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What does the US military think of the Chinese army?

This post originally appeared on Quora as an an answer to the question, “What do members of the United States military think of the Chinese army?

I am not a member of the American armed forces, but I read Defense publications every day for my job. For my corporate blog, I rely on many of the same sources that the American military relies on for their information. My impression, as an outsider, is that the American military simultaneously regards the Chinese with two opposing attitudes, i.e. respect and contempt.

Why respect?

  1. The Chinese have a reputation for being clever, resourceful, and practical. Only a fool would underestimate them.
  2. As noted in other answers, not only is the Chinese military big (really big!), but so is their economy, which means, in theory, they can adequately support their armed forces.
  3. The DF-21D anti-ship ballistic missile (ASBM) could play a significant role in countering US Naval capabilities in the most likely theater of conflict, the South China Sea. The US Navy is adjusting its plans for technological development and acquisition to specifically deal with this threat.
  4. Chinese anti-satellite and cyber capabilities are genuine concerns.

Why contempt? This is a little trickier to answer, since the American Defense establishment is highly motivated to praise Chinese capabilities, i.e. nobody ever got more money from Congress by telling them the enemy’s military stinks. However, the contempt is real, at least for some members of the American military.

Here are my best guesses why there is contempt:

  1. There are reasons why the Chinese have an army of cyber thieves trying to steal from us, and we are not trying to steal from them. As good as Chinese technology is, it’s just not where it should be for a first-class power. Their technological base lacks the quality and depth that is needed. Whenever I read a Western Defense publication reporting on a Chinese announcement of their latest and greatest super weapon (usually a bad copy of outdated Soviet technology), one can practically see the snark dripping off the webpage. For example, Chinese lack the capability of making an engine suitable for a fifth-generation combat jet (my info may be out of date on this). This negative assessment of their technological capabilities may be incorrect, but at least some analysts hold it.
  2. The American military is a highly-trained professional force that can project power anywhere in the world. The Chinese military is a mostly uneducated and conscripted force designed primarily for domestic control. Basically, some Americans look at the Chinese the same way that the British regulars looked at the American colonial militias. Yeah, they’re good on their home turf, but in a proper fight on foreign soil? Forget about it.
  3. The Americans fight wars all the time. The Chinese do not. We know which of our stuff works and our officers are experienced in combat. The Chinese military has demonstrated great capabilities in scaring Filipino fishermen, but how would they perform in actual fight with a significant foe? No one really knows.

I want to make it clear that the above opinions do not necessarily reflect my own. I am merely reporting on what I have heard and read. For what it’s worth, I think the real wild card is the surreal level of Chinese corruption. Has it affected the ability of the Chinese military to project force? Again, no one really knows. Hopefully, we will never find out.

 

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Nine things you need to know about the Defense budget

Once again we stare into the opaque crystal ball that is Washington and try to divine the fate of this year’s Defense appropriation bill.

The good news, sort of Out of the 12 appropriation bills facing Congress, Defense is the one that will most likely pass in time for due date. That is the view of Saxby Chambliss, a Southern senator who sounds and looks just like an actor playing a Southern senator from a 1930’s movie. Speaking at a recent Bloomberg web conference, he sounded cautiously optimistic, noting that the Senate and House have already passed versions of Defense bill, ahead of where we were at last year.

On the other hand… The House and Senate bills are different. The House authorized $583 billion, while the Senate funded $602 billion (these amounts vary in news reports, and to a certain extent are subject to interpretation; the Defense budget in a tricky multi-factorial affair).

Significantly, the House wants to diminish the Overseas Contingency Operation (OCO) fund, which is a gimmick designed to circumvent sequestration. In fact they shifted funds over to the base budget in order to mitigate the Army and Marine’s planned drawdown (and increase military pay by 2.1%, not the proposed 1.8%). The President is not amused and has threatened a veto over this and other issues.

The other issues The Senate, led by Senate Armed Services Chairman John McCain, has proposed that the position of Undersecretary of Defense for Acquisition, Technology, and Logistics (ALT) be eliminated. Responsibilities are to be divided between new Undersecretary of Defense for Research and Engineering, or USD(R&E), and the renamed Undersecretary of Management and Support, or USD(M&S).  Somehow, this bureaucratic reshuffle is supposed to make it easier for the military to adopt new technology.

Dear reader, does this make sense to you? I have been writing and reading about the acquisition for novel technology by the Department of Defense for several years now, and I can’t understand how this will help at all. If you have any ideas about this particular change, pro or con, please email me at editor@amrel.com. I need someone to explain this to me.

The administration doesn’t like these proposed changes, accuses Congress of “micromanaging,” and promises to veto these budgets. Other issues that the administration has with Congress’s Defense appropriation concern the proposed closing of Guantanamo, drafting of women, the role of readiness, and miscellaneous non-defense issues.

