Monthly Risk Spotlight: May 2022

Cyber Risk and Preparedness in Latin America
On 27 April, the Russian cybercrime group, Conti, announced that it had hacked the Peruvian Dirrección General de Inteligencia (National Directorate of Intelligence) and would release sensitive information if payment was not made. This comes after Costa Rica’s Ministry of Labor and Ministry of Finance servers were also targeted in mid-April by the Conti group. Conti had threatened to release sensitive information if a ransom of 10 million USD was not paid. Costa Rica refused to pay and on 21 April the group released approximately 46 gigabytes of stolen data including personal tax return information on Costa Rican citizens.

Despite high levels of internet integration and proliferation, state actors in Latin America exhibit significantly varied levels of cyber preparedness. The Inter-American Development Bank in a recent study reported that just twelve of thirty-three countries in Latin America had an approved national cyber security strategy. While this one variable alone cannot define a country’s cyber preparedness, it does indicate that many countries in the region may be underinvesting in this critical space and thus leaving themselves vulnerable to cybercrime.

The risk of being impacted by a cybercrime is defined by two main factors: 1) preparedness and 2) target selection. The US Federal Emergency Management Association (FEMA) defines cyber preparedness as the ability to prevent, detect, and respond to a cyber-attack. For not only states but also corporate and individual actors, cybercrime preparedness is all about investing in protection and preventative measures to make the success of bad actors as difficult as possible. Measures could include technical investment in things like data encryption and network firewalls, but also strict password rules and phishing training to bolster against attacks that aim to take advantage of human error/social engineering vulnerabilities. Target selection deals with whether an actor is targeted at all, and, like many crimes, is primarily driven by perceived payoff and perceived likelihood of success. The payoff for a cyber-crime can be motivated by many objectives including strategic/geopolitical concerns (ex. Stuxnet attack on Iranian nuclear reactors, defacing of Russian state television programming with anti-war messages) and purely economic ones (ex. Conti explicitly states they are apolitical and wish solely to be paid).

If the perceived reward for a successful cyber-attack is high enough any bad actor may ultimately decide it’s worth the risk. But in most cases, the benefits are weighed against the cost/likelihood of success. Often clear and loud, investment in preventative measures can convince bad actors to move on to other, less prepared targets. A similar dynamic can be seen on the city streets where the bike secured with a lock that looks ‘jack-hammer proof’ is most often less likely to weather an attempted theft than one secured with just a flimsy cable lock. Similarly, the owner of a very old and less expensive bike might assume they do not need to lock their bike at all as potential bad actors would likely not even wish to steal it in the first place given all the fancier bikes on the street. A similar thought process is common for companies, individuals, and even some countries who assume they couldn’t possibly be selected for a cyber-attack among all the potential options. They believe they have nothing particularly valuable to lose and thus have no need to invest in cyber preparedness. Unlike in the bike metaphor, this logic does not hold for cybercrime.

In March 2020, as COVID-19 was beginning to spread to all corners of the world, Costa Rica saw a malware named ‘COVID Lock’ shared around which claimed to provide interactive maps tracking COVID-19 spread across the country. Instead, it turned to be a scam, hijacking and locking victim devices until ransom was paid. Similarly, during this period Latin American countries including Costa Rica, Mexico, Colombia, and Guatemala saw a surge in scams related to stimulus payments/unemployment benefits, transition to work from home, insurance, and even online tax payment. Most of these scams targeted small companies and individuals with low cost/low effort tactics knowing they had little to no cyber preparedness. Small companies and individuals have also been targeted for cyber-attacks–not for what they have to lose–but for what they have to better prepared and protected against secondary targets. While the Peruvian National Directorate of Intelligence (after this incident) will likely have sophisticated cyber preparedness, it also works with numerous partners and third-party vendors. Some of these exterior parties could have access to their servers, and they may not have cyber preparedness on par with the Peruvian National Directorate of Intelligence.

When it comes to cyber preparedness, the individual/company/ state actor is only as strong as its weakest link. As the Latin American region continues to see a rise in cyber-attacks, and not necessarily just those who are perceived as “high value” targets, it will become clear to many that the price of investment in cyber preparedness is well worth avoiding the risk of being compromised.

