Posts Tagged ‘India’


In a Computer Worm, a Possible Biblical Clue

September 29, 2010
Deep inside the computer worm that some specialists suspect is aimed at slowing Iran’s race for a nuclear weapon lies what could be a fleeting reference to the Book of Esther, the Old Testament tale in which the Jews pre-empt a Persian plot to destroy them.
That use of the word “Myrtus” — which can be read as an allusion to Esther — to name a file inside the code is one of several murky clues that have emerged as computer experts try to trace the origin and purpose of the rogue Stuxnet program, which seeks out a specific kind of command module for industrial equipment.
Not surprisingly, the Israelis are not saying whether Stuxnet has any connection to the secretive cyberwar unit it has built inside Israel’s intelligence service. Nor is the Obama administration, which while talking about cyberdefenses has also rapidly ramped up a broad covert program, inherited from the Bush administration, to undermine Iran’s nuclear program. In interviews in several countries, experts in both cyberwar and nuclear enrichment technology say the Stuxnet mystery may never be solved.
There are many competing explanations for myrtus, which could simply signify myrtle, a plant important to many cultures in the region. But some security experts see the reference as a signature allusion to Esther, a clear warning in a mounting technological and psychological battle as Israel and its allies try to breach Tehran’s most heavily guarded project. Others doubt the Israelis were involved and say the word could have been inserted as deliberate misinformation, to implicate Israel.
“The Iranians are already paranoid about the fact that some of their scientists have defected and several of their secret nuclear sites have been revealed,” one former intelligence official who still works on Iran issues said recently. “Whatever the origin and purpose of Stuxnet, it ramps up the psychological pressure.”
So a calling card in the code could be part of a mind game, or sloppiness or whimsy from the coders.
The malicious code has appeared in many countries, notably China, India, Indonesia and Iran. But there are tantalizing hints that Iran’s nuclear program was the primary target. Officials in both the United States and Israel have made no secret of the fact that undermining the computer systems that control Iran’s huge enrichment plant at Natanz is a high priority. (The Iranians know it, too: They have never let international inspectors into the control room of the plant, the inspectors report, presumably to keep secret what kind of equipment they are using.)
The fact that Stuxnet appears designed to attack a certain type of Siemens industrial control computer, used widely to manage oil pipelines, electrical power grids and many kinds of nuclear plants, may be telling. Just last year officials in Dubai seized a large shipment of those controllers — known as the Simatic S-7 — after Western intelligence agencies warned that the shipment was bound for Iran and would likely be used in its nuclear program.
“What we were told by many sources,” said Olli Heinonen, who retired last month as the head of inspections at the International Atomic Energy Agency in Vienna, “was that the Iranian nuclear program was acquiring this kind of equipment.”
Also, starting in the summer of 2009, the Iranians began having tremendous difficulty running their centrifuges, the tall, silvery machines that spin at supersonic speed to enrich uranium — and which can explode spectacularly if they become unstable. In New York last week, Iran’s president, Mahmoud Ahmadinejad, shrugged off suggestions that the country was having trouble keeping its enrichment plants going.
Yet something — perhaps the worm or some other form of sabotage, bad parts or a dearth of skilled technicians — is indeed slowing Iran’s advance.
The reports on Iran show a fairly steady drop in the number of centrifuges used to enrich uranium at the main Natanz plant. After reaching a peak of 4,920 machines in May 2009, the numbers declined to 3,772 centrifuges this past August, the most recent reporting period. That is a decline of 23 percent. (At the same time, production of low-enriched uranium has remained fairly constant, indicating the Iranians have learned how to make better use of fewer working machines.)
Computer experts say the first versions of the worm appeared as early as 2009 and that the sophisticated version contained an internal time stamp from January of this year.
