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Uncut Geopolitics: Russia’s Armed Commercialism in the C.A.R. Diamond Trade

Uncut Geopolitics: Russia’s Armed Commercialism in the C.A.R. Diamond Trade

[Download the HD report here] Executive Summary State and nonstate actors of the Russian Federation have conducted a coordinated effort to take over the diamond extraction sector in the Central African Republic (CAR). This has been done through several economic, diplomatic, and strategic means. The affair thus far has concerned the United States regarding a wanted, sanctioned Russian oligarch, Yevgeniy Prigozhin, and his private military company Wagner Group. Yet, this individual and his assets are only one piece of a larger plan for the Russian state to use force to monopolize the CAR diamond trade. The United States Treasury should review the affair and determine if sanctions have been violated by involved entities. The US State Department should assess the affair and determine if its nature should be brought before the Kimberley Process for condemnation. Introduction On January 25, 2021, Central African Republic (C.A.R.) troops, aided by Russian, Rwandan, and UN coalition forces, successfully carried out an attack against rebel forces in the village of Boyali, roughly 90 kilometers from the capital city of Bangui. Just three days earlier in a failed attempt to overrun the capital, rebel groups seized the two main roads leading into Bangui. Only worsening the already catastrophic humanitarian crisis, the seizure resulted in President Touadéra declaring a 15-day state of emergency. In recent years, the Central African Republic has held divisive elections, been engulfed in complex factional conflicts, and endured economic stagnation. The current instability is rooted in the events of the past two decades. Five years after the conclusion of the C.A.R. Bush War (2004-2007), the then-President of the Central African Republic, François Bozizé, was ousted by Michel Djotodia in March 2013. Djotodia, who commanded a coalition of Muslim armed groups known as Seleka in the Bush War, was appointed to a government post after peace was brokered. Not long afterward, he would again ignite conflict as he and his supporters accused the government of defying agreed-upon articles of the peace accord. After a brief period of fighting, Seleka forces assaulted the capital Bangui, and installed Djotodia as President. While he formally dissolved the Seleka groups, they continued their campaigns of violence and atrocities against the majority-Christian populace, and he was forced to resign only after 10 months in office. Following this, the country descended into anarchy, with the central government having no real power or control outside the capital. With the reemergence of armed Muslim groups, now known as ex-Seleka, an alliance of armed Christian militias known as anti-balaka (laka being local slang for AK-47, a popular weapon among Seleka fighters) began popping up all over the country to counter their advances and to protect their communities against violence. Soon anti-balaka militias began committing the same crimes and atrocities against Muslims and Christians alike, as the power vacuum left by the state turned these fighters into warlords. France would be the first nation to send troops to the country to protect French citizens, followed a year later by a UN mission known as the Multidimensional Integrated Stabilization Mission in the Central African Republic (UN MINUSCA). As of 2021, there are approximately 12,000 foreign troops engaged in peacekeeping operations in the country, not including mercenary and paramilitary forces. The 2020-2021 elections sparked the emergence of the Coalition of Patriots for Change (CPC), a loose confederation of Muslim ex-Seleka fighters and anti-balaka Christian militias that once battled against them. The CPC opposes the leadership of the Touadéra administration, and is currently in control of approximately two-thirds of the entire country. Such unrest led to the arrival of Russian advisors and supplies being brought in at the behest of President Touadéra. While this request for foreign assistance is fairly recent, Russian activities in the region are nothing new, with the Russian private military company Wagner Group being in the country as far back as early 2018. The mercenary group, led by Russian oligarch and Putin-ally Yevgeny Prigozhin, provides the central government with military advisors, conducts site security, and provides close personal security for President Touadéra and his cabinet. With Wagner Group’s close proximity to the country’s leadership, and Russia’s readiness to send assets to operate in one of the most underdeveloped countries in the world, the question must be asked: What are Russia’s interests in the Central African Republic, and why have the assets and services of Yevgeniy Prigozhin been called in? The answer is diamonds. Prigozhin's Hand While conflict is nothing new to the region, Wagner Group’s presence and proximity to President Touadéra is fairly recent. For many it is a cause for alarm, or at the very least, heightened awareness. Directing the operations Yevgeny Prigozhin, the aforementioned billionaire oligarch with close ties to Vladimir Putin, whose commercial interests add an extra level of complexities in a region already rife with instability. For many years, Wagner Group has served as a proxy for Russian military and intelligence branches. As a private army, it can be deployed when plausible deniability is preferred by the Russian state. The group has been spotted operating in various warzones of the past decade: Syria, Libya, Ukraine, and more recently in places like Sudan and the Central African Republic, whose limited state capacity, civil strife, and natural resource wealth has attracted a lot of foreign attention. While Wagner Group does the fighting top side, other companies with ties to Prigozhin deal with business below the surface. Two companies that are never far from conflict are M-Finance and M-Invest. M-Finance has been registered since August 2015, and has been connected to Russia’s special operations in both Ukraine and Syria; this company is known to buy and sell vehicles and weapons, but also has been known to hire geological surveyors and make loans to other companies affiliated with Prigozhin and his allies. M-Invest has been registered since February 2017, and deals with mining and resource extraction operations, most notably a gold prospecting contract offered by Sudan’s Ministry of Minerals and signed off by Russia’s Prime Minister Medvedev in November that same year. M-Invest has also recently done deals with South African and Chinese companies to produce diamond-mining and boring equipment. Alongside Wagner Group’s