The real problem with China is not Pirelli, but the memorandum on the Silk Road
The government has exercised golden power over Pirelli to reduce China's influence, but has yet to decide what to do with the memorandum – a political agreement – on the New Silk Road. The analysis of Francesco D'Arrigo, director of the Italian Institute of Strategic Studies "Niccolò Machiavelli"
The complex financial passages that have characterized the participation in the Pirelli shareholding of Russian and Chinese shareholders reached breaking point on 15 June, when the Italian Government approved the "exercise of the special golden powers" regarding the new shareholders' agreement on the governance of Pirelli , providing for "specific provisions for the protection of the strategic asset consisting of CYBER sensors that can be implanted in the tyres". These sensors, explains a note from Palazzo Chigi, “are able to collect vehicle data concerning, among other things, road structures, geolocation and the state of the infrastructures. The information collected in this way can be transmitted to cloud processing systems and super computers for the creation, using artificial intelligence, of complex digital models that can be used in cutting-edge systems such as smart cities and digital twins".
THE STRATEGIC RELEVANCE OF PIRELLI, ACCORDING TO THE GOVERNMENT
According to Prime Minister Meloni's government, this technology assumes "national strategic importance", as improper use can lead to considerable risks not only for the confidentiality of user data, but also for the possible transfer of information relevant to national security. Hence the need to adopt "prescriptions" which aim to protect: "the independence of Pirelli & CSpA and its management, the security of procedures, the protection of information of strategic importance, the know-how possessed by the company. ”
A response to the change in strategy of companies controlled by the Communist Party of the Republic of China, which has associated industrial espionage with a policy aimed at inserting its own technologies and managers with decision-making power in the governance of critical Western infrastructures, to control their efficiency and influence their choices strategies in the event of growing competitive tensions or conflicts.
For decades, Chinese hackers focused on the large-scale and often strong-handed theft of Western trade secrets, what then-NSA Director Gen. Keith Alexander in 2012 called "the largest transfer of knowledge and richness of history”. But in recent years, the NSA and independent experts agree, the Chinese have become much more sophisticated, combining the work of their best hackers who use cyberspace for industrial espionage with the integration of IoT technologies in all sectors to prepare the battlefield for a future conflict. According to the NSA, what's going on right now isn't just systematic espionage. It's not just about intelligence agencies stealing this or that secret, it's not just industrial espionage where some company from another country wants to get the trial for a product or something. We are not talking about the well-known systematic commitment to equalize the technological advantage that the West enjoys over all other countries in the world, but to assume technological control and governance of critical infrastructures and companies, through devices connected to the network.
A strategic paradigm shift.
To counter such malicious activity, on May 24, the NSA issued an extraordinary multinational warning identifying indicators of compromise (IOC) associated with state-sponsored actors of the People's Republic of China (PRC), which use techniques to target critical infrastructure networks US and those of its allies. An alarm that the USA has transferred not only to all its agencies but also to those of Australia, Canada, Great Britain and New Zealand, members of the “ Five Eyes ” Alliance.
In a recent statement, NSA director of cybersecurity Rob Joyce specified that “the NSA agrees with the assessment of Microsoft (which recently suffered an attack attributed to the Chinese hacker group “Volt Typhoon” ) that the target of the PRC is to develop fileless malware cyber capabilities (malware that never requires the writing of a file on the disk to activate), and to infiltrate managers in the governance of critical infrastructures, in order to create the conditions for potential nuisance or sabotage actions in case of conflict. We all know that nation states collect information and we witness commercial espionage, but it is clear that some of the latter activities do not produce any intelligence value. The idea that these actors are trying to evade our detection techniques, gain persistent access, and position themselves inside to exploit our critical infrastructure poses a real threat. The fact that malicious actors from the PRC are present in any critical infrastructure is unacceptable."
NEW TECHNOLOGIES, NEW THREATS
In recent years, the West has had to deal with security threats posed by Russian, Iranian and Chinese hackers, companies blacklisted by the US FCC , WeChat, TikTok, ByteDance, 5G technologies and apps, Hikvision cameras, ChatGPT, minerals and rare earths, and those of artificial intelligence. But with the Pirelli affair, we discovered that another, equally dangerous one must be added to the catalog of the Chinese threat : the security of the Internet of Things (IoT) cellular modules.
While semiconductors represent the technology that has made it possible to build the new industrial and lifestyle revolutions, cellular modules are those small components incorporated in equipment or devices that process software, have geolocation capabilities, are equipped with an e-sim to connect to the Internet (such as mobile phones) and everything that allows the transmission, reception and processing of large amounts of data in any environment they are inserted.
All commonly used technologies equipped with cellular modules, which today seem absolutely harmless, can turn into a real nightmare, only apparently the result of the fantasy of a science fiction novel, but which can become reality.
