In this episode of our BryghtCast edition of the Managing Uncertainty Podcast, Bryghtpath Principal & CEO Bryan Strawser and Consultant Bray Wheeler take a look at three current risks and upcoming events:
Bryan Strawser: Hello, and welcome to the Managing Uncertainty Podcast. This is Brian Strawser, principal and CEO here at Bryghtpath.
Bray Wheeler: Hi, this is Bray Wheeler, Consultant at Bryghtpath.
Bryan Strawser: This is our BryghtCast edition of the Managing Uncertainty Podcast, where we break down two or three interesting developments around the world and talk about what that may or could mean for the private sector and other organizations. This week we’re going to start off by talking yet again about developments in the city of Hong Kong.
Bray Wheeler: Again.
Bryan Strawser: Hong Kong, the special administrative region of China, continues to have disruption. We’ve now evolved, today, we’re recording this podcast on Monday, August 5th, today there was a general strike in Hong Kong that paralyzed transportation networks during rush hour, forced the cancellation of hundreds of flights, and shut down scores of business and restaurants after another chaotic weekend of protest across several parts of the city.
Bryan Strawser: It’s interesting now that this is evolving from protest to a general strike, which I think portends a much more difficult path for the Hong Kong government, and the Chinese government for that matter, and the demonstrators are getting more savvy. They’re using tactics deliberately to outsmart the police. They’re using lasers and lights in order to disrupt facial recognition. That was one example.
Bray Wheeler: That was a big concern here kind of over the last week that they were afraid they weren’t going to be able to make much more progress in terms of the protest based on the fact that China was going to use this facial recognition to start rounding folks up.
Bryan Strawser: Identify people. Yeah. Yeah. It looks like tens of thousands of people participated in the protest including airline pilots, airline crews, baggage handlers, bus drivers, financial planners and others who declined to show up to work. In fact, transportation networks, the train system, primarily, train and bus system across Hong Kong, which is normally quite efficient in the financial hub, were suspended or delayed, including the airport express train that links downtown Hong Kong to the airport. More than 200 flights were delayed or canceled at Hong Kong’s International Airport.
Bryan Strawser: The protests have now been going on since June, and I think they’ve solidified now on kind of what their demands are. Of course, they’re demanding the complete withdrawal of the current suspended bill that started this, the bill that allowed extradition to mainland China for trial of individuals that were arrested in Hong Kong. They want the resignation of Hong Kong’s chief executive, they want an independent investigation of the police, and they want the protestors that have been arrested and charged with crimes, fake crimes, as they’re describing them, to be freed or the charges dropped, I think. I’m not sure they’re still in jail.
Bray Wheeler: Just a couple of demands.
Bryan Strawser: Just a few demands, which I think are probably going to get ignored by the mainland Chinese government. So, does our recommendation change? I mean, our recommendation has really been about monitoring what’s going on. What do you think companies should be looking at now, Bray?
Bray Wheeler: Well, I think right now we’re starting to see that these protesters are making a much more impactful impact on life in Hong Kong. Being able to shut down transportation, being able to shut down the markets within Hong Kong, are some pretty major steps in terms of disruption. The fact that they are escalating and not deescalating as many thought probably may happen over the last week or two, just from a sustainment standpoint, that’s not taking place. If anything, they’re escalating this pretty substantially in terms of disruptions to businesses.
Bray Wheeler: Again, not much is changing in terms of probably our recommendations for businesses, other than they continue to monitor. But I think if you haven’t had discussions around continuity planning, around [crosstalk 00:04:27]-
Bryan Strawser: Travel, safety-
Bray Wheeler: Safety-
Bryan Strawser: Travel safety.
Bray Wheeler: Travel safety.
Bryan Strawser: Yeah.
Bray Wheeler: Those conversations need to start taking place, probably sooner rather than later.
