Hello, hello! 👋🏻👋🏻
Welcome back to another edition of Tidbits covering all the recent things worth talking about in business, media, and technology.
There’s almost nothing directly related to business, media, or tech in this edition. It’s all Ukraine, but that’s just a reflection of how overpowering geopolitics is at the moment.
🗺 World Affairs + Geopolitics
#1 Russia Invasion of Ukraine Ignites European Security Crisis
Russian President Vladimir Putin started his long-anticipated invasion of Ukraine, triggering one of the worst security crises in Europe since World War II, after threats of economic sanctions from the U.S. and its allies failed to deter him.
The Russian leader, in a televised speech coinciding with the start of the operation around dawn, vowed to “demilitarize” the neighboring country of more than 40 million people, denigrated the Ukrainian leadership and said the assault was targeted at people he said have taken Ukraine “hostage.”Source: Bloomberg
This is the first major continental European war since the 1940s (almost a century ago). Although digital transformation has lulled most people into thinking the physical world doesn’t matter, it still does. And countries like Russia and Ukraine still can’t escape the geography they are cursed with. Russia is forever insecure. And Ukraine is forever next to a highly insecure country.
Is there any doubt that this crisis is partially a calculation on Putin’s part that the US would not want to get involved in another military conflict so soon after pulling out of Afghanistan? The moment US military commitment begins to waver, the history of the world and its geography resumes once more.
#2 A Look At Toughest Us Sanctions Facing Russia
President Joe Biden on Tuesday rolled out the first of what the U.S. says could be an ever-fiercer, ever-broader cascade of financial sanctions and penalties over Russia’s moves against Ukraine.
Tuesday’s first installment of sanctions hit members of Putin’s inner circle and their families and two banks that the U.S. considers especially crucial to the Kremlin and Russia’s military. Another new U.S. measure limits Russia’s power to raise money abroad.
U.S. officials made clear they were holding in possible reserve more devastating measures, in case Russia escalates actions threatening Ukraine’s territory and sovereignty. The Biden administration says those more sweeping penalties would cripple Russia’s ability to do business at home and abroad, and likely bring on a recession there.Source: AP News
The US and European allies have applied multiple rounds of sanctions over the past week. This article gives a good overview of the first wave of sanctions as well as some of the potential additional sanctions in reserve (some of which were subsequently announced later in the week).
Includes discussions on Nordstream 2 (gas pipeline / energy), sanctions on individuals, sanctions on Russian banks, export controls, and ejection from SWIFT.
#3 EU, UK, Canada, US Pledge To Remove Selected Russian Banks From Interbank Messaging System SWIFT
The U.S., European allies and Canada agreed Saturday to remove key Russian banks from the interbank messaging system, SWIFT, an extraordinary step that will sever the country from much of the global financial system.
“This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally,” the global powers wrote in a joint statement announcing the significant retaliatory measure.
The leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the U.S. also plan to limit the sale of so-called golden passports. The official described them as a loophole that allows wealthy Russians connected to the Kremlin to become citizens in other countries and access certain financial systems.
“We will go after their yachts, their luxury apartments, their money and their ability to send their kids to fancy colleges in the west,” the official added.Source: CNBC
The most damaging sanction announced so far is probably the ejection from SWIFT alongside sanctions on Russia’s banks including Sberbank (the largest bank in Russia) and the Russian central bank. These sanctions collectively deny Russia’s ability to transact globally in multiple currency systems. USD assets are immediately seized or rejected depending on the entity when it crosses the USD system.
SWIFT is the world’s largest interbank messaging system that allows banks to “speak” with each other. By denying Russia the ability to use SWIFT, it basically makes it near impossible to initiate or engage in financial transactions across most of the world. SWIFT is NOT a USD-only messaging system. This basically disrupts Russia’s ability to transact across multiple currencies including USD, GBP, EUR, JPY.
#4 Putin Puts Nuclear Forces On High Alert, Escalating Tensions
In a dramatic escalation of East-West tensions over Russia’s invasion of Ukraine, President Vladimir Putin ordered Russian nuclear forces put on high alert Sunday in response to what he called “aggressive statements” by leading NATO powers.
The order to put Russia’s nuclear weapons in an increased state of readiness for launch raised fears that the crisis could boil over into nuclear warfare, whether by design or miscalculation.
The practical meaning of Putin’s order was not immediately clear. Russia and the United States typically have land- and submarine-based nuclear forces on alert and prepared for combat at all times, but nuclear-capable bombers and other aircraft are not.
