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A commuter Seabus passes idle shipping cranes towering over stacked containers during a strike by dock workers at Canada's busiest port of Vancouver, British Columbia.
Canadian dock workers to go back to work, but UPS strike still on
Right on the buzzer Thursday, over 7,000 workers at some of Canada’s busiest ports — including Vancouver and Prince Rupert — accepted a settlement proposed by a federal mediator to end their strike.
The dock workers stopped going to work to demand higher wages on July 1st, slowing down $377 million in trade per day. Bringing the two ports to a near halt was nothing to sneeze at, since they handle one-third of goods coming to and from Canada. Economists had warned that if the strikes dragged on much longer, they could have eventually forced the central bank to hike rates even more right when inflation was finally starting to go down.
Meanwhile, in the US, unionized employees of the private shipping firm UPS are still counting the days until their contract expires on July 31st after failing to reach a deal over better pay and working conditions. UPS workers move merchandise worth an estimated 6% of America's GDP, and if the 68% represented by the main union don't show up, only 160,000 workers will be left to do the work normally done by 500,000. It could be the biggest single-employer strike in US history.
The twin strikes are very bad news for the Canadian and US economies right when broken supply chains were just beginning to recover from COVID, and inflation was starting to ease. Those trends could be reversed if more employers and unions in this crucial industry don't find common ground soon.
No one wants a throwback to late 2021-style inflation supercharged by broken supply chains.Sustainable Investing Spotlight
In Planting for Tomorrow: Weaving sustainability into the path toward food security, a new special edition newsletter from Citi Global Wealth and Eurasia Group/GZERO Media, we take a deep dive into the challenges and the innovations in sustainable agriculture. This newsletter gives you an essential look into the future of food.
Want to go even deeper in the food security challenge? Check out the Living Beyond Borders podcast from Citi Global Wealth Investments and GZERO and listen to our episode compelling called Global Food (In)security.
Listen:"We need to keep that investment flowing to come up with better ways to do this so that everyone is fed within the constraints of what the planet is able to bear," says Peter Ceretti, Director of Global Macro Geo Strategy at Eurasia Group.
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Ceretti is joined by Harlin Singh, Global Head of Sustainable Investing, and Malcolm Spittler, Global Investment Strategist and Senior US Economist, both at Citi Global Wealth Investments, to discuss the latest causes and ripple effects of food shortages around the globe.
Following shortages that came out of the COVID pandemic as well as the war in Ukraine, the dual food problems of affordability and availability persist. While temporary impacts may be waning, the experts also discuss the longer-term impacts of the global food production system on the environment and what will - or won't - be sustainable going forward, including the food system's massive dependence on fossil fuels.
This episode is moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability.
Peter Ceretti
Director, Global Macro-Geostrategy, Eurasiia Group
Harlin Singh
Global Head of Sustainable Investing, Citi Global Wealth Investments
Malcolm Spittler
Global Investment Strategist and Senior US Economist, Citi Global Wealth Investments
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
Episode 5: Energy transition today
Listen: "It actually all comes down to one thing and that's money," says Raad Alkadiri, Managing Director of Energy, Climate and Resources at Eurasia Group. "Will there be the money for investment in renewables, in energy efficiency made available? And I'm not just talking about the industrialized world, I'm talking about globally."
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Alkadiri is joined by Malcolm Spittler, Global Investment Strategist and Senior US Economist at Citi Global Wealth Investments, to look at where the energy transition to renewable fuels stands globally, after setbacks from the pandemic and geopolitical instability.
They discuss the increasing need for energy security being a big driver for renewable energy in regions like Europe, how the war in Ukraine is still affecting energy markets, and what kinds of investments need to happen in technology and infrastructure to realize more sustainable and cleaner energy globally.
Malcolm Spittler
Global Investment Strategist & Senior US Economist, Citi Global Wealth Investments
Raad Alkadiri
Managing Director of Energy, Climate and Resources, Eurasia Group
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
- Episode 7: Future-proofing: How we fix broken supply chains ›
- Episode 9: US/China power struggle, the global political balance, and your finances ›
- Episode 1: Should I STILL be worried? ›
- S3 Episode 9: US/China power struggle, the global political balance, and your finances - GZERO Media ›
- Episode 6: Can the US and China find common ground? - GZERO Media ›
- Episode 7: How AI is changing our economy - GZERO Media ›
Episode 4: Broken (supply) chains
Listen: "Other than the impacts of the pandemic, which are easing, and from Russia/Ukraine, I'd say that the greatest risk to global supply chains today and moving forward will likely be from the US-China relationship, and the movement towards selective decoupling," says Jon Lang, Director for Trade and Supply Chains at Eurasia Group.
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Lang is joined by Charlie Reinhard, Head of Investment Strategy for North America at Citi Global Wealth Investments, to discuss how global supply chains have largely adapted to and moved on from changes that occurred during the global pandemic.