recent involvement in the C.A.R, a developing nation with an abundance of gold, diamonds, and uranium, M-Invest found the perfect opportunity to strike a deal with the Touadéra government, reinforcing the Russian commitment to the security and mineral sector development of the region. Specifically for ventures in the C.A.R, Prigozhin founded Lobaye Invest Sarlu. This financial support body funds the mercenary and mining operations in a similar manner as M-Finance and M-Invest would, but is registered locally in the C.A.R. instead of Saint Petersburg as the other two companies are. Another one of Prigozhin’s companies acting on Russia’s behalf to assert influence or control abroad is the Internet Research Agency. The Internet Research Agency (IRA) is a misinformation bot farm that has been tied to Prigozhin by the United States Treasury as a foreign asset that was found to have conducted interference in the 2018 US Midterm Elections. Facebook has stated that the Internet Research Agency was reportedly found to have interfered in the 2020 C.A.R. Presidential Elections. In essence, IRA was in competition to peddle misinformation in a rivalry with an opposing campaign with ties to the French military, with IRA supporting the re-election of Touadéra and the other supporting his main opponent, Anicet-Georges Dologuélé. Facebook flagged both campaigns as coordinated inauthentic behavior (CIB) of foreign origin. Russian tactical strategy can be defined in two parts. First, there is armament. The Russian Armed Forces, (not Wagner Group), have donated many hard assets to the Touadéra government over the past year. In October 2020, Russia donated 10 BRDM-2 armored personnel carriers to the C.A.R. These Cold War-era vehicles come from the vast surplus of military equipment Russia can spare. This is in addition to the two MI-8 Helicopters and hundreds of small arms Russia has shipped into the country. The Russian foreign ministry has been vague on its personnel in the country, claiming both that Russian state military advisors are and are not present in the C.A.R. It was estimated that by the end of 2020, there were about 300 Russian operators in the C.A.R, but which were Wagner Group, Sewa Security Service, and military regulars remains unclear. The second part of tactical strategy would be day-to-day operations. It is a primary task of Wagner Group to provide the close personal protection of President Touadéra. There are several photos of the mercenaries dressed in camouflage escorting and watching over the president, toting AK-47s. Other photos suggest that Russian mercenaries carry out other security related missions in the C.A.R., such as advising local government forces throughout the country. A known headquarters for Wagner Group in the C.A.R. is the Bokassa Residence, northeast of Mbaïki. The grounds of the estate of former Central African President and Emperor, Jean-Bédel Bokassa, now serve as a training ground for C.A.R. soldiers to be trained by elite mercenaries. The residence is next to an airstrip to its east and a shooting range to the north. Satellite image of the Bokassa Residence, sourced from the open-content collaborative mapping site wikimapia.com. Note the Cyrillic text at the top spelling "стрельбище" (strelbishche), meaning "Shooting range". 4°2'39"N 18°7'14"E The Russian Diamond Sector The motives that have brought Russian influence into the Central African region are far removed from any humanitarian or altruistic goals of solely bringing stability to the country. The Central African Republic has significant natural resources that have defined much of its past foreign relations. Resource extraction shaped the colonial period under France, where private corporations benefited on an imperial model of labor exploitation. Independence from this system however did not allow for the nation prospering from natural resources. The C.A.R has had its modern history marked with conflict and violence, which often would relate to the ownership and extraction of goods like oil, precious gems, and gold. Such realities have led to the C.A.R being ranked as one of the least wealthy countries in the world, despite its abundance of exportable resources. This bottleneck to prosperity, and the possibility of relieving it, is what allowed Russian interests the trust of the country’s leadership. Diamonds are a vital pillar of understanding the current affairs in the C.A.R. and other African nations. In numerous conflicts, warring factions have used diamonds to finance their campaigns, often forcing others against their will to mine for them. These instances contributed to the larger trend of the “Blood Diamond” market throughout sub-Saharan Africa, in which diamonds mined to fund conflict or coming from conflict regions were entering the international gem and jewelry markets. In response, the international jewelry sector in 2003 by a United Nations resolution established the Kimberley Process. The Kimberley Process (KP) is the UN-affiliated international body responsible for designating diamond sources as conflict diamonds and drafting sanction frameworks to remove such diamonds from the international precious gem market. Currently, 81 nations are participants. During the C.A.R. Bush War and the subsequent years, there was the constant use of forced labor by various factions to extract diamonds and use the profits to acquire funding. In 2013, the Kimberley Process placed sanctions on the C.A.R. in which any diamonds sourced from the country were prohibited from reaching the international rough diamond market. Geographically, Russia is the world’s largest producer of rough diamonds, and Russia’s partially state-owned diamond mining company, Alrosa, is the largest diamond company in the world. The Russian government owns one-third of Alrosa’s public shares. One in four of all diamonds ever mined are Alrosa diamonds. Many of these are sourced from Yakutia, where Alrosa runs the world's largest diamond mine, the Aikhal mine. Alrosa has also expanded into Africa. In Angola, Alrosa owns 38% of the Catoca diamond mine, the world's fourth largest diamond mine. In Zimbabwe, the new entity Alrosa Zimbabwe Limited and Zimbabwe Consolidated Diamond Company (ZCDC) agreed in 2020 to have direct investment into the diamond extraction sector from Russia with Alrosa having special rights to the mines. Since 2017, Alrosa has publicly stated its interest in beginning a venture in the C.A.R. In 2019, President Touadéra invited the famed South African DeBeers Diamond Group and Alrosa to bid for exclusive rights to mine for diamonds in the country. Although there had been provisions in 2016 that allowed for some diamonds to be exported from known secure zones, President Touadéra wished to see the sanctions fully lifted. Mining had