Israel is Looking to Create a Civilian National Guard
In early May, Israel’s Prime Minister Naftali Bennet announced the government is looking to establish a new civilian national guard. The civilian national guard’s goal is to fight domestic terrorism and organized crime throughout Israel. It will be comprised of units of civilian volunteers as well as Israeli reserve soldiers and Israeli border police, who operate in occupied territories. The government is expected to deploy the guard throughout the country to enable them to respond to an emergency quickly, even before local police arrive. The National Security Council and the Ministry of Public Security are expected to present the government with a budgeted plan to establish the civilian national guard by the end of May. Israel already incorporates some volunteers within its police force. It is believed that this new civilian national guard force could emulate the United States’ National Guard force.

This announcement comes after the latest outbreak of violence, including lone attacks in Israeli cities, Israeli military operations in the occupied West Bank, and violence at the holiest site in Jerusalem. Several Israelis have been killed in separate shooting attacks in downtown Tel Aviv as well as stabbing attacks in surrounding towns. At least 18 Israelis have been killed between 22 March and 11 May while 29 Palestinians have been killed in that same time period. The Palestinians killed included perpetrators of attacks on Israelis but also those killed by Israeli forces in numerous military operations in the occupied West Bank.

The concept of the civilian national guard was first discussed in 2021. Prime Minister Bennett and former Prime Minister Benjamin Netanyahu discussed the idea behind closed doors shortly after last May’s outbreak of violence between Israel and Hamas. The violence was initially caused by the forced evictions of Palestinian residents in the Sheikh Jarrah neighborhood of East Jerusalem. Israeli soldiers also raided the Al-Aqsa Mosque with stun grenades and tear gas, injuring several Palestinians during prayer. Hamas warned Israel of escalating tensions. Soon, Hamas began launching missiles from the Gaza Strip into Israeli cities. Both Hamas and the Israeli Defense Forces launched hundreds of rockets toward each other’s territories resulting in over 200 Palestinian deaths and 13 Israeli deaths.

Some fear the implementation of an Israeli civilian national guard may only exacerbate the divide between Israelis and Palestinians. In fact, UN experts warn that an Israeli crackdown will fuel more violence. A UN Human Rights expert has called on the international community to initiate both short-term and long-term steps to address the escalating violence. It appears that the two sides of this deeply rooted conflict may be further from resolution today than they ever have been.

Papua New Guinea: Election Watch
On 18 June 2022, five-million eligible voters of the Oceanic country of Papua New Guinea (PNG) will take to the polls in the country’s 10th election since its independence from Australia in 1975. With guaranteed results not expected until July 2022 and a new government not being formed until August, it is anticipated that the upcoming months could be tumultuous for Papua New Guinea, especially with the backdrop of a downward trending economy since the COVID-19 pandemic onset.

The country’s politics has been dominated by resource nationalism over the past few years with current Prime Minister James Marape (2019-present) coming to power under the populist sloganeering of “Take Back PNG”. Marape’s ascent to power occurred through a vote of no confidence against his predecessor and former ally Peter O’Neil, the former Prime Minister from 2011 to 2019. Marape argued that the country was not getting enough benefits from large resource projects such as the Liquefied Natural Gas (LNG) and various mines operating in the country.  Upon taking up the top job in 2019, he attempted to renegotiate the terms of these large resource projects but has currently come under attack for reportedly not being able to negotiate appropriate deals quickly enough. Regardless of the outcome of the election, the resource nationalism agenda is expected to continue in PNG.

Ahead of the 18 June vote, Marape is attempting to shore up support in Papua New Guinea’s ever-fluid political environment. Political loyalty is a loose concept in PNG, with politicians known to switch in and out of government coalitions during a parliamentary cycle. Allegiances are not driven by any affinity to an ideology, but instead by the interests of a respective politician’s community. Money politics is the common currency, which in turn leads to political jockeying.

Looking at the larger picture, Papua New Guinea had acted within Australia and the US’ spheres of influence since independence in 1975. However, these relationships are being threatened as Chinese funding and diplomatic overtures have become increasingly important for the country’s development. Moreover, China views the southern Pacific as a significant geopolitical region, necessary to its continued quest for global superpower status. This has made Papua New Guinea to be increasingly caught up in the crosshairs of geostrategic competition between Beijing and Washington/Canberra.

