Functional splintering [of the internet] is already happening. When tech companies build “walled gardens”, they decide the rules for what happens inside the walls, and users outside the network are excluded…
Governments are playing catch-up but they will eventually reclaim the regulatory power that has slipped from their grasp. Dictatorships such as China retained control from the start; others, including Russia, are following Beijing. With democracies, too, asserting their jurisdiction over the digital economy, a fragmentation of the internet along national lines is more likely. …The prospect of a “splinternet” has not been lost on governments. To avoid it, Japan’s G20 presidency has pushed for a shared approach to internet governance. In January 2019, prime minister Shinzo Abe called for “data free flow with trust”. The 2019 Osaka summit pledged international co-operation to “encourage the interoperability of different frameworks”.
But Europe is most in the crosshairs of those who warn against fragmentation…US tech giants have not appreciated EU authorities challenging their business model through privacy laws or competition rulings. But more objective commentators, too, fear the EU may cut itself off from the global digital economy. The critics fail to recognise that fragmentation can be the best outcome if values and tastes fundamentally differ…
If Europeans collectively do not want micro-targeted advertising, or artificial intelligence-powered behaviour manipulation, or excessive data collection, then the absence on a European internet of services using such techniques is a gain, not a loss. The price could be to miss out on some services available elsewhere… More probably, non-EU providers will eventually find a way to charge EU users in lieu of monetising their data…Some fear EU rules make it hard to collect the big data sets needed for AI training. But the same point applies. EU consumers may not want AI trained to do intrusive things. In any case, Europe is a big enough market to generate stripped, non-personal data needed for dumber but more tolerable AI, though this may require more harmonised within-EU digital governance. Indeed, even if stricter EU rules splinter the global internet, they also create incentives for more investment into EU-tailored digital products. In the absence of global regulatory agreements, that is a good second best for Europe to aim for.
Excerpts from Martin Sandbu, Europe Should Not be Afraid of Splinternet, FT, July 2, 2019
A competition for the North Pole heated up in May 2019, as Canada became the third country to claim—based on extensive scientific data—that it should have sovereignty over a large swath of the Arctic Ocean, including the pole. Canada’s bid, submitted to the United Nations’s Commission on the Limits of the Continental Shelf (CLCS), joins competing claims from Russia and Denmark. Like theirs, it is motivated by the prospect of mineral riches: the large oil reserves believed to lie under the Arctic Ocean, which will become more accessible as the polar ice retreats. And all three claims, along with dozens of similar claims in other oceans, rest on extensive seafloor mapping, which has proved to be a boon to science…
Coastal nations have sovereign rights over an exclusive economic zone (EEZ), extending by definition 200 nautical miles (370 kilometers) out from their coastline. But the 1982 United Nations Convention on the Law of the Sea opened up the possibility of expanding that zone if a country can convince CLCS that its continental shelf extends beyond the EEZ’s limits…..Most of the 84 submissions so far were driven by the prospect of oil and gas, although advances in deep-sea mining technology have added new reasons to apply. Brazil, for example, filed an application in December 2018 that included the Rio Grande Rise, a deep-ocean mountain range 1500 kilometers southeast of Rio De Janeiro that’s covered in cobalt-rich ferromanganese crusts.
To make a claim, a country has to submit detailed data on the shape of the sea floor and on its sediment, which is thicker on the shelf than in the deep ocean. …CLCS, composed of 21 scientists in fields such as geology and hydrography who are elected by member states, has accepted 24 of the 28 claims it has finished evaluating, some partially or with caveats; in several cases, it has asked for follow-up submissions with more data. Australia was the first country to succeed, adding 2.5 million square kilometers to its territory in 2008. New Zealand gained undersea territory six times larger than its terrestrial area. But CLCS only judges the merit of each individual scientific claim; it has no authority to decide boundaries when claims overlap. To do that, countries have to turn to diplomatic channels once the science is settled.
