Tag Archives: Security

Asia-Pacific, Global Analysis, Territorial and Law of the Sea Disputes

Deciphering the Japanese Ship Guarding Act

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Written by Simon O. Williams with research support credited to Michitsuna Watanabe

First released by The Maritime Executive, July 1st, 2014

Over six months since the Japanese government issued a landmark national law permitting privately contracted armed security personnel (PCASP) aboard Japanese flagged vessels, there remains confusion and uncertainty as to its scope and practical application. The legislation is entitled the “Special Measures Act for Security of Japanese Vessels in Pirate Infested Waters” of 20th November 2013, Law No.75 (Japanese Ship Guarding Act.) This Act, along with its supporting Orders and Ordinances, sets the policies, procedures, and applications for the employment of armed guards aboard Japanese flagged oil tankers. It is written exclusively in Japanese and requires not only translation, but also analysis by those seeking to provide or procure compliant maritime security services for the Japanese market.

THE ACT

Despite the Act being rolled out more than half a year ago, Japanese ship-owners and operators struggle to find foreign PCASP and private maritime security companies ready to provide their services aboard Japanese vessels.

According to Mr. Henri Vlahovic, founding director of Amniscor Ltd., which offers market entry support to companies in this sector, “while our team has developed the right compliance solutions for the constantly evolving procedures in Japan, significant challenges remain for foreign private maritime security companies to enter this new-born market. There are several reasons, including a lack of comprehensive information on policies and laws, which themselves are still not completely defined and remain emerging. This is compounded by protracted application procedures that hinder, rather than foster, advancement of this crucial new industry segment in Japan. The Japanese Ministry Of Land, Infrastructure, Transportation and Tourism (MLIT) is still missing sufficient mechanisms to attract foreign service providers, while Japanese ship-owners’ demand for high standard PCASP is steadily increasing.”

So as the demand grows, supply of services remains lacking due to the complexity of navigating the Japanese legal system, especially the hurdle of deciphering the Japanese Ship Guarding Act, which can be seen as scaring off foreign security providers.

While the world now observes a trend in piracy and maritime-armed robbery, priority areas shifting to West Africa and Malacca, the Act came into existence against the backdrop of increased PCASP deployment aboard vessels transiting the High Risk Area– the Horn of Africa and the Indian Ocean. The Japanese government accepted the correlation of increased use of PCASP with decreased successful pirate boarding in this region. Coupling this with Japan’s energy dependence being exclusively sea-borne from source countries mostly in the Middle East, authorities sought strategies to protect their vulnerable maritime assets and energy flow. However, unlike some other nations which could place PCASP on-board their ships at-will, Japanese flagged vessels were prevented from doing so as firearms possession is prohibited by the Japanese Swords and Firearms Control Law of 1958.

The recently adopted Japanese Ship Guarding Act provides an exception to this Law. The Japanese legal system is composed of three unique components: Laws, Orders, and Ordinances.

The Act itself is actually a Law, meaning that it was passed by a vote in the Diet, Japan’s parliament. However, it also includes Orders and Ordinances, which can be modified without Diet debate by the cabinet or the relevant ministry, in this case—MLIT. This allows the cabinet and MLIT the necessary legal latitude to independently adapt or expand the scope of the legislation without Diet approval, a crucial aspect to respond to the fluid nature of maritime operations and maritime threats.

THE ORDERS

According to the relevant Orders, to obtain MLIT permission for embarking armed guards on Japanese flagged vessels, the candidate vessel must be a Japanese flagged tanker carrying crude oil and meeting certain fundamental static requirements as set down in the Ordinances described below.

The Orders prescribe the use of PCASP only within a designated High Seas area in the Gulf of Aden and Indian Ocean along with a ‘passing area’ at Bab-el-Mandeb, the entrance to the Red Sea.

Japanese Ship Guarding Act Subject Area

According to Mr. Takashi Watanabe, the Deputy Director of MLIT’s International Shipping Division, the operational area remains the High Seas, beyond twelve nautical miles from shore, as prescribed by the UNCLOS framework, while the territorial sea spaces of these oceans are considered transit areas. This means that armed guards may be onboard within twelve nautical miles, designed specifically to facilitate embark and disembark procedures in a coastal state’s territorial sea, but in such locations they are forbidden from using weapons.

As these requirements are prescribed specifically in the Order and not the Act itself, the Japanese government maintains the jurisdiction to modify such specific geographic requirements as needed to adapt to fluid operational and threat conditions.