been a topic of discussion between President Touadéra and President Putin at the 2019 Russia-Africa Economic Forum in Sochi, of which Alrosa acted as a co-organizer. Alrosa has since been awarded the contract. Touadéra was likely eager to take the Russian option over DeBeers, because 2020 and 2021 are years in which the Russian Federation chairs the Kimberley Process. Russian Deputy Finance Minister Alexey Moiseev will be the Chairperson for the KP for the next 10 months, and it was his advocacy that streamlined the lifting of all KP diamond export sanctions from the C.A.R.. Moiseev insisted that Russia would take the role of guiding the C.A.R. toward rejuvenation and security in the sector. Moiseev is also on the Alrosa Supervisory Board, and is Chairman of the Alrosa Strategic Planning Committee. The role of Moiseev is significant because it illustrates the nexus of intergovernmental, national, and commercial interests in the Russian presence in the C.A.R. The coordinated efforts of the Russian-Led Kimberley Process, Prigozhin’s financial mechanisms, and hard assets like Wagner Group have paved the way for Alrosa to move into the C.A.R, exclusively. International policy, local politics, regional security, and developmental funding were all matters that had to be dealt to make the affair possible to ensure that Russia would have access to C.A.R. diamonds. Sanction Violations The sanctions released on September 23, 2020 by the US Treasury Department is a recent addition to the many condemnations against Yevgeniy Prigozhin. The statement cites Wagner Group’s involvement in several operations that contradicted US interests, such as in Ukraine, Syria, and Libya. It also cites that Prigozhin’s Internet Research Agency was designated by the Office of Foreign Asset Controls (OFAC) in 2018 as a hostile entity to sovereignties of various nations, including the United States. The 2020 sanctions highlight Prigozhin’s activities and travels to the C.A.R., and call for further sanctioning of any interaction with his enterprises and ventures in the C.A.R. This means that any entity assists in advancing Russian interests in the C.A.R. or assists other organizations in sanction evasion related to the Russian C.A.R. affair would be in violation of US sanctions. Alrosa is traded as a Public Joint-Stock Company (PJSC), with operations licensed overseas. One such operation is Alrosa USA Incorporated, the company’s affiliate entity for trading within the United States. Alrosa USA has an office in the New York City jewelry district, and is registered in the State of Delaware as a Foreign Business Corporation. Alrosa USA is a facilitator for gems held by the parent company to make it to American retailers like Signet Jewelers, and their subordinate entities of Zales, Kay Jewelers, and Jared. Alrosa also enjoys a memorandum of cooperation with the US-based auction house Sotheby's. Because Alrosa PJSC is clearly an advocate for Russian interests in the C.A.R and directly benefits from the actions of Yevgeniy Prigozhin, their American-based assets should be subject to the sanctions and their enforcement. September 23, 2020 announcement from the United States Department of the Treasury WASHINGTON – Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took further action against the network of Kremlin-connected Russian operative Yevgeniy Prigozhin (Prigozhin), by targeting entities and individuals working on behalf of Prigozhin to advance Russia’s influence in the Central African Republic (CAR). Concurrently, OFAC is targeting those that have supported the Russian Federal Security Service directly, as well as those that assist persons helping designated Russian actors to evade U.S. sanctions. “Yevgeniy Prigozhin has an international network of supporters to spread his malign political and economic influence around the globe,” said Secretary Steven T. Mnuchin. “The United States will continue to target the ability of Prigozhin to conduct operations globally.” https://home.treasury.gov/news/press-releases/sm1133 Armed Commercialism as a trend At the time of this writing, there is not evidence of the diamonds being mined in a way that violates human rights. The diamonds also enter the market legally at the time of excavation. The United States cannot presently state that the diamonds coming out of the C.A.R. as conflict diamonds or blood diamonds, however the US State Department should bring the nature of the affair before the Kimberley Process. This should be done to express that there is a line between conducting international trade agreements, and doing so through the employment of individuals who have been cited to conduct election interference and command clandestine armies who provide plausible deniability for their homeland. One can speculate that if concerns of Wagner Group’s and Prigozhin’s involvement in the diamond market is brought before the Kimberley Process, it would likely be dismissed by the chair nation, Russia, who benefits from the very venture that it has been entrusted by the international community to monitor. Some have argued that the increase of Russian presence and influence in the Central African Republic is a product of power projection between the Russian Federation and the West. This would be to the end of asserting influence in the region through both hard and soft power at the deficit of other foreign powers with presences in Africa, such as the United States, France, or China. This is simply not the case. If it was, then why would the affair maintain a clandestine nature? Power projection would entail primarily the deployment of marked Russian government troops, not unmarked mercenaries. Their mission there would be defined by strategic objectives, and would likely call for the construction of bases. Of the Russian Federation’s foreign policy objectives, there are several that likely are more pressing to the state than the internal conflict within the C.A.R. The mining interests however were too precious to Russia’s stature in the diamond trade, and warranted action. Commercial soldiers and companies fulfilled this commercial objective. For Prigozhin and his affiliates, this may be business as usual, but the Russia-C.A.R. Diamond affair unfortunately shows that conflicts of interests and secret armies can buy out a sector of trade. To counter this reality, such affairs should be monitored, and condemned if appropriate, by the international community. MPSG will continue to follow these key world events as they unfold. It is important to know that this story is a developing one, and will warrant subsequent inquiries into the region by MP Strategic Group. All content-related inquires may be directed to Robert Sanchez, Director of Research, MP Strategic Group LLC. (robertsanchez@mpstrategicgroup.com)