These events add up to a mass of suspicions, not proof. Moreover, the difficulty experts have had in figuring out the origin of Stuxnet points to both the appeal and the danger of computer attacks in a new age of cyberwar.
For intelligence agencies they are an almost irresistible weapon, free of fingerprints. Israel has poured huge resources into Unit 8200, its secretive cyberwar operation, and the United States has built its capacity inside the National Security Agency and inside the military, which just opened a Cyber Command.
But the near impossibility of figuring out where they came from makes deterrence a huge problem — and explains why many have warned against the use of cyberweapons. No country, President Obama was warned even before he took office, is more vulnerable to cyberattack than the United States.
For now, it is hard to determine if the worm has infected centrifuge controllers at Natanz. While the S-7 industrial controller is used widely in Iran, and many other countries, even Siemens says it does not know where it is being used. Alexander Machowetz, a spokesman in Germany for Siemens, said the company did no business with Iran’s nuclear program. “It could be that there is equipment,” he said in a telephone interview. “But we never delivered it to Natanz.”
But Siemens industrial controllers are unregulated commodities that are sold and resold all over the world — the controllers intercepted in Dubai traveled through China, according to officials familiar with the seizure.
Ralph Langner, a German computer security consultant who was the first independent expert to assert that the malware had been “weaponized” and designed to attack the Iranian centrifuge array, argues that the Stuxnet worm could have been brought into the Iranian nuclear complex by Russian contractors.
“It would be an absolute no-brainer to leave an infected USB stick near one of these guys,” he said, “and there would be more than a 50 percent chance of having him pick it up and infect his computer.”
There are many reasons to suspect Israel’s involvement in Stuxnet. Intelligence is the single largest section of its military and the unit devoted to signal, electronic and computer network intelligence, known as Unit 8200, is the largest group within intelligence.
Yossi Melman, who covers intelligence for the newspaper Haaretz and is at work on a book about Israeli intelligence over the past decade, said in a telephone interview that he suspected that Israel was involved.
He noted that Meir Dagan, head of Mossad, had his term extended last year partly because he was said to be involved in important projects. He added that in the past year Israeli estimates of when Iran will have a nuclear weapon had been extended to 2014.
“They seem to know something, that they have more time than originally thought,” he said.
Then there is the allusion to myrtus — which may be telling, or may be a red herring.
Several of the teams of computer security researchers who have been dissecting the software found a text string that suggests that the attackers named their project Myrtus. The guava fruit is part of the Myrtus family, and one of the code modules is identified as Guava.
It was Mr. Langner who first noted that Myrtus is an allusion to the Hebrew word for Esther. The Book of Esther tells the story of a Persian plot against the Jews, who attacked their enemies pre-emptively.
“If you read the Bible you can make a guess,” said Mr. Langner, in a telephone interview from Germany on Wednesday.
Carol Newsom, an Old Testament scholar at Emory University, confirmed the linguistic connection between the plant family and the Old Testament figure, noting that Queen Esther’s original name in Hebrew was Hadassah, which is similar to the Hebrew word for myrtle. Perhaps, she said, “someone was making a learned cross-linguistic wordplay.”
But other Israeli experts said they doubted Israel’s involvement. Shai Blitzblau, the technical director and head of the computer warfare laboratory at Maglan, an Israeli company specializing in information security, said he was “convinced that Israel had nothing to do with Stuxnet.”
“We did a complete simulation of it and we sliced the code to its deepest level,” he said. “We have studied its protocols and functionality. Our two main suspects for this are high-level industrial espionage against Siemens and a kind of academic experiment.”
Mr. Blitzblau noted that the worm hit India, Indonesia and Russia before it hit Iran, though the worm has been found disproportionately in Iranian computers. He also noted that the Stuxnet worm has no code that reports back the results of the infection it creates. Presumably, a good intelligence agency would like to trace its work.