Should security operations be needed to protect the Japanese fleet in West Africa or Malacca, for example, the government maintains the power to grant these permissions in the form of a new or modified Order which can expand the subject area for a security response.

Likewise, should the need for increased protection be deemed necessary aboard vessels other than crude oil tankers, such as LNG carriers, fishing vessels, or even perhaps the Japanese whaling fleet, cabinet can similarly expand the scope of the Order to include these parameters.

THE ORDINANCES

Related Ordinances specify that in order to qualify for armed security permission, Japanese oil tankers must have a maximum speed no faster than eighteen knots fully loaded, and have a freeboard less than sixteen meters (distance between the water line and the deck or other places where humans can enter the ship.) Ships must also have a secure citadel where crew members can seek refuge and continue external communication in the event of an attack, along with primary preventative measures including a water discharging system and razor wire along exposed areas of the deck.

Application forms are included with the Ordinances as appendices available in Japanese only, which ship-owners must submit to MLIT for obtaining permission to employ PCASP aboard their Japanese flagged vessel. However, a summary of required information has been created and is presented below.

This includes applications to authorize a Ship Security Plan, modify all or part of the Ship Security Plan, confirm security personnel and their weapons, change of security personnel, submit the guarding implementation plan, and notify MLIT about lost or stolen firearms.

Ship-owners must submit a designated guarding plan for each candidate vessel to MLIT along with personal details of the PCASP and their embarked weapons. These applications are free of any charges and commissions and have validity periods of two months, after which a new application must be submitted.

DESIGNATED GUARDING PLAN

An application must be submitted to MLIT detailing the Designated Guarding Plan. This plan includes information on the ship-owner, including copies of their personal identification documents and criminal record check. It also must include details of the candidate vessel, certification of its Japanese flag possession, architectural schemes, pictures, and drawings. This evidence shall detail the equipment required under the Regulation to prevent and reduce damage by piracy, including that of the citadel, razor-wire, water discharge system, and appropriate storage facilities for firearms. Moreover, a written pledge by the Ship’s Master (Captain) must be enclosed stating that he/she is over twenty years old, and does not have any psychological or physical conditions which may impact his performance, is not a previous criminal offender, and is capable of overseeing and monitoring the possession and use of firearms onboard for special security activities.

The ship-owner or their liaison must also submit relevant documents about the PCASP to be embarked on the vessel and the company they hail from. Along with copies of relevant PCASP team leader or company director’s personal identification documents, such as residency card, a medical certification by a doctor or public body indicating this individual does not suffer from any psychological issues, addictions, or other health problems that can impact this line of work must be included. They must also submit results of a clean criminal background check indicating they have not been imprisoned in the past five years or have been a violent criminal within the last ten years. A copy of the guards or guarding company’s insurance or alternative form of liability protection demonstrating that the PCASP to be employed are insured for the scope and duration of their operations must be included.

The ship-owner or their designated liaison must submit documents indicating details of the intended voyage, cargo, number of rifles, bullets, and activities to take place on the candidate vessel during the special security period. Photographs of weapon profiles and serial numbers must be attached for the specific firearms slotted to be brought on-board.

VERIFICATION OF DESIGNATED GUARDING BUSINESS (DGB) PERSONNEL

MLIT also requires an application to verify what they call the Designated Guarding Business (DGB) Personnel, or PCASP, to be engaged in special security activities aboard the candidate vessel. This is the middle stage after ship-owner’s Designated Guarding Plan has been approved, but before they receive the final greenlight to undertake the specific maritime security operations requested in their Guarding Implementation Plan, described in the subsequent section.

The verification of Designated Guarding Business Personnel by MLIT takes approximately two months to process, so it is imperative for ship-owners to begin this process early. It requires them to provide evidence attesting to the quality and competence of the individual guards scheduled to embark upon their vessel. It requires evidence of their training and education which must be submitted in a document indicating that the individuals were trained by the relevant maritime security company along with a video demonstrating their proficiency for MLIT review and record-keeping. These videos must demonstrate (1) rifle handling and the other basic skills, (2) inspection of firearms, (3) loading / unloading various types of ammunition, (4) shooting form and weapons handling, (5) marksmanship and external variables. In some circumstances MLIT may issue a paper test to be completed by PCASP in order to verify their qualifications and education.

As is standard throughout this industry, medical certification by a doctor or public body must be produced that indicates the mental and physical health of the candidate. A document indicating the employment relationship between the maritime security company and the individual guard must be provided along with copies of the individual’s passport, residence permit, as well as a clean criminal background check indicating they have not been imprisoned in the past five years or have been a violent criminal within the last ten years. Evidence of insurance coverage for damages that can occur from their activities should also be included.

