Soft on Cyber Crime

Obama rejected tough options for countering Chinese cyber attacks two years ago


President Barack Obama two years ago rejected a series of tough actions against China, including counter-cyber attacks and economic sanctions, for Beijing’s aggressive campaign of cyber espionage against the U.S. government and private businesses networks, according to administration officials.

Meanwhile, China recently issued a veiled threat to the United States about U.S. accusations of Chinese military cyber espionage. China told U.S. officials that continued U.S. public accusations of cyber espionage would render future bilateral discussions unproductive during recent U.S.-China talks following the release of a security firm’s report linking the Chinese military to cyber spying.

On plans to deter Chinese cyber attacks, senior administration officials turned down a series of tough options designed to dissuade China from further attacks that were developed over a three-month period beginning in August 2011.

According to administration officials familiar with internal discussions, the options were dismissed as too disruptive of U.S.-China relations.

The president’s closest advisers feared that taking action would potentially undermine U.S. relations with China, a major economic trading partner that currently has holdings of $1.2 trillion in Treasury debt, the officials told the Free Beacon.

Government security and military officials under the White House Interagency Policy Committee, a working group directly supporting the National Security Council, developed the options.

The committee is made up of representatives from the Pentagon, intelligence community, law enforcement, homeland security, and foreign affairs agencies.

Caitlin Hayden, a White House National Security Council spokesperson, declined to comment. “I am not going to discuss internal deliberations, but we have been clear that we have substantial and growing concerns about the threats to U.S. economic and national security posed by cyber intrusions, including the theft of commercial information,” she said in a statement.

Hayden said because China and the United States are major “actors” in cyberspace “it is vital that we continue a sustained, meaningful dialogue and work together to develop an understanding of acceptable behavior in cyberspace.”

“We have repeatedly raised our concerns at the highest levels about cyber theft with senior Chinese officials, including in the military, and we will continue to do so,” she added.

Disclosure of the administration’s failure to take a tough stance on Chinese cyber intrusions is likely to further upset U.S. industry, which has been pressing the government to do more against China for the hacking.

The interagency group was tasked in August 2011 with developing options for Obama to deter China in cyberspace, as evidence mounted for years that China’s government, despite repeated public and private denials, is continuing a highly damaging program of stealing U.S. secrets and proprietary economic information that has helped China’s industry and its military to leapfrog technological hurdles and more favorably compete against the United States.

The options that eventually were presented included using bilateral and multilateral diplomacy, conducting covert computer network attack operations, levying economic sanctions, and taking legal action against the Chinese government and military.

The officials said the options developed by the committee covered the full spectrum of statecraft, including diplomatic, military, intelligence, and economic measures designed to pressure China into halting the cyber attacks.

Hayden, the White House NSC spokeswoman, defended administration cyber security efforts. “We are taking an active approach to addressing cyber theft,” she said. “We regularly release technical information intended to improve the ability of the private sector to defend against cyber intrusions.”

The security of U.S. government networks is also being boosted, along with critical infrastructure, she said, adding that the president wants legislation to create new tools and authorities to address cybersecurity challenges, she said.

The head of the U.S. Cyber Command Gen. Keith Alexander last year estimated that foreign computer attacks are costing U.S. companies $250 billion a year in stolen data. Alexander said in a speech in July 2012 that the data theft is “the greatest transfer of wealth in history.”

The Obama administration in late 2011 decided against approving a comprehensive strategy that would counter the problem of what many analysts regard as a campaign of Chinese cyberwarfare against the United States despite the warnings from national security policymakers.

The U.S. Cyber Command is expanding its Fort Meade-based cyber forces and is prepared to conduct offensive cyber attacks against states or groups that persistently target U.S. networks. The offensive strikes include the ability of computer-based forces to disable and destroy foreign computer networks remotely.

Economic sanctions against China’s military would be a largely symbolic gesture and would publicly identify offending Chinese military cyber warfare units such as those recently identified in Beijing and Shanghai.

Instead of offensive cyber strikes or sanctions, the administration, as reflected in the recently published strategy to counter the theft of U.S. trade secrets, went to great lengths to avoid pinpointing China as a major trade secrets thief.

Said a White House official of the strategy: “This strategy is not focused on any one country, nor is it focused on cybersecurity exclusively, though cyber does play an important role in the strategy.”

The administration strategy limits U.S. government action to diplomacy and law enforcement efforts against cyber attacks. The officials said the strategy deliberately played down China’s role in the theft of trade secrets and ducked effective action to avoid upsetting relations with China.