The three claims on the North Pole revolve around the Lomonosov Ridge, an underwater mountain system that runs from Ellesmere Island in Canada’s Qikiqtaaluk region to the New Siberian Islands of Russia, passing the North Pole. Both countries claim the ridge is geologically connected to their continent, whereas Denmark says it is also tied to Greenland, a Danish territory. As the ridge is thought to be continental crust, the territorial extensions could be extensive)
Tensions flared when Russia planted a titanium flag on the sea floor beneath the North Pole in 2007, after CLCS rejected its first claim, saying more data were needed. The Canadian foreign minister at the time likened the move to the land grabs of early European colonizers. Not that the North Pole has any material value: “The oil potential there is zip,” says geologist Henry Dick of the Woods Hole Oceanographic Institution in Massachusetts. “The real fight is over the Amerasian Basin” where large amounts of oil are thought to be locked up…
There’s also a proposal to makethe North Pole international, like Antarctica (South Pole), as a sign of peace, says Oran Young, a political scientist at the University of California, Santa Barbara. “It seems a very sensible idea.”
Richard Kemeny, Fight for the Arctic Ocean is a boon for science, June 21, 2019
America is no fan of Huawei. Its officials have spent months warning that the Chinese giant’s smartphones and networking gear could be Trojan horses for Chinese spies (something Huawei has repeatedly denied). They have threatened to withhold intelligence from any ally that allows the firm in.
On May 15th, 2019 they raised the stakes. President Donald Trump barred American firms from using telecoms equipment made by firms posing a “risk to national security”. His order named no names. But its target was plain. More significant was the announcement by the Commerce Department, on the same day, that it was adding Huawei to a list of firms with which American companies cannot do business without official permission. That amounts to a prohibition on exports of American technology to Huawei. It is a seismic decision, for no technology firm is an island. Supply chains are highly specialised and globally connected. Cutting them off—“weaponising interdependence”, in the jargon—can cause serious disruption. When ZTE, another Chinese technology company, received the same treatment in 2018 for violating American sanctions on Iran, it was brought to the brink of ruin. It survived only because Mr Trump intervened, claiming it was a favour to Xi Jinping, China’s president.
By May 20th, 2019 the impact of the ban was becoming clear. Google said it had stopped supplying the proprietary components of its Android mobile operating system to Huawei. A string of American chipmakers, including Intel, Qualcomm and Micron, have also ceased sales. Later that day the Commerce Department softened its line slightly, saying that firms could continue to supply Huawei for 90 days, but for existing products—for instance, with software updates for Huawei phones already in use. New sales, on which Huawei’s future revenue depends, remain banned…
Without Google’s co-operation, new Huawei phones will lack the latest versions of Android, and popular apps such as Gmail or Maps. That may not matter in China, where Google’s apps are forbidden. But it could be crippling in Europe, Huawei’s second-biggest market. Its telecoms business needs beefy server chips from Intel. The supply of software to manage those networks could dry up too. Huawei is developing replacements for all three, but they are far from ready….Accrording to Paul Triolo of Eurasia Group, the Huawei ban as “the logical end-game of the US campaign to take down Huawei”. A long-lasting ban would force the firm to look for alternative chips and software that Chinese suppliers would struggle to provide.
The second question concerns the reach of American power. The tangled nature of chip-industry supply chains means that many non-American companies make use of American parts or intellectual property. They may therefore consider themselves covered, wholly or partially, by the ban. Take Arm, a Britain-based firm whose technology powers chips in virtually every phone in the world, including those made by HiSilicon. Arm says that it will comply with the Commerce Department’s rules. That suggests that Arm will not grant Huawei new licences. It is unclear if Arm will offer support for existing licences, however. As Arm’s technology advances, Huawei risks being left behind.
Other non-American companies are as important. One industry insider with contacts in Taiwan says that American officials are pressing Taiwan Semiconductor Manufacturing Company (tsmc), a big and cutting-edge chipmaker, to drop Huawei, which is its third-biggest customer. That would be a crushing blow, for Chinese chip factories are not up to the task of manufacturing HiSilicon’s sophisticated designs. tsmc’s only peer is Samsung—and South Korea is another of America’s allies. tsmc said on May 23rd that it would continue supplying Huawei for now.