GUARDING IMPLEMENTATION PLAN

After guards are approved by MLIT, the ship-owner must submit the Guarding Implementation Plan at least five days prior to the commencement of the special security arrangements. Like the other documents, there is no fee for MLIT processing this request.

To this they must attach a copy of the contract between the ship-owner and PCASP or their hiring company along with details of the special security activities planned. This shall include navigational charts for the assigned vessel’s voyage indicating the location where weapons will be loaded/unloaded and if relevant, where PCASP will embark/disembark.

NOTIFICATION FOR LOST OR STOLEN FIREARMS

When guns are lost or stolen, the Master of the approved vessel must submit a pre-form document which is included with the Act to report the location, nature, and reason for the loss along with indication and identification of the missing items. Masters are requested to contact MLIT for updates to the document and to submit the details as soon as possible after their disappearance.

RULES FOR THE USE OF FORCE (RUF)

Mr. Takashi Watanabe of MLIT highlights that the use of firearms to deter pirates attacking a Japanese vessel remains a last resort. The preliminary steps taken beyond deterrence with razor wire are discharging water and escaping the crew into a reinforced citadel, or protected area.

To use rifles, additional steps are required. First, PCASP must warn the suspected pirates using all other means, both audio and visual, without using firearms. Second stage is warning by rifle use, safely firing warning shots into the sky or sea to deter attack.

Only in cases which the first two measures are undertaken, but the pirates do not halt their attack, are PCASP aboard Japanese flagged vessels permitted to shoot at the pirate ship for the purpose of protecting the lives of crew members.

The Japanese government’s move to permit PCASP onboard their vessels is certainly a step welcomed by the international maritime community. Its redundant safety and approval protocols will keep their seafarers safe and energy supply uninterrupted, while ensuring that PCASP operations remain monitored for compliance. Although challenging to decipher, the Japanese legal system caters specifically to this complex Act, placing its components within the numerous levels of Law, Order, and Ordinance that permit the Japanese cabinet and MLIT the flexibility to expand the Act’s scope and geographic-area as new threats against the Japanese fleet emerge and security responses evolve.

 

Written by Simon O. Williams with research support from Michitsuna Watanabe, under the auspices of Tactique Ltd. Their team remains available for contact at info@tactique.org should there be queries regarding this subject or related compliance matters.

This article is for information only and does not constitute legal consultation services.

Strategic Outlook, Tactical Concepts

Offshore Installations: Practical Security and Legal Considerations

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Evaluation of physical security risks to energy infrastructure traditionally focused on onshore installations and pipelines. Recent well-publicized open water incidents bring offshore contingencies to the forefront of operators’, insurers’, governments’ and even the public’s concerns. The increasing importance of offshore hydrocarbon operations coupled with the changing risk nature of the offshore environment, marked by a shift in perspective from terrorism to include civil disobedience and unsanctioned scientific research, present additional vulnerabilities warranting consideration in today’s paradigm.

Polish anti-terror forces training on a platform in the Baltic Sea

Polish anti-terror forces training on the ‘Petrobaltic’ platform in the Baltic Sea

This article seeks to clarify practical and legal considerations which have been absent from mainstream discourse in the wake of recent offshore contingencies. It further argues that updated legislative and regulatory developments to match the changing threat paradigm are needed to guide offshore installation security policies and responses.

Practical Issues Regarding Offshore Security

In recent weeks, eco-activists’ attempts to board offshore drilling platforms as a form of civil disobedience has revived the question of a coastal state’s enforcement powers and more specifically the lengths which a state can go to protect its offshore assets.

This analysis does not seek to qualify the actions of the perpetrators as any specific illegal act. That judgment is up to the relevant courts to decide based on violations of international and national laws. However, the author notes that no matter the motive, any attack on or hostile approach to an offshore installation – whether for purposes of terrorism or civil disobedience – is extremely dangerous to life and property.

First and foremost, offshore platforms are high-hazard installations and any unauthorized activities should be considered a security threat, having the potential to damage the installation, with subsequent increased risk to the rig itself, personnel onboard, and to the regional ecosystem.

Secondly, from a rig operator’s or coast guard patrol vessel’s perspective, when a large vessel unexpectedly transits near a rig, the operators and any security personnel rightfully should have some heightened alarm. Despite being built of reinforced materials, some even capable of withstanding icebergs, offshore platforms are not designed to endure collision with vessels and subsequent ramifications that could arise thereof.