Don’t fear the veto The threat of the veto and the fight between the executive and legislative branches don’t overly concern Saxby Chambliss. This is par for the course, and even with a veto, there is more than enough time to pass the Defense bill.

Why are non-Defense issues significant in the Defense budget? One of the most interesting parts of the Bloomberg webinar was Saxby Chambliss’ description of the Congressional dynamics behind the Defense budget.

Congress has a lot of relatively new representatives who have no experience of the old days, when ideological and partisan opponents routinely worked together in a relatively non-contentious manner to pass bills. Besides Intelligence (which has its own problems), Defense is the only appropriation that is funded yearly as opposed to multi-yearly. It is one of the few times that congressmen from opposite sides of the aisle actually talk and work with each other. This is the new “normal.” As a result, a lot of non-Defense items (which get blocked in the polarized deadlocked Congress) get linked to the Defense budget.

I know what you did last session Another factor in the yearly Defense drama is the elimination of earmarks, and the severe limiting of riders. In the past, these “greased” the gears of the appropriation process. Now everything has to be fought out in the open, which is subjected to heightened scrutiny of the internet. It is common that when a proposal is first made by a representative in Congress, an immediate hostile reaction in social media follows in real time.

If you think things are bad now ….  An observation made at the Bloomberg webinar was that the current administration is avoiding critical decisions in Iraq and Afghanistan and is letting the clock run out. The next president will have some hard choices to face.

No Defense bill until November In spite of the Saxby Chambliss’ guarded optimism, the consensus of the Bloomberg webinar participants was that the Defense bill will probably not pass until the “lame duck” session after the election. Once the poll results are known for sure, the losing party will be more motivated to negotiate a compromise.

Watch for “continuing resolutions” One common “work around” when Congress gets paralyzed is the “continuing resolution.” This temporarily funds specific agencies and programs. If Congress goes this route, examine the length of the resolution carefully. It is a short or long term resolution? Will it kick the Defense budget mess over to the new Congress? Will it include the beleaguered OCO?

Of course, unexpected events, such as a new war, could significantly alter the dynamics of the appropriations process. Since AMREL supplies mission-critical rugged solutions to warfighters and other key defense personnel, we will keep a close eye on the fate of Defense funding. We will apprise you of future developments.

 

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Winners & Losers in the Defense Budget

A recent blog post described the phenomenon of the “Bow Wave” and its importance to Defense spending priorities. AMREL takes its responsibility of supplying mobile computing solutions to warfighters seriously, so we keep a close eye on how Defense allocates its resources.

Under the “Bow Wave’s” influence, who are the winners and losers? Take a look at what the well-respected experts at the Center for Strategic and International Studies (CSIS) are predicting to be the top acquisition programs.

Defense 2

Defense Modernization Plans through 2020

A cursory analysis reveals that the Air Force, specifically aircraft acquisition (even more specifically the F-35) is the big “Bow Wave” winner.

“The Air Force is the largest contributor to the overall modernization Bow Wave. … funding for Air Force major acquisition programs is projected to grow by 73 percent in real terms from FY 2015 to its projected peak in FY 2023. This growth is driven primarily by aircraft programs. The Air Force’s three largest programs in terms of funding are the F-35A Joint Strike Fighter, Long Range Strike-Bomber (LRS-B), and KC- 46A aerial refueling tanker.”

Defense Modernization Plans through 2020

In spite of the presence of some big-ticket seafaring items on the above chart, the CSIS claims that the Navy and Marines do not much to look forward to in their future, at least according to a strict “Bow Wave’ analysis. However, I have doubts this will prove to be true. For one thing, they have plans:

“The Navy has been able to modernize by incorporating economically efficient capabilities, but much remains to be done. The sea service is making significant investments in aviation, he (Adm. Mulloy) noted, but it needs the RAQ-25 unmanned aerial vehicle quickly. Other critical capabilities include the SM-6, the LRASM, the HVP and maritime TACTOM.”

Signal

If things heat up in the South China Sea, I suspect the Navy won’t have any problems getting funding.

The CSIS analysis says that the Army will be another big winner.

“The Army’s budget for major acquisition programs is projected to increase 28 percent in real terms from FY 2015 to the peak in FY 2022. The Army’s plans indicate a significant Bow Wave in funding for ground systems…

“… the Army plans to ramp up funding for five major vehicle programs over the next five years… The largest of these programs is the Joint Light Tactical Vehicle (JLTV), a replacement for the Humvee. The program plans to reach full rate production of 2,200 vehicles per year by FY 2040. The Army is also developing the Armored Multi- Purpose Vehicle (AMPV), with low rate production planned to begin in FY 2020 and a total planned procurement of 2,897 vehicles. Programs are also planned to replace the Paladin self-propelled Howitzer, to upgrade Abrams tanks, and to modernize the fleet of Bradley Infantry Fighting Vehicles. Together these programs will increase funding for the Army’s major ground systems nearly threefold between FY 2015 an FY 2021.