Even if the optimists are right, and the ban is lifted in exchange for trade concessions, a return to business as usual seems unlikely. America has twice demonstrated a willingness to throttle big Chinese companies. Trust in American technology firms has been eroded, says Mr Triolo. China has already committed billions of dollars to efforts to boost its domestic capabilities in chipmaking and technology. For its rulers, America’s bans highlight the urgency of that policy. Catching up will not be easy, believes Mr Ernst, for chips and software are the most complicated products that humans make. But, he says, if you talk to people in China’s tech industry they all say the same thing: “We no longer have any other option.”
Excerpts from Huawei has been cut off from American technology, Economist, May 25, 2019.
In 2018 America imposed sanctions on about 1,500 people, firms, vessels and other entities, nearly triple the number in 2016. The past six months of 2019 have been particularly eventful. America began imposing sanctions on Iran in November, and in January on Venezuela, another big oil exporter. On May 9th 2019, for the first time, it seized a ship accused of transporting banned North Korean coal.
Second, blackballed countries and unscrupulous middlemen are getting better at evasion. In March 2019advisers to the un, relying in part on Windward data, and American Treasury officials published separate reports that described common ways of doing it. Boats turn off their transmissions systems to avoid detection. Oil is transferred from one ship to another in the middle of the ocean—ships trading on behalf of North Korea find each other in the East China Sea using WeChat, a popular Chinese messaging service. Captains disguise a ship’s identity by manipulating transponder data to transmit false locations and identity numbers of different vessels.
Such methods have helped Iran and Russia transport oil to Syria, American officials say. In 2018 North Korea managed to import refined petroleum far in excess of the level allowed by multilateral sanctions. The situation in Venezuela is different—technically, America’s sanctions still allow foreigners to do business with the country. But fear that sanctions will expand mean that traditional trading partners are scarce. Nicolás Maduro’s regime this month found a shipowner to transport crude to India, according to a shipbroker familiar with the deal, but Venezuela had to pay twice the going rate.
Businesses keen to understand such shenanigans can be roughly divided into two categories. The first includes those who can profit from grasping sanctions’ impact on energy markets, such as hedge funds, analysts and traders. A squadron of firms is ready to assist them, combing through ship transmission data, commercial satellite imagery and other public and semi-public information. They do not specialise in sanctions, but sanctions are boosting demand for their tracking and data-crunching expertise.
A main determinant of Venezuela’s output, for instance, is access to the diluent it needs to blend with its heavy crude. A firm called Clipper Data has noted Russian ships delivering diluent to vessels near Malta, which then transport it to Venezuela. Kpler, a French rival, uses satellite images of shadows on lids of storage tanks to help estimate the volume of oil inside. Using transmissions data, images, port records and more, Kpler produces estimates of Iran’s exports for customers such as the International Energy Agency and Bernstein, a research firm—including a recent uptick in Iranian exports without a specific destination (see chart).
The second category of companies are wary of violating sanctions themselves. They need assistance of a different sort. Latham & Watkins, a firm that advised the chairman of EN+, which controls a Russian aluminium giant, as he successfully removed the company from America’s sanctions list this year, has seen a surge in sanctions-related business. Refinitiv, a data company, offers software which permits clients to screen partners and customers against lists of embargoed entities. Windward uses machine learning to pore over data such as ships’ travel patterns, transmissions gaps (some of which may be legitimate) and name changes to help firms identify suspicious activity. Kharon, founded last year by former United States Treasury officials, offers detailed analysis of anyone or anything on sanctions lists.
HIde and Seek: Sanctions Inc, Economist, May 18, 2019
A new front has opened in the battle between the U.S. and China over control of global networks that deliver the internet. This one is beneath the ocean. While the U.S. wages a high-profile campaign to exclude China’s Huawei Technologies Co. from next-generation mobile networks over fears of espionage, the company is embedding itself into undersea cable networks that ferry nearly all of the world’s internet data.
About 380 active submarine cables—bundles of fiber-optic lines that travel oceans on the seabed—carry about 95% of intercontinental voice and data traffic, making them critical for the economies and national security of most countries.
The Huawei Marine’s Undersea Cable Network majority owned by Huawei Technologies, has worked on some 90 projects to build or upgrade submarine cables around the world…US o fficials say the company’s knowledge of and access to undersea cables could allow China to attach devices that divert or monitor data traffic—or, in a conflict, to sever links to entire nations. Such interference could be done remotely, via Huawei network management software and other equipment at coastal landing stations, where submarine cables join land-based networks, these officials say.