The Strategic Energy Implications of the 2020 Nagorno-Karabakh Conflict

The Strategic Energy Implications of the 2020 Nagorno-Karabakh Conflict

THE STRATEGIC ENERGY IMPLICATIONS OF THE 2020 NAGORNO-KARABAKH CONFLICT The collapse of the Soviet Union resulted in the sudden creation of newly independent states that now have the responsibility of governing over different ethnic groups, many of whom are constantly on the verge of conflict. During the reign of the USSR, boundaries were changed and different ethnic groups were moved. Despite this, nationalist uprisings and terrorist organizations were managed ruthlessly due to the nature of the Soviet government. The absence of this iron fist has left room for conflicts between states and ethnic groups, fueled by nationalist sentiments over everything from rightful claims to territory to representation in their nation’s government. This instability presents a challenge for states and private companies that wish to develop energy pipelines throughout Central Asia and the Caucasus. There may be no clear cut solution to these conflicts, but securing these pipelines is vital to nations that are exporting and importing hydrocarbon resources from Central Asia and the Caucasus regions. The Nagorno-Karabakh Conflict Nagorno-Karabakh is a region within the boundaries of Azerbaijan that is under the control of the partially recognized Republic of Artsakh, with its presence there assisted by Armenia and it’s military. The origin of this disputed area dates back to 1920, when the USSR designated this area as an autonomous region with a ninety-five percent Armenian population. Conflicts over this region have become frequent ever since the breakup of the Soviet Union. The Nagorno-Karabakh government passed legislation in 1988 declaring that they wished to become part of Armenia. In 1991, when the Soviet Union finally collapsed, war could no longer be contained. This conflict resulted in approximately 30,000 casualties and led to the region falling under the military control of Armenia who held approximately fourteen percent of Azerbaijan’s territory. With the help of Russian mediation a ceasefire was reached in 1994, but tensions resurfaced again in 2016. U.S. Ambassador Perina, Special Negotiator for Eurasian Conflicts, was called in to help negotiate an end to the conflict. However, he has stated that he was pessimistic about finding a peaceful solution. Stabilizing this region is required in order to secure vital infrastructure, such as pipelines. Armenia’s occupation of the Nagorno-Karabakh region in Azerbaijan has left a relatively small gap for pipelines to pass through on to the West. This sixty mile wide space is known as the Ganja Gap. Named after the Azeri city of Ganja, this pathway is the only region in Azerbaijan that can securely house these pipelines. It would make sense for countries who are interested in seeing natural gas and oil successfully exported to the West from the Caucasus region to invest in the security of this unstable area. At times, up to 25,000 Armenian troops have been stationed in the Nagorno-Karabakh region. These forces are heavily backed by Russia who has maintained military bases in Armenia since the 1940’s. The most recent outbreak of the Nagorno-Karabakh conflict in 2020 follows closely on the heels of the KAVKAZ-2020 joint military exercises held in the Caucasus region, which both Russia and Armenia took part in. This served as a red flag for both Azerbaijan and Turkey to expect disruptions to pipelines feeding into the Trans-Anatolian Pipeline system (TANAP). Russia has an interest in seeing this conflict flare up because it will disrupt the Baku-Tbilisi-Cehyan Pipeline and the Baku-Tbilisi-Erzurum Pipeline. The Baku-Tblisi-Ezerum Pipeline feeds into TANAP and serves as a vital artery for transporting natural gas into Europe. TANAP threatens Russia’s monopoly over European energy imports by offering a viable alternative source of natural gas from the Caucasus. The flare up of the Nagorno-Karabakh conflict threatens Turkey’s ability to operate as a key transit state and Azerbaijan’s ability to operate as both a producer and transit state. Despite Russia’s involvement in brokering peace talks between Azerbaijan and Armenia in the past, Moscow has habitually exploited ethnic conflicts as a way of fostering instability in regions that pose a threat to their energy hegemony over Europe. The South Ossetia Conflict Competing Georgian and Russian claims over the republic of South Ossetia, a region located in northern Georgia, led to armed conflict in which gas pipelines were a strategic objective for both sides. South Ossetia is partially recognized as its own state, but is officially recognized as a part of Georgia. Tensions between Georgia and the Ossetians date back to the early years of the USSR. When Georgia declared its independence from the Russian Empire after the Russian Revolution, they began to clash with separatists in South Ossetia who were backed by the USSR. South Ossetia became an autonomous region within Georgia. In 1991, the South Ossetians stated that it was their plan to separate from Georgia and rejoin the Republic of North Ossetia – Alania, the Russian federal subject adjacent to the north. War ensued, which resulted in approximately 2,000 deaths and hundreds of thousands of people escaping from Georgia and South Ossetia. Even though this was a relatively short war and a ceasefire was brokered in 1992, there was no agreement made regarding the status of this territory. It still remains within Georgia’s borders. In 2008, war broke out again. The 2008 Russo-Georgian war saw the Russian backing of two separatist entities, the Republic of Abkhazia in Georgia’s northwest, as well as the Republic of South Ossetia. During the conflict, Russia took control over a 1.5 km section of the Baku-Supsa Pipeline which runs through South Ossetia. Two days before the conflict began, the Baku-Tbilisi-Cehyan Pipeline which connects Azeri oil to Turkey via Georgia, was attacked and partially exploded in its Turkish section. The explosion, which was claimed by the Kurdish Workers Party, caused the temporary closing of the Baku-Tbilisi-Cehyan Pipeline on August 6th 2008. Its closing prompted the oil to be rerouted to the Baku-Supsa Pipeline. The Russo-Georgian war started on August 7th. During the conflict, Russian forces assisting South Ossetian separatists overtook a segment of the Baku-Supsa Pipeline, effectively causing the closure of that pipeline by the conflict’s end on August 12th. Journalistic and Georgian government sources cite that throughout the conflict, Russian forces had targeted both the Baku-Tbilisi-Cehyan Pipeline and the Baku-Supsa Pipeline. After the conflict subsided, tensions around these pipelines eased, but Russia has maintained its presence in South Ossetia. In 2015, a Russian demarcation team tasked with marking the Georgian-South Ossetian border pushed the line to include a segment of the Baku-Supsa Pipeline. Although this action did not cause escalation, it was seen as a projection of power from Russia to Georgia about their presence in the region as well as a symbol to dissuade Georgia from joining NATO. Caspian Energy as a Strategic Western Asset In addition to engaging in proxy wars and stoking ethnic conflicts, Russia also rejects international law in order to block alternative pipelines to Europe. The proposed Trans-Caspian Pipeline system, which is currently being contested by Russia, provides further proof of Moscow’s consistently aggressive energy policy. There are multiple factors at play within the Caspian Sea region that are interrelated. The legal regime for this body of water has profound impacts on the development of subsea pipelines. The proposed Trans-Caspian Pipeline would afford eastern Caspian littoral states, such as Kazakhstan and Turkmenistan, the ability to efficiently export their massive hydrocarbon reserves to foreign markets in Europe via TANAP, bypassing Russia altogether. Subsea cables and pipelines are permitted under the United Nations Law of the Sea (UNCLOS), both on the high seas and along a coastal nation’s continental shelf. These provisions are also applied to enclosed and