“The Army has several modernization programs for communications systems planned as well. The Warfighter Information Network-Tactical (WIN-T) plans to continue fielding Increment 2 capabilities… The Army also plans to ramp up production of two variants of the Joint Tactical Radio System (JTRS): the Handheld, Manpack, and Small Form Fit (HMS radio and the Airborne, Maritime, and Fixed (AMF) radio. Having already experienced cost overruns, schedule slips, and many program changes, these three major Army communications programs are poised to more than double in funding between FY 2015 and FY 2021.”

Defense Modernization Plans through 2020

Then there are the non-service specific programs that can be expected to be well-funded. For example, cyber security will be favored in the budget process.

“Cyber right now is the cat’s meow—a notion sure to keep funding flowing for technological solutions, at least in the near term, to counter the emerging threats, according to Col. Gary Salmans, USAF, senior materiel leader of the Cryptologic and Cyber Systems Division within the Air Force Materiel Command.”

Signal

“President Barack Obama championed cybersecurity efforts Tuesday in seeking $19 billion for the cause as part of his fiscal year 2017 budget proposal. …The budget proposal for FY17, which begins October 1, is a 35 percent increase over the current fiscal year.”

Signal

Everybody loves SOCOM, so expect them to be eating steak, not hamburger. Space is being heavily militarized, so that’s another market Defense vendors should consider.

“In its enduring space race to narrow the materializing gap between the United States and peer competitors, the Air Force’s fiscal year 2017 budget emphasizes sustaining mission capabilities and improving space resilience by investing in command and control programs, situational awareness technologies, expendable launch systems and satellite communications.”

Signal

“U.S. officials to make recent bold leaps in their approaches, including establishing the Joint Interagency Combined Space Operations Center and making the Air Force secretary the principal DoD space adviser. With a goal to shift the Air Force’s space culture to one of warfighting, the center and the service secretary’s office will oversee a five-year, $5 billion budget increase for industry and allies to test new capabilities.”

Signal

 If I wanted to pick the fattest single Defense target, I would say it was retrofitting.

“Upgrades and retrofits of existing programs appear to give the greatest number of opportunities for COTS systems. These are often replacing proprietary systems for more open standards that are ultimately easier and cheaper to maintain going forward.”

Robert Day, Vice President, Sales & Marketing, Lynx Software Technologies,  Military Embedded Systems

The military can’t afford new stuff, so they want to make the old stuff last longer. At AMREL, we are very excited about this opportunity.  Our platform flexibility, extensive technical support, and customization capabilities make us a very good fit for this. In fact, many of the programs favored by the “Bow Wave” (communication, vehicles, SOCOM, etc.) present excellent opportunities for us and our partners.

For over 30 years, AMREL has been proud to provide mobile computer solutions for American Defense needs. Whatever requirements arise, you can be sure that we will be there to meet them.

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“Bow Wave” is Critical to Defense Budgets

At AMREL we play close attention to pressures placed on the Department of Defense (DoD) budgets. We strive to respond to ever changing needs of our clients and market forces.

How are things going for the DoD? If you listen to the leadership, not so good.

“Every single time I stand on stage, I tell people the budget is getting worse and worse, and I’ve always proven to be correct,” said Tony Montemarano, executive deputy director (Defnse Information Systems Agency) … “there are a lot of legacy programs … that now will lose funding.” Signal

“Adm. Mulloy cited an old saying about Navy chiefs squeezing nickels ‘until the buffalo squeaks,’ advising chiefs today to watch their spares closely…” Signal

“The Navy continues to postpone much needed repairs and upgrades for the majority of our infrastructure,” said Admiral Michelle Howard, vice chief of naval operations. “We are still paying down the readiness debt we accrued over the last decade, but more slowly than we would prefer and at continued risk to our shore infrastructure.” VOA

The above represents just a small sample of the grumblings emanating from our military leadership. Complaints about budgetary limitations are ringing across the land. A half-trillion dollar Defense budget is just not enough.

 

Defense budget

What’s going on here? Is this just business as usual? After all, no officer ever advanced his career by loudly proclaiming his command had too much money. Let’s look at the Defense budget:

Defense 1

DoD Budget Request 2017

The budget for 2017 is $521.7 billion, which is down from previous requests (2013 was $525. 4 billion). As can be seen from the above chart, procurement funding has decreased, while funding for research has increased. Of course, this doesn’t include the Overseas Contingency Operations (OCO) budget, which has been slashed. Supposedly OCO doesn’t affect base expenses and is used only for actual war operations.

Could these relatively modest decreases be responsible for the economic squeeze that Defense is so vigilantly complaining about?