Huawei Marine said in an email that no customer, industry player or government has directly raised security concerns about its products and operations.Joe Kelly, a Huawei spokesman, said the company is privately owned and has never been asked by any government to do anything that would jeopardize its customers or business. “If asked to do so,” he said, “we would refuse.”
The U.S. has sought to block Huawei from its own telecom infrastructure, including undersea cables, since at least 2012. American concerns about subsea links have since deepened—and spread to allies—as China moves to erode U.S. dominance of the world’s internet infrastructure…..Undersea cables are owned mainly by telecom operators and, in recent years, by such content providers as Facebook and Google. Smaller players rent bandwidth.Most users can’t control which cable systems carry their data between continents. A handful of switches typically route traffic along the path considered best, based on available capacity and agreements between cable operators.
In June 2017, Nick Warner, then head of Australia’s Secret Intelligence Service, traveled to the Solomon Islands, a strategically located South Pacific archipelago. His mission, according to people familiar with the visit, was to block a 2016 deal with Huawei Marine to build a 2,500-mile cable connecting Sydney to the Solomons. Mr. Warner told the Solomons’ prime minister the deal would give China a connection to Australia’s internet grid through a Sydney landing point, creating a cyber risk, these people said. Australia later announced it would finance the cable link and steered the contract to an Australian company. In another recent clash, the U.S., Australia and Japan tried unsuccessfully in September 2018 to quash an undersea-cable deal between Huawei Marine and Papua New Guinea.
U.S. and allied officials point to China’s record of cyber intrusions, growing Communist Party influence inside Chinese firms and a recent Chinese law requiring companies to assist intelligence operations. Landing stations are more exposed in poorer countries where cyber defenses tend to be weakest, U.S. and allied officials said. And network management systems are generally operated using computer servers at risk of cyber intrusion. Undersea cables are vulnerable, officials said, because large segments lie in international waters, where physical tampering can go undetected. At least one U.S. submarine can hack into seabed cables, defense experts said. In 2013, former National Security Agency contractor Edward Snowden alleged that Britain and the U.S. monitored submarine cable data. The U.S. and its allies now fear such tactics could be used against them. American and British military commanders warned recently that Russian submarines were operating near undersea cables. In 2018, the U.S. sanctioned a Russian company for supplying Russian spies with diving equipment to help tap seabed cables.
China seeks to build a Digital Silk Road, including undersea cables, terrestrial and satellite links, as part of its Belt and Road plan to finance a new global infrastructure network. Chinese government strategy papers on the Digital Silk Road cite the importance of undersea cables, as well as Huawei’s role in them. A research institute attached to China’s Ministry of Industry and Information Technology, in a paper published in September, praised Huawei’s technical prowess in undersea cable transmission and said China was poised to become “one of the world’s most important international submarine cable communication centers within a decade or two.” China’s foreign and technology ministries didn’t respond to requests for comment…
Bjarni Thorvardarson, then chief executive of the cable’s Ireland-based operator, said U.S. authorities raised no objections until 2012, when a congressional report declared Huawei Technologies a national security threat. Mr. Thorvardarson wasn’t convinced. “It was camouflaged as a security risk, but it was mostly about a preference for using U.S. technology,” he said. Under pressure, Mr. Thorvardarson dropped Huawei Marine from Project Express in 2013. The older cable network continued to use Huawei equipment.
The company is now the fourth-biggest player in an industry long dominated by U.S.-based SubCom and Finnish-owned Alcatel Submarine Networks. Japan’s NEC Corp is in third place.Huawei Marine is expected to complete 28 cables between 2015 and 2020—nearly a quarter of all those built globally—and it has upgraded many more, according to TeleGeography, a research company.
Excerpts from America’s Undersea Battle With China for Control of the Global Internet Grid , WSJ, Mar. 12, 2019
At least two tankers have ferried Iranian fuel oil to Asia in February 2019 despite U.S. sanctions against such shipments, according to a Reuters analysis of ship-tracking data and port information, as well as interviews with brokers and traders. The shipments were loaded onto tankers with documents showing the fuel oil was Iraqi. But three Iraqi oil industry sources and Prakash Vakkayil, a manager at United Arab Emirates (UAE) shipping services firm Yacht International Co, said the papers were forged. The people said they did not know who forged the documents, nor when.
