Speaker 1: Welcome to the World of Intelligence, a podcast for you to discover the latest analysis of global military and security trends within the open- source defense intelligence community. Now onto the episode with your host, Harry Kemsley.

Harry Kemsley: Hello and welcome to this edition of World of Intelligence by Janes. Hello, Sean, my co- conspirator. Thanks for joining me again.

Sean: Hi, Harry. Good to be here, as always.

Harry Kemsley: As always, Sean, I thought today we might extend from a recent podcast we did around the commercial use of open- source intelligence, where we talked about how that might be used in industry. And actually stretch that now into economic and financial intelligence and how that can be used in the national security arena as well. Particularly going to look at the economic statecraft intelligence and we'll talk a bit more about what that means later as one of the key elements of our open- source intelligence toolbox. Now many of us will be aware of the alleged or so- called great power competition going on with China, arguably, and in some people's minds the thought that that might be considered a new Cold War. But one aspect of that is the use of state activity through the form of business transactions. In quotes, no strings attached financial aid that investment and generous contract terms might be given to certain countries for things like infrastructure projects, for example. And there are of course potentially more than one interpretation and implications of those for national security. So, we're going to look at that today from an open- source lens we have with us an expert guest, Claire Chu. Hello Claire.

Claire Chu: Hi. Thanks for having me, Harry.

Harry Kemsley: Thanks for coming, Claire. Now for those that don't know Claire, there are very few people in the world that don't seem to be following you on Twitter and the like in your social media accounts, Claire. Claire is a senior China analyst with Janes as part of the IntelTrak team, which examines the economic state craft activities of China and Russia. She specializes in the geopolitical and the national security implications of China's global economic activity. She launched a Belt and Road monitor in 2017, which provides a comprehensive biweekly overview of China's overseas trade investment activities and policy developments. She previously held research roles at Think Tanks, including the Mercator Institute of China Studies in Berlin. The Project 2049 Institute in Arlington and the Center for the National Interest in Washington, D. C. She's also worked on rule of law and governance issues at the Congressional- Executive Commission on China and at Human Rights Watch. Claire has also testified before the US House of Representatives and her commentary has been featured in major media outlets in the United States in Europe and Asia. Claire, welcome. It's great to have you here.

Claire Chu: Thanks again. Looking forward to it.

Harry Kemsley: All right. So, as always Sean, let's get started to make sure the listener knows that when we talk about open- source information and the intelligence, we can derive from it, OSINT, open- source intelligence. They know that we're talking about the same thing as they are. So how would you define for us, Sean? open- source intelligence?

Sean: Yeah. Thanks Harry. As I've said previously actually, but always worth reiterating and I think my own views and Janes' views actually coincide perfectly on this, is that for us, OSINT has four primary components. The first of which is got to be, it's derived from information that's freely or commercially available to all. So, you don't have to have clandestine techniques, tactics and procedures to actually get hold of it. The lay person on the street should be able to get access to it. The second part of that is linked in that it has to be derived from legal and as we previous talked about ethical sources and techniques. So, we're not talking about getting into the dark web or having a false persona or that sort of thing is it's has got to be open and above board. And then the last two really are applied to any open- source intelligence and well, any intelligence specialization actually. And that's, it's got to be applied to a specific problem set or requirement. So, you've got to be trying to answer a question as set and it has to add value, the so what as I always call it.

Harry Kemsley: Very good. Thank you, Sean. So, Claire, let's turn to economic and financial intelligence and specifically the economic statecraft piece. How would you define that? And then when we've done that, let's move on to the utility of that as a open- source intelligence domain. How would you define economic statecraft?

Claire Chu: Economic statecraft, especially as it pertains to China, can be used to describe how Chinese's economic and financial activity. Including ostensibly commercial activities and are taken by the private sector to support state goals, strategic aims and other objectives that may or may not be private seeking or commercial in nature.

Harry Kemsley: Okay. So how does that, in your mind, relate generally speaking to national security? Why should a national security analyst be interested and concerned about what they might be able to find in statecraft intelligence?