If Putin is arming or otherwise raising the nuclear combat readiness of his bombers, or if he is ordering more ballistic missile submarines to sea, then the United States might feel compelled to respond in kind, said Hans Kristensen, a nuclear analyst at the Federation of American Scientists. That would mark a worrisome escalation, he said.Source: AP News
I cannot say I understand Putin’s mind or his calculations. Is this simply a negotiating tactic to get what he wants (or back-out of the spiraling conflict he is now engulfed in)? Or is this a credible threat?
#5 Biden Has Been Presented With Options For Massive Cyberattacks Against Russia
President Joe Biden has been presented with a menu of options for the U.S. to carry out massive cyberattacks designed to disrupt Russia’s ability to sustain its military operations in Ukraine, four people familiar with the deliberations tell NBC News.
Two U.S. intelligence officials, one Western intelligence official and another person briefed on the matter say no final decisions have been made, but they say U.S. intelligence and military cyber warriors are proposing the use of American cyberweapons on a scale never before contemplated. Among the options: disrupting internet connectivity across Russia, shutting off electric power, and tampering with railroad switches to hamper Russia’s ability to resupply its forces, three of the sources said.
“You could do everything from slow the trains down to have them fall off the tracks,” one person briefed on the matter said.
They said most of the potential cyberattacks under consideration are designed to disrupt but not destroy, and therefore fall short of an act of war by the United States against Russia.
Any use of cyberweapons to retaliate for the Russian invasion of Ukraine would be a turning point for U.S. cyber operations, which have largely been focused on intelligence gathering, information operations and targeted strikes, many of them for counterterrorism purposes.Source: NBC News
One common theme we have been discussing here for years is how digitization has changed the nature of defense and war. Ukraine is quite far from most of us, but that does not mean we are “safe”. The digital world has removed borders and physical defenses. Just as much as it allows Biden to “attack” Russia with cyber weapons, Russia can do the same to us.
And please note these cyber weapons can have real world consequences. You can kill people by cutting off electricity (to hospitals, example). You can send trains into ditches. You can cause malfunctions at critical facilities like nuclear plants or dams.
The world is at a turning point that we may never come back from.
#6 The World Is Bracing For A Global Cyberwar As Russia Invades Ukraine
As Russia steps up its cyberattacks on Ukraine alongside a military invasion, governments on both sides of the Atlantic are worried the situation could spill over into other countries, becoming an all-out cyberwar.
Russia has been blamed for a number of cyberattacks targeting Ukraine’s government and banking system in recent weeks.
On Thursday, cybersecurity firm ESET said it had discovered new “wiper” malware targeting Ukrainian organizations. Such software aims to erase data from the systems it targets.
“We have long theorized that cyberattacks are going to be part of any nation-state’s arsenal and I think what we’re witnessing for the first time frankly in human history is cyberattacks have become the weapon of first strike,” Hitesh Sheth, CEO of Vectra AI, told CNBC’s “Squawk Box Asia” on Friday.Source: CNBC
#7 U.S. Officials Repeatedly Urged China to Help Avert War in Ukraine
Over three months, senior Biden administration officials held half a dozen urgent meetings with top Chinese officials in which the Americans presented intelligence showing Russia’s troop buildup around Ukraine and beseeched the Chinese to tell Russia not to invade, according to U.S. officials.
Each time, the Chinese officials, including the foreign minister and the ambassador to the United States, rebuffed the Americans, saying they did not think an invasion was in the works. After one diplomatic exchange in December, U.S. officials got intelligence showing Beijing had shared the information with Moscow, telling the Russians that the United States was trying to sow discord — and that China would not try to impede Russian plans and actions, the officials said.
The Biden administration’s diplomatic outreach to China to try to avert war began after President Biden and Mr. Xi held a video summit on Nov. 15. In the talk, the two leaders acknowledged challenges in the relationship between their nations, which is at its lowest point in decades, but agreed to try to cooperate on issues of common interest, including health security, climate change and nuclear weapons proliferation, White House officials said at the time.
After the meeting, American officials decided that the Russian troop buildup around Ukraine presented the most immediate problem that China and the United States could try to defuse together. Some officials thought the outcome of the video summit indicated there was potential for an improvement in U.S.-China relations. Others were more skeptical, but thought it was important to leave no stone unturned in efforts to prevent Russia from attacking, one official said.Source: NYT
China is caught in a very uncomfortable place. China is not on friendly terms with the US, but it’s not clear that it necessarily makes sense to get directly involved with the escalating confrontation between US / Europe and Russia. US and Europe remain very important partners for China given how large these markets are. And US and Europe remain key providers of high tech inputs for China’s economy and strategic goals.