 

War is bad for living things and new acquisitions

During the Iraqi and Afghanistan campaigns, the DoD had to divert funding from upgrades, maintenance, readiness, and acquisitions to pay for the land wars. Furthermore, the money spent the land wars did not contribute to DoD’s assets or goals. Equipment was scraped, abandoned, or given away.

“For the most part, war-related acquisition funding was not used to modernize and recapitalize the inventory of equipment.”

Defense Modernization Plans through 2020

Bow Wave

As a result of this diversion, the programs for new acquisitions were stalled and goals became delayed to an unknown time. This created the phenomenon known as “Bow Wave.”  Think of the bow of a ship pushing into the ocean. The wave it creates is constantly moving forward. The defense community uses this as a metaphor for the current state of funding. A “Bow Wave” in defense parlance, is the delay into the indefinite future of major expenses. It’s sort of like a balloon payment at the end of a mortgage.

The “Bow Wave” is expected to suck all available funding, causing non-prioritized projects to suffer. As a result, the brass is scrambling to declare that their individual programs are overwhelmingly important, while the other guys’ pet projects are just waste.

In the big fight about defining what is and what is not waste, we could simply build the kind of military we need and get rid of everything else. One small problem with that way of thinking; take a look at DoD’s goals as outlined in the DoD Budget Request 2017.

“Funds a joint force with the capacity and capability to:

– Defend the homeland

– Respond to five challenges

o Russia

o China

o North Korea

o Iran

o Global counter-terrorism”

As you might expect, the forces required to deter Russia are quite a bit different from those that would engage China and so on. No one really knows what war we are going to fight next.

How is the “Bow Wave” going to affect defense-spending priorities?  A future blog post will discuss winners and losers in upcoming Defense budgets.

 

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Counter-Terrorism Lessons from Israel

As images of bloody bodies flow in from Brussels and Pakistan, we once again search for an appropriate response to the horror of a successful terrorist attack. Some people call for revenge. Others declare liberties are a luxury that we can no longer afford. Many seem stunned into inaction. What are we to do?

At AMREL, we watch these events with keen interest. Of course, like all citizens, we are concerned about terrorism, but we also wonder what our role will be in future counter-terrorism efforts. We have been supplying warfighters and security personnel with rugged mobile computing solutions for over 30 years. What will we be called on to supply next?  Will we be asked for our mobile biometric devices? Our Defense solutions?  Our Public Safety equipment? Something completely new?

I watch these events with a sickening sense of familiarity. I lived in Israel at a time of intense terrorist activity.  No country in world has been more subjected to terrorism than Israel. None take their security more seriously than Israel does.

While living there, I had an opportunity to see firsthand a country fighting terror every day. I also had numerous conversations about terrorism with Israeli intelligence, government, and military professionals (this isn’t unusual; Israel is a small country where everyone knows everyone else).

The following represents some of the lessons that I learned about terrorism while living in Israel.

Even under continuous terrorist threat, it is possible to have a free society. Of everything I experienced in Israel, this was the thing that impressed me the most. Despite a wide range of security measures, and a state of constant hyper-vigilance, Israel enjoys a robust, free-wheeling democracy. Israel may have an impressive multi-layered security regime, but Israelis did not seem intimidated by it in the slightest. Certainly, it did not restrain them from loudly expressing their opinions about the government in general and politicians in particular.

Of course, I write this as someone who is not an Arab. Arab citizens bitterly complain of discrimination. Jews counterclaim that Arabs living in Israel are freer there than they are in any other country in the Middle East.

I am not qualified to discuss the experiences of Israeli Arabs. If you wish to learn about their life in Israel, I strongly recommend the outrageously funny television show, Arab Labor. Written by an Israeli Arab, it humorously explores the bizarre experiences of living as suspected minority in a society dominated by terrorist fear. You can watch it online in a number of places, including here.

Most of impositions to liberty seem relatively trivial. In Israel, I had to carry an internal passport at all times. Can you imagine the howls from both the Left and the Right if the federal government tried to impose a system of national identification here? It’s not that Israelis are less jealous of their liberties than Americans (if anything, they distrust their government more), it’s just that they’re more accepting of the necessity of security measures. Carrying an internal passport all the time is really no different than how I teat my drivers license in the US.

Profiling works, just not in the way that you think it does. I have heard self-appointed “security experts” envy the Israeli freedom in profiling Arab minorities.

Of course, Israeli officials target Arabs for extra security measures. And young European women as well. Several years ago there was a highly publicized incident in which a terrorist tricked a young Irish woman into carrying a bomb aboard an airplane. Ever since then, Israeli security at airports carefully screens single young women. I knew one foreign visitor who had an Israeli acquaintance accompany her to airports and pretend to be her boyfriend, specifically so she could avoid the extra level of scrutiny.

Do not assume profiling will not apply to you, because…

Everybody is profiled. It’s very simple. If security only subjected Arabs to extra inspections, then terrorists would use people who didn’t look like Arabs. If security places restrictions on young men, then terrorists use women. If both young men and women are subjected to extra scrutiny, then terrorists would use old folks.