Bryan Strawser: I mean, there’s a potentially a very disruptive situation that could happen here, and you and I have experienced this in other countries where there has been political strife. We saw general strikes in parts of India. We saw significant strikes and protests of different type, both peaceful and violent, during the Arab Spring of 2011. I mean, we’ve seen this before, where, literally, the city or state can shut down. Given the number of financial institutions and businesses that use Hong Kong as their Asia headquarters, Asia base, in a lot of cases, this may change the calculus of what that’s going to look like in the future.
Bray Wheeler: Even as a transportation hub for the region and being able to get in and out of that airport, I mean, that’s going to have impacts, even if you don’t have business based directly in Hong Kong, you can’t really use that as a hub anymore.
Bryan Strawser: I know that the Chinese military commander for Hong Kong said that the … Where was his quote? The top military official, China’s top military official in Hong Kong, according to this Reuters report, called the protests “absolutely intolerable” and made that statement alongside releasing video of the Chinese army conducting anti-riot drills in downtown Hong Kong.
Bray Wheeler: Those protesters thought the police were a problem. The PLA is involved.
Bryan Strawser: The PLA is a significant problem.
Bray Wheeler: That’s correct.
Bryan Strawser: For those of you that haven’t been to Hong Kong, they literally are in a garrison, right downtown, on the water, in the financial district. It is impossible to miss, because there are gigantic Chinese flags. It’s the only place you really see that, and it’s right there. It’s been there since they took over from the British that the PLA was going to … I believe it was the old British garrison that they’re in.
Bray Wheeler: Yeah.
Bryan Strawser: British army garrison.
Bray Wheeler: What we need to expect here, more than likely, is that given the complications of all sorts of other things that are happening, and not trying to make kind of direct connections, but given the fact that Hong Kong is in an uprising over democracy, really, their position on it, the trade war with the U.S., those contentions, a lot of this kind of atmosphere and dynamic that’s going on right now compounds kind of China’s ability in some of their calculus in terms of what they’re going to do next. They’re probably not too worried about other countries getting involved, necessarily, if we’ve escalated this up with trade wars and other things. There’s a little bit of that dynamic at play, too, that just the environment of what’s happening here, it’s not, it’s less in control than it has been, even when these first started, that the calculus has changed a little bit. There’s a little bit more uncertainty out there.
Bryan Strawser: And I’m not sure what the answer is. I mean, where will this go in the long run? As we’ve talked previously, China’s history for dealing with internal disruption is not pretty.
Bray Wheeler: No.
Bryan Strawser: These protests are on the scale or bigger than what happened in Tiananmen Square. I think that was 1989, if I remember right. These are beyond that in terms of scale, and they’re happening in this city where press censorship is much more difficult than what they did in Beijing in ’89 when they decided to act on the student protests.
Bray Wheeler: Well, and even in some of their more remote regions that they’ve kind of asserted their control over different rebellions and uprisings that they’ve seen, Hong Kong, to your point, it’s a very different animal in terms of that freedom of press, that exposure to the international scene. People are seeing it. You can’t get away from it from a global standpoint, and so China, they have to assert themselves, probably, at some point, how they’re going to choose to do that given that exposure. I think to your point, we just don’t know yet.
Bryan Strawser: I mean, I’m not sure what the path is going to be. I think there might be a middle ground here if China picks a new chief executive, and the new chief executive comes in and just withdrawals the law, the previous law, and calls it a day, and does it end or does it continue? I can see that being a move that China makes, because they could brush it off as ineffective leadership by Carrie Lam, and so, “We’re going to dump her, and we’re going to pick a new chief executive.” And then make that play. That’s not … China’s done this before in the aftermath of Tiananmen, where they made major changes to the successors of the regime at the time, because they were opposed to that action, so they deposed them.
Bray Wheeler: Yep. The party will always survive.
Bryan Strawser: The party will survive.
Bray Wheeler: It’s just a matter of who’s going to take the blame for it. Yeah. I mean, that scenario is entirely possible given they’re kind of demonstrating some of their strong arm tactics and kind of their rhetoric, that to be able to back off and find a happy medium, in terms of making those leadership changes and kind of, hopefully, settling it out and then addressing their issues later on a few years from now, a year from now, something like that, through new legislation or new politics.