While there are some impacts from the war in Ukraine and pent up demand, they also look at how tension between the US and China, as well as increasing regulation and calls for transparency, are changing the shape of supply chains as well as the economy as a whole.
Jon Lang
Director for Trade and Supply Chains, Eurasia Group
Charlie Reinhard
Head of Investment Strategy, North America, Citi Global Wealth Investments
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
- The Graphic Truth: The great supply chain squeeze ›
- Episode 7: Future-proofing: How we fix broken supply chains ›
- Episode 9: US/China power struggle, the global political balance, and your finances ›
- Episode 1: Should I STILL be worried? ›
- S3 Episode 9: US/China power struggle, the global political balance, and your finances - GZERO Media ›
- Episode 6: Can the US and China find common ground? - GZERO Media ›
- Episode 8: Global food (in)security - GZERO Media ›
- Episode 7: How AI is changing our economy - GZERO Media ›
The Graphic Truth: The great supply chain squeeze
The pandemic sent global supply chains into a tizzy. Then, just as economies were embarking on their post-COVID economic recoveries, Russia invaded Ukraine, upending the global grain trade and sending supply chains spiraling further. Supply chain frictions have a lot of unintended consequences: Brexit-related supply chain issues made it hard for some Brits to get their hands on a pint of beer, while China’s punitive zero-COVID policy drove the auto industry – among others – into a full-blown crisis. We take a look at the Global Supply Chain Index from 2000-2022 along with key global economic milestones.
Episode 7: Future-proofing: How we fix broken supply chains
Listen: “Envision supply chains like a strand of Christmas lights. If one light goes out, then the whole strand will stop working,” said Eurasia Group’s Christina Huguet.
On the latest episode of Living Beyond Borders, we’re talking about the moment those lights went out—as the COVID-19 pandemic took hold and disrupted shipping, manufacturing, and labor all at once—and what it will take more than two years later to turn those lights back on and create more resilient global supply chains.
This episode is moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, and features David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth; and Christina Huguet, Industrial and Consumer Analyst at Eurasia Group.
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
David Bailin
Chief Investment Officer and Global Head of Investments, Citi Global Wealth
Christina Huguet
Industrial and Consumer Analyst, Eurasia Group
Will stagflation make a comeback?
America’s fashionistas are super excited these days about 1990s crop tops, baggy outfits, and tattoo chokers, but economists are freaking out over a specter from a different decade: the ’70s. That’s when the US economy sputtered into what's known as “stagflation.”
Stagflation, very simply explained, is the double whammy of a stagnant economy coupled with double-digit inflation. In the mid-’70s it was caused by two oil crises, which doubled the price of crude and triggered recessions in many Western countries well into the early ’80s.
Why now? Six months ago, when COVID-related supply chain disruptions first started pushing up global inflation, there was a heated debate among economists about whether stagflation was looming. The skeptics argued that prices would stop rising when the pandemic ended and things “got back to normal.”
But earlier this year came two unexpected shocks. The first was Russia's war in Ukraine, which has driven the cost of energy, food, and other commodities through the roof. The second was China's zero-COVID policy, which has snarled supply chains even more.
It’s the war, stupid. TIGER — a global index tracking the global economic recovery set up by the Brookings Institution and the Financial Times — warned in its Sunday update that stagflation might affect most economies this year as the war in Ukraine exacerbates a slowdown in the global post-pandemic recovery.
What’s more, on Tuesday the International Monetary Fund will lower its growth forecasts for 143 of the world’s economies, representing a staggering 86% of global GDP.
Barely six months ago, IMF chief Kristalina Georgieva dismissed talk of stagflation when prices were beginning to rise mainly due to pandemic-induced supply chain disruptions. Now, she says that the Russian invasion is a “massive setback for the global recovery” from COVID and admits that “for the first time in many years, inflation has become a clear and present danger.”
How big of a deal is this? Stagflation has often been described as pretty much the worst thing that can happen to an economy outside of a war, a natural disaster or, obviously, a pandemic. If GDP doesn’t grow enough for wages to keep pace with inflation, everyone feels the pinch: purchasing power declines, people lose their jobs, credit and investment dry up, and poverty increases.
Also, recessions tend to have political consequences. US President Joe Biden surely knows that his predecessor Jimmy Carter blames losing his job in part on America’s economic “malaise” at the end of his term. Wherever stagflation hits, expect incumbents to feel the heat from populist insurgents who claim to have the secret sauce for making economic woes go away (spoiler: they likely won’t).
So, should we be worried? As always, economists disagree.
On the one hand, the war and zero-COVID have thrown a wrench into a global recovery that was already limping. The longer the war drags on and the longer Xi Jinping doubles down on his policy to contain the pandemic in China, the more prices will continue to rise and the more supply chains will be impacted by Chinese lockdowns.
Xi might be able to keep China’s economy chugging along with more stimulus spending, but other countries won’t because COVID left their coffers empty. Also, the world’s economy is a lot more interconnected than it was in the ’70s, and since inflation is a global phenomenon, all nations will take a big hit.