Several times a year, a high level representative of a church or government complains to a local Israeli newspaper about the “outrageous” security measures he endured at an Israeli airport. I always laugh at these tirades, because the measures he describes are the exact same ones that I and everyone else must undergo.

The next time you see a grandmother in a wheelchair being searched at an airport, don’t bemoan it as political correctness gone amuck. It’s simple common sense. Security personnel have learned what the classic cartoon Pogo once so wisely observed, “We have met the enemy, and he is us.”

Bigotry is a poor counter-terrorist strategy. Very few genuine counter-terrorists experts in the United States embrace the view that all Arabs or all Moslems are our enemy. They are fully aware that Arabs and Moslems are the primary victims of radicalized Islamic terror, and serve as our allies (if uneasy ones) in the war against terror.

In Israel, “They all want to kill us” is an extremely popular view. However, this hasn’t stopped Israeli military and intelligence from cooperating with Palestinian authorities on counter-terrorists actions. It’s not unusual to read a complaint from the Israeli Prime Minister’s office about the Palestinian leadership inciting violence, while in the same newspaper the head of an Army unit is quoted as praising his Palestinian counterpart for a successfully destroying a terrorist cell.

Painting all Moslems or Arabs with the same terrorist brush turns assets into liabilities and converts allies into enemies. We have to be smarter than that.

Kabuki theater works. Waiting in line to enter a mall while some under-paid guard searches backpacks and women’s purses, someone will inevitably comment that these inconvenient security measures are stupid and pointless. No determined terrorist would be deterred by these farcically ineffective procedures.

Except that they are. I’ve read interviews with would-be suicide bombers and other terrorists about their thought processes as they prepare to attack. A major factor in their consideration is the same silly security measures that are widely mocked. What seems stupid to us, is intimidating to a terrorist.

Terrorism is the new normal. While writing this article, I talked to a people who had traveled through the Philippines, Singapore, Indonesia, and South Korea. Each of these countries has experienced problems with terrorism and has instituted counter-measures.

Along with cell phones, television, and the internet, magnetic wands and metal detectors are the technologies that will define our time.

Terrorists adapt. Every few years Israel experiences waves of terror. A while back, suicide bombers were a problem. At the time, the problem seemed insurmountable. None of Israel’s traditional security methods seemed effective.

So, Israel developed new security methods. Among other things, they built a highly controversial security wall to keep out terrorists. Israelis increased surveillance on possible terrorists and with more help from the Palestinian security services than they like to admit, this particular wave of attacks has been thwarted. Deaths and incidents died down.

And then they started again. It hasn’t gotten much publicity in this country, but Israel is undergoing what is sometimes referred to as the “Lone Wolf” Intifada. Individuals, seemingly unconnected to any organization, are randomly stabbing people. In the last 6 months, 34 Israelis have been killed and 404 have been wounded.

Just like with earlier wave of terrorism, no one seems to know what to do. No one is sure what will be effective countermeasures. Despite the anxieties being expressed now in the Israeli media, I have no doubt that Israel’s highly motivated security establishment will eventually devise effective defense actions.

Unfortunately, their enemies will then figure out a new way of attacking them. In a war of terror, the side that is the most innovative and flexible will always have the advantage.

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Nine Defense Questions for the Next President

If you were to hire a CEO for a company with a budget of $600+ billion, wouldn’t you ask them some questions about it?  Wouldn’t you want to know if they were familiar with company’s programs, and how they intend to manage them?

Evidently, the media and politicians don’t think so.  Sure, Senator Sanders has bragged about his bill to help veterans, and many politicians have vowed to strengthen the military. However, no one is asking the candidates the most basic questions about how they intend to oversee Defense spending, which is approximately half the Federal budget.

Here is a list of questions that I think every candidate should be asked.  None of them concern trivial matters and all reflect actual decisions the next president will have to make. A presidential answer to any of these questions would profoundly affect strategic thinking in capitals all around the world and cause billions of dollars (if not more) to change hands.