When offshore rig operators witness a large unknown vessel dispatch two-man-teams in small RIBs to approach and possibly attempt to seize their platform, they again should rightfully be concerned. Irrespective of the assailants’ motives, the bright color of their wetsuits, or the name painted on the side of their RIBs and mothership, operators and maritime security authorities must be prepared for all scenarios, not just civil disobedience, but anything the incident could escalate to including piracy and terrorism.

Looking down at a fleet of small boats, which can seem like Fast Attack Craft swarming toward the platform, it is impossible to make a precise judgment as to the immediate threat they posed, impossible to verify their true identity and intent, and impossible to recognize onboard equipment as being innocent, especially when they attempt to evade authorities and disregard navigational safety demands. Could they be pirates? Could they be saboteurs? Could they be terrorists? Could they be eco-activists? In today’s world it gets even more complicated. Could they be terrorists or pirates disguised as eco-activists?

To some this sounds like science fiction or the plot of a Tom Clancy novel, but increasingly such false flag operations are becoming commonplace. In Afghanistan terrorists have donned ISAF or Afghan Police fatigues to gain access to secure buildings and wreak havoc. In Chechnya, they used police uniforms. In Pakistan and East Africa there have been recent reports of male terrorists dressing in women’s clothing to avoid detection. Off the Horn of Africa pirates regularly try to blend in with fishermen, even throwing their weapons overboard and begin playing with fishing equipment if they think interception or capture is imminent. An extremist environmentalist group or extremist group operating under the guise of an environmental organization isn’t that far-fetched a concept, especially when the equipment needed for such an operation would be virtually the same – plus concealed weapons or explosives.

Can maritime-based demonstrations of civil disobedience by bona fide environmental organizations be a deadly risk? Absolutely. Many civil disobedience demonstrations around the globe have unexpectedly escalated from non-violent peaceful protest into violent clashes with opposition civilians and/or authorities which resulted in injuries and death. This may not always be the fault of the demonstrating group; sometimes it is the authorities who escalate the response. Those who choose to stage demonstrations of any kind will have to deal with the international and national legal consequences of their actions regardless of their ideological motive – be it in the name of ‘democracy,’ religious extremism, or ‘environmental protection.’

Claiming environmental protection as an ideological motive is not a carte blanche to stage an attack or raid on national critical infrastructure, whether violent or non-violent. Private property and critical infrastructure at sea, specifically offshore platforms, are not suitable and far too precariously situated to be an appropriate venue for demonstration, especially attempted raids or seizures.

Thus, from a practical standpoint, offshore crews, coast guards, and other relevant individuals must always be prepared for the worst case scenario, and then adjust their response to meet the actual threat posed. If vessels are compliant and respond to traffic control requests indicating navigation error and attempt to steer away from the platform, then the threat level decreases. However, when RHIBs approaching the platform disregard these directives and undertake evasive maneuvering to avoid capture by authorities, then the threat level and threat response should increase accordingly.

Legal Considerations: Offshore Safety Zones

Irrespective of the label placed on those approaching an offshore platform or their assumed motives, the legal basis providing states jurisdiction to respond to threats must be understood to ensure security and safe navigation around offshore installations.

The 1982 United Nations Convention on the Law of the Sea provides the backbone for offshore governance by coastal states and those navigating the oceans. This treaty does not only zone coastal states’ offshore areas, but also provides specific guidance for their rights, responsibilities, and jurisdiction in the concentric zones as well as basic legal basis for protecting offshore installations.
UNCLOS

 

Offshore platforms are typically located in one of a coastal state’s three main zones: the territorial sea, contiguous zone, or exclusive economic zone (and in special circumstances even further on a state’s continental shelf). Within the territorial sea, the coastal state has full enforcement jurisdiction over all security matters and can take enforcement measures against any vessels not in innocent passage. In the contiguous zone, the coastal state has enforcement powers over law enforcement issues which affect its domestic stability, specifically customs, fiscal, immigration, health, and sanitary issues. Thus, within these two zones the coastal state has broad jurisdiction and ability to secure its offshore assets.

In the exclusive economic zone (EEZ, 24-200 nautical miles from the coastline) however, a coastal state’s rights are more limited. There, the state has full sovereignty to exploit living and non living marine resources and take protective measures to maintain those operations, yet it cannot generally restrict others’ right to innocently transit the waters.