Bray Wheeler: The second item we have this week just kind of happened also today. On Monday, India revoked Kashmir’s special status. Why that’s important here … Kashmir is kind of a long-contested region between India and Pakistan, primarily. China also has a little bit of an involvement there, but it’s India’s only Muslim kind of majority state. And so there’s some difficulties from that standpoint, as well. But Kashmir, once India and Pakistan won kind of their independence from Britain in 1947, they ended up dividing Kashmir kind of as an independent area, kind of between the nations. India has since kind of asserted some more direct control through constitutional and different deals. But given that … And which kind of forms the basis for that special status. The fact that they’ve revoked that special status is a pretty big deal, and it’s a little bit unprecedented. They’ve kind of toyed with it in the past. They’ve suggested some different things in the past that were kind of around that, but never made this direct move.
Bray Wheeler: And why this is important is a couplefold. Probably from the international community, Kashmir doesn’t have a whole lot of kind of impact on global economics, excuse me. But from their relationship with Pakistan and probably a little bit with China, this is a big deal. Pakistan has already made indications that they’re pretty outraged about it. This is a pretty direct kind of move by India in that region. There’s often been skirmishes, there’s been battles, there’s been troop movements, things like that in Kashmir. It’s a very contested zone. But for India to take this kind of dramatic step and contest control of that area, directly, is probably not only incites kind of internal politics within India, but also kind of outrages Pakistan. The fact that they’re so close to each other, and just their given their history, we don’t know where this leads.
Bryan Strawser: For those who don’t know the history, of course, when India became independent, Pakistan also became independent. It was part of India for forever. But it really spun off because Pakistan was made up, for the most part, the Muslim majority provinces or states of India, with the exception of Kashmir. Kashmir is India’s only Muslim majority state, and its proximity to Pakistan has always been in dispute since their separation in 1947. The fight over Kashmir, which has always been more of a cold fight with a few hot spots, on a monthly basis thrown in there, as in they like to lob artillery at each other regularly.
Bray Wheeler: Suicide attacks.
Bryan Strawser: Suicide attacks-
Bray Wheeler: Troop movements-
Bryan Strawser: Some troop movement. Look, India has committed aggressive acts against Pakistan. Pakistan has committed aggressive acts against India. It all happens in and around Kashmir, for the most part. It’s nothing unusual. But yeah, I mean, it’s kind of like, all of a sudden, they just looked at this tinder box and said, “Well, let’s throw a match in it and see what happens.”
Bryan Strawser: I mean, this is really controversial. It’s controversial within India’s parliament, where the representatives from the two impacted states, in one case, they’re taking the state’s actual government away and making it an arm of the central government. Right? And the other one, they’re telling them that they’ve lost their autonomy, their special autonomy status that they had. It’s just, it’s an interesting one. And I don’t know, would this have happened under a different prime minister?
Bray Wheeler: Maybe, maybe not. I think probably what we’re seeing here is … This is, again, I think we’ve talked about this a few podcasts ago. India’s kind of assertion of their power in the region kind of leads here a little bit. This is kind of another move by India to kind of make some noise, make some hay, assert their kind of control and their power. They’re kind of flexing their muscles a little bit with this, because Pakistan can’t directly stop this decision.
Bryan Strawser: Right.
Bray Wheeler: The fact that Pakistan and the U.S. met within the last week or so, India’s kind of reasserting themselves. That, because Pakistan had asked the U.S. to kind of help mediate between the two countries regarding Kashmir, U.S. and China have, obviously, had some stuff over the last couple of weeks, India is now making a little bit of a kind of a power move to just get in the game and kind of assert themselves is really kind of my view on this move, is really to kind of take a step and say, “Yeah, we’re not forgotten here. We’re making a move.”