Cellular modules are increasingly popular and used in a wide range of industrial applications, including energy, logistics, manufacturing, transportation, healthcare, security, payment processing. They are present in our homes, cars, smart meters, computers, electric vehicle chargers and appliances. They monitor and control complex systems remotely. To ensure that these systems work efficiently, they collect huge amounts of data and metadata to analyze. Then, through software updates, they push improvements to what they control. Like mushrooms, they form a network independent of human action. They reach where WiFi can't reach, and unlike WiFi, they don't lose signal at crucial moments.
The UK Government Security Services recently completely disassembled a car because data was being transferred via a 'Chinese e-sim' (a cellular module) inside it. The British government has kept a tight lid on who used that car, or if it ever transported the Prime Minister. But we know from another Tesla scandal that it would be perfectly possible for a Chinese engineer to record a private conversation in a car with a cellular module.
Everyone has heard of Huawei and Hikvision, but few know Quectel , Fibocom or other Chinese manufacturers of IoT cellular modules, even if they represent a much more serious threat to Western democratic countries, free and open to technologies.
With cellular modules, China is using the same strategy as 5G telecommunications and Huawei/ZTE. The Communist Party of China (CPC) wants to establish a global monopoly of these vital components through little-known companies, using subsidies, access to cheap finance, shared technology and other state support. Chinese companies already hold 64% of the global sales market and 75% for connectivity. In North America and Europe their market shares reached 30%, while in India they reached 86%.
The strategic goal is to bankrupt suppliers from other countries by offering the modules at incredibly low prices, to create a systemic dependence on Chinese suppliers and equipment. No doubt Quectel and others will claim, like Huawei, TikTok and others, that they are private companies. But China's 2017 national security law stipulates that "any organization and citizen" must support and cooperate" with the work of intelligence and state security organs.
IS THE SILK ROAD A DANGEROUS SPIDERWEB?
At a time of tension, the CCP may decide it is in its best interest to harm the governance or economies of its Western rivals. Through cellular modules, it could make our institutions and infrastructures even less efficient, by altering the entrance systems to buildings, interfering with alarm systems or modifying the operating levels of machinery to make work impossible. It could also attack the NHS, or even interfere with the delivery of drugs for a particular patient undergoing an operation – a novel way to assassinate enemies or hostile government officials.
Using cellular modules it is possible to build and disseminate images and sensitive information of a targeted person. You can spy on her from the home alarm system cameras, follow her from the street cameras, her car, her consumption, her payments. Conversations in restaurants or workplaces could even be intercepted, thanks to lip-reading technology combined with Hikvision cameras (also supplied by Italian ministries and companies, produced by a company owned by the Central Propaganda Department, which boasts the ability to translate lip reading into 65 languages).
To many people it may seem unimportant if their TV or home burglar alarm is spying on them for China. But they certainly would be sorry if the refrigerator or their car stopped working. By sending software updates to cellular modules, China could cut off the electricity supply remotely. If the CCP manages to get a monopoly on the supply of cellular modules, it could bring down a state's power grid by targeting smart meters (which contain these modules) in a time of energy crisis. Or it could block traffic in smart cities such as London, Washington or New York by disabling traffic light control systems, air traffic control centers, ship docking and loading and unloading systems, their aircraft repair and maintenance programmes. planes. Secret software instructions could ensure that they are not able to function, or even allow the CCP to shut them down in a moment of political tension, and the recovery of the module, according to the availability of the Chinese company, could require compensation, such as cancellation any economic sanctions.
It is a world that technology managed by companies answerable to opposing (or enemy) states could turn into chaos. It may sound like a scenario from a science fiction novel, but unfortunately we are already living it, we just haven't realized it yet.
Most policy makers, government officials and infrastructure stakeholders have never heard of cellular modules. And industries must consider the potential consequences of continuing to rely on Chinese cellular modules, beyond the short-term economic benefit. Many Western companies are still continuing to sign contracts with Chinese manufacturers despite having been informed of the security risks (see Pirelli): but economy and their interests prevail over our privacy and national security in the long term .
DISMANTLING DEMOCRACY FROM WITHIN
Democracy, freedom, privacy have a powerful enemy, who is working to dismantle them from within.
The Russian invasion of Ukraine has definitively thrown into crisis the globalized system of which China has been, until now, the major beneficiary.
China, which in the past has shown a preference for trade relations and using BRI investments as soft power, has given way to a communist party that wants to transform the world in its image, using economic investments and new technologies as instruments of coercion. Beijing's increasingly accentuated assertiveness, investments and projection of military strength are provoking a strong reaction from the USA and other medium powers, which are adopting policies to reduce their vulnerabilities, protecting their sovereignty and autonomy through the increase defense spending, but mostly through reducing their economic ties with China, reshoring and diversifying, trying to do it gradually so as not to completely jeopardize their relationship with China.
Is the fact that all the technologies essential for the operation of any infrastructure to be entrusted to the People's Republic of China acceptable?
Will the memorandum between Italy and China on the Belt and Road Initiative (or New Silk Road) signed by the Conte government expire in 2024, will it be renewed?
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/italia-problema-cina-pirelli-memorandum-via-della-seta/ on Tue, 20 Jun 2023 05:11:48 +0000.