  1. Drawdown With the wind down of our involvement in Asian land wars, the ARMY is experiencing a personnel drawdown. As president would you continue this drawdown? If not, then how do you justify maintaining the ARMY’s larger size in the current world situation? If you would continue the drawdown, how would you do it?  Would you do it the way that it was done in the 1990s with an early retirement program, or would you limit recruitment of new enlistees?
  2. Overseas Contingency Operations (OCO) Funding Our recent wars have been funded through the OCO.  Would you continue doing this, or would you fund future military operations through the main Defense budget? How would your decision affect sequestration?
  3. F-35 The F-35 program has been heavily criticized and there have even been calls for its cancellation. Do you intend to keep the F-35 program or cancel it?  If you intend to maintain it, how would you improve it? If you intend to cancel it, what would you replace it with?
  4. Procurement reform  While the people who work in acquisition may be professional and honest, the Defense procurement process itself has a terrible reputation. How do you plan to reform defense acquisition?
  5. Redundancy Do you think that redundancy is a problem in the Pentagon? If you do not think it is, then you’re an idiot and no further questions are necessary. If you do think it is a problem, how do you do plan to deal with it?
  6. “Pacific Tilt” Do you plan to implement the current administration’s “Pacific Tilt?” How will your decision affect Defense spending priorities?
  7. Pentagon audit Contrary to federal law, the Department of Defense has never passed an audit. They do not even have relational database for their inventory.  As president, how do plan to deal with this problem?  Do you support the Audit the Pentagon Act of 2015, which was co-sponsored by Senators Sanders and Cruz?
  8. War on terror How do perceive the military’s role in the War on Terror? How would this affect spending priorities?
  9. Budget Do you plan to increase or decrease Defense spending? What funding do you plan to cut?  Where do you plan to increase spending?

By the way, I think a perfectly fine answer to some of these questions is “I do not know.” The President is Commander-in-Chief, not a miracle worker.  But we should expect him to have at least a cursory familiarity with these challenges, and he should give us an idea of he would manage them.  AMREL has an interest in Defense management, since we have been supplying warfighters with customized mobile rugged computer solutions for over 30 years. Along with you, we will be very closely watching this election and our new president.

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What to look for in 2016

Recently, I read several articles that listed predictions, e.g. “Top Ten security Risks in 2016.”  Like everyone else who services Defense and Security industries, AMREL is always looking ahead to see what products and services will be in demand.

What I noticed is that none of the articles predicted the big stories of 2016 that have already happen, i.e. the crumbling stock market and collapsing oil prices.  Rather than make predictions, I decided to analyze these events and their implications for the year ahead.

 

Oil

As has been widely reported, oil prices have slumped because of Saudi Arabia’s aggressive campaign to wipe out fracking. Fracking and other non-traditional methods of oil extraction have resulted in unprecedented levels of North American oil production.  Fracking is expensive; oil needs to be around $60 or $70 a barrel for it to be economical. Saudi’s aggressive pumping of cheap oil has pushed it down the price of a barrel to around $30. This has caused a massive reduction of capital investments and extensive layoffs in the fracking industry, which is what Saudi Arabia wants.

 

Stock market

Why has cheap oil caused the stock market to decline? Obviously, oil companies are suffering from the Saudi campaign, and this is a drag on the whole market. Some argue that eventually the economic benefits of cheaper oil will become so evident than even the famously manic-depressive stock market will have to notice them.

However, the other possible cause of oil’s price decline is what is really spooking the financial markets. China drives the world’s economy, especially with its voracious appetites for raw materials. Nobody believes the Chinese government’s official statistics, so businessmen are always looking for indications of the true state of its economy. If oil prices are low, that means their economy is not demanding as much, which means that it is slowing down. That means a lesser demand for raw materials, and that means bad times for all.  Add to this that Brazil, a major supplier of raw goods to China, is having serious problems, and you got yourself a worldwide economic freak out.

 

What does this mean for Defense industries?

How will the Chinese government react to its economic slowdown? After all, the Communist Party has held onto power partly through China’s unparalleled economic growth rates. How will they placate their citizens who expect and demand upward mobility? The Party could enact political and economic reforms that will enable true transparency, genuine economic freedom, and an elimination of the near-surrealistic levels of smothering corruption.

Sorry about that last sentence. I needed a good laugh. What the Chinese leadership has done in recent years and will probably do in the future when faced with a discontented public is foment nationalism and beat the drums of war.

Educated Chinese still talk about the “century of humiliation” when Japan and Western powers carved up China like a roast turkey. Nationalistic pride is a raw nerve easily aggravated, especially when it comes to matters of territorial claims.

Consider:

  • China is heavily dependent on trade.
  • United States Navy is capable of enforcing choke points of China’s major trade routes in the South China Sea.
  • China has border disputes with virtually every one of its neighbors (not an exaggeration).
  • China is aggressively ramping up its naval capabilities.

The United States us fully aware of this situation and has tried to shift its military resources in the so-called “Pacific Tilt.”  Good news for Defense firms that supply Naval needs. No so good for those that supply land-based military needs.

I am not suggesting that there will be a war between a China and the US. Nobody wants that (it should be pointed out, however, that historically “what everybody wants” has very little to do with whether or not a war starts). But what it does mean is a build-up of military assets and equipment.

I am also assuming that the United Sates will be able to avoid further major land-based operations in the Middle East.  After the expensive, inconclusive wars in Iraq and Afghanistan, the American public simply has no appetite for another lengthy ground battle.