Claire Chu: Again, using China as my primary example, commercial actors can operate in ways are conducive to state strategic interests. And that means companies can link corporate activities at CCP policy frameworks. A lot of these companies, whether they're private or public, are ultimately controlled or controllable by the government and their national laws and regulations. That means that the party state is embedded in commercial decision- making processes and that ultimately can affect foreign joint venture partners, that can affect foreign governments, our beneficiaries of Chinese aid or Chinese projects. And it's worth understanding how and why a lot of these actors act the way that they do. Why are they pursuing certain projects? Who is involved and what are the potential risk implications?

Harry Kemsley: So, you're talking about the apparent motivations being commercial and yet it could be construed that the motivations might be more about more state level purpose, is that what you're saying?

Claire Chu: Yes. And we see this sometimes with projects that don't seem to be particularly profitable. We've seen certain companies go into Pacific Islands and offer large sums of money for tracks of land that they're saying are meant for fishing, but we're also told that there aren't a lot of fishing to be had in those same waters. We're seeing companies go into other parts of the world and saying that they're developing certain mining capabilities there. But we're also told that there are a lot of conflicts and that the projects again, are not profitable in nature. So, why are the companies there? Sometimes it goes both ways. I'm not saying that every company pursues projects overseas for state to achieve stakeholds. Sometimes companies will go overseas as an entrepreneurial mission, and they are seeking to achieve some commercial profit as well. But at the same time, if you are a small company and you're able to go to a new market and launch a successful project, then in turn you can go back to the Chinese government and ask for greater funding. You can ask for more state back support. And if you're not successful in your overseas ventures, then perhaps that doesn't happen. It goes both ways.

Harry Kemsley: Right. Got it. Now, I've mentioned earlier that we're going to look at it through the prism of national security because that's our primary focus on this conversation. But it's fair to say, isn't it that commercial organizations would also have interest in the activities of state led or state funded, state governed commercial bodies out of China and Russia as well, because that might create an unreasonable relative playing field for them.

Claire Chu: Absolutely. And it's interesting to look into the backgrounds of some of these actors overseas, which is why my team at IntelTrak at Janes spends a lot of time mapping out ownership networks, understanding beneficial ownership structures and trying to understand exactly who these actors are. Sometimes, we have players that again, are ostensibly commercial nature and then you track back and back and back. You do with path at the top research, and you realize that they're ultimately being funded by certain government initiatives or through state backed actors. And this happens also in the financial space where there are companies, there are private equity firms and if you do the research and you can realize that some of the funding is coming from against state funds and Chinese state funds that ultimately are seeking to develop certain digit technologies. And there are certain goals that perhaps can be perceived as risky by certain audiences, perhaps not as risky by others, but should at least be known and taken as part of the calculation was whether or not to engage with these actors or receive funding or to partner together.

Harry Kemsley: Yeah. Now, I want to come on in just a second. You mentioned the idea of research into this and how you go through the various layers to get to perhaps the ground truth. Sean, let me just come to you first though to talk about the national security value of this kind of intelligence. Because it's not one to be honest with you that in my experience I saw a great deal of, okay, it's been a while since I was anywhere close to national intelligence bodies on the customer side. But anyway, your view of how useful this would have been or is now for you in the intelligence world?