China has already achieved a recent geopolitical dividend in neighboring Solomon Islands, where in April 2022 China announced it had signed a security cooperation agreement with the Solomon Island’s government. While the exact nature of the deal is largely concealed thus far, there are concerns it will allow for the deployment of Chinese security forces and could eventually lead to the development of a Chinese naval port, in what Australia traditionally views as its maritime backyard.

The China factor has become an increasingly important one during elections in the Oceanic and ASEAN region over the past ten years. Beijing’s influence weighed heavily in the elections of Timor Leste in March 2022 as well, and also was an increasingly important issue surrounding the elections in the Philippines and Australia in 2022. While China’s influence and financing has not been a major talking point in the run-up to the elections in Papua New Guinea, Washington/Canberra is expected to be watching closely and maneuvering to ensure Beijing doesn’t get a toehold and another geopolitical advantage in the region, by way of Papua New Guinea.

Flooding in South Africa Fuels Frustrations
On 11 April 2022, heavy rains and fast-moving floods targeted the Kwazulu-Natal province in eastern South Africa. Hundreds of citizens died, and the death count continued to rise through April as floods and landslides wrecked homes. By early May, tens of thousands of people are still in need of shelter.  Many communities remain without power or water due to major damage to power stations and water treatment plants. Scheduled power cuts were utilized mid-April, and although local officials suspended the cuts on 22 April, they could be reinstated at any point in the future if power constraints continue.

The heavy rainfall comes from a common weather phenomenon in South Africa known as a cut-off low. This occurs when a low-pressure system develops and its flow is disrupted, resulting in a slow-moving storm. Strong storms that do not move quickly often devastate specific areas, such as Kwazulu-Natal. Experts have attested that the phenomenon is rapidly strengthening due to global warming.

Most of the destruction targeted shanty settlements along rivers in the region, due to lacking infrastructure many shanty homes were destroyed. This is not an isolated experience, many of the people and families who were affected by major flooding in 2019 are experiencing similar and severe damage this time as well, highlighting the lack of change and preparation. Many citizens have begun to express their immense frustration, the majority of whom are in Mega City, a shanty settlement south of Durban. Sbu Zikode, the president of Abahlali baseMjondolo, a shanty dwellers movement told reporters: “When infrastructure fails it leads to human catastrophe.” He then referenced the government’s reaction to the recent flooding with the “lack of political will not only to invest in the infrastructure development, but also to maintain the infrastructure that we have.” Residents recalled promises from the government and local officials to improve infrastructure to manage floods, and move shanty settlers into more stable housing, promises that were not fulfilled. Growing frustration and continual distress may lead to civil unrest, especially if the government continues to react with a lack of preventive measures in an area that has come to expect these natural disasters.

Europe Scrambles to Find Alternatives to Russian Gas
Despite the invasion in Ukraine, Russia has continued to supply a large amount of gas to European countries. However, after recent sanctions placed on Russia by Western powers, President Vladimir Putin announced that countries deemed ‘unfriendly’ would have to pay for gas in Russian currency. Making payments in rubles would reinforce the Russian currency and benefit its economy.

Oil supplies to Poland and Bulgaria have been cut off due to their failure to make payments in Russian rubles and the Russian-state-owned energy company, Gazprom, has threatened to do the same to other nations, cranking up retaliation against imposed sanctions. The European Union considers Russia’s actions to be blackmail but claims it would easily manage it as it was already pivoting away from Russian energy. The EU has initiated plans to ban all purchases of Russian oil by the end of the year. However, there remains deep uncertainty over how quickly Europe can change its course, and what impact the ban will have on oil and natural gas prices throughout the continent.

The stakes are high for the rest of Europe, as Russia accounts for over 40% of the continent’s natural gas imports. Because Europe is largely dependent on Russian oil, loss of their supply could result in an additional hike in crude oil prices.  The United States, which has long criticized Europe for its reliance on Russian oil, has agreed to ship an additional 15 billion cubic meters of liquefied natural gas by the end of the year but may not be able to make up the shortfall.

The conflict between the EU and Russia also poses a challenge for the world gas market which is enduring sudden price volatility and manipulation. Countries are scrambling to seek alternatives to Russian oil. The US also wants Saudi Arabia to increase oil production and is considering relaxing sanctions on Venezuela’s oil as well. As the conflict continues, consumers can expect to face an additional rise in their energy and fuel bills. Prices are anticipated to increase even more if Russia restricts its gas exports to Europe.


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