semi-enclosed bodies of water, as set by past precedents. All states are permitted to lay lines past the continental shelf, because the deep seas are defined as global commons. No one nation has sole ownership of these waters. Subsea cables and pipelines on the high seas must be planned out in coordination with all existing infrastructure so as to not cause any interference or damage. States may lay pipelines and cables within their own territorial waters as they wish. If another nation is proposing to install a pipeline or cable within another state’s territorial waters then this development is up to the discretion of the nation that claims jurisdiction over these waters. The coastal state has every legal right to dictate infrastructure development and implement fees related to pipeline transportation. Provisions under UNCLOS regarding subsea pipelines are crucial to Azerbaijan, Turkmenistan and Kazakhstan’s ability to legally construct a Trans-Caspian Pipeline. Russia has vehemently contested this specific UNCLOS ruling in the Caspian Sea, and thus have successfully blocked the development of this pipeline system in order to maintain its dominance in the regional energy market. As a result Kazakhstan and Turkmenistan are forced to export the majority of their hydrocarbon products through Russia, effectively making these two resource wealthy nations subservient to Moscow’s energy policies. This chokehold is detrimental not only to Kazakhstan and Turkmenistan, but to European energy markets as well. Europe desperately needs to diversify their sources of oil and natural gas imports. However they currently remain heavily dependent upon Russia for their energy needs. The upcoming installation of the Nord-Stream 2 pipeline will only further entrench Europe into this unhealthy relationship of reliance on Russia. The Trans-Caspian Gas Pipeline would play a crucial role in creating an East-West Caspian gas corridor that would connect to TANAP. The development of this subsea pipeline, and the maintenance of existing ones rely heavily upon the backing of western corporations. While Azerbaijan, Turkmenistan, and Kazakhstan are all resource-wealthy nations, they are also experiencing a prolonged period of economic crisis. Their economic recovery is pinned to the success of their respective energy sectors. Due to the fact that they have not recovered financially yet, they need help financing energy projects, such as the construction of pipelines, storage facilities, and developing gas and oil fields. For this reason most of these states have signed Production Sharing Agreements (PSA). These contracts allow them to receive funding from corporations such as BP, Total and Chevron as well as from institutions like the World Bank and the EBRD in order to build and develop energy projects in exchange for a share percentage. Azerbaijan’s energy sector is backed heavily by corporations interested in connecting hydrocarbon reserves from Central Asia and the Caucasus, to Europe via Turkey. While all foreign military presence is strictly prohibited within the Caspian Sea, PSA’s allow corporations to engage in exercising soft power on behalf of the West. In 2017, an amended PSA was agreed upon between SOCAR, Azerbaijan’s state owned oil company, and the private sector to help further develop the Azeri-Chirag-Gunashli (ACG) offshore oil fields through 2049. The upstream development of ACG must be matched with midstream upgrades to pipelines and storage facilities in order to meet heightened production capacities. Western corporations and NATO allies have a lot at stake in this region in their attempt to achieve greater energy security. The role of the West, within the Caspian Sea region is limited but crucial to providing funding for the development of upstream and midstream energy infrastructure. Russia’s attempt to restart conflicts in this region in order to disrupt hydrocarbon transport will undoubtedly draw the attention of Europe and Turkey. This has also drawn attention from Israel as well, which receives a large portion of their nation’s oil from Azerbaijan. Israel has been noted for its limited involvement in the 2020 Nagorno-Karabakh conflict, mainly through its arms-trade relationship with Azerbaijan which existed before the conflict began. This relationship has recently been brought to light by correspondence from the battle space reporting on Israeli-made weapons and technology being used by Azerbaijan’s armed forces. As the conflict develops, it is possible that transactions between Israel and Azerbaijan have accelerated, which can be shown through public flight data citing cargo plane flights between Baku and northern Israel. This relationship allows for Israel to arm its ally, Azerbaijan, in which it has a heavily vested interest in its territorial integrity. Israel receives 40% of its oil for domestic consumption from Azerbaijan. This oil is transported to Israel by the pipelines that travel through the Ganja Gap, through Georgia, into Turkey, and then by oil tanker to Israeli ports. If the pipelines are interrupted, Israel can quickly have its energy consumption needs shocked, leaving it with temporary shortages and potential gaps in economic or military efficiency. Therefore, Israel has rejected claims that it has hostility towards Armenia, but has affirmed that it wishes to see stability in the Caucasus. Potential Obstacles to the Peace Process The ongoing conflict in Nagorno-Karabakh has brought impediments to life, prosperity, and peace in the Caucasus region. It is important to consider the geopolitical and energy aspects that are spurring the conflict. In addition to the territorial disputes between Armenia and Azerbaijan, it is likely that this conflict has been hijacked, and is being used as a proxy war by Russia to stifle and restrict the energy demands of the West. Nagorno-Karabakh is the latest instance of the employment of Russia’s hybrid warfare model, in which all aspects of society, including energy, are militarized in an effort to project control along the Russian periphery. As Russia is offering to lead peace talks between the two parties, there are outcomes to consider that would in some way benefit Russia’s position over the West. First, it would be beneficial for Russia to close the Ganja Gap, or at least to continue its chess-like maneuvers to place assets closer to energy routes in Azerbaijan. If Armenia gains the Nagorno-Karabakh region, or the Republic of Artsakh gains independence from Azerbaijan, Russian influence around the Ganja Gap will be solidified. If so, Russia may be able to construct a base closer to this energy chokepoint. Another obstacle to lasting peace would be the risk of the peace process being sabotaged. There have been many peace treaties between Azerbaijan and Armenia throughout the years, yet these agreements have fallen through, and some failures have been attributed to interference from the Russian intelligence community. A main example of interference would be the complications created by the Soviet GRU in orchestrating the 1999 Armenian Parliament shooting, as stated by the late FSB officer Alexander Litvinenko. The regional peace must be sustained fully and justly, because doubts about security can encourage further actions from external states such as Russia. Russia may attribute the lack of regional security as a justification to occupy the area, effectively taking over the pipelines of the Ganja Gap. The Collective Security Treaty Organization (CSTO) has also previously stated that the six-nation alliance will engage in this region militarily if Armenia proper is attacked. This is justified by the mutual defence treaty the organization holds and would effectively blockade the westward energy market. The CSTO nations recently participated in the KAVKAZ-2020 war-game exercises where many of the exercises took place in South Ossetia, the Caspian coastline, and in Armenia. Other objectives may be to in some way gain more control over the Caspian Sea energy market. MPSG will continue to follow these key world events as they unfold. It is important to know that this story is a developing one, and will warrant subsequent inquiries into the region by MP Strategic Group.