Ethan Bronner contributed reporting from Israel, and William J. Broad from New York.

 In a Computer Worm, a Possible Biblical Clue – NYTimes.com

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>A computer worm proliferating in Iran targets automated activity in large industrial facilities. Speculation that the worm represents an effort by a national intelligence agency to attack Iranian nuclear facilities is widespread in the media. The characteristics of the complex worm do in fact suggest a national intelligence agency was involved. If so, the full story is likely to remain shrouded in mystery.

Analysis

A computer virus known as a worm that has been spreading on computers primarily in Iran, India and Indonesia could be a cyberattack on Iranian nuclear facilities, according to widespread media speculation.

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The Stuxnet Computer Worm and the Iranian Nuclear Program

Summary

A computer worm proliferating in Iran targets automated activity in large industrial facilities. Speculation that the worm represents an effort by a national intelligence agency to attack Iranian nuclear facilities is widespread in the media. The characteristics of the complex worm do in fact suggest a national intelligence agency was involved. If so, the full story is likely to remain shrouded in mystery.

Analysis

A computer virus known as a worm that has been spreading on computers primarily in Iran, India and Indonesia could be a cyberattack on Iranian nuclear facilities, according to widespread media speculation.
Creating such a program, which targets a specific Siemens software system controlling automated activity in large industrial facilities, would have required a large team with experience and actionable intelligence. If a national intelligence agency in fact targeted Iranian nuclear facilities, this would be the first deployment of a cyberweapon reported on in the media. It would also mean that the full details of the operation are not likely ever to be known.
The so-called Stuxnet worm first attracted significant attention when Microsoft announced concerns over the situation in a Sept. 13 security bulletin, though various experts in the information technology community had been analyzing it for at least a few months. The worm is very advanced, required specific intelligence on its target, exploits multiple system vulnerabilities and uses two stolen security certificates, suggesting a typical hacker did not create it.
On a technical level, Stuxnet uses four different vulnerabilities to gain access to Windows systems and USB flash drives, identified independently by antivirus software makers Symantec and Kaspersky Lab. Discovering and exploiting all four vulnerabilities, which in this case are errors in code that allow access to the system or program for unintended purposes, would have required a major effort. Three of them were “zero-day” vulnerabilities, meaning they were unknown before now. A Polish security publication, Hakin9, had discovered the fourth, but Microsoft had failed to fix it. Typically, hackers who discover zero-day vulnerabilities exploit them immediately to avoid pre-emption by software companies, which fix them as soon as they learn of them. In another advanced technique, the worm uses two stolen security certificates from Realtek Semiconductor Corp. to access parts of the Windows operating system.
Stuxnet seems to target a specific Siemens software system, the Simatic WinCC SCADA, operating a unique hardware configuration, according to industrial systems security expert Ralph Langner and Symantec, which both dissected the worm. SCADA stands for “supervisory control and data acquisition systems,” which oversee a number of programmable logic controllers (PLCs), which are used to control individual industrial processes. Stuxnet thus targets individual computers that carry out automated activity in large industrial facilities, but only will activate when it finds the right one. Siemens reported that 14 facilities using its software had already been infected, but nothing had happened. When Stuxnet finds the right configuration of industrial processes run by this software, it supposedly will execute certain files that would disrupt or destroy the system and its equipment. Unlike most sophisticated worms or viruses created by criminal or hacker groups, this worm thus does not involve winning wealth or fame for the creator, but rather aims to disrupt one particular facility, shutting down vital systems that run continuously for a few seconds at a time.
VirusBlokAda, a Minsk-based company, announced the discovery of Stuxnet June 17, 2010, on customers’ computers in Iran. Data from Symantec indicates that most of the targeted and infected computers are in Iran, Indonesia and India. Nearly 60 percent of the infected computers were in Iran. Later research found that at least one version of Stuxnet had been around since June 2009. The proliferation of the worm in Iran indicates that country was the target, but where it started and how it has spread to different countries remains unclear.
Few countries have the kind of technology and industrial base and security agencies geared toward computer security and operations required to devise such a worm, which displays a creativity that few intelligence agencies have demonstrated. This list includes, in no particular order, the United States, India, the United Kingdom, Israel, Russia, Germany, France, China and South Korea.
Media speculation has focused on the United States and Israel, both of which are seeking to disrupt the Iranian nuclear program. Though a conventional war against Iran would be difficult, clandestine attempts at disruption can function as temporarily solutions. Evidence exists of other sabotage attempts in the covert war between the United States and Israel on one side and Iran on the other over Iranian efforts to build a deliverable nuclear weapon.
U.S. President Barack Obama has launched a major diplomatic initiative to involve other countries in stopping Iran’s nuclear activities, so another country might have decided to contribute this creative solution. Whoever developed the worm had very specific intelligence on their target. Targeting a classified Iranian industrial facility would require reliable intelligence assets, likely of a human nature, able to provide the specific parameters for the target. A number of defectors could have provided this information, as could have the plants’ designers or operators. Assuming Siemens systems were actually used, the plans or data needed could have been in Germany, or elsewhere.
Evidence pinpointing who created the worm is not likely to emerge. All that is known for certain is that it targets a particular industrial system using Siemens’ programming. Whether the worm has found its target also remains unclear. It may have done so months ago, meaning now we are just seeing the remnants spread. Assuming the target was a secret facility — which would make this the first cyberweapon reported in the media — the attack might well never be publicized. The Iranians have yet to comment on the worm. They may still be investigating to see where it has spread, working to prevent further damage and trying to identify the culprit. If a government did launch the worm, like any good intelligence operation, no one is likely to take credit for the attack. But no matter who was responsible for the worm, Stuxnet is a display of serious innovation by its designer.