 

Three things to look for in 2016

  • California real estate prices. The phenomenon of cash-rich overseas Chinese investors buying up California real estate is so well known that it is practically a cliché. If the Chinese economy is really in trouble, and the threat of war looms large, expect the already insanely expensive housing market in the Golden State to heat up further as wealthy Chinese seek safe harbor for their assets.
  • Marines get busy. Satirist Tom Lehr says it best:

When someone makes a move
Of which we don’t approve,
Who is it that always intervenes?
UN and OAS,
They have their place, I guess,
But first send the Marines!

If America is serious about a show of force in the South Chinese Sea, expect to see Uncle Sam’s Misguided Children (USMC) conducting training missions on remote rocky atolls. Also, keep track of aircraft carriers, Unmanned Combat Air Vehicles, the DF-5 (Chinese ICBM) and other technologies that may be used in coming Pacific face-off.

  • Syrian peace talks. Just because we don’t want to fight a major land war in the Middle East, doesn’t mean that we won’t. Right now, the region resembles a live action version of the board game Risk. No sensible, rational person would want to get mixed up in this unholy mess. So, we can’t rule out US involvement.

The Russians are supporting the brutal Syrian dictator Assad. They are dragging their feet in the Syrian peace talks, trying to gain military advantage before any final settlement. However, the Russians have their own troubles. European sanctions against them for their Ukrainian intervention, low prices on their only economic asset (oil) and the fact that achieving a meaningful military intervention in the Middle East is like trying to sweep back the ocean with a broom are just few problems that might force them to negotiate peace in earnest. Keep in mind that the Russian government is unprincipled, sociopathic and thuggish.  This means they will be easier to deal with than the other players in the Middle East.

Speaking of unprincipled, thuggish, sociopaths, it looks like Iran has decided to play nice. The kerfuffle with the captured American sailors could have been a lot worse. Yes, Iran violated international law with the humiliating videotape of the sailors’ capture and forced apology. But this is nothing compared to the grand drawn-out comic farce it could have been.  Within days the sailors were released and all naval equipment was returned.

Please note the economic benefits of the nuclear deal will be slow in coming. The deal only removes some of the sanctions against Iran. Oil is at an all-time low. Iranian pumping infrastructure is old and rusty. The $100 billion dollars unfrozen assts that you may have heard about is an exaggeration; Iran owes a lot of that money to other countries. Money is a powerful motive to get along with your neighbors and curtail military actions.

Furthermore, the US is circulating rumors that Iran has withdrawn most of its forces from Syria. Other rumors indicate that Iranian involvement with Syria is deeply unpopular with the Iranian public.

The Syrian war is by far the most dangerous conflict in that part of the world (even more so than the Israeli-Palestinian one). A peace agreement, even a flawed one, would be an enormously stabilizing event. While it may be farfetched, it is not a possibility that can be dismissed out of hand.

 

AMREL’S role

We haven’t noticed any dramatic change in the nature of our purchasing orders. Whatever the Defense needs will be this year, we will meet them. For over 30 years AMREL has supplied customized rugged solutions to the Defense market.

While we are best known for supplying land forces, we also have provided equipment to the Navy, Coast Guard, and Marines.  They appreciate the durability of computer platforms in surviving humidity, salt fog, and other challenges of a marine environment. In fact, January’s Customization of the Month features a push-to-talk handheld that we did for the futuristic DDG. Read about it here. We don’t just sell rugged computers. We sell rugged customized solutions.

What do you think? Got any predictions you want?  Write editor@amrel.com.

 

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Russia’s Armed Unmanned Vehicle [VIDEO]

Check out the video below of Uran-9, the new Russian unmanned armored vehicle.

Pretty impressive, isn’t it? This thing packs:

  • 30mm 2A72 automatic cannon
  • Coaxial 7.62mm machine gun
  • Ataka Anti-Tank Guided Missiles

According to Defense Talk, it has “a laser warning system and target detection, identification and tracking equipment.”

Russia has big plans to promote Uran-9 in the international market where it “…will be particularly useful during local military and counter-terror operations, including those in cities.”

Not to be too much of a wet blanket, but why would anyone buy this?  Russia says that it will reduce personnel casualties, one of the prime benefits of unmanned systems.  I wonder if this is true.  For one thing, the remote operators are located in a mobile command unit. Is that safer than an armored vehicle? Is the operating range so great that the remote operators are significantly out of harm’s way?

For Russia’s target market, how significant are personnel casualties? The US is obviously not going to buy it (for one thing the American version would be called UranUS and yes, I wrote this whole article so I could use this joke). America pours a lot of money into its soldiers, so that they are the most expensive piece of equipment on any given battlefield. Other countries also invest a lot in their soldiers, but none do as much as the US. I bet for many countries, the loss of an armored vehicle is more expensive than the personnel casualties.  I realize that this sounds cold blooded, but as commanders decide where to commit their limited resources, they will do these calculations. Will they want to pay more for a system that has a greater number of points of failure?