Bryan Strawser: How much of this … The reason I asked the question about would this have happened under the previous prime minister, this move kind of fits with Modi’s approach as a Hindu nationalist. He has been unafraid to making decisions based upon India’s Hindu majority population.
Bray Wheeler: Correct.
Bryan Strawser: This kind of fits in that mold from the standpoint that he’s stripping this autonomy from a region that is not a Hindu majority. In fact, it’s a Muslim majority population. A lot of the Hindus, because of ancient … I shouldn’t say “ancient”, because the history of India, the India-Pakistan independence movement, the two religions and its adherence don’t necessarily trust each other inside of India. The central government hasn’t always done a good job of respecting that difference of religious view, either.
Bray Wheeler: No, and that leads a little bit to the, some of what they’ve given as explanations for this move, in terms of terrorism and kind of Muslim attacks within Kashmir and kind of the contested area. I mean, that aligns with kind of Modi’s M.O. around that, and kind of taking some direct stances against that. That’s kind of one of the reasons they’ve given for this.
Bray Wheeler: But I mean, really, for companies right now, this is a thing to watch, especially if you have business within India, especially if you have business within some of those areas along the coast in between Pakistan and India. We’ve seen terrorism attacks in the past within India. It’s not out of the question for groups within Pakistan, not necessarily affiliated directly with Pakistan. Some are. But it is possible for this to get out of control pretty quick, depending on kind of where this goes over the next 48 to 72 hours, and kind of Pakistan’s response.
Bray Wheeler: Now, Pakistan has, obviously, appealed to the UN, because it’s in violation of some of the UN resolutions and kind of deals that have been struck. Pakistan has been kind of making all the right moves politically to set themselves up as aggrieved.
Bray Wheeler: But that’s not going to stop some of these groups from potentially kind of exercising their more aggressive tendencies. That’s not to say it’s doom and gloom, that it’s going to happen, but companies definitely need to start kind of paying attention to this and preparing for the fact that this could go sideways pretty quick. Because this is, as we’ve talked about, this as a pretty unprecedented step for India.
Bryan Strawser: I would go as far as to say that unless your company specifically has business operations in Kashmir, to your travelers or expatriates that are in India, I would make Kashmir off limits to them. There’s too much risk of conflict, and you’re suddenly going to find yourselves in a situation where you’ve got a couple of travelers who wanted to see Kashmir, because it’s beautiful, and they’re out there, and an artillery barrage starts. There’s not a lot you’re going to be able to do at that point in time to guarantee their safety, to ensure their safety.
Bray Wheeler: Yep. That’s one of those regions in the world where it’s beautiful-
Bryan Strawser: It’s best just not to be there.
Bray Wheeler: It’s beautiful for a reason. Because it’s-
Bryan Strawser: Because it’s best not to be there.
Bray Wheeler: It’s like the Korean demilitarized zone. It’s beautiful for a reason. You know? Because there’s guns pointed on both sides.
Bryan Strawser: I think our last story for this episode is about a Iran’s seizure of yet another tanker in the Strait of Hormuz. Bray, what’s the story there?
Bray Wheeler: Iran has taken a couple of steps here in the last kind of few days. They’ve claimed they’ve seized another oil tanker, which they say is smuggling oil through the Strait of Hormuz and the Persian Gulf. They’re kind of elevating their presence as a security force to guarantee kind of tanker safety and maritime safety within the region. All of which is a little bit fuzzy, because they’re the ones taking tankers. However, this kind of demonstrates that they really haven’t backed off, and they’re not backing off. If anything, they’re continuing to kind of elevate their posture with some of that.
Bray Wheeler: They’ve also made some pretty kind of direct comments kind of at European powers here today, as well, in terms of the kind of nuclear deal, and their kind of escalation of, “Unless we can work something out … ” Excuse me. “Unless we can work something out between Iran and Europe for the U.S. kind of backing out of the agreement,” they’re going to start kind of elevating their production of nuclear materials, heavy water, uranium, plutonium, et cetera. There’s really not much Europe can do about that, because the U.S. has kind of led the charge on that, so there’s only so much Europe can do. It kind of fits in the mold of what kind of Iran’s been doing of kind of escalating tensions there in the area.