“Some buyers…will want Iranian oil regardless of U.S. strategic objectives to deny Tehran oil revenue, and Iran will find a way to keep some volumes flowing,” said Peter Kiernan, lead energy analyst at the Economist Intelligence Unit. While the United States has granted eight countries temporary waivers allowing limited purchases of Iranian crude oil, these exemptions do not cover products refined from crude, including fuel oil, mainly used to power the engines of large ships. Documents forwarded to Reuters by ship owners say a 300,000 tonne-supertanker, the Grace 1, took on fuel oil at Basra, Iraq, between Dec. 10 and 12, 2018. But Basra port loading schedules reviewed by Reuters do not list the Grace 1 as being in port during those dates. One Iraqi industry source with knowledge of the port’s operations confirmed there were no records of the Grace 1 at Basra during this period.
Reuters examined data from four ship-tracking information providers – Refinitiv, Kpler, IHS Markit and Vessel Finder – to locate the Grace 1 during that time. All four showed that the Grace 1 had its Automatic Identification System (AIS), or transponder, switched off between Nov. 30 and Dec. 14, 2018, meaning its location could not be tracked. The Grace 1 then re-appeared in waters near Iran’s port of Bandar Assaluyeh, fully loaded, data showed. The cargo was transferred onto two smaller ships in UAE waters in January, from where one ship delivered fuel oil to Singapore in February 2019. Shipping documents showed about 284,000 tonnes of fuel oil were transferred in the cargoes tracked by Reuters, worth about $120 million at current prices…
One of those vessels, the 130,000 tonne-capacity Kriti Island, offloaded fuel oil into a storage terminal in Singapore around Feb. 5 to 7. Reuters was unable to determine who purchased the fuel oil for storage in Singapore. The Kriti Island is managed by Greece’s Avin International SA… Avin International’s Chief Executive Officer George Mylonas told Reuters. Mylonas confirmed the Kriti Island took on fuel oil from the Grace 1.There is no indication that Avin International knowingly shipped Iranian fuel oil. Mylonas said his firm had conducted all necessary due diligence to ensure the cargo’s legitimate origin….
Excerpts from Roslan Khasawneh et al, Exclusive: How Iran fuel oil exports beat U.S. sanctions in tanker odyssey to Asia, Reuters, Mar. 20, 2019
“Name any country in Africa, and I could have found a world-class firm there a decade ago,” says John Page of the Brookings Institution, a think tank, the co-author of a forthcoming book on African manufacturing. “The problem is, two years later, I’d go back and still find just the one firm. In Cambodia or Vietnam, I would go back and find 50 new ones.”
To be sure, many countries deindustrialise as they grow richer (growth in service-based parts of the economy, such as entertainment, helps shrink manufacturing’s slice of the total). But many African countries are deindustrialising while they are still poor, raising the worrying prospectthat they will miss out on the chance to grow rich by shifting workers from farms to higher-paying factory jobs.
Thi is not just happening in Africa—other developing countries are also seeing the growth of factories slowing, partly because technology is reducing the demand for low-skilled workers. “Manufacturing has become less labour intensive across the board,” says Margaret McMillan of Tufts University. That means that it is hard, and getting harder, for African firms to create jobs in the same numbers that Asian ones did from the 1970s onwards.
Yet deindustrialisation appears to be hitting African countries particularly hard. This is partly because weak infrastructure drives up the costs of making things. The African Development Bank found in 2010 that electricity, a large cost for most manufacturers, costs three times more on average in Africa than it does even in South Asia. Poor roads and congested ports also drive up the cost of moving raw materials about and shipping out finished goods.
Africa’s second disadvantage is, perversely, its bounty of natural riches. Booming commodity prices over the past decade brought with them the “Dutch disease”: economies benefiting from increased exports of oil and the like tend to see their exchange rates driven up, which then makes it cheaper to import goods such as cars and fridges, and harder to produce and export locally manufactured goods.
Excerpt from Industrialisation in Africa: More a marathon than a sprint, Economist, Nov. 7, 2015, at 41