Furthermore, there is a good chance that there will be no cost savings for personnel, even if an operator could drive multiple vehicles. The installation and maintenance of the mobile command center as well as the remote control systems themselves will require highly trained personnel.

Also, what will be the situational awareness of the remote operator as compared to one actually inside the vehicle? As a rule, remote operators have less. Will that leave the vehicle more vulnerable?

Of course, my doubts may be completely unfounded, and this thing may sell better than iPhones. But I can’t help feeling that this vehicle was designed not for practical reasons, but because somebody somewhere thought unmanned systems were cool.

I asked Richard Barrios, ex-Marine Ammo tech and aficionado of all things that go BOOM, to take a look at the video.  He agreed that the ordinance was impressive, but pointed out that the Geneva Convention prohibited these particular weapons from being used on personnel (as opposed to tanks and similar platforms).  This puts a crimp in Russia’s assertion that this is a counter-terrorist weapon. Richard and I agreed that Russia and its clients probably will not care about this particular problem.

Richard suggested that this might be a good defense vehicle for a base. I countered that there were cheaper and more practical alternatives. Richard agreed and said that he preferred Precision Remote’s .50 caliber M2 remote-controlled solution (see video here). BTW,  in the video you can see the ROCKY DK Rugged Tablet being used as a control unit for this .50 caliber solution.

Richard likes the Russian armored UGV, but like me, he harbors doubts about the usefulness of this platform as compared to a manned one. “I wouldn’t want to take it to war,” he said. “But I would want it as a toy.”

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Latin America Defense Market: Hot or Not?

Americas Society/ Council of the Americas has an interesting infographic on Defense spending by Latin American countries in 2013 (see below). While worldwide Defense spending fell 1.9% in 2013, it actually increased in Latin America by 2.2%. Gangs, drugs, and other transnational criminal activities are driving military expenditures.

A couple of things to keep in mind:

  • Increases vary significantly by country. Honduras, Nicaragua, and Paraguay had the greatest increases, while Brazil (the region’s biggest spender by a very wide margin) had a decrease of 3.9%.
  • Defense spending has dramatically increased everywhere since 2005. So even though Brazil actually cut its 2013 budget, it still much larger than it was just a few years earlier.
  • Everybody wants to sell to Latin America. Chinese and Russian presidents conducted high profile tours of Latin America, specifically to strengthen Defense and security ties. Brazil is expected to accept delivery of Russian anti-aircraft missile systems in 2016.

What about 2014?

Do the 2013 trends illustrated by the infographic hold true today?  Americas Society/ Council of the Americas drew their facts and figures from research by the Stockholm International Peace Institute, so I visited their website to find more up-to-date information.

According to their Trends In World Military Expenditure, 2014 (2015 is not available yet) “….spending in Latin America was essentially unchanged” for 2014.

In fact, “Total military spending in South America was $67.3 billion, down 1.3 per cent in real terms since 2013…” For the second year in a row, Brazil again cut military spending marginally (1.7%). For more details on 2014, see the table below the infographic.

Even with these slight decreases, overall Latin American Defense spending was still higher than 2005 by a whopping 48%.

To make sense of this data, I contacted James Bell, AMREL’s Director of Sales for Latin America. He has many years of experience and is an expert on these markets.  His reply:

“Military spending in Latin America has slowed somewhat due to dramatic changes in the currency exchange rates during 2015 in favor of the US$ — making the purchase of imported products 20% – 30% more expensive.  This has the effect of governments cancelling more expensive military programs in favor of smaller, more highly focused solutions.”

In the case of Brazil, the Stockholm International Peace Institute also cited social protests and a stalled economy as reasons for the flat expenditures.

AMREL has not noticed any significant change in the level of acquisition of our products by Latin America. Interest continues to be shown in our DK tablets and our RK laptops.

If you have questions about this important market, please contact James Bell at jimb@amrel.com

latin america

Source: Americas Society/ Council of the Americas

white bit

latin america 2014

Source: Trends In World Military Expenditure, 2014

 

 

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Facts & Figures for Global Defense Spending [TABLE]

Strategy Page has a comprehensive article about global Defense spending, full of facts and figures. Whenever I deal with with a report with lots of numbers, I arrange the most salient figures in a table, so I can comprehend them more easily. Below is a table with data pulled from the Strategy Page.

Defense table

Some key take-aways include:

  1. America continues its dominance in the global arms market, despite impressive gains by Russia and China.
  2. Global defense spending as a whole is growing.
  3. If you are an American arms salesman, whose territory includes the Middle East, you are a happy person.
  4. There are people out there in the world who actually want F-35s, and are willing to pay for them.

AMREL makes rugged mobile computer solutions that have been used by warfighters for 30 years.  While we mostly service American Defense needs, we have noticed an increase in international interest for certain products, especially the Flexpedient® AT80 Rugged Tablet.

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