Sean: Yeah. Well, I mean we've always followed an acronym, haven't we? DIME, which is Diplomacy Information in the Military and Economic levers of national power. And we spent a lot of time focusing on the first three, but not necessarily in the past on the final one it's been there and there's been an awareness, but it's been left alone. Now that's not strictly clear in all cases, but for example, within defenses intelligence, I think it's only 10 years ago that they started getting in financial analysts to actually start looking at that. For me though, and so it is starting to percolate, but I think the real value of the economic side of things is that you'll have heard me talking about the threat matrix, threat equals, capability plus intent plus opportunity. And I think in particular, if you're looking at the economy of a country or an organization by understanding economics, you can look at actually what it's trying to achieve. So, the intent, which is one of the areas which is quite demanding for the intelligence community. So, I think there's real potential there. We have started looking at it, but probably on a more tactical basis. So, we've always done the illicit finances for sanctions breaking to monitor that, is that happening for terrorism finances et cetera. But I think the first time I came across it in any real strength in terms of looking at it as a leverage of... a lever of a national power was... there was a task force set up in Afghanistan called Task Force Shafafiyat. And that was set up predominantly with the US but to track the money that was the huge amounts of aid and money that was putting in... being put into Afghanistan and just seemingly disappear. So, the levels of national power were right, okay, we need to develop the economy, we need to help the Afghan national forces to develop themselves and the institutions and this is what we're going to do with all the money, which would just then disappear. And it was a really hard one to actually work out. So, the intent thing and what is happening with your hard- earned money I think is a really important one as well.

Harry Kemsley: Yeah. I'd love to come back to that point in a moment about how we might use this intelligence. But I guess one of the problems with this, Claire, is that actually a lot of what you are seeing is construed as perfectly above- board commercial activity. And it's an interpretation that we have to place on it to ensure that we understand what the potential implications might be for national security. And clearly an interpretation is a matter of judgment and expertise. So, for me, I think we might come back to this in a minute, but one of the problems with this economic statecraft is it might be happening all around you. You just haven't thought about the implications when you start to look at it hope more holistically. There are 20 transactions happening in your district and you've only seen one tactically. You may not fully appreciate the strategic endeavor that's underway, but maybe we'll come back to that later. Claire, help us understand how you do, what you do. So, we've talked about the fact that we're tracking transactions by commercial organizations. You mentioned earlier that you go back and back higher and higher up a stack until perhaps getting into a government or state level organization. How do you do that in the open- source environment? What's your approach?

Claire Chu: Our team of analysts use publicly available information to track Chinese economic activity overseas. But also, to map out all of the key players, understand who they are, their ownership networks and affiliations, and also understand what China's geopolitical and strategic interests are. And we do that by looking at listed systems of trade, investment, finance, transport, which often leave a digital trail that we can trace. And what is fun sometimes about working in this space is that Chinese companies that are going overseas are very proud of this. These are successes. A lot of times even companies that work in most shadowy spaces or in spaces that are subject to a lot of criticism overseas are still happy to share this information online. This is not all taking place in the shadows, it's quite different than follow the money type of work. It's different from tracking money laundering or illicit finance because we're working with groups that are again, commercial in nature or appear to be commercial nature. And it's a combination of understanding intent, understanding government interest, strategic planning, understanding some of the geopolitical realities on the ground. And also understanding what post countries are interested in out of these interactions and some of the pressures and obstacles that they're facing, that we're able to get to the bottom of what does this transaction mean. What are some of their parents and trends we've seen in this space. And once again, back to the bottom line, this is posed national security risk to this country or to the US or any other potential partners or allies.

Harry Kemsley: So, it sounds a little bit like hiding in plain sight and I'm wondering whether if a nation, it doesn't matter which nation was unaware of the amount of activity going on by apparently commercial organizations. They would be unaware of the potential implications of that. And Sean, I'm thinking that if you brought that together with other forms of intelligence, you might actually start to see a picture that you might otherwise miss. But for the lack of the understanding of all these different commercial organizations and how they link to the policies, the Belt and Road policy, for example, Claire, which I know you know a great deal. I'm wondering how do we bring this together? Because again, been a while since I was being close to a live commercial, excuse me, classified agency, but it didn't strike me 10 years ago, 12 years ago. This was a big topic of conversation and maybe that'll come back to you with that in a second, Claire, to find out how much you think this is getting traction in the agencies you talk to. But Sean, what's your thoughts?