Although vague, UNCLOS includes a special clause which provides coastal states with the ability to harden offshore structures in the EEZ and beyond* by creating a 500 meter safety zone around them. Article 60 of the Convention stipulates:

 

“- … The coastal State may, where necessary, establish reasonable safety zones around such artificial islands, installations and structures in which it may take appropriate measures to ensure the safety both of navigation and of the artificial islands, installations and structures.

 

– The breadth of the safety zones shall be determined by the coastal State, taking into account applicable international standards. Such zones shall be designed to ensure that they are reasonably related to the nature and function of the artificial islands, installations or structures, and shall not exceed a distance of 500 metres around them, measured from each point of their outer edge, except as authorized by generally accepted international standards or as recommended by the competent international organization. Due notice shall be given of the extent of safety zones.

 

– All ships must respect these safety zones and shall comply with generally accepted international standards regarding navigation in the vicinity of artificial islands, installations, structures and safety zones…”

In essence, such a safety zone is an area of restricted navigation. The zone itself may or may not be marked, monitored, or enforced, but ships are expected to refrain from navigating close to offshore structures. Any uninvited encroachment on the zone by large vessels, small craft, individuals, or jettisoned material is considered a definite safety hazard and potential security concern.

Within the zone the coastal state and potentially the offshore operations team can restrict navigation and take reasonable measures to apprehend and even penalize violators. In more serious situations, especially regarding potentially hostile approaches, they can take measures to prevent approach to the structure including actions to disable the vessel should it ignore good faith efforts to stop it without the use of force.

 

 

The safety zone was designed with navigational hazards in mind, not prevention of a deliberate hostile attack, whether that is ramming a vessel laden with explosives into a platform or raiding the platform for piracy or any other purpose. As shown in the above illustration, 500 meters is not a large security space within which to operate a defensive strategy. It is not broad enough, for example, to immobilize large ships, which can take some miles to slow down to a complete stop.

For reference, a Harvard University analysis showed that a vessel traveling at twenty-five knots (29 mph) would cross the outermost limit of the zone and make contact with the platform in about 39 seconds. This timeframe is so limited that it is impossible to realistically identify the vessel as friend or foe, attempt to make communications contact, await response, and if no response or unsatisfactory response is given, then dispatch a security team (which may or may not be onboard the platform) to intercept the vessel if possible, let alone request assistance from state law enforcement or military. This exposes a significant gap in the regulatory framework governing offshore maritime security and warrants further examination and tightening to match today’s threat environment.

While the wording of UNCLOS does allow for extending the breadth of this zone: “safety zone … shall not exceed a distance of 500 metres…except as authorized by generally accepted international standards or as recommended by the competent international organization,” to date, the UN’s International Maritime Organization (IMO) has yet to approve any requests for extension.

The IMO has, however, adopted Resolution A.671(16) which tasks flag states with ensuring their vessels do not wrongly enter established safety zones and suggests coastal states report infringements to the vessel’s flag state. While this resolution grants further legal basis to enforce vessel adherence to these safety zones, it provides only a reactionary response by the flag state, and does not provide specific authority for a coastal state’s immediate response to vessels which pose imminent threats to a platform.

What specific interception measures coastal state authorities or security forces can adopt within such safety zones is a contested issue. Clearly, the fact that they can establish zones and restrict navigation means they have some limited jurisdiction. Increasingly, creeping maritime security jurisdiction in the post-9/11 paradigm has given coastal states substantial latitude to take security measures in their EEZs in the name of national security, based on national decrees or customary international law. And of course the right of self defense to protect life and property from imminent risk of harm is a universally recognized concept.

The risk of damage and the subsequent security or environmental consequences that could result from a hostile approach to or takeover of a platform are far too great to ignore. For isolated locations far out at sea, clarifying and possibly enhancing the legal regime which governs security jurisdiction for offshore platforms is crucial to design and deliver appropriate responses to varied threats.

*UNCLOS Article 80: “Article 60 applies mutatis mutandis to artificial islands, installations and structures on the continental shelf.”

Simon O. Williams is a maritime security analyst specializing in offshore security, Arctic maritime challenges, naval capabilities, and multinational cooperation. He previously worked in the American and British private sector and in several roles supporting the US government. He is now based in Norway and contributes independent analysis to industry, media, and policymakers while pursuing an LL.M. in Law of the Sea.

This article is for information only and does not provide legal consultation services.

Beans Boots Bullets

The Great Oil Contango of 2008-2009 & Maritime Security: A Retrospective

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Oil storage commodities swinging at anchor in idled VLCCs.
                                                                     Fill ‘er up! 

The following article is special to our International Maritime Shipping Week. While we often discuss the threats to maritime shipping, this week looks at dangers arising from such global trade, and possible mitigations.