Read more: The Stuxnet Computer Worm and the Iranian Nuclear Program | STRATFOR 

Also see:

Iran ‘attacked’ by computer worm
Iran’s nuclear agency trying to combat a virus capable of taking over systems that control power plants, media says.
Last Modified: 25 Sep 2010 15:08 GMT
Foreign media has speculated that the worm is aimed at disrupting the Bushehr nuclear plant [EPA]

Iran’s nuclear agency is trying to combat a complex computer worm that has affected industrial sites throughout the country and is capable of taking over the control systems of power plants, Iranian media reports have said.
Experts from the Atomic Energy Organisation of Iran met this week to discuss how to remove the malicious computer code, or worm, the semi-official Isna news agency reported on Friday.
No damage or disruption of nuclear facilities has yet been reported, however.
The computer worm, dubbed Stuxnet, can take over systems that control the inner workings of industrial plants.
Experts in Germany discovered the worm in July, and it has since shown up in a number of attacks – primarily in Iran, Indonesia, India and the US.
‘Disrupting Bushehr’
Isna said the malware had spread throughout Iran, but did not name specific sites affected.
Foreign media reports have speculated the worm was aimed at disrupting Iran’s first nuclear power plant, which is to go online in October in the southern port city of Bushehr.

The Russian-built plant will be internationally supervised, but world powers remain concerned that Iran wants to use its civil nuclear power programme as a cover for making weapons.
Iran denies such an aim and says its nuclear work is solely for peaceful purposes.
The destructive Stuxnet worm has surprised experts because it is the first one specifically created to take over industrial control systems, rather than just steal or manipulate data.
Speaking to Al Jazeera, Rik Ferguson, a senior security adviser at the computer security company Trend Micro, described the worm as “very sophisticated”.
“It is designed both for information theft, looking for design documents and sending that information back to the controllers, and for disruptive purposes,” he said.
“It can issue new commands or change commands used in manufacturing.
“It’s difficult to say with any certainty who is behind it. There are multiple theories, and in all honesty, any of of them could be correct.”
Western experts have said the worm’s sophistication – and the fact that about 60 per cent of computers infected looked to be in Iran – pointed to a government-backed attack.
Washington is also tracking the worm, and the Department of Homeland Security is building specialised teams that can respond quickly to cyber emergencies at industrial facilities across the US.

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First, it is very important to understand that militant activity in Afghanistan is nothing new. It has existed there for centuries 



Militancy and the U.S. Drawdown in Afghanistan
September 2, 2010
 

By Scott Stewart The drawdown of U.S. forces in Iraq <http://www.stratfor.com/analysis/20100830_iraqs_security_forces_after_us_withdrawal?fn=9717046652> has served to shift attention toward Afghanistan, where the United States has been increasing its troop strength in hopes of forming conditions conducive to a political settlement. This is similar to the way it used the 2007 surge in Iraq to help reach a negotiated settlement with the Sunni insurgents that eventually set the stage for withdrawal there. As we’ve discussed elsewhere, the Taliban at this point do not feel the pressure <http://www.stratfor.com/analysis/20100830_afghanistan_why_taliban_are_winning?fn=1217046690> required for them to capitulate or negotiate and therefore continue to follow their strategy of surviving and waiting for the coalition forces to depart so that they can again make a move to assume control over Afghanistan. Indeed, with the United States having set a deadline of July 2011 to begin the drawdown of combat forces in Afghanistan — and with many of its NATO allies withdrawing sooner — the Taliban can sense that the end is near. As they wait expectantly for the departure of the International Security Assistance Force (ISAF) from Afghanistan, a look at the history of militancy in Afghanistan provides a bit of a preview of what could follow the U.S. withdrawal.