Sean: Well, I certainly think 10 years ago there was work happening in this area, but as I mentioned before, more in the illicit and more specialist stuff, special forces type activities. But I think it has certainly in the last maybe five years, maybe more been looked at from the lens. And there are so many different applications now and it is considered definitely, I mean, just look at the most contemporary right now, Russia. And really the exam question in terms of Russia is its sustainability. How easy is it going to be to sustain its force levels and its economy for its people, which has got to have a direct impact on whether it manages to keep the campaign in Ukraine going or whether it actually loses. But there's a lot more than that as well. And when you're looking at the strategic level of intelligence and you mentioned the Belt and Road and Claire will know far more than I will, but when you see basically Chinese bases, port facilities being set up in Djibouti and Sri Lanka. Yeah. Ostensibly, on a commercial basis, but that they're going to be or could be used for military capabilities. So, you can do exactly the same analysis on that type of organization in terms of, sorry, structure to see what are its capabilities. I think you can also get into the supply chain, which is again, big business now you've really got to understand where your suppliers are coming from and in the community, we've not been necessarily particularly good at that. And again, China is the great example and we in the UK and I think as much in the US as well are very suspicious of Huawei. It's a commercial comms company, but it does a lot more than that we think. So, there's that side of things as well. So, I think to answer your question, I think we've always considered it, but I think as we've got into the... if you want to call it the post terrorism world, it's not post terrorism, but as we're focusing more on big state actors now. I think it's becoming more prominent.

Harry Kemsley: Claire, you are working across a range of different organizations I know as our customers with Janes IntelTrak. To what extent do you feel it is being recognized now as a valuable additional source of intelligence to blend with others to come up with a view that's perhaps not otherwise visible to the naked eyes it were?

Claire Chu: Well, I agree with Sean that in the past five years we've really seen an emergence of interest and focus on economic statecraft, where commercial diplomacy as a field of study, as something that the US government and other governments should be aware of and should build capabilities to understand. And in the past five years, we've really seen introduction of a whole of government approach that's brought together concerns like human rights, trade and investment, even finite global capital flows, into the national security fold. And with general, I would say bipartisan consensus for the first time. And also, around that time was when Made in China 2025 was publicly introduced as some might be familiar with Made in China 2025 was initiative that the Chinese government launched in order to introduce or in order to hast an indigenous innovation and manufacturing. And when that happened, we saw, especially in the west an emergence of think pieces of public discussion about the intersection of national security and commercial business interests as well as with tech and innovation, industrialization. And so, it's been a really exciting time to be in this space and I think people are increasingly understanding that economics does not exist independently of natural security or geopolitics. It's very much a piece of the puzzle. And again, as Sean mentioned with what's happening Ukraine and Russia, I think a lot of countries are realizing that once again it's a capability that we really need to build up. We really need to build talent pipeline to understand because increasingly as warfare becomes potentially less kinetic. Especially looking at China, maybe Taiwan potential conflict there, we're going to be looking at a very different playing field and it's going to be one that has economics and finance at the forefront.

Harry Kemsley: Yeah. Let me move us on then to where you've seen utility of this intelligence, Claire, from your experience, but as you are collecting your thoughts on that. Something that occurs to me Sean, is I wonder if we were to be able to look through a capability like IntelTrak and see a picture that otherwise isn't available to us that we haven't considered, whether we'd actually be horrified that there may actually be a huge amount of economic statecraft going on in our own backyards. I mean, I watch with interest the development of this capability as it now starts to blossom and fuse with other intelligences. As we said, that's probably where the pictures can become clearest. But I almost wonder whether we're going to find some quote really horrific stories about what's been going on maybe for years we've been blissfully unaware.

Sean: I think that's 100% true, Harry. I think we already are realizing this, and I go back to my example of supply chain and how if you do start looking at, and again, open source can do this quite easily about how some of the technology is transferred has been transferred. And it's still being transferred from western countries to fuel the Russian war machine, some of the components. And one of the good ways of identifying those is to... and I understand what you're saying, inaudible in terms of not specifically tracking the money, but if you can see where the economic flow and the economic dependencies and relationships are, it doesn't take long to work out that inadvertently because people haven't been looking at this. There are many western nations who are probably still certainly, but at the start of the war who are actually fueling the Russian campaign.