For example, the strategy report says senior U.S. officials will raise trade secret theft in meetings with foreign leaders while the State Department will track economic spying and “deliver appropriate messages to their foreign counterparts.”

Critics say the failure to adopt a more aggressive counter strategy against Chinese cyber attacks will lead to more losses.

“The problem is that there is no line. The administration is refusing to tell [the Chinese] what the limits are,” said one U.S. official.

“There’s so much of it going on the adversaries don’t know what the line is. They do not know that there is a line they can’t cross.”

Former United Nations Ambassador John Bolton has said the administration is making a mistake by dealing with cyber attacks in the ways similar to its approach to treating terrorism as mainly a criminal matter best addressed through law enforcement.

The issue of Chinese cyber espionage gained wide public attention last month after the private security firm Mandiant published a report detailing long-suspected activities of the Chinese military in conducting cyber espionage.

The Mandiant report revealed that China’s main military cyber espionage group is the People’s Liberation Army’s 2nd Bureau of the General Staff Department’s 3rd Dept., code-named Unit 61398, located in a suburb of Shanghai.

China’s government, as it has in the past, called the report’s findings “groundless” and military spokesmen denied having any dedicated cyber warfare forces.

The Mandiant report followed recent public admissions by major U.S. newspapers that they had been victims of sophisticated computer hacking by China. They included the New York Times, which exposed corruption by a senior Chinese leader last year, as well as the Wall Street Journal and Washington Post.

The administration remained silent on the Mandiant report’s disclosures, the first time a major cyber security firm had gone public with details of Chinese military cyber attacks. The government has kept secret most of its information on Chinese cyber attacks, to the dismay of many private sector companies that have been hit by the cyber spies.

Michael Daniels, the White House National Security Council aide in charge of cyber security policy, explained the administration’s approach to Chinese cyber attack in a recent interview on the cable network CSPAN.

Daniels played down China’s role in cyber attacks and said current U.S. cyber security strategy is “not directed at any one specific country.”

“It’s really addressed at the broad range of threats that we face in cyberspace,” including both foreign and domestic sources, he said, adding that unspecified “actors in China” were linked to cyber attacks, but that “we’ve seen that in multiple countries in the world.”

“The attribution problem continues to be difficult in cyberspace,” Daniel said in seeking to downplay the Chinese role.

“From the administration side, we try not to focus as much on those sorts of headlines [implicating China] and really focus on improving our cyber defenses across the board so that we can thwart whatever actors are behind the intrusion and try to reduce them as much as possible,” Daniel said.

Pressed on Mandiant’s findings about cyber attacks traced to the Chinese military in Shanghai, Daniel said it was an “interesting question” about when cyber attacks pose a military or national security threat. He said the issue remains a “source of a lively debate both within the government and the private sector.”

A second U.S. official took issue with Daniel: “It’s tragic the administration is merely having lively debates. The National Security Council staff should be planning how to convince the Chinese to stop their intense cyber warfare campaign before it escalates out of control.”

Private companies that have been victimized by Chinese hacking are pressing the administration to take action to stop the attacks, officials said.

Rep. Mike Rogers (R., Mich.), chairman of the House Permanent Select Committee on Intelligence, said he has no doubt about the state-sponsored origins of Chinese cyber attacks.

“Beyond a shadow of a doubt, [the Chinese] use their military and intelligence structure to steal intellectual property from American businesses and European businesses and Asian businesses, repurpose it, and then compete in the international market against the United States,” Rogers said Feb. 24 on ABC’s “This Week.”

“It is unprecedented,” Rogers added. “This has never happened in the history of the world where one nation steals the intellectual property to repurpose it to illegally compete against a country.”

“And I’ll tell you, it is as bad as I’ve ever seen it and exponentially getting worse,” Rogers said. “Why? There’s no consequence for it.”

Kenneth deGraffenreid, a former Reagan administration White House intelligence director, said the duration, intensity, breadth, and persistence of the Chinese cyber attack threat reflects the long term strategic challenge China poses to the United States.

“Unfortunately, historically, the U.S. has found it difficult to respond to long term strategic threats in a consistent way,” he said. “The strategic policy immaturity and incompetence offered by the Obama administration makes this challenge even more problematic.”

DeGraffenreid said a serious response “would encompass an integrated strategic use of all of the tools of statecraft and begin with an honest, forthright presentation to the American people of the stakes involved in every aspect of our national life.”

“The U.S. cannot prevail in this arena on the cheap; fiscally, intellectually, or politically,” he added.

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