Quantum Computing: Memorandum and Recommendations on the Threats of Emerging Technology

Quantum Computing: Memorandum and Recommendations on the Threats of Emerging Technology

By Elle Zesky Analyst, Center for Terrorism, Extremism, and Counterterrorism [Download the HD report here] Executive Summary It is highly likely Quantum Computing technologies (QCT) will post a significant data security risk over the next ten years. However, given the complexity of the technology and needed overhead of resources it is highly unlikely any attack using QCT would come from a nonstate actor. Rather, any abuse of QCT would likely be a state sanctioned cyber-attack. The members of the GIFCT have an obligation to their users to move away from cryptographic algorithms which are vulnerable to quantum cryptanalytic techniques and seek out Post Quantum Encryption (PQE) techniques. The capability for Quantum Computers being able to break commercial encryption is inevitable and is in the not-so-distant future. It is projected that the world’s leaders in this technology may reach this capability as early as 2023 and could reach a 1 million qubit capacity by 2030. Overview: The Race Towards the Quantum Age There is a global cyber-arms-race underway. The goal is the creation of a powerful Quantum Computer. Most countries involved project they will be able to achieve quantum supremacy in the next ten years. The front runners of this race have proven to be private sector technology companies within the Unites States and China, working from both institutional and government awarded funding. Quantum computing could drive the development of life saving medications, rapid developments in machine learning, it could lead to the dawn of a new secure communications age, and it could create the architecture for a faster, more sustainable technological future. However, it could also lead to the breaking of all modern encryption networks and break modern computer security methods as we know it. With the development of QC comes an existential threat to everything which is guarded by Advanced Encryption Standard (AES) encryption. AES is often used to encrypt government classified documents. RSA (Rivert-Shamir-Adleman) and ECDSA (Elliptic Curve Digital Signature Algorithm) encrypted data, are used to encrypt nearly all passwords and websites used by the public. Public Key Encryption (PKE) would be easily broken by QC, and parallel ‘Brute Force Attacks’ on could be carried out at a pace and success rate never before seen. In 2019, Google created the Sycamore quantum processor (QP) which was able to perform specific tasks in 200 seconds. The specific tasks completed would have taken the world’s fastest supercomputer 10,000 years to complete. In doing so, the Sycamore QP reached ‘Quantum Supremacy’. This QP is only comprised of 54-qubits (running at 53). However, Google has a plan to reach 1 million qubits by 2030. In 2020 IBMs Quantum Computing mission created the largest known QP at 65 qubits and released a road map for the development of its quantum computers, its largest goal is to have a QP containing 1000 qubits by 2023. This is to say, developments in QC are moving quickly and the members of the GIFCT should feel obligated to begin preparing today. What is a Quantum Computer? It is imperative to understand that the development of Quantum Computers will not wipe out the usage of conventional computers. It is also important to understand that QCs are not able to behave and are not designed to be used as a conventional computer. QCs must be designed specifically to complete targeted operations . For bad actors who are not affiliated with a state actor, Quantum Computers will not be economically feasible, accessible or a likely mode of attack. A QC utilizes quantum mechanics which allows it to run on qubits rather than the typical bit. Where a ‘bit’ exists in a 1 or 0, electronic or optical pulse, a qubit exists as a subatomic particle, like an electron or photon. A qubit is subject to ‘superposition’, meaning a single qubit can exist as a combination of 0 and 1 at the same time. This allows a QC to get through many potential outcomes simultaneously, this results in a quantum ‘collapse’ into 1 or 0. This is the key to a QCs speed. Why Quantum Computers Pose a Threat to Encryption and Passwords Due to superposition, bad actors could quickly move through mathematical and algorithmic obstacles faster than ever before5 . Thanks to these phenomena qubits lead to exponential processing power. So much exponential power that if a QC is designed specifically for a certain cryptographic target, they could eventually work its way through every possible permutation of cryptographic keys very quickly and effectively carry out a Brute Force Attack and get into personal accounts or decrypt data. QCs which can carry out such attacks on a small scale already exist, as stated above. This is not a problem to leave to the future this is a problem that is complex enough and worrisome enough that it must be tackled as soon as intelligent capability is identified. How Does it Work: Shor and Grover Algorithm Advanced QCs, when designed specifically, can solve some of the most common methods of encryption. Often, QCs utilize either the Shor or Grover algorithms. Shor’s algorithm gives an exponential gain over classic computational algorithms as it pertains to integer factorization and discrete logarithms. This leaves cryptosystems like RSA, which depends on factoring being impossible for large enough integers, vulnerable to being broken by Shor’s algorithm run on an advanced QC. Grover’s algorithms give a quadratic advantage in database searches. Theoretically, Grover’s algorithm could weaken the security of any symmetric cryptographic algorithm, this includes AES. Grover’s algorithm does have limitations. Hash functions which produce 256-bit outputs are not expected currently to be threatened by the current state of quantum