Harry Kemsley: I do want to pick up on that point about supply chain. I suspect you could probably find for us Claire, examples of where even at the mining of certain ores and special metals and so on out of the ground. If they were in the wrong hands, could introduce all kinds of strategic risks for supply chains. But I'm not going to let that one distract us yet, we'll come back to that one later. So, let's talk about use cases then. So, we've talked about more or less what this topic is about. We've talked about the techniques that we can use and so on, but what are the use cases you've seen, Claire, that are the most obvious and perhaps less obvious use cases we could have for an understanding of this intelligence of economic statecraft?

Claire Chu: Sure. To answer that I think, and you would back up a little bit and explain how or what exactly we track every day what we look at the information that my team at IntelTrak has. The foundation of all of it is transactions, which is hand cold every day. We seek to capture all of China as well as Russia's overseas economic activities. And that means mergers acquisitions, foreign direct investments, contracts, subcontracts, loans and grants, even aid and donations. And we try to be as thorough as possible to really get the full picture. That means we also track things like media partnerships, and we track everything from the beginning starting with verbal pledges, letters of intent, feasibility, environmental studies, all the way to potential delays, cancellations, and other obstacles or even protests that might be affecting a project. So, I would say that we have very full pictures of this type of engagement on the ground, what it looks like in terms of engagement, local communities, sometimes local governments. And we can help paint a picture of not just what is China doing, how are they doing it? Who are the actors involved or certain actors more involved in certain regions? Is there a reason? For example, recently noticed that Huawei is making a big business push in the Middle East, and we saw many transactions with certain companies with Huawei involved. There are certain technologies I think Huawei's seeking to push and they really see a geopolitical opportunity there right now to build a new market. Especially with COVID and after COVID some might say, and with increasing backlash from certain other countries as well that are starting to look into written replace programs. And so, we've had questions in the past even just from our analysts about what can we look at all Chinese tech investments in Israel from 2015 onward? Can we look at which of those are dual use in our dual use capabilities and how do we ascertain that? Can we look at the actors involved? Do we look at the type of technology? Do we look at the financing parties to understand what is intended to be dual use and what is not? Or we could look at, for example, all Chinese activity in Gwadar, which is near the Gwadar deep seaport. And I try to understand, so we know publicly that there is a port that's been built but layered with all of information we see that they also donated a hospital, to try the Chinese government finance a hospital built it. We've seen that the Chinese government has awarded several following contracts, Chinese companies we're seeing that Chinese private security companies are potentially moving into that area and being involved. And we're also seeing that the Chinese government has helped fund a vocational institute to train local employees to help sustain the Gwadar Port operations long after Chinese workers have left. And so, then we start to paint a bigger picture of what is the national security exposure now with the Gwadar Port and operation? What is the potential long term business planning for the companies that are involved? And also, how could this potentially change the local landscape with the number of workers that are now living there with on the physical assets but also the Chinese nationals that are there. But also, with local populations that are now comfortable with Chinese technical standards, Chinese language, Chinese norms, and are likely going to be helping this project flourish for again, years and years to come.

Harry Kemsley: Yeah. Absolutely. Fascinating. And sadly, we are going to run out of time, but as I often hear myself saying, Sean, we'll have to get Claire back and we'll do some more of this later. So Sean, your thoughts, your final thoughts then in terms of use cases, you've heard a fair amount from Claire there about how we do, what we do with economic and financial intelligence around statecraft and some use case examples as well. What are your final thoughts in terms of the intelligence value of this type of intelligence?