On the other hand, it might be too early to determine whether the current economic slowdown will be enough to trigger stagflation in many parts of the world. For instance, the US economy is still doing well and unemployment remains low despite recession fears. (The traditional definition includes high unemployment, but most economists now believe economic stagnation and high inflation are enough.)
"While global inflation is now very high — above 7% in the US, the EU, and the UK — it is still forecasted to lower in the next few months," says Eurasia Group analyst Robert Habib. "For one thing, spending will cool in part because central banks will raise interests rates across the board. For another, supply chain issues will ease as cargo traffic starts to pick up."
Whatever happens, people are definitely curious about stagflation nowadays. Last month, Google searches for the term far exceeded those during the 2008 global financial crisis.
What's your take? Let us know here.Podcast: Lessons of the SolarWinds attack
Listen: Two years after the discovery of one of the largest cyber attacks in history, we’re looking at the current state of security for both software and hardware supply chains.
In early 2020, a group of hackers broke into a software system built and managed by the Texas-based company SolarWinds. The malware they installed was eventually downloaded by thousands of SolarWinds customers, including both private companies and government agencies like the US State Department. SolarWinds has since said the number of clients actually hacked was far lower.
What lessons were learned, and how vulnerable are information and communication technology supply chains today?
In the third episode of Patching the System, a GZERO podcast produced as part of the Global Stage partnership with Microsoft, we’re examining that question with two top experts in the field.
Our participants are:
- Gaus Rajnovic, cybersecurity manager at Panasonic Europe
- Charles Carmakal, senior vice president and chief technology officer at Mandiant
- Ali Wyne, Eurasia Group Senior Analyst (moderator)
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, Stitcher, or your preferred podcast platform, to receive new episodes as soon as they're published.
Podcast: Lessons of the SolarWinds attack
Disclosure: The opinions expressed by Eurasia Group analysts in this podcast episode are their own, and may differ from those of Microsoft and its affiliates.
Gaus Rajnovic: Scope and coverage, that is why those supply chain attacks are so dangerous. They spread easily and relatively quickly.
Charles Carmakal: As an average person though, it is impossible for us to really consider all the variety of cybersecurity attacks that are out there. And in general, the right practice is to have some level of trust of the vendors of the software that you use.
Ali Wyne: Welcome to Patching The System, a special podcast for the Global Stage series, a partnership between GZERO Media and Microsoft. I'm Ali Wyne, a senior analyst at Eurasia Group. Throughout this series, we're highlighting the work of the Cybersecurity Tech Accord, a public commitment from more than 150 global technology companies dedicated to creating a safer cyber world for all of us.
Today we're talking about a cyber attack so massive it became a household name, SolarWinds. In early 2020, a group of hackers broke into a software system called Orion, which was built and managed by the Texas-based company SolarWinds. They installed malicious code and later that spring, it was unwittingly delivered to customers in routine software updates. In total, more than 18,000 clients were affected, including large private companies as well as some government agencies, including the state department and the Department of Homeland Security.
Now the SolarWinds hack is an example of what we call a supply chain attack on information and communication technology, or ICT for short. We're going to talk about what those kinds of attacks are and why they pose a serious and unique threat in the world of cyber attacks.
Joining us now are two industry representatives who work on different sides of this issue. First
Charles Carmakal, who is a senior vice president and chief technology officer at Mandiant, a security research firm working to discover and thwart bad actors who target technology products and services. Charles, it's great to have you here.
Charles Carmakal: Thanks a lot. It's great to be here.
Ali Wyne: We're also joined by Gaus Rajnovic. He serves as a cybersecurity manager at Panasonic Europe, which makes a wide range of technology products, many of which listeners may be familiar with. Gaus, welcome.
Gaus Rajnovic: Hello.
Ali Wyne: Let's dive in first just by providing some additional context around the hacking attack that I mentioned, SolarWinds. Charles you are from Mandiant, which obviously has a relationship to this attack so why don't you explain to us from your perspective first, how bad was this attack? Second, how was it discovered? And third, what was the fallout?
Charles Carmakal: Yeah, absolutely. So I was very close to the event. It really changed my world and I remember it very vividly. So back in December, 2020, I worked for FireEye and that was the organization that ended up detecting and discovering the SolarWinds attack. An employee had registered a second mobile device into our multifactor authentication solution and one of our security analysts had picked that up and noticed that the second enrollment of the secondary device seemed a little bit suspicious. And so he actually reached out to the employee to figure out whether or not he had actually enrolled a second mobile device and he said he didn't.
And that actually kicked off what ended up being probably one of the most notable cybersecurity events in history. And so as the days progressed and as we conducted an investigation to really try to understand how did somebody get access to the credentials of this employee to be able to enroll a second mobile device into our multifactor authentication solution, we started finding evidence of attacker activity.