computing. Even if Grover’s algorithm is utilized, it would take 2400 qubits to break a hash function like SHA256 (a partner function to AES). However, Grover’s algorithm opens password insecurity. Password hashing is at a higher risk due to the space of user passwords not being very large. For example, a 10-character password could be permutated by Grover’s algorithm in about 10 billion steps, which at the speed of a classical processor would take only a few seconds. The Answer: Post Quantum Encryption Overall, the end goal is for all computational and cryptographic systems to be encrypted with Post Quantum Encryption methods. Post Quantum Encryption (PQE) can be implemented using today’s classical computers and will help the computers of tomorrow be impervious to attacks from quantum computers. However, developing methods of PQE takes an extreme amount of mathematical knowhow and expertise. One of the strategies to achieve PQE, is to increase the size of a digital key. This raises the amount of computational power exponentially. Other strategies include developing more complex ‘trapdoor’ functions. To do this, the worlds best mathematicians would have to develop such complex mathematical equations that even Shor’s algorithm couldn’t solve without so much overhead that the utilization of a QC would be rendered useless. Regardless, the goal is to make sure that whatever strategy, adopted, can be widely spread, quick enough to outpace bad actors and with enough accessibility that all personal use machines which contain data can quickly update to the new encryption standards. Leading institutions like the US National Institute of Standards and Technology (NIST) claim they are likely to begin drafting techniques as early as 2022. Liminal Recommendations Members of the GIFCT should act proactively to prepare user data for the quantum age. It is crucial for the United States to continue to fund projects which develop Post Quantum Cryptography, biometrics, secure coprocessors, to fund teams which aim to develop a system to replace RSA and ECDSA cryptography and static passwords. In the liminal period, all members of GIFCT which house personal data must either force a password reset and enforce stricter password standards or move away from passwords all together swiftly with a strong meantime method. The members of the GIFCT should also begin encrypting their sites using hash functions which produce at least 256-bit outputs. Members should instead seek to move into the use of biometrics, one-time-passwords, device identification and multi-factor authentication. Leveling the Playing Field During the Shift: Coprocessors and Equity It is highly unlikely Quantum Computers or Quantum Computing technology will be widely available to the public anytime soon. It will likely be governments who utilize the technology first. As such, governments will be able to, at will, get into personal devices without needing to ask tech companies for backdoor entries. While this may sound farfetched, the 2017 Las Vegas shooting posed an interesting ethical dilemma for the private sector. As such, large software companies should seek to develop a coprocessor which can run post quantum encryption and protect users’ devices from unlawful QCT attacks and data breaches. These coprocessors would likely be comparable to Apples T2 security chip which seeks to combat malicious actors from gaining access to users’ devices and stealing the user’s data. This would also allow for a safe transition between the time that no user devices utilize PQE and the time where all user devices utilize PQE as it is highly unlikely that all devices could or would be updated in the same instant. It is also within the scope of recommendation for the members of GIFCT to seek development in technological capacity building. With the speed of development at which QC is moving, all demographics should be able to enjoy secure and equitable cyber access as the world moves into an increasingly more technological dependent landscape. Author's Contact Elle Zesky Via LinkedIn: https://www.linkedin.com/in/elle-zesky-279667162/ Graduate Research Assistant: Extremist Content Monitoring at the Center on Terrorism, Extremism, and Counterterrorism (CTEC) Analyst, MP Strategic Group References: https://www.bbc.com/news/science-environment-50154993#:~:text=Google%20says%20an%20advanced%20computer,supercomputer%2010%2C000%20years%20t https://www.science.org/content/article/ibm-promises-1000-qubit-quantum-computer-milestone-2023#:~:text=IBM's%20current%20largest%20quantum%20computer,run%20on%20different%20quantum%20co https://www.newscientist.com/question/what-is-a-quantum-computer/ https://www.technologyreview.com/2019/01/29/66141/what-is-quantum-computing/ https://www.ibm.com/quantum-computing/?p1=Search&p4=43700050386405608&p5=b&gclid=Cj0KCQjwgtWDBhDZARIsADEKwgNztf4vXHByar-kMzT3btlQrS_1xU0jqHo1j_1I0RKfEhIqb5f29ZgaAso-EALw_wcB&gclsrc=aw.ds https://www.newsweek.com/2020/12/25/china-leads-quantum-computing-race-us-spies-plan-world-fewer-secrets-1554439.html https://www.movable-type.co.uk/scripts/sha256.html https://qiskit.org/textbook/ch-algorithms/grover.html https://qz.com/1605685/the-solution-to-quantum-computers-cracking-cryptography/ https://www.ibm.com/quantum-computing/?p1=Search&p4=43700050386405608&p5=b&gclid=Cj0KCQjwgtWDBhDZARIsADEKwgNztf4vXHByar-kMzT3btlQrS_1xU0jqHo1j_1I0RKfEhIqb5f29ZgaAso-EALw_wcB&gclsrc=aw.ds https://www.technologyreview.com/2019/07/12/134211/explainer-what-is-post-quantum-cryptography/ https://appleinsider.com/articles/19/07/29/what-apples-t2-chip-does-in-your-new-macbook-air-or-macbook-pro MPSG will continue to follow these trends as they unfold. It is important to know that this topic is a developing one, and will warrant subsequent inquiries by MP Strategic Group. All content-related inquires may be directed to Robert Sanchez, Director of Research, MP Strategic Group LLC. (robertsanchez@mpstrategicgroup.com)