A Tradition of Militancy
First, it is very important to understand that militant activity in Afghanistan is nothing new. It has existed there for centuries <http://www.stratfor.com/analysis/20100212_border_playbill_militant_actors_afghanpakistani_frontier?fn=8817046654> , driven by a number of factors. One of the primary factors is the country’s geography. Because of its rugged and remote terrain, it is very difficult for a foreign power (or even an indigenous government in Kabul) to enforce its writ on many parts of the country. A second, closely related factor is culture. Many of the tribes in Afghanistan have traditionally been warrior societies that live in the mountains, disconnected from Kabul because of geography, and tend to exercise autonomous rule that breeds independence and suspicion of the central government. A third factor is ethnicity. There is no real Afghan national identity. Rather, the country is a patchwork of Pashtun, Tajik, Hazara and other ethnicities that tend also to be segregated by geography. Finally, there is religion. While Afghanistan is a predominantly Muslim country, there is a significant Shiite minority as well as a large Sufi presence in the country. The hardcore Deobandi Taliban are not very tolerant of the Shia or Sufis, and they can also be harsh toward more moderate Sunnis who do things such as send their daughters to school, trim their beards, listen to music and watch movies.

(click here to enlarge image)
<http://web.stratfor.com/images/maps/Afghan_Pakistan_ethnic_800.jpg?fn=2617046671> Any of these forces on its own would pose challenges to peace, stability and centralized governance, but together they pose a daunting problem and result in near-constant strife in Afghanistan. Because of this environment, it is quite easy for outside forces to stir up militancy in Afghanistan. One tried-and-true method is to play to the independent spirit of the Afghans and encourage them to rise up against the foreign powers that have attempted to control the country. We saw this executed to perfection in the 1800s during the Great Game between the British and the Russians for control of Afghanistan. This tool was also used after the 1979 Soviet intervention in Afghanistan and it has been used again in recent years following the 2001 U.S. invasion of the country. The Taliban are clearly being used by competing outside powers against the United States (more on this later). But driving out an invading power is not the only thing that will lead to militancy and violence in Afghanistan. The ethnic, cultural and religious differences mentioned above and even things like grazing or water rights and tribal blood feuds can also lead to violence. Moreover, these factors can (and have been) used by outside powers to either disrupt the peace in Afghanistan or exert control over the country via a proxy (such as Pakistan’s use of the Taliban movement). Militant activity in Afghanistan is, therefore, not just the result of an outside invasion. Rather, it has been a near constant throughout the history of the region, and it will likely continue to be so for the foreseeable future.

Foreign Influence
When we consider the history of outside manipulation in Afghanistan, it becomes clear that such manipulation has long been an important factor in the country and will continue to be so after the United States and the rest of the ISAF withdraw. There are a number of countries that have an interest in Afghanistan and that will seek to exert some control over what the post-invasion country looks like.

  • The United States does not want the country to revert to being a refuge for al Qaeda and other transnational jihadist groups. At the end of the day, this is the real U.S. national interest in Afghanistan. It is not counterinsurgency or building democracy or anything else.
  • Russia does not want the Taliban to return to power. The Russians view the Taliban as a disease that can infect and erode their sphere of influence in countries like Uzbekistan and Tajikistan and then move on to pose a threat to Russian control in the predominately Muslim regions of the Caucasus. This is why the Russians were so active in supporting the Northern Alliance against the Taliban regime. There are reports, though, that the Russians have been aiding the Taliban in an effort to keep the United States tied down in Afghanistan, since as long as the United States is distracted there it has less latitude <http://www.stratfor.com/russias_window_opportunity?fn=1217046642> to counter Russian activity elsewhere.
  • On the other side of that equation, Pakistan helped foster the creation of the Pashtun Taliban organization and then used the organization as a tool to exert its influence in Afghanistan. Facing enemies on its borders with India and Iran, Pakistan must control Afghanistan in order to have strategic depth <http://www.stratfor.com/analysis/20100316_afghanistan_campaign_part_3_pakistani_strategy?fn=1117046681> and ensure that it will not be forced to defend itself along its northwest as well. While the emergence of the Pakistani Taliban and the threat it poses to Pakistan will alter Islamabad’s strategy somewhat — and Pakistan has indeed been recalculating its use of militant proxies <http://www.stratfor.com/analysis/pakistan_new_phase_militant_proxy_saga?fn=5017046637> — Pakistan will try hard to ensure that the regime in Kabul is pro-Pakistani.