As part of any investigation, you've got to figure out how did the attackers actually get access to the environment. And as we were digging and digging and digging, the earliest evidence of attacker activity that we saw occurred on SolarWinds' Orion systems that we use at FireEye, but we couldn't tell exactly how did the threat actor get access to those systems. And there were a number of hypotheses that we tested and one of those tests was whether or not there was a potential supply chain attack, essentially meaning was it possible that malicious code was actually sent to our computers through SolarWinds, through a legitimate code process? And what we ended up doing to figure out if this actually was the case, was we reverse engineered these SolarWinds' Orion software. We essentially reverse engineered, tens of thousands of lines of code.
And ultimately, we identified a few thousand lines of code that were heavily obfuscated and looked very suspicious, if not malicious in nature. And the thing that we noticed about it was it was digitally signed by the vendor. So we knew that the code, although it looked suspicious, arguably malicious, we knew that it came from SolarWinds because it was digitally signed unless the digital signatures were stolen or the keys were stolen from SolarWinds. And so as part of the process, we called SolarWinds and we let them know what our findings were. And we got back on the phone with them a few hours later and what they had confirmed to us was that they didn't see any malicious code in the code repositories for the SolarWinds' Orion product.
But what they told us is after the product was built, they see these unauthorized routines that are added to the finished product. And at that point in time, we knew that there was a supply chain attack, and we knew that the legitimate software that was downloaded by thousands of organizations ended up having a malicious component, what we call SUNBURST, which would've allowed a Russian adversary to get access to computer systems that were running the software.
The important thing to note is, this was arguably one of the most expensive cyber weapons that had been developed by a government. And because it was so expensive, the threat actor behind it was very specific in choosing which organizations they were going to leverage this backdoor and this capability to conduct further intrusion activity on. And we suspect that there were less than a hundred organizations that they chose to leverage this capability with.
But those a hundred, some odd organizations are arguably some of the most high profile, hardest to hack organizations out there from both a commercial and a government perspective. The impact was pretty significant in the sense that this enabled the Russian government to get access to data that was of strategic interest to the Russian government. They were very interested in data that governments had, and they were interested in commercial entities that either had access to that same data, or that could facilitate access to the systems or the network of government entities to get that information that was of strategic interest to the Russian government.
Ali Wyne: Wow. I mean, almost felt like I was listening to a new Netflix drama on the SolarWinds attack. Now granted this particular hack took place in 2020, but the narrative that you just related to us, it obviously couldn't be more timely in light of Russia's invasion of Ukraine. Gaus, I want to come to you. Can you give us a basic understanding of what we mean by the phrase supply chain attacks? I mean, why are they dangerous?
Gaus Rajnovic: Absolutely. Let me just say, I am working for a vendor. Part of my answers is basically describing how those attacks influence us vendors, so people who are producing something, but at the same time, how it also affects users of technology.
So coming to your question, scope and coverage, that is what makes them dangerous. They spread easily and relatively quickly. I was also always puzzled why we haven't seen them a little bit earlier because from my vendor side, you were able to see that potential some time ago.
Gaus Rajnovic: And why I'm saying that, let me give example how products are being made. So when you want to create a new product, you would take ready-made components, you just put everything on one pile and then you add a little bit of magic, something that is unique for your product, so that you can be different from the others. But basically, apart from really relatively small number of vendors, most of the vendors are using already made components. So there is a high spread reuse and that is why it spread through our industry and that is why those supply chain attacks are so dangerous.
Ali Wyne: Charles, I want to come back to you in light of the explanation that Gaus just provided and talking about not only sort of software but hardware. When we hear the phrase supply chains, we often think about physical components. So imagine, for example, car parts that are made in one country that are put in cars in another country, but in the case of SolarWinds, we're talking about the targeting of software, not hardware. It's less about a bunch of items that are stored in a warehouse somewhere. Can you explain a little bit more about what is in a software supply chain? And maybe in addition to explaining what is in a software supply chain, help us understand the various points along that chain that potentially could be targeted?
Charles Carmakal: Yeah, yeah. So look, I think there is a general confusion as to what a supply chain attack is and if you asked somebody what a supply chain attack is back in the summer of 2020, they'd give you a very different definition than what they would've told you in January of 2021. And many of our definitions changed in December, 2020 when we heard about the SolarWinds attack.
Ali Wyne: Sure.
Charles Carmakal: And that's kind of because of the ubiquity of SolarWinds and because of how prevalent the attack was. So what happened with SolarWinds is a threat actor found a way to insert malicious code into a legitimate product that ended up getting shipped out to a variety of customers across the globe.
And that software was authenticated by SolarWinds and it was part of a legitimate software update process that SolarWinds had established to allow people to get updated version of their software. And when they say 18,000 some odd organizations could have potentially been impacted by SUNBURST or by this attack, that's really the estimated count of the number of organizations that had legitimately downloaded the software update.
Another way to look at a supply chain attack is, can a threat actor break into one company, perhaps a service provider, and leverage that access to that one service provider and get access to dozens or hundreds or thousands of other organizations because of the legitimate connectivity between that service provider and their thousands, some odd customers?