The Relationship Between Central Asian Energy Markets and 3SI

The Relationship Between Central Asian Energy Markets and 3SI

On June 5th 2019, US Secretary of Energy Rick Perry took part in speaking at the Three Seas Initiative (3SI) Summit in Ljubljana, Slovenia and acknowledged that the United States recognizes the importance of diversifying and securing energy markets for its European allies. He specifically acknowledged Germany, Lithuania, and Poland for investing in energy infrastructure projects such as the construction of new import terminals and the expansion of existing ones, before mentioning the Southern Energy Corridor and its ability to connect the vast hydrocarbon reserves of the Caspian region to energy markets in Central Europe. His speech highlighted 3SI’s ability to create a North-South energy corridor in Europe that connects to the Caspian region via the Southern Energy Corridor. Facilitating this connection would increase and diversify the imports of natural gas and oil products to Europe. More importantly, this initiative will incentivize a greater push for the development of a Trans-Caspian Pipeline, which would open up Central Asian energy markets to Europe as well. Trans-Caspian Pipeline The Trans-Caspian Pipeline would be a subsea pipeline, running 300 km from the city of Turkmenbasy, on Turkmenistan's west coast, through the Caspian Sea, and on to Baku in Azerbaijan, where the Baku-Tbilisi-Ezurum Gas Pipeline begins. Originally this project was proposed by the United States in 1996. With an estimated cost of $2.5 billion dollars, it would have the capacity to export 30 billion cubic meters of gas per year. A Trans-Caspian Pipeline system would play a crucial role in allowing Central Asian states to take full advantage of their hydrocarbon reserves. Blomberg, T. (2018). Trans-Caspian Gas Pipeline Kazakhstan and Turkmenistan have some of the largest on and offshore oil and gas fields in the world. Combined these two nations have 52 trillion cubic meters in proven natural gas reserves and 72 billion tons in proven oil reserves, but are geographically constrained to exporting through Russia. UNCLOS & Subsea Pipelines The UN Convention on the Law of the Sea (UNCLOS) provides legal rulings on subsea pipelines. If these international laws were applied to the case of the Caspian Sea they would allow Azerbaijan, Turkmenistan and Kazakhstan to legally construct a Trans-Caspian Pipeline. UNCLOS Part VII Article 112 asserts that subsea cables and pipelines are permitted both on the high seas and along a coastal state’s continental shelf. All states are permitted to lay lines past the continental shelf because the deep seas are defined as a global commons and no one state has sole ownership over these waters. Littoral states may lay pipelines and cables within their own territorial waters as they wish. If another state is proposing to install a pipeline or cable within another state’s territorial waters, then this development is up to the discretion of the state that claims jurisdiction over these waters. The coastal state is within its full right to regulate the course of this infrastructure and implement fees associated with transportation. Geological Intelligence Services. (2017). Caspian oil and gas in a world of plenty Production Sharing Agreements While Azerbaijan, Turkmenistan, and Kazakhstan are all resource wealthy, they are also experiencing a prolonged period of economic crisis. Their economic recovery is pinned to the success of their respective energy sectors. Due to the fact that they have not recovered financially yet, they need help financing energy projects, such as the construction of pipelines, storage facilities, and developing gas and oil fields. For this reason most of these states have signed Production Sharing Agreements (PSA). These contracts allow them to receive funding from corporations such as BP, Total and Chevron as well as from institutions like the World Bank and the EBRD in order to build and develop energy projects in exchange for a share percentage. While all foreign military presence is strictly prohibited within the Caspian Sea, PSA’s allow corporations to engage in exercising soft power on behalf of the West. Azerbaijan’s energy sector is backed heavily by corporations interested in connecting hydrocarbon reserves from Central Asia and the Caucasus, to Europe via Turkey. In 2017, an amended PSA was agreed upon between SOCAR, Azerbaijan’s state owned oil company, and corporations such as BP, Chevron, and ExxonMobil, to help further develop the Azeri-Chirag-Gunashli (ACG) offshore oil fields through 2049. The upstream development of ACG must be matched with midstream upgrades to pipelines and storage facilities in order to meet heightened production capacities. Russian Countermeasures UNCLOS legal provisions and PSA’s undermine Russian interests in the Eurasian energy market. Both push an agenda of sovereignty for Central Asian energy markets, and aim to provide gas and oil exports, from this region to Europe, through an alternate transport route that bypasses Russia all together. Russian policymakers realize that the development of a Trans-Caspian Pipeline, and the influence of Western corporations via PSA’s, jeopardize its monopoly over energy exports to Europe from Central Asia, which is why the regional power is deeply concerned about the legal status of this body of water. They are opposed to any legal ruling under UNCLOS which would allow for the development of subsea pipelines through the Caspian Sea. Russia predominately chooses to engage in bilateral discussions with other Caspian states, rather than multilateral agreements, as a way of maintaining a level of uncertainty around the legal status of this body of water as it pertains to the creation of a Trans-Caspian Pipeline. This practice allows Russia to engage in negotiations regarding maritime delimitations without having to make any concessions regarding subsea cables and pipelines. Russia is willing to negotiate maritime boundaries because their share of the Caspian Sea, under UNCLOS, holds inconsequential hydrocarbon reserves. They are more concerned with keeping the status of the Caspian Sea in legal limbo, in order to block alternative energy transit routes, than they are with claiming maritime territory in the region. In addition to prolonging concrete legal agreements regarding the Caspian Sea, Russia also has the ability to influence regional conflicts. The former Soviet Republics that make up Central Asia and the Caucasus still hold close economic and social ties to Russia. The collapse of the Soviet Union created new borders, which has in turn resulted in ongoing conflicts amongst different ethnic groups vying for sovereignty. These flashpoints have the ability to impact oil and gas pipelines running through their respective regions. The most recent outbreak of the South Ossetia Conflict in 2008 resulted in Russia annexing a 1.5 km section of the Baku-Supsa-Pipeline. The Nagorno-Karabakh Conflict between Armenia and Azerbaijan presents similar implications for energy transportation. Armenia’s occupation of the Nagorno-Karabakh region in Azerbaijan has left a relatively small gap for pipelines to pass through. The “Ganja Gap” is a sixty mile wide chokepoint that houses three vital oil and gas pipelines. By using the Nagorno-Karabakh as a proxy, Russia could potentially disrupt the Baku-Tbilisi-Cehyan, Baku-Supsa, and South Caucasus Pipelines, which are all responsible for transporting hydrocarbon reserves to Europe. Three Seas Initiative Implications Regional policy initiatives, like the 3SI in Europe, make energy security a paramount part of their platform, due to Europe’s dependency on Russia for natural gas. Increased investment from 3SI nations looking to secure the stable production and transportation of energy products from Central Asia will undoubtedly put added pressure upon Russia to tighten their grip on energy exports. In order to push forth this agenda, 3SI nation states must continue to be proactive in developing and upgrading midstream and downstream infrastructure responsible for transporting, storing, and converting hydrocarbon products. In addition to upgrading their own infrastructure, European governments and Western multinational corporations should continue to exercise soft power by funneling foreign direct investment into these upstream Caspian nation states. 3SI nation states must also lend assistance in mediating security concerns regarding the aforementioned ethnic conflicts in the Caucasus in order to ensure that disruptions to key pipelines do not occur. From a practical perspective, the development of subsea pipelines through the Caspian would benefit a much greater population by allowing Kazakhstan, Turkmenistan and other countries further east, such as Uzbekistan and Tajikistan, to truly open up their energy markets to the West. These nations desperately need to diversify their sources of energy production, and it would also allow Azerbaijan to become a key transit state as well as a major hydrocarbon producer. Ultimately, this region has the ability to change the dynamics of the Eurasian energy market but has been relatively ignored by the West. While the geopolitics of the Caspian Sea have not received the necessary attention from the international community in the past, the 3SI will force Europe to increase its focus towards this region in an effort to secure a viable energy corridor. Increased pressure from international actors, such as nation states and multinational corporations, could prove to be a key factor that shifts the power imbalance in this region, and helps to establish a concrete legal framework, allowing for the creation of a Trans-Caspian Pipeline.

002.1 5G Challenges and Implementation in Eastern Europe

002.1 5G Challenges and Implementation in Eastern Europe

DAB Report #2.1 goes over the challenges facing 5G roll-out in Eastern Europe, and insight into potential obstetrical facing the 3 Seas Initiative Digital Highway. View and Download below.

001 Seafarers Guidelines for COVID-19

001 Seafarers Guidelines for COVID-19

MP Strategic Group's first Diversified Affairs Briefing (DAB). These briefings are designed to deliver content regarding pertinent geopolitical topics, as well as niche research topics. View and Download below.

002 Snapshots of The Three Seas Initiative: Part 1

002 Snapshots of The Three Seas Initiative: Part 1

DAB Report #2 is a brief overview of the Three Seas Initiative. MPSG will be releasing subsequent reports regarding the Three Seas Initiative in the near future. View and Download below.