It sounds like a variant of a famous and complex Latin dance, but Contango is actually a financial phenomenon involving the trading of futures-based commodities. For the layman it goes like this: take a product such as crude oil. If you buy it now, you pay X, the “spot price”. Due to market conditions, you’re confident that a year from now you can sell it for a higher price of X+, the “future price”. Such a situation is a Contango. To take advantage of it you sell contracts now to purchasers willing to take the commodity at the future date, price, and quantity. You are now a speculator or “arbitraguer”. The challenge becomes storing enough of it until that time comes to deliver the agreed commodity. As long as storage and other overhead costs didn’t exceed X+ (the “spread”), you turn a profit.

Like many historical events, the so-called Oil Contango of 2008-2009 was a the result of several factors:

  • The first year of the Global Financial Crisis had passed and the effects were being felt in full, namely low consumer spending and unfavorable market conditions (sub-prime mortgages, credit collapse, etc)
  • OPEC was reluctant to reduce production rates for fear of sending the already unstable markets into free-fall – the surplus was growing at a rate of 1 to 2 million barrels daily
  • The resulting oil glut combined with low spending because of the crisis resulted in a low spot price (X), but with an expectation of a higher future delivery price (X+) as the economy slowly recovered

The key of for those willing to do business was to find storage at cheap enough prices that made large purchases of oil contracts profitable. Here’s where history becomes stranger than fiction. The glut literally overran land-based storage facilities. In the United States, a small Oklahoma town called Cushing is considered the benchmark for crude oil as traded on the New York Mercantile Exchange. It’s status is derived from being a primary hub connecting many delivery points within North America, and it’s maximum storage capability is approximately 42 million barrels (about 10% of U.S. oil production). At the time of the Contango, it cost approximately $1 a barrel per day to store crude there. But the oil glut had a big side effect – a lot of tankers were idled, and thus their operating prices declined. Around November of 2009, the daily rate for a million barrel capacity crude carrier was $10,000 a day at it’s lowest. The profit “spread” looked to be about $10 a barrel. Those market conditions made it very attractive for firms with the wherewithal to take full advantage of the Contango.

No one turns down Mr. Gere for a dance Contango.
                    Care for a dance Contango?

And what a list of arbitrage firms there were – Citibank, Morgan Stanley among them. While banks are typically loath to touch anything but paper instruments of commodities (i.e. not purchase the assets themselves), here they were directly chartering any decent-sized vessel capable of holding a million barrels or more. These were some of the very same institutions that took it on the chin during the Global Financial Crisis, and had every incentive to make up for their losses.

The result is a sweeping trend of world-wide seaborne oil-storage. In the end, all the tankers that the various arbitrage players could get their hands on could have formed a 26-mile long convoy of Very Large Crude Carriers (VLCC), totaling about 130 million barrels, or a little over 12 times what would normally be found at sea at any given time in recent history. All of it swinging at anchorage in major ports around the globe, for a year or more. The maritime security implications are numerous, and represent challenges for consideration.

With that much crude afloat and idle, the period of The Great Oil Contango presented one of the largest and most tempting targets for terrorist and other actors to strike and prolong what was already an immensely unstable global financial crisis. The risk potential was heightened by the fact that the glut easily overwhelmed the best efforts of ashore storage locations such as Cushing to supplement their capacity, adding anywhere from 5-to-10 million barrels of space.

The second-order effects are worth noting too: First, the chartering frenzy impacted not only the industries that used crude carriers, but spilled over to other sectors as firms moved beyond floating tankers and hired other types of ships for their storage capacity. Second, oil refineries eventually had to shut down or reduce shifts as OPEC and other oil producing concerns acknowledged market forces and cut back production output.

The potential environmental and safety impacts of that much oil afloat is staggering. As a comparison, the worst spill in modern history is the Deepwater Horizon well disaster – which sent about 90 million barrels into the Gulf of Mexico, devastated the U.S. southern coastline and surrounding waters, and required two years to complete major cleanup operations. The number of ships filled to the brim also increases the risk of partial spills and fire/collision hazards during the offloading, such as ship-to-ship transfers.

The Contango also caused an unintended and negative effect on the Strategic Petroleum Reserve (SPR) – several countries released their SPRs because of the market’s perception that there wasn’t enough oil in distribution – that was true – to the extent that much of it was being set aside by the arbitrageurs. While the SPR technically increased the amount of oil available on the market, it also further drove down the Spot Price (X), thereby increasing the “spread” or price differential of the Futures Price (X+). Therefore, there the incentive for abitrageurs to release any of the oil they already had was further reduced. In fact, by releasing the SPR, those nations put at risk their capability to respond to a crisis such as a wartime footing where energy to power the military is most needed.