And we see attacks like this all the time.
Ali Wyne: Gaus, Panasonic is a company that obviously makes a lot of consumer devices. So are there similar cyber vulnerabilities in the hardware supply chain? How can hardware supply chains be targeted?
Gaus Rajnovic: Oh, well, yes. I mean, nowadays, and especially in IT hardware, it is just software in disguise because usually, I mean, if possible, you would like to have a chip that you can use for multiple purposes. So basically you will have a hardware that then you program and then you change the function as needed. So yeah, absolutely. But not if we move a little bit away from that and look generally how hardware and chips in particular, about vulnerabilities in them, it is a longstanding concern and especially for, well, Western governments, because what is happening is that obviously they need to procure products for their environment whenever they're using it. And sometimes that environment tend to rely on relatively old chips, which are not being produced by, let's say, Western vendors anymore. So they need to procure it from elsewhere. Now you have a question, do we really trust that those chips would not contain any undocumented and unwanted functionalities?
So you do have the whole science of testing and verifying that what you are getting is actually what you want to do and that there is nothing else in it. And it is hard.
Ali Wyne: So Charles, let me come back to you. So software supply chains are being targeted, hardware supply chains are being targeted. Well, obviously as listeners, I think all of us, regardless of what our position is or what kinds of devices we have, we all want to take steps to enhance the security of our devices, but I've got to be candid with you. When I think about how many times, just in a given day, how many times my phone asks me to install certain updates, my laptop asks me to install certain updates, my instinct is to install them because I want to enhance the security of my devices, but it's pretty overwhelming to think about whether or not we can actually trust all of these updates that we were being asked to install. Isn't it?
Charles Carmakal: It absolutely is. And a funny argument that was being made during the SolarWinds supply chain days was that the organizations that weren't impacted were the ones that were really late to apply the patch. And so some of them joke that they just had such bad patch management processes that they didn't have to deal with the cybersecurity implications of the attack.
Ali Wyne: Yeah.
Charles Carmakal: As an average person though, it is impossible for us to really consider all the variety of cybersecurity attacks that are out there. And in general, the right practice is to have some level of trust of the vendors of the software that you use, assuming that you're using legitimate commercial software or open source software, and it's to apply the patches that are made available because the vast majority of the time, the patches will actually increase the overall security posture of your system, of your device, of whatever it is that you're installing the patch on.
It's the edge cases where attackers get access to software supply chains and are able to modify legitimate code and insert malicious code there. It happens. I could list off a few dozen examples where it's happened in the past, but for all the times that it's happened in the past, I mean, that's representative of less than 0.001% of all the software updates and the patching that goes on out there. So I think in general, as an average, everyday person, patching is good, patching provides additional security capability and benefits. And when there are situations where patches are actually malicious, usually the community figures that out and they share that information broadly and people take corrective action.
Ali Wyne: No, that's helpful. That's helpful to know. Gaus, I want to come back to you and I want to make a little bit of an analogy between some of the supply chain vulnerabilities that we've been discussing and some of the vulnerabilities that we've seen in the time of COVID and I want to ask you if you can reflect a little bit on that comparison. So specifically, we know that supply chain issues earlier on in the product life cycle, say in raw materials, for example, that they can have a much greater impact later on when products get closer to consumers.
And we saw something kind of similar to this in global supply chain issues we faced, and that we continue to face during the coronavirus pandemic. So for example, if the raw materials were delayed a week due to labor shortages, that might mean that the next step of production was delayed two weeks or the next step four weeks, and so on. Do you think that it's valid to apply kind of a similar model to ICT supply chain attacks? And that is to say, the earlier in the process we see a vulnerability, the worse and broader the negative result and impact might be later on?
Gaus Rajnovic: Unfortunately, the answer is yes. Yes. There is also additional, how to say, complication to that, because usually the earlier in the chain you get, those really basic components they tend not to be so sexy so people don't really pay that much attention to them. And they'll just say, "Yeah, yeah, fine. I mean, that was working for the last 20, 30 years. Why should I look at it? Just take it and run." And I hear one great example for that. So there is something that is called Abstract Syntax Notation Number One, or in short ASN 1. It is something that is being used everywhere. Not many people heard about it, but it is a way how you would format data before you send it over the network to another peer, approximately 20 odd years ago, there was a vulnerability in ASN 1 library. So basically, the way how that data format was unpacked and processed, there was a vulnerability there. It was very bad vulnerability.
So you were able to do remote code execution on many, many devices by just sending a packet to a device and that packet and that vulnerability would be triggered the moment device start processing packet way, way, way before any other logic kicks in. So it was really basic stuff. If you go and look for those old advisories and you would still find them and just look number of the vendors which are affected, well, that used to be affected by that vulnerability, it is staggering. And also, if you look what protocols were implicated, meaning they were using and they still use ASN 1 notation. So it is absolutely unbelievable. But the worst thing is that we are now almost 20 years after that incident and I am not sure that all vendors still patched it because there are still plenty of old vulnerable libraries lying around and some small vendors, they would just take it and run it and nobody would look at it because, "Hey, it was working for the last 20, 30 years. Why bother? It works." So unfortunately, yes, the sooner you get into supply chain, the more damage you can make.