No matter the outcome, this was probably the most consequential mistake of US / China diplomacy. It seems like the US was willing to try to begin patching things up after the Biden / Xi meeting in November, but not only did the opportunity escape both parties, China possibly emboldened Putin by publicly announcing a pact with Putin in early February.
#8 China Adjusts, and Readjusts, Its Embrace of Russia in Ukraine Crisis
Beijing has been flailing to adjust its position on the Ukraine situation ever since Mr. Xi signed on to an extraordinary solidarity statement with Mr. Putin early this month, a decision influenced by a Chinese foreign-policy establishment stuck in a belief that Mr. Putin wasn’t out for war.
For weeks, China’s foreign-policy establishment dismissed a steady stream of warnings from the U.S. and its European allies about a pending Russian invasion, and instead blamed Washington for hyping the Russian threats.
As late as this week, with signs looming of an impending invasion, when a well-connected foreign-policy scholar in China gave a talk to a group of worried Chinese investors and analysts, he titled the speech “A War That Won’t Happen.”
In the days leading up to Mr. Putin’s visit to Beijing, policy advice to China’s top leadership focused on how the partnership could give China leverage over the U.S. but played down or even outright dismissed the likelihood of a Russian invasion of Ukraine, according to people close to Beijing’s foreign-policy establishment.
Since the invasion, China has been stuck in an increasingly difficult diplomatic straddle. It needs to honor its partnership with Russia—one that both sides a few weeks ago said has “no limits”—while not abandoning its commitment to foreign-policy principles around noninterference, which would require it to unequivocally condemn the Russian assault. Adding to its balancing act is a desire to prevent its relations with the U.S. and Europe from going completely off the rails.Source: WSJ
The only way I can see it is a miscalculation. China sought Russia’s (long-term) help in its own struggle against the US / Europe, but did not anticipate that Putin would turn the relationship the other way so quickly and use it for his own goals in Europe.
Now China is attached to a potentially sinking ship and can’t decide if it’s better to unhitch itself or continue through.
I think part of the calculation is whether China thinks Russia is a reliable partner…you would assume that Putin would have given China a heads-up about something this important before the public display of affection in early February. So either China knew about it and was okay with it, or China didn’t know about it and is now unsure of how to deal with an unreliable partner.
#9 China State Banks Restrict Financing for Russian Commodities
At least two of China’s largest state-owned banks are restricting financing for purchases of Russian commodities, underscoring the limits of Beijing’s pledge to maintain economic ties with one of its most important strategic partners in the face of sanctions by the U.S. and its allies.
Industrial & Commercial Bank of China Ltd.’s offshore units stopped issuing U.S. dollar-denominated letters of credit for purchases of physical Russian commodities ready for export, two people familiar with the matter said. Yuan-denominated letters of credit are still available for some clients, subject to approvals from senior executives, the people said, asking not to be identified discussing private information.Source: Bloomberg
Although China is trying to figure out its stance, it is currently complying where it needs to comply. China is no longer providing USD financing to Russia, but RMB financing remains.
👻 Cryptocurrencies + NFTs
#10 Ukraine Tweeted Its Crypto Wallet And Got $4 Million In Donations To Help Fight Russia
On Saturday, just days after Russia invaded Ukraine, the country’s official Twitter account tweeted out a call for donations through bitcoin, ethereum, and the stablecoin tether.
Yarema Dukh, a communications strategist who helped set up the official Ukraine Twitter account in 2016, confirmed to BuzzFeed News that the tweet and wallet were a legitimate government plan. He said he believed the crypto funds would go to “exterminate as many Russian occupants as possible,” but was not sure of exact government spending plans.
Initially, some people, including Ethereum founder Vitalik Buterin, were concerned that the tweet may have been from scammers who had hacked the account. After hearing from the vice prime minister, Buterin tweeted that he had received confirmation, but encouraged people to always be cautious when sending donations in cryptocurrency.Source: Buzzfeed
Even during war we still can’t seem to escape crypto. Ukraine is trying to raise funds through crypto.
Of course, you can raise funds through the traditional banking system, too. The advantages for crypto is that it’s easier to just put your crypto wallet address on the internet than to try to figure out how to get people to send you money to your bank account directly. The disadvantage is that crypto fees are really high, and you never know if a crypto address online is a scam address or not.