Sean: You have heard me say this before, Harry, that the word all source or the phrase all source intelligence easily trips off the tongue, but we don't really do it. We do multi- source intelligence. For this... for me, I think the economic side is something that we have considered in the strategic level in the past, but I think it's becoming into far more focused now because people are starting to ask the right questions, which is a key element of the intelligence side, and we are more sophisticated in terms of how we analyze that. So, I think it is my final thought it would be that yes, it is only one source of intelligence, and you should remember that, but actually it's a really key one that has probably not had the degree of brutally that it needs in the past, but it can lead into all the elements of intelligence, all the way from the strategic to the tactical. And as much as anything it's the in order to. So, it's understanding that intent and I think that's something that economic intelligence can play a big part in.

Harry Kemsley: Yeah. I think understanding the intent is one thing, but actually just considering what the intent might be and it may not just be an entirely commercial one. I think that's really the point, isn't it about this?

Sean: Yeah. Yeah.

Harry Kemsley: And then the other thing I would add to that is that in isolation, a series of commercial activities don't appear to be in anything else in series of commercial activities. But when put together with everything else we can see and explore as Claire has described, then perhaps the picture becomes clear. So, Claire, an unfair question, it's short notice, but I do this at the end of every podcast. I'm curious to know what you would want the audience to walk away with if you have one thing for them to remember, what would it be? And Sean, of course you're going to come next, so stand by for more. What's the one thing you'd like the audience to walk away from this conversation with, Claire?

Claire Chu: I'd like to remind folks that economics and finance, although they might seem maybe not directly relevant, net security at times at least for the Chinese government, are very much intertwined with the concept of security. Xi Jinping has stated recently that security is a precondition for development and within the past year has introduced new initiative called the Global Security Initiative, which endeavors to provide security for projects overseas, intro stability and security of the Asia Pacific, among other goals. And so, with in terms of this initiative, which is meant to compliment the Belt and Road, we're seeing that Chinese projects are frequently being accompanied now with security presence with paramilitary forces and prep security contractors in Pakistan. The Pakistani army we've seen has created a special unit that is meant to safeguard Chinese projects. And in Cambodia, we've seen a Chinese company that was seeking to develop the Dara Sakor coastline work with the Cambodian military to clear out villagers. And so, this intersection between not just the military but also paramilitary private security forces and the security presence growing overseas as a result of Chinese development and Chinese projects. Chinese investment is something we're going to be seeing a lot more of. And it's important to understand development and economics, not just in terms of the money and where it's going, but also what it means for security going forward.

Harry Kemsley: Thank you, Claire. Sean?

Sean: Yeah. Just to double down on that, if you think that every element of national power in its greatest definition right away from the strategic to the tactical is dependent on the economics of that country and how it uses its economy as leverage. And so, we have to consider that in part of an holistic approach, whether that's within the military, whether that's in wider defense or whether it's in the more strategic power.

Harry Kemsley: Yeah. I agree with all of that. And I think I would add for my one takeaway, I wonder if any analysts or decision makers listening to this podcast really understand what has been going on in their own backyards or in their own regions with economic state craft from countries like Russia and China in the holistic sense. If they could pull back the cover and see what might actually have been the true intent, would they view them differently? I sense that there is a picture waiting to be found there, which might horrify, as I said a few minutes ago. So for me, the one takeaway is ladies and gents, how they're listening, have a think about what the various commercial activities going on, but on the face of it appeared to be just commercial, might actually be driven by slightly other motivations. Claire, thank you so much for that. A genuinely fascinating topic. And I think you used the word exciting. It is exciting, but it's also somewhat daunting. But nonetheless, thank you so much for your clarity in describing what it is and how you do it. And the best of luck with continuing with it because it sounds like a fascinating and important topic.

Claire Chu: Thanks, Harry. This is a lot of fun. Glad we're able to shine light on a really emerging topic, I think the national security sphere.

Harry Kemsley: Yeah. Absolutely true. Sean, as always, thank you for your help. And for the listener, we look forward to speaking to you again very soon. Take care. Bye- bye.

Speaker 1: Thanks for joining us this week on the World of Intelligence. Make sure to visit our website, janes. com/ podcast where you can subscribe to the show on Apple Podcasts, Spotify, or Google Podcasts. So, you'll never miss an episode.