Ali Wyne: That's sobering and it's sobering to think that even 20 years on, 30 years on, that we still have some of these initial vulnerabilities that companies haven't adequately addressed. Charles, you talked about SolarWinds. It affected 18,000, right? I should say it targeted 18,000 organizations, but as you mentioned, the attacks themselves were only actually executed against a handful of government organizations. So let's say that I'm a business owner who didn't have my systems disrupted, can you help the listeners understand what might be going on? Why it might be the case that I, as a business owner, didn't have my systems disrupted by the SolarWinds attack?
Charles Carmakal: Yeah. And just to clarify, so the threat actor leveraged the SolarWinds backdoor to get access to both government and commercial entities.
Ali Wyne: Right.
Charles Carmakal: So there were a number of technology companies and a variety of other companies that weren't government entities that were targeted. Those companies, as you think about the victimology, I mean, a lot of those companies were pretty large organizations with very large customer bases that potentially could have been the next SolarWinds. And in fact, we may not be calling it the SolarWinds attack if it hadn't been detected when it was detected. What I mean by that is the threat actor, I believe, was surprised that they got caught when they did. I think they were surprised when we outed them. I think they probably thought that they had months or years to continue to do what they were doing. They were doing things in such a clandestine and quiet manner, and they were doing it relatively slowly because they didn't want to get caught. They wanted to keep stealing information, again, that was a strategic interest to the Russian government.
Ali Wyne: Sure.
Charles Carmakal: And I think that they were interested in continuing to create other supply chain attacks. When you look at some of the companies that they broke into, I mean, they broke into security companies, they broke into technology companies. I do think that in a way we're all lucky that it was detected when it was, because I think we very likely stopped what could have been the SolarWinds attack, plus the technology company X's attack, plus the technology company Y's attack that a lot of people would've probably talked about.
For companies outside of the big companies that were targeted, so you just think about just any other company out there, look, most organizations aren't of interest to the Russian government. When Russia conducts offensive operations, they do it for a reason. Sometimes they do it because there is political reason. Sometimes they do it for national defense purposes. Sometimes they do it because they're embarrassed by something. And so you think back to 2016, and no, I'm not going to give the example about the US presidential elections, because everybody talks about that, but I'm going to give a different example. I'm going to talk about the attacks against the Anti-Doping agencies. And there are a number of them that were hacked. And essentially what happened was there were Russian athletes that were accused of doping and it was made known that the Russian government was aware of the performance enhancement drugs that Russian athletes were using.
And so the Russian government wanted to prove that the rest of the world uses performance enhancement drugs and they dope and they hacked into a number of the anti-doping agencies and they ended up publishing a lot of information related to athletes that had failed tests before certain sporting events. And so that is an example of one of the reasons why the Russian government may conduct intrusion operations. There's usually a specific reason. Today as we think about the invasion of Ukraine, I think it's interesting that we haven't seen destructive attacks against the Western world yet. Now leading up to the Ukrainian invasion, we definitely saw a number of intrusions against ministries of foreign affairs and a variety of countries by Russian threat actors to steal information, again, of strategic interests to the government.
We definitely saw very destructive and disruptive attacks against organizations in Ukraine, leading up to the invasion and then coinciding with the invasion. But we haven't seen the attacks against other Western organizations. And I think the anticipation and the fear is that the Russian government tends to go tit for tat. They will very likely target the sectors that were most impacted in Russia, but in other parts of the world. So when you think about the sanctions against Russian entities, there's a very good chance or least the belief is that the Russian government will conduct some kind of cyber operation against the US financial services sector. There's fear and anticipation that the Russian government will target energy sector organizations. There's also fear that Russia will look at who are the companies that are publicly aligning with Ukraine and very vocally standing up against Russia and those are very likely going to be targets of Russian espionage and destructive operators.
Ali Wyne: This kind of actually goes to the name of this podcast series, patching the system. Gaus I want to come back to you so obviously, prevention is probably better than patching things up after an attack. Supply chains are getting more and more complex, more and more complicated. The vast majority of everything comes from somewhere else. I mean, what can companies realistically do to protect themselves?
Gaus Rajnovic: Well, trust, but verify. So I would like to split this answer into two. So one is from perspective of organization as a consumer of technology. So obviously you cannot go and, I don't know, disassemble and analyze each and every line of a patch that you receive and do that constantly for each and every device. It is just out of question, but what you can do is that you are monitoring what is going on in your environment. So that should be a part of your normal security operation center or CERT, or some other security function that you have, or should have internally. So you could trust that what you receive is legitimate and you trust that everything should be fine, but still you need to go and verify that things that you are seeing inside your system matches what you would expect to see inside the system.