Historically, the Contango ended, or more accurately declined, when too many arbitrageurs entered the market and wiped out the remaining availability of product, driving up prices. By doing so, they reduced the price “spread.” Additionally, the particularly harsh winter of 2010 made it attractive to unload stockpiles and cash-in as fuel demands were at an all-time high. Finally, a regulatory investigation by the U.S. Commodities Futures Trading Commission (CFTC) on practices such as the oil-storage trade convinced investments firms and traders to move on to greener pastures.

Lessons Learned: the vagaries and complexities of the modern financial market have many effects, most of them unpredictable, especially when dealing with energy supplies. In 2008-2009, several factors came together that not only artificially imposed limitations upon the world’s oil supply, but had indirect effects upon world shipping and national petroleum reserves. What was also interesting to note is that as instability began to threaten traditional supplies of oil (say the Libyan Uprising), the market price spread started to narrow as consumers were more than willing to pay an elevated spot price for energy now. The Contango also highlighted the growing influence of non-state actors such as corporations and financial firms to indirectly influence the availability and price of oil. Previously, the oil commodity market was a reasonable reflection of global supply and demand, the presence and practices of OPEC notwithstanding.

Surprisingly, for the time period during and shortly after, there wasn’t a lot of open-source intelligence or even published articles on the strategic and security implications of The Great Oil Contango. Everyone appeared to be focused on the monetary and market impact, but little else. It behooves us as industry professionals and observers to be aware of these developments and understand better the linkages to strategic security and public policy. One future trend we can expect is the greening of major navies as nations seek to minimize energy supply impacts to their foreign policy and military capabilities.

Juramentado is the pseudonym for Armando J. Heredia, a civilian observer of naval affairs. He is an IT Risk and Information Security practitioner, with a background in the defense and financial services industries.  The views and opinions expressed in this article are those of the author, and do not necessarily represent the views of, and should not be attributed to, any particular nation’s government or related agency.

Cyber War

From Epipole to Cyber War

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Walls and Counter-Walls
Walls and Counter-Walls

From The Jaws of Victory

In the Peloponnesian War, the 414 BC final battle of Epipole showed the pitfalls of an over-reliance on communications and single circuits. During this last battle of the Athenian siege of Syracuse, the Syracusans countered the attempt of Athens to wall in the city by building a counter-wall in the projected path of Athen’s efforts. The Syracusans had gained a critical blocking position, and Athenian General Demosthenes concocted a plan to dislodge the defenders. The Athenian forces stalled during the daytime battles outside the counter-wall, when their enemies could easily observe and rally against them, so General Demosthenes planned t strike the counter-wall at night. The well-organized nighttime Athenian attack completely overwhelmed and nearly destroyed the first Syracusan garrison. As the alarm sounded, the Athenians rushed forward without allowing themselves time to re-organize and re-identify. When the first real resistance was met, the ensuing disaster captured by Thucydides is worth citing in full:

IFF degrades to, "is this person stabbing me in the face?"
Primative IFF:  “is this person stabbing me in the face?”

“Although there was a bright moon they saw each other only as men do by moonlight, that is to say, they could distinguish the form of the body, but could not tell for certain whether it was a friend or an enemy. Both had great numbers of heavy infantry moving about in a small space. Some of the Athenians were already defeated, while others were coming up yet unconquered for their first attack. A large part also of the rest of their forces either had only just got up, or were still ascending, so that they did not know which way to march. Owing to the rout that had taken place all in front was now in confusion, and the noise made it difficult to distinguish anything. The victorious Syracusans and allies were cheering each other on with loud cries, by night the only possible means of communication, and meanwhile receiving all who came against them; while the Athenians were seeking for one another, taking all in front of them for enemies, even although they might be some of their now flying friends; and by constantly asking for the watchword, which was their only means of recognition, not only caused great confusion among themselves by asking all at once, but also made it known to the enemy, whose own they did not so readily discover, as the Syracusans were victorious and not scattered, and thus less easily mistaken. The result was that if the Athenians fell in with a party of the enemy that was weaker than they, it escaped them through knowing their watchword; while if they themselves failed to answer they were put to the sword. But what hurt them as much, or indeed more than anything else, was the singing of the paean, from the perplexity which it caused by being nearly the same on either side; the Argives and Corcyraeans and any other Dorian peoples in the army, struck terror into the Athenians whenever they raised their paean, no less than did the enemy.”

