The Risk of Cyberwarfare

In the event you have not been keeping in touch with current events, President Obama has expressed displeasure with the current Syrian regime for it's alleged use of chemical weapons on it's own population (this claim is substantiated by Doctors Without Borders first-hand observations, in addition to Israeli intelligence info - both of which are very credible).  President Obama has stated that this action would be, "crossing the red line," and has inferred that military retaliation is warranted...although the terms of this have been vague, at best.  In any event, the pure might of the US military, when involved in just about any type of assault, is uncontested and cannot be stopped once set in motion.....we have seen this in both Iraq and Afghanistan. It would be reasonable to ascertain that if the US chooses to intervene with Syria, there would be swift and uncontested consequences from a military perspective.....but that is not the main issue.  Iran will likely get involved, which in turn, could involve Russia and China.....as you can see, this could turn into World War III rather quickly.  However, global military conflict is not the main concern.......or at least, it should not be.

In 2008, the Rand Corporation authored a paper about the dangers of a new type of war, called Cyberwar, for which is now a household term.  Some of the key elements of Cyberwar, making it different from conventional war, are:

• It is relatively inexpensive to wage, versus the vast costs of an army, navy, and air force.  Concurrently, it is expensive to defend against cyberterror, as the variables of vulnerability are drastically different
• The technology used to wage this war (coding) is easily transferred from creator to "highest bidder", versus conventional military technology which is tangible, large, and easily tracked
• Cyber attacks can be waged from just about anywhere that has an internet connection, versus conventional warfare which must be waged in a theater of combat
• Cyber attacks focus on areas of vulnerability and are constantly changing depending on the target, versus a standing military force which may have weaknesses but do not change regularly
• As more nations become reliant on computer technology, a cyber attack can cripple infrastructure whereas a conventional war will require pinpoint and extended military strikes to accomplish the same

Iran was the "lucky" recipient of the Stuxnet, which was specifically targeted at their respective nuclear facilities....it was revolutionary, paralyzed their reactors, and was introduced without military intervention (although many of the details of this are still classified, and my theories of how it was introduced are pure speculation).  Stuxnet was a game changer, and proved to the world that something like this was possible.  As we all know, computer programmers worldwide are getting better and better....and if you build a bigger mousetrap, the mice in this game simply get smarter. There is (and never will be) such a thing as a completely hack proof system, but it can be made more and more complicated.

The main concern on Wall Street is that military conflict can possibly disrupt oil supplies, as indicated by a $6 increase in the cost of a BBL of crude this week (prices have subsequently simmered down to an "affordable" $108.50/bbl this AM).  If indeed military conflict happens, this can and should be expected....simple laws of supply and demand, combined with the increased risk of transport of oil.  This, in turn, will impact business, and likely will affect the already shaky recovery from the 2008 Financial Crisis.  However, I feel Wall Street is missing the bigger risk......the possibility of a cyber attack by either a nation (Syria or Iran) or rogues acting within as a form of rebellion. 

Cyberwar is no different than cowardice acts of terrorism....The goal is to attack the soft underbelly of society in an area in which it is more vulnerable.  The targets are relatively easy to achieve, and the resulting widespread panic and disruption are the main goals.  Based on this premise, it is reasonable to conclude attackers will likely never pursue the most well-defended networks.....the Pentagon and White House come to mind as the most guarded and will likely require the greatest degree of effort to crack, as they have virtually unlimited resources that can be used to defend against such an attack.  That being said, the greatest opportunities will be the less well-defended targets, such as municipalities and business which lack the degree of resources that the Pentagon has.

I still hold very firmly the belief that the United States Military is uncontested in the world, and will be victorious in every conflict it is drawn into.  Iran and Syria would fall as quickly as Baghdad, but their population represents a different challenge - the presence of skilled programmers that could become cyber warriors.  The effects could be devastating beyond any calculation Wall Street has made.  Syria and Iran pose a threat not because of their military, but rather, the potential they have with their computer geniuses.  The stakes in this one are extremely high......