And Charles said that at the beginning, how they discovered just because they spotted an anomaly. The other part of my answer is when I look this question through my vendor's eyes, what I can do as a vendor to make sure at least what I'm receiving is more or less legitimate or what I'm expecting, so that what I am giving further up supply chain is also do not contain any defects or vulnerabilities or anything else. And again, the same principle, trust, but verify, so all my suppliers. You can start with some really basic things. For example, I would like to know, contact in each of my suppliers who is handling product security vulnerability, meaning that if I find something in that component, I know who to call. Another, very basic thing, soft bill of material or bill of material in general. I would like to know what is inside component that I am receiving.
I would also like to know what tests my supplier have done on that component and what are results. And then I would repeat the testing myself just to make sure that everything matches. So those are some very basic things, but they help a lot. And I am sometimes ashamed to say that industry today, even with all this advancement, we are still having our vendors, and I'm not talking about really small vendors, I'm talking about midsize vendors, that we do not have anybody to call when we have a vulnerability in their product, and we need to fix that.
Ali Wyne: Charles, you heard what Gaus just said. I mean, what are some of the ways in which software and hardware manufacturers can come together to help build trust and to help verify? I mean, how should they coordinate their efforts, how should they keep their lines of communication open, especially because hardware increasingly needs constant updates to software?
Charles Carmakal: Yeah, absolutely. I mean, I definitely agree with Gaus on the trust but verify. And I think there's a certain amount of trust that organizations have to place in their vendors that they're doing the right things and I think most people want to do the right things. It sometimes becomes cost prohibitive to do so, so it doesn't always happen. I think having more transparency amongst security issues that exist that people identify in doing timely fixes is really important. And I'll tell you, it's definitely frustrating to security researchers that identify security vulnerabilities and in particular products, they notify the vendors and they never get an acknowledgement that the vendors heard that there's a vulnerability, or sometimes the vendor will say, "There isn't a vulnerability." Sometimes they'll say, "There is a vulnerability, but we'll get around to fixing it whenever we get around to fixing it."
And so responses like that can be really demoralizing for security researchers. Being as transparent as you can, trying to be timely with fixes, sharing information, and collaborating as a community are really important to addressing this problem.
Look, I'll tell you, things have dramatically changed for the better in terms of the collaboration of vendors and the security community. 20 years ago, we all used to laugh at Microsoft and say that they have arguably a terrible cybersecurity program. But when I look at probably one of the best case studies of an organization that's dramatically changed people's perceptions of them and just how much time and effort and care they put into security, I mean, Microsoft's one of the best examples.
Ali Wyne: So as both of you know, in an earlier podcast episode, I spoke to Annalaura Gallo. She's the head of the secretary of the Cybersecurity Tech Accord. Here's what she had to say about new approaches to combating ICT threats.
Annalaura Gallo: So we've been engaging with UN in the context of the dialogues on responsible state behavior in cyberspace, and we will continue to do so. And we have been encouraging state in particular to introduce a new norm that clearly declares this cyber attacks against the ICT supply chain out of bounds. But our signatories have also been calling for a shift in the way governments and businesses defend from this type of attacks, because taking a purely defensive approach is no longer enough. Organizations should start and think like the attackers.
Ali Wyne: So Gaus, why don't we start with you? What is your reaction to Annalaura's assessment?
Gaus Rajnovic: I agree with assessment. Yes, we need to change things because obviously the way they are at the moment, it is not ideal situation and we would like to improve it. Having said that, so there are multiple points and first point, for example, being somehow putting a supply chain out of bounds, so you should not attack supply chain. It is admirable goal. Personally, I am skeptical that it will be ever achieved just because supply chain is so big. I mean, when you look at single product, how many components are coming and from where, and to how many hands that product is passing, I mean, it is really hard to say, "Okay, so we will just limit everything that relates to supply chain. It is out of bound. We will not attack it. We will not mess with it, but we will go after everything else."
And please bear in mind that there are also initiatives, for example, some national infrastructure, which is necessary for a civilian to live, also to be put out on bounds and things like that. I'm afraid in flux of wars, it doesn't work that way. So admirable, but skeptical towards it. If I may just quickly?
Ali Wyne: Sure.
Gaus Rajnovic: There is another point of not being only defensive. So yes, I heard those ideas multiple times, which is suggesting that we should also go into offensive in a sense, at least to have an active defense. Again, personally, I'm not in favor of active defense because in my mind, imagine two gun slingers in old Wild West. They would just come to the streets. Everybody would move aside. Then they would have a shootout and then pack their things and go away to continue this duel at some other times.
But what will happen is that after that duel, there will be lots of bullets in the walls, broken windows, and somebody will have to go and fix that. So just apply this metaphor into a cyberspace. And yes, you will have bad guys and good guys, and they will having go at each other but in the meantime and then throughout that battle, there will be lots of broken stuff, which somebody will have to fix later. And unfortunately, some of that stuff that has been broken during the conflict, there are people whose life depends on it. And that is the reason why I'm not overly fond of active defense.