  • This is exactly why India wants to play a big part in Afghanistan — to deny Pakistan that strategic depth. In the past, India worked with Russia and Iran to support the Northern Alliance and keep the Taliban from total domination of the country. Indications are that the Indians are teaming up with the Russians and Iranians once again.

  • Iran also has an interest in the future of Afghanistan and has worked to cultivate certain factions of the Taliban by providing them with shelter, weapons and training. The Iranians also have been strongly opposed to the Taliban and have supported anti-Taliban militants, particularly those from the Shiite Hazara people. When the Taliban captured Mazar-e-Sharif in 1998, they killed 11 Iranian diplomats and journalists. Iran does not want the Taliban to become too powerful, but it will use them as a tool to hurt the United States. Iran will also attempt to install a pro-Iranian government in Kabul or, at the very least, try to thwart efforts by the Pakistanis and Americans to exert control over the country.

A History of Death and Violence It may seem counterintuitive, but following the U.S. invasion of Afghanistan, the casualties from militancy in the country declined considerably. According to the International Institute for Strategic Studies Armed Conflict Database, the fatalities due to armed conflict in Afghanistan fell from an estimated 10,000 a year prior to the invasion to 4,000 in 2002 and 1,000 by 2004. Even as the Taliban began to regroup in 2005 and the number of fatalities began to move upward, by 2009 (the last year for which the institute offers data) the total was only 7,140, still well-under the pre-invasion death tolls (though admittedly far greater than at the ebb of the insurgency in 2004). Still, even with death tolls rising, the U.S. invasion has not produced anywhere near the estimated 1 million deaths that resulted during the Soviet occupation. The Soviets and their Afghan allies were not concerned about conducting a hearts-and-minds campaign. Indeed, their efforts were more akin to a scorched-earth strategy complete with attacks directed against the population. This strategy also resulted in millions of refugees fleeing Afghanistan for Pakistan and Iran and badly disrupted the tribal structure in much of Afghanistan. This massive disruption of the societal structure helped lead to a state of widespread anarchy that later led many Afghans to see the Taliban as saviors.  Following the Soviet withdrawal in 1989, the communist government in Kabul was able to survive for three more years, backed heavily with Soviet arms, but these years were again marked by heavy casualties. When the communist government fell in 1992, the warlords who had opposed the government attempted to form a power-sharing agreement to govern Afghanistan, but all the factions could not reach a consensus and another civil war broke out, this time among the various anti-communist Afghan warlords vying for control of the country. During this period, Kabul was repeatedly shelled and the bloodshed continued. Neither the Soviet departure nor the fall of the communist regime ended the carnage. With the rise of the Taliban, the violence began to diminish in many parts of the country, though the fighting remained fierce and tens of thousands of people were killed as the Taliban tried to exert control over the country. The Taliban were still engaged in a protracted and bloody civil war against the Northern Alliance when the United States invaded Afghanistan in 2001. During the initial invasion, very few U.S. troops were actually on the ground. The United States used the Northern Alliance as the main ground-force element, along with U.S. air power and special operations forces, and was able to remove the Taliban from power in short order. It is important to remember that the Taliban was never really defeated on the battlefield. Once they realized that they were no match for U.S. air power in a conventional war, they declined battle and faded away to launch their insurgency. Today, the forces collectively referred to as the Taliban in Afghanistan are not all part of one hierarchical organization under the leadership of Mullah Mohammad Omar. Although Mullah Omar is the dominant force and is without peer among Afghan insurgent leaders, there are a number of local and regional militant commanders who are fighting against the U.S. occupation beside the Taliban and who have post-U.S. occupation interests that diverge from those of the Taliban. Such groups are opportunists rather than hardcore Taliban and they might fight against Mullah Omar’s Taliban if he and his militants come to power in Kabul, especially if an outside power manipulates, funds and arms them — and outside powers will certainly be seeking to do so. The United States has tried to peel away the more independent factions from the wider Taliban “movement” but has had little success, mainly because the faction leaders see that the United States is going to disengage and that the Taliban will be a force to be reckoned with in the aftermath. Once U.S. and ISAF forces withdraw from Afghanistan, then, it is quite likely that Afghanistan will again fall into a period of civil war, as the Taliban attempt to defeat the Karzai government, as the United States tries to support it and as other outside powers such as Pakistan, Russia and Iran try to gain influence through their proxies in the country. The only thing that can really prevent this civil war from occurring is a total defeat of the Taliban and other militants in the country or some sort of political settlement. With the sheer size of the Taliban and its many factions, and the fact that many factions are receiving shelter and support from patrons in Pakistan and Iran, it is simply not possible for the U.S. military to completely destroy them before the Americans begin to withdraw next summer. This will result in a tremendous amount of pressure on the Americans to find a political solution to the problem. At this time, the Taliban simply don’t feel pressured to come to the negotiating table — especially with the U.S. drawdown in sight. And even if a political settlement is somehow reached, not everyone will be pleased with it. Certainly, the outside manipulation in Afghanistan will continue, as will the fighting, as it has for centuries. 