Bryan Strawser: There’s been a lot of discussion about some type of maritime security alliance in the Gulf, through the Strait of Hormuz, where I believe, initially, this was kind of, this was bounced around a little bit in the last two weeks. But, initially, when the United States talked about it, no one wanted to play with us. Primarily, because of the current administration’s foreign policy approach, the president’s foreign policy approach. Then it became, “Well, the UK can lead a maritime security alliance in the Strait of Hormuz.” The Brits approached the French and the Germans who said, “No.” Now this appears to be coming back or headed back towards a UK-U.S., which means probably Canada, New Zealand and Australia will come along and play for this.
Bray Wheeler: Right.
Bryan Strawser: There was an interesting piece related to this whole issue on the U.S. Naval Institute blog, kind of the think tank that looks at maritime issues from a U.S. perspective, where a retired U.S. naval officer made a long argument why the data shows that the Brits, the Royal Navy, can, essentially, not project enough power to do this on their own. They have one destroyer, as I understand, or a cruiser, in the Persian Gulf-
Bray Wheeler: It’s limited.
Bryan Strawser: … and that’s what they can do. And he really kind of took to task the Brits for some of their defense decisions when it comes to the navy. I’m just going to read the end, because I thought it was an interesting and insightful view that “Alliances at sea are tender devices. Everyone’s relearning today a lesson that will be eternal for any nation’s naval forces. Friends are nice to have, but they’re often fleeting, and you need to be prepared to fight alone or just go home. Design your nation’s navy accordingly.” I think the Brits are in a situation where they simply can’t project enough power to protect their shipping-
Bray Wheeler: They can’t.
Bryan Strawser: … in that area. They have other ships who are committed elsewhere. I think in the end, this is going to come down to can the Brits, and the U.S., and perhaps some of the Commonwealth countries, the Five Eyes, figure out how we can do this together. Of course, we have the challenges of our president’s current lack of relationships on the international front probably complicate this, because there is no personal diplomacy to be had to build that alliance.
Bray Wheeler: Well, and this all stems somewhat back to the nuclear deal and our, the U.S.’s decision to-
Bryan Strawser: To blow it up.
Bray Wheeler: … to pull out of it. It’s kind of forced Europe into a box, particularly the UK, because they’re one of the kind of the major parties of that. The UK, again, doesn’t have the force projection in the Strait of Hormuz. They continue to do it. The U.S. has indicated that, “Well, it’s British tankers, it’s kind of your problem.” There’s a reluctance to, necessarily, probably on our end, to get super-involved from a U.S. standpoint, just based on everything else that’s going on. Unless there’s some kind of direct confrontation that would kind of force our hand in a different way. It’s just this situation in particular is, again, like we’ve seen with Hong Kong, isn’t going away anytime soon. There’s not-
Bryan Strawser: No.
Bray Wheeler: There’s not a magic answer here.
Bryan Strawser: No, there’s not. There’s a very deliberate effort. I mean, you have to kind of take a step back and look at who benefits from all of this.
Bray Wheeler: Right.
Bryan Strawser: There’s a very deliberate effort underway with Iran’s approach having the JPOA pulled by the United States. What Iran is trying to do is, they see the personality split in the NATO alliance, in the [inaudible] Atlantic alliances, between the U.S. and others in Europe. They see the split between President Trump and the European leaders, and they’re trying to drive a wedge through that by continuing to separate the United States from its traditional allies. Because in the end, that just benefits to them.
Bray Wheeler: Right.
Bryan Strawser: They know they can’t win. They don’t want a war, a shooting war. They know they can’t win in a head on conflict between themselves and the NATO powers. No one’s going to back their play, so they’re trying to divide us. They’re trying to separate these traditional alliances through this irregular warfare. Iran is the expert, the modern day expert, in irregular warfare. They’ve been doing it with Hamas and Hezbollah, with Israel and Lebanon, all along.
