that the Comac C919 will be largely limited to the Chinese market, as the manufacturer works toward local airworthiness certification while seeing no sure path to the desired FAA endorsement of the type.

The Chinese market is big, so sales of perhaps 1,000 units remain plausible, in the opinion of program officials. But the 158-seat narrowbody's prospects for making much of an impact on the wider market, perhaps never large, are diminishing.

The problem emerged in 2011 and is still unresolved. Delays in Comac's earlier program, the ARJ21 regional jet, are holding up FAA recognition of the certification competence of the Civil Aviation Administration of China (CAAC) (AW&ST Sept. 12, 2011, p. 24). That casts doubt on the FAA's eventual acceptance of the CAAC's current work on C919 and therefore the Chinese type certificate. Without Western airworthiness endorsement, the C919 cannot be sold in main commercial aircraft markets outside of China.

“As we see it, this is a highly complex situation,” says an executive closely involved in the C919 certification effort. “Because the FAA's position is affected by the ARJ21, we currently have no way of resolving this problem.” For the moment, the C919 program can only work on obtaining CAAC certification and hope the Chinese authority and the FAA can come to a helpful agreement. Comac has not given up, the executive adds: FAA endorsement is still a C919 objective.

Under a Bilateral Air Safety Agreement, the FAA is coaching and supervising the CAAC in dealing with the ARJ21 certification application. If and when the process is correctly completed, with the issue or refusal of a type certificate, the FAA will recognize the CAAC as a certifying authority. The FAA is similarly helping the Japanese Civil Aviation Bureau, with the Mitsubishi Aircraft MRJ regional jet as the test case. The FAA and European Aviation Safety Authority support authorities of other countries in this way because Americans and Europeans also fly on the foreign aircraft.

The ARJ is not now expected to be certified until the end of 2014, by which time the CAAC will have accumulated at least three years of C919 work with little or no FAA involvement. The issue is whether the FAA will recognize the validity of that work retrospectively once the CAAC proves itself with the ARJ21. The FAA would have to accept that its Chinese counterpart had followed the same procedures with the C919 as it used for the ARJ21. Last year, an official familiar with the FAA's options suggested that it could do so. Comac officials have no assurance that it will, however. And the FAA's confidence can only decline as the volume of unrecognized work rises.

Customers of the C919 have expressed a desire for FAA endorsement of the certification, even though they are all Chinese and therefore do not need it. There is no suggestion the CAAC would be soft on Comac; on the contrary, it is repeatedly reported that the Chinese authority is tougher than the FAA.

The C919's competitiveness in non-Chinese markets has long been questioned, especially since 2010-11, when Airbus and Boeing launched new versions of the A320 and 737 with engines the same as or similar to the CFM Leap 1 on Comac's aircraft. This year's schedule slippages and rejection of a composite material for the center wing box have further diminished the C919's market clout (AW&ST Aug. 19, p. 39).

But even if the aircraft proved to be seriously outmatched, production subsidies could conceivably allow Comac, itself a state agency, to sell it—providing the C919 had the certification that made it eligible for the market.

Subsidies are likely anyway. The announced C919 development budget is 58 billion yuan ($9.5 billion) but the real figure is probably 50% higher, says an industry executive whose company, not a competitor to Comac, has studied the issue. Adding interest, a production run of 1,000 C919s would demand recovery of well over $20 million in development costs per aircraft, a figure the market is not likely to bear.

Comac's Chinese engineers are probably earning about half as much as their counterparts at Boeing or Airbus, but the C919 program is also employing many very costly expatriate foreign engineers. Most important, inexperienced managers cannot be expected to know the most efficient ways of developing an airliner, so program costs should be unusually high, says the executive.

Two years ago Comac had to ask for top-up development funding from the government, which agreed to an unknown amount. The money seems to be budgeted but not assured, however, because Comac has to secure its funds every year from the government, industry officials say.

Since the top-up was approved, Comac has added about a year to the development schedule, implying another year of salaries. It has a three-month buffer in its current schedule, which includes a first flight late in 2015.

Production costs of the C919 will have to be higher than those of the A320 and 737 at first, since Airbus and Boeing have very well-honed manufacturing processes. But studies by the same outside company suggest that when the C919 production line is mature, Comac should be able build more, cheaply, thanks largely to lower wages.

Comac has forecast production of 2,200 C919s and an eventual steady rate of 150 a year. Executives who have studied the program say the actual total will probably be about half of the forecast. They do not see reason to be more pessimistic, because Chinese demand can probably soak up 1,000 C919s, providing the aircraft performs reasonably well. The key performance target is an operating cost 10% below those of current-production 737s and A320s.

The Chinese manufacturer is investing in advanced automatic fabrication equipment, which should cut costs if kept running at an optimum level, as well as guarantee precision. Its new plant outside Shanghai is mostly a final assembly line, however. Major airframe modules will come from Avic, whose efficiency and investment will therefore heavily influence costs.

The quality of Avic's production may be an issue. Comac has been dissatisfied with ARJ21 assemblies from Avic, even though that separate state group is quite capable of excellent work. For example, it produces A320 outer wings, to Airbus's great satisfaction.

Comac is leaning toward aluminum-lithium for the skin of the C919 fuselage, but only in the cylindrical sections, since it does not want Avic to try making the difficult double curvatures of the nose and tail with an unfamiliar material. Comac is somewhat obliged to use the Alcoa metal, because it no longer has a composite center wing box but still needs to meet a government requirement for 30% advanced materials in the airframe. The tail and movable surfaces will be of carbon-fiber composite.

The design is currently overweight, says an executive familiar with development, but the problem is not considered serious. The cause is mainly in the weight of equipment, not the structure.
Assembly of the first prototype should be underway by the end of 2014, assuming no further delays. A delay announced in August was the program's second; the first was not revealed officially but was reported by Aviation Week (AW&ST June 17, p. 96).

The C919's iron bird, a structure on the ground on which systems are tested, was due to be operational around the end of 2013 with mechanical and hydraulic systems. By mid 2014 it should be working with all systems.
The ARJ21, meanwhile, should now be in the last of 12 years of development. The first two production aircraft are due to be completed this month. Judging from recent progress in assembly at Comac's old Shanghai factory, at least one of them will be.

ARJ21 production is said to be supported by a government order for 50 aircraft as official transports. Comac is also selling 30 of the type to itself; Chengdu Airlines, owned by the manufacturer, will be the first operator. Contracts with other airlines probably had little binding effect when signed and, following the enormous development delays, even less now. Shortly after program launch, the ARJ21 was originally due to go into service in 2007.