Militancy and the U.S. Drawdown in Afghanistan


 “This report is republished with permission of STRATFOR ” 


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World Gold Council Report ( WGC)

WGC-  China’s gold investment demand grew by 121% in 2Q- Central Banks buy more gold-

CONCLUSION: the WGC just reported its 2Q report ( see attached). Three key things:

 

1- ONE OF THE KEY NEW TRENDS IS CHINA WHERE RETAIL INVESTMENT DEMAND JUMPED BY 121% ( SEE PAGE 11). We continue to believe that deregulation of the gold market in China could OPEN a major new market for gold.

 

2- ANOTHER INTERESTING TREND IS THAT INDUSTRIAL DEMAND FOR GOLD CONTINUED TO IMPROVE BY 14% MAINLY DRIVEN BY ELECTRONICS UP 25% ( see page 10).

 

3- CENTRAL BANKS WERE NET PURCHASERS OF 7 TONNES OF GOLD DESPITE THE IMF SALE OF 47 TONNES DURING THE QUARTER. RUSSIA WAS AMONG THE LARGEST BUYERS ( 34 TONNES). The philippines also bought more gold.

 

Gold Demand Trends for Q2 2010 out (see Enclosed file), and WGC press release below>

  

 

INVESTMENT DEMAND WILL CONTINUE TO SUPPORT ROBUST GOLD MARKET DURING 2010

 

Demand for gold will remain robust during 2010 as a result of accelerating demand from India and China, as well as increasing global investment demand driven by continuing uncertainty over public debt and economic recovery, the World Gold Council (“WGC”) said.

According to the WGC’s Gold Demand Trends report for Q2 2010, published today, demand for gold for the rest of 2010 will be underpinned by the following market forces:

* India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewellery, for the remainder of 2010.

* Retail investment will continue to be a substantial source of gold demand in Europe.

* Over the longer-term, demand for gold in China is expected to grow considerably. A report recently published by The People’s Bank of China and five other organisations to foster the development of the domestic gold market will add impetus to the growth in gold ownership among Chinese consumers.

* Electronics demand is likely to return to higher historic levels after the sector exhibited further signs of recovery, especially in the US and Japan.

 

Marcus Grubb, Managing Director, Investment at the WGC commented:

“Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly.

“Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment.”

 

 

GLOBAL DEMAND STATISTICS FOR Q2 2010

* Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion.

* Investment demand2 was the strongest performing segment during the second quarter, posting a rise of 118% to 534.4 tonnes compared with 245.4 tonnes in Q2 2009.

* The largest contribution to this rise came from the ETF segment of investment demand, which grew by 414% to 291.3 tonnes, the second highest quarter on * Physical gold bar demand, which largely covers the non-western markets, rose 29% from Q2 2009 to 96.3 tonnes.

 

 


India abandons plan for sovereign wealth fund – Finance – Economy – News – The Economic Times


NEW DELHI: India has abandoned the plan to create a sovereign wealth fund on the line of Singapore, United Arab Emirates, Saudi Arabia, China and Russia, the finance ministry said on Friday.

“The government had examined a proposal to create a sovereign fund of $5 bn for financing acquisitions of companies abroad. However, it was decided not to pursue this proposal,” Minister of State for Finance Namo Narain Meena said in written reply to a question in the Lok Sabha.

Currently, there are more than 50 sovereign wealth funds, managing assets worth nearly $3 trillion.

Most of these funds are run by the countries that have huge trade surplus. It is mostly funded by commodity revenues, predominantly from oil and gas exports.