In Sicily, the simple task of a man not stabbing his own ally in the face with a sword was hard enough with only primordial Identification Friend or Foe (IFF) and comms. In today’s high-speed remote-control warfare and vulnerable high-tech comms, in which seconds can mean life-or-death, the potential to accidentally destroy a friend, miss an enemy, or become isolated is even greater. When the enemy knows the “watch-words,” this potential becomes a certainty as paranoia and confusion set in.
 
The Offense Challenge

 

The defender often has the simpler fight. As illustrated in the excerpt and so aptly explained by the indomitable Chesty Puller, “So they’ve got us surrounded, good! Now we can fire in any direction, those bastards won’t get away this time!” The U.S. Navy, in its typical role as the expeditionary power, will almost always have that offense-disadvantage. It has yet to fight an enemy that can attack the precious network of communications that creates such an unspeakable force multiplier in the field. When the network is attacked, the swarm of American ships, missiles, and aircraft itself becomes a liability, as were the Athenians who cut apart their own brothers ahead of them.
 
Protecting Less with More
 
The solution to the communication weakness is to stay ahead of the offense-defense struggle through aggressive capital investment and streamlined lines of communication. As with the use of setting AEGIS doctrine to auto-respond to anti-ship missile (ASM) threats, cyber-warfare is far too fast for human operators. Our virtual-defense infrastructure may be significant, but it is slow, human, and defending far too many unnecessary and redundant communications. A response is a smarter investment in cyber-defense capital and a more disciplined use of our vital communications networks.

"We got the info via e-mail? Good! Bill, request a message. Susanne, request it be added to three status and SITREP messages. I'll request voice reports on two different circuits. I'll also need 6 of you to chat them every 3 minutes from your individual accounts. After that, we'll send a powerpoint for them to update. Also, one of you be sure to forget this is high-side information and constantly ping them until they cave and email it from Gmail. Get to it, people!"
“We got the info via e-mail? Good! Bill, request a message. Susanne, request it be added to three status and SITREP messages. I’ll request voice reports on two different circuits. I’ll also need 6 of you to chat them every 3 minutes from your individual accounts. After that, we’ll send a powerpoint for them to update. Also, one of you be sure to forget this is high-side information and constantly ping them until they cave and email it from Gmail. Get to it, people!”

Streamlining comes from bringing all communications under control, or more accurately bringing under control those using them. We are the Athenians screaming our watch-word at one another because no one bothered to re-organize before charging in. It boils down to paying attention and staying calm; what we have is seventeen sources pinging a ship for the same information that is held in 8 PowerPoint trackers, 2 messages, at least one call over the voice circuits, and 30 emails with at least half the lazy people asking for the information in the CC line. The sheer bandwidth of material that needs protection and monitoring could be decreased with a “ctrl-f” search of email and message traffic. It also leaves a veritable treasure-trove of information lying around in hundreds of different locations, making it easier to steal or detect. Better training – not only in proper communications procedures/methods, but basic computer literacy, – could solve this problem.

Unfortunately, people are not as good at defending us from cyber attack as John McClane might have you think.
Unfortunately, no matter what Hollywood would have you believe, most cyber attacks can’t be defeated by John McClane.

The speed of cyber-attacks only allows the “labor” side of the equation to be reactive; capital investment would concentrate more money in autonomous and innovative defensive programs: 10th Fleet’s AEGIS. Proactive patrol and detection can be done with greater advances in adaptive self-modifying programs and programs that can learn or understand context.  Recent developments in computing systems point to more organic systems that can”live” in the systems they defend. Biological processors and organic computing allow for hardware that thinks and learns independently, potentially giving defensive networks the added advantage of an instinct and suspicion. The development of mutable indium antimonide magnetic processors mean that the circuit hardware of a device may now be as mutable as the software running it. Imagine the vast new horizons in the OODA loop of defensive cyber systems  with hubs sporting the defensive animal instinct and the ability to re-wire their own hardware. The image painted is dramatic and far-off, but modest investment and staged introduction would serve as a better model than the dangerous possibility of a “human wave” mode of thinking. With better fluid cyber-defense systems guarding more disciplined communicators, the U.S. Navy can guard its forces against Epipolaes.

Matt Hipple is a surface warfare officer in the U.S. Navy. The opinions and views expressed in this post are his alone and are presented in his personal capacity. They do not necessarily represent the views of U.S. Department of Defense or the U.S. Navy.