Bray Wheeler: Yep. Right.
Bryan Strawser: They know how to play that game better than anybody on that end of the spectrum. So, that’s the challenge. The foreign policy, national security challenge, anyway. The corporate challenge is, it’s just a very unsafe situation.
Bray Wheeler: Well, I think that’s kind of the general theme, in particular, with these three topics this week, is it’s just an indication of the changing dynamic of the U.S. foreign policy influence kind of in the global community, and what’s happening, and people’s desire or courage to take some different steps that they may not have taken in the past. Would Iran have done this five years ago, 10 years ago? Maybe, maybe not, depending on the situation. But there’s definitely an environment out there that they feel pretty willing to try and take some pretty overt moves in terms of, to your point, driving the wedge and finding those cracks in the policies, and just pushing enough that they continue to kind of get away with what they want to get away with.
Bryan Strawser: To me, this poses the bigger national security and private sector challenge is that, certainly, there’s the potential for great power conflict between the United States and China or Russia. And we are dealing with that in some different ways that we’ve talked about here before with Taiwan, and Hong Kong, and elsewhere. I still think it’s the irregular warfare situation that’s driven by, really, Iran is the last big player in this area.
Bryan Strawser: But, certainly, the terrorist groups fit in here. I mean, this was Isis’ and Al-Qaeda’s approach, and AQAP’s approach in Yemen, and Somalia, and Ethiopia, Djibouti. You know? And things that we still see happening. But I think that this is the threat. It’s not going to be the great naval and air war between the U.S. and China. It’s going to be, how do we continue to deal with the irregular warfare set in the Middle East and elsewhere, Horn of Africa, that cause these issues?
Bray Wheeler: Well, and just the unstable environments that arise, that pop up, that are stoked by different nations trying to unsettle things. And so, private sector, certainly, from the U.S. and from other kind of western European kind of origins, you’re having to change. You’re starting to see a change in the writing on the wall, or whatever cliche you want to insert there, that your business as usual is evolving, and probably in a way that is going to be kind of a slow burn, until all of a sudden in a spot you were pretty comfortable in, is no longer comfortable. It’s popped up, not because of kind of armed conflict, even. It could just be what we’re seeing in Hong Kong, or kind of heightened tensions with Kashmir, or kind of disruption with economic trade like we’re seeing in the Strait of Hormuz. I mean, all these things are kind of little slow burns that all of a sudden change the dynamic, and you’re operating in a different way. And if you’re not thinking about that, and you’re not paying attention to those things, you’re going to get caught.
Bryan Strawser: This kind of takes us to another pivot that’s going on, and I don’t think we’ve recognized it for what it is yet. But if you think about the last 20 years, starting with September 10th and what we thought was the challenge from a national security and private sector perspective, and how the next day changed all of that. Right? We woke up on September 12th, 2001, and we spent the next couple of years figuring out the new rule sets. Right?
Bray Wheeler: Yep.
Bryan Strawser: Everything had changed. Business resiliency suddenly became a real thing, because 9/11 made it much more real to a lot of people and companies than before. Then you saw the pivot in the kind of counterinsurgency and the rise of irregular warfare in the Middle East, driven by our, the United States efforts in Afghanistan and Iraq, what that meant for surrounding areas.
Bryan Strawser: Now I think we’re on the next pivot, and the pivot is, now it’s Iran spinning much more publicly, much more visibly, this web of issues that it’s creating, and we still have those other irregular warfare things going on to disrupt our world. Not to mention the active shooter incidents of this past weekend that changed the security posture of companies, and mass gatherings, and things along those lines. But that’s a conversation for another day.
Bray Wheeler: It is. It is. We’re not jumping in that one today.
Bryan Strawser: That’s it for this edition of the Managing Uncertainty Podcast, the BryghtCast edition for the week of August 5th, 2019. We’ll have more episodes coming soon. Hope to see you then. Thanks for listening.
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