Prominent sovereign wealth funds are of Saudi Arabia, UAE, China, Russia, Singapore, Qatar, Japan, South Korea and Bahrain.

India abandons plan for sovereign wealth fund – Finance – Economy – News – The Economic Times

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Googlopolis

Eric Schmidt tells FP what makes a city smart, how not to lose $1 trillion — and the one place he’s never been.

INTERVIEW BY CHRISTINA LARSON | SEPT. / OCT. 2010

Can there ever be another Silicon Valley, in the United States or anywhere else? What makes it so special?
One thing is the weather. You think I’m joking, but the weather is certainly a part of it.
There can be many Silicon Valleys. It is absolutely a reproducible model; it’s not something in the water. You know, the history starts in the ’50s. What basically happened in Silicon Valley is that you had strong research universities, a relatively liberal and creative culture, lots of reasons for young people to stay in the area — and young people are the ones with the new ideas. Then you had the development of the venture capital industry.
What’s interesting is that every 10 years someone writes an article about how Silicon Valley was responsible for the last innovation wave, but it will miss the next wave. Yet Silicon Valley has now been at the forefront of four or five successive tech waves and has proved itself remarkably resilient because of the combination of the universities, the culture, the climate, the capital. My point is that if you have all of those elements, you can have your own Silicon Valley wherever you want.
If Google weren’t located in Silicon Valley, is there anywhere else you’ve visited that you can imagine it could be located in — or any places that remind you of Silicon Valley around the world?
That’s a very hard question to answer. Most would argue that Cambridge, England has a lot of the criteria — there’s been an explosion of start-ups there. Another scenario would be New York City. Obviously it does not have the weather, but it has the draw for young people and certainly the financial sophistication; plenty of smart people and the sense of globalization are very important. It’s unlikely that would occur in a place that does not see itself in a global context. The Bay Area, because it’s a gateway to Asia, has always seen itself in a global context.
What about a place like Shanghai or Beijing?
Shanghai could do it, although in China the universities are strongest in Beijing. Shanghai isn’t quite the New York of China, but it could be. Bangalore emerged as a tech hub in India in part because of favorable weather, a strong university system, and concerted support by the state government. So there are partial versions of that happening.
How is information technology changing the world?
When I was growing up, an elite controlled the media. And the majority of the world was very, very poor, both in a resource sense and an information sense. Since then, a set of things have occurred: the digital revolution, the mobile revolution, and so forth — of which I am enormously proud because they are roughly the equivalent of lifting people from abject poverty and ignorance to a reasonable ability to communicate and participate in the conversation.
Information empowers individuals. And it has a huge and overwhelmingly positive impact on society. Think of someone who can now get information about finance or technology, or they’re in school and they can’t afford textbooks but access information online. Or imagine medicine — I mean there’s just issue after issue.
Globalization has clearly been responsible for lifting at least 2 billion people from abject poverty to extremely low levels of middle class. As a result, they have greater access to education and opportunity; they are much less likely to attack you, and they’re busy trying to fulfill their low-cost version of the American Dream. They’re trying to buy a car.
Is there a downside to hyper-information access?
I am worried about the decline of what I call deep reading. In other words, the sort of “here I am on the airplane, there’s no Internet connection, I am reading a book thoroughly” reading. You do less of that in a world where everything is a snippet, everything is an instant message, everything is an alert.
What are you reading right now?
Steve Coll’s Ghost Wars.
What is one place in the world that you have never visited but you would like to?
Israel.
What’s a good risk?
You cannot eliminate all risk, but you can certainly put yourself into situations where the failures are not horrific. In other words, fail early. Fail early in a small team before you have devoted $20 billion to something. If 10 people fail, maybe you have lost their time and a couple million dollars, but if a space shuttle blows up and the whole thing is a disaster, you have lost a trillion dollars.
How does innovation happen?
Real insights don’t come out of linear plans; they come from collecting ideas and thinking about things and then all of the sudden — creativity occurs on Saturday morning when you least expect it.
Illustration by Joe Ciardiello for FP

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Illustration By Joe Ciardiello for FP
Eric E. Schmidt is CEO of Google.

Interview by Foreign Policy contributing editor Christina Larson.

Googlopolis – Interview by Christina Larson | Foreign Policy

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