Charles Carmakal: Look, I think there are general rules of engagement that certain countries operate by. So for example, when you look at the Chinese government, they typically conduct operations for political or military purposes. They used to also conduct offensive operations for economic purposes, but there was an agreement with president Obama and president Xi where nobody acknowledged hacking into companies in each other's countries, but they said in the future, they wouldn't do it for economic espionage. So I think rules of our engagement are really important. That helps figure out what is the line, when does it get crossed, or what events would be considered crossing the line and a potential escalation. And that's something that we're all thinking about right now. If what happened in Ukraine a few years ago with NotPetya happened in the United States, I'd be afraid to figure out and to see what the United States might do in retaliation.
And so we're all trying to figure out and I think Russia and many governments are very mindful of at what point in time does a cyber operation cross the line and force the victim, or maybe a collection of countries to retaliate in a very escalatory way. And then at what point in time does the retaliation include kinetic consequences? So for example, when we look at the Colonial Pipeline incident from last year, from my perspective, our assessment is that the Colonial Pipeline intrusion was done for financially motivated purposes by organized criminals. We don't believe that Putin had directed that, or at least we have no evidence that Putin had knowledge or directed that. But it'd be a very different thing if there was evidence of Putin directly asking for the intrusion of Colonial Pipeline that would have an impact on the supply chain of gas getting to airplanes and vehicles.
And so, again, I think we're all thinking about the escalation. So it is good to have rules of engagement, but the downside of having rules of engagement is basically everything that you are not expressly saying is prohibited. Is everything else okay to do? So if you say-
Ali Wyne: Right.
Charles Carmakal: "Protect the supply chain," or, "You can't attack healthcare," is it then fair game to hack into financial services companies, into manufacturing companies, and schools, right? So that's the counterpoint. So it's hard to tell, but I think the rules of engagement, generally speaking, are good.
Ali Wyne: I would guess that most of the folks who are tuning in to today's podcast, don't have your expertise either on the hardware side or on the software side. Most of the listeners, I would guess, are just lay consumers. And so for us lay consumers, what can we do? What can we do to enhance the security of our devices, to mitigate some of the issues that we've talked about today?
Charles Carmakal: Yep. There's three things and these are three very important things that are, unfortunately, somewhat hard to do. The first thing is we strongly encourage everybody to use a password manager and have a unique and different password for every single website that you use. And the reason for that is because when a threat actor hacks into a particular website or a company, one thing that they do is they download all the usernames and the passwords for all the users that use that resource. And they attempt to use those usernames and passwords for other websites. It could be email accounts or bank accounts or social media accounts, but that is a very prominent way for how threat actors break into organizations and break into accounts and steal data from people. Number two, use multifactor authentication. So that's basically where you provide an username, a password, and then some secondary form of authentication.
Sometimes it's a code that gets texted to you over your phone, sometimes it's an email that gets sent to you with a code, or maybe there's an app on your phone that gives you a randomly generated number. That helps mitigate the risk of somebody getting access to your account. And the third thing is apply software patches when your device tells you to apply software patches, but try to be cautious and careful. You don't want to get tricked into clicking a link on a website that's telling you to apply a patch, but that's actually malicious. You want to get comfortable and familiar with where would a computer or a device tell you to apply an update and just get comfortable with that and do it when they're asked and try to be mindful and try to be aware that there are trickers or scammers and threat actors that will attempt to trick people into applying patches that aren't real that are actually malicious.
Gaus Rajnovic: I totally agree with Charles, what he said, and those are the things that the consumer can do. I mean, looking from perspective of somebody who is making those products, they need to be as easy to use as possible. And unfortunately, that also limits what other actions users can do. At the other end, also, if I have a product that everybody needs to tweak, I don't know, two hours before they use it, I will not sell that product at all because people want functionality and people want stuff to work as is. So password management, absolutely must, do it. There is one thing that, at least on producing side, we see that it is coming, something that is called security labels. So there are several governments around the world who are toying with that idea. So basically that you have a label on a product that we tell you how secure the product is more or less. It is not finalized yet.
There are some pilot schemes going in Finland and Singapore. Most likely it is something that will come to the market in the next, I don't know, three to five years or thereabouts. So that will be also something that later on consumers could look for and try to find if this product is more secure than alternative and then obviously try to base their purchasing decision on that label. But we are not there yet at the moment.
Ali Wyne: Charles Carmakal, senior vice president and chief technology officer at Mandiant, Gaus Rajnovic, cybersecurity manager at Panasonic Europe, thank you both so much for being here.
Charles Carmakal: Absolutely.
Gaus Rajnovic: Pleasure was mine.
Ali Wyne: Well, that's it for this episode of Patching the System. You can tune in next time for more on the future of cyber threats and also what we can do about them. You can catch this particular podcast as a special drop Ian Bremmer's GZERO World Feed anywhere you get your podcast. I'm Ali Wyne. Thanks very much for listening.