Also if you can send money to Ukraine, it’s also possible people are sending money to Russia, too…
Here’s another reminder that tech and Capitalism are tools. No tool can only be guaranteed to be used for what you view as good. If it’s possible to send money to Ukraine via crypto, you better bet a lot of people (that would benefit from a Russian victory) are also sending money to Russia.
#11 Russia Could Use Cryptocurrency to Blunt the Force of U.S. Sanctions
…the global market for cryptocurrencies and other digital assets has ballooned. That’s bad news for enforcers of sanctions, and good news for Russia.
On Tuesday, the Biden administration enacted fresh sanctions on Russia over the conflict in Ukraine, aiming to thwart its access to foreign capital. But Russian entities are preparing to blunt some of the worst effects by making deals with anyone around the world willing to work with them, experts said. And, they say, those entities can then use digital currencies to bypass the control points that governments rely on — mainly transfers of money by banks — to block deal execution.
Sanctions are some of the most powerful tools the United States and European countries have to influence the behavior of nations they don’t consider allies. The United States in particular is able to use sanctions as a diplomatic tool because the dollar is the world’s reserve currency and used in payments worldwide. But American government officials are increasingly aware of the potential for cryptocurrencies to lessen the impact of sanctions and are stepping up their scrutiny of digital assets.
To apply sanctions, a government makes a list of people and businesses its citizens must avoid. Anyone caught engaging with a member of the list faces heavy fines. But the real key to any effective sanctions program is the global financial system. Banks around the world play a major role in enforcement: They see where money comes from and where it’s bound, and anti-money-laundering laws require them to block transactions with entities that are under sanctions and report what they see to authorities. But if banks are the eyes and ears of governments in this space, the explosion of digital currencies is blinding them.
Iran and North Korea are among countries that have used digital currencies to mitigate the effects of Western sanctions, a trend that U.S. and United Nations officials have recently observed. North Korea, for instance, has used ransomware to steal cryptocurrency to fund its nuclear program, according to a U.N. report.Source: WSJ
This is what I fear most. The US has two major levers – The military and our USD system. We are increasingly reluctant to use our military (or can’t, especially if it is against another nuclear state like Russia or China). That means our USD system has to carry most of the burden. But crypto is destroying the power of the USD system (in exchange for very questionable benefits at the moment other than “vibes” and “culture”).
#12 China Tells Banks, State Firms to Report Exposure to Jack Ma’s Ant
Chinese authorities told the nation’s biggest state-owned firms and banks to start a fresh round of checks on their financial exposure and other links to Ant Group Co., renewing scrutiny of billionaire Jack Ma’s financial empire, according to people familiar with the matter.
More than a year after the Chinese government snuffed out the biggest initial public offering in history by Ant, Beijing has showed no letup in a crackdown that has snowballed into an assault on every corner of China’s technosphere.
Chinese technology shares slumped for a second session Monday, with Tencent Holdings Ltd. sinking 5.2% on Monday due to renewed fears Beijing may roll out more restrictions for private enterprise. Meituan lost $26 billion of market value on Friday after China issued new guidelines asking for food delivery platforms to cut fees, underscoring that investor angst over the nation’s tech giants remains high.Source: Bloomberg
Thought I would flag the continued crackdown on Ant (and maybe tech in general in China).
#13 The Battle for the World’s Most Powerful Cyberweapon
For nearly a decade, the Israeli firm had been selling its surveillance software on a subscription basis to law-enforcement and intelligence agencies around the world, promising that it could do what no one else — not a private company, not even a state intelligence service — could do: consistently and reliably crack the encrypted communications of any iPhone or Android smartphone.
Selling weapons for diplomatic ends has long been a tool of statecraft. Foreign-service officers posted in American Embassies abroad have served for years as pitchmen for defense firms hoping to sell arms to their client states, as the thousands of diplomatic cables released by WikiLeaks in 2010 showed; when American defense secretaries meet with their counterparts in allied capitals, the end result is often the announcement of an arms deal that pads the profits of Lockheed Martin or Raytheon.
Cyberweapons have changed international relations more profoundly than any advance since the advent of the atomic bomb. In some ways, they are even more profoundly destabilizing — they are comparatively cheap, easily distributed and can be deployed without consequences to the attacker. Dealing with their proliferation is radically changing the nature of state relations, as Israel long ago discovered and the rest of the world is now also beginning to understand.Source: NYT
The most powerful weapons in the world are nuclear, but the most powerful weapons that get used are all cyber. This NYT piece on NSO’ Pegasus cyber weapon is a must read. Reveals a lot about how the world is changing.