Companies, governments in west must be ready for cyber conflict if sanctions against Russia gain steam: Robert Gottliebsen

If sanctions against Russia gather momentum, it will develop into a cyber conflict so all companies and governments in the western region need to be on alert. Picture: Michal Cizek/AFP

The market aspects of the sanctions war between Russia and the NATO allies started exactly as expected with pressure on oil and gas prices and a strengthening of the gold market. US shares fell sharply but then recovered so overall it was not a big conventional market event.

The Australian market actually rose as analysts pointed out that Russia can bring on a global recession if the US goes too far on sanctions. The US depends on Russia (and Ukraine) for C4F6 gas, neon, palladium and scandium. C4F6 gas is used for etching node logic devices; neon is essential for chip making and Palladium is used for computer memory.

In our technology society they are the modern equivalent of oil. Meanwhile, the west’s aerospace industry led by Boeing depends on Russia for titanium. To that add Europe’s dependence on Russia for gas.

President Biden can hit Russia but now knows Putin’s return blows will be severe. Its another potential Afghanistanso Markets expect the US will back down.

The only area where there can be a “fair fight” is cyber.

If the 2022 sanctions gather momentum, I believe they will develop into a cyber conflict so all companies and governments in the western region need to be on the alert.

Russia will step up its cyber attacks. One of it’s great skills is manipulating opinions on western social media which clearly played a role in the last US election. They have since been enhanced and will be used again.

Several events that took place in the lead up to the sanctions give us clues as to how this cyber war will be conducted.

Both sides have considerable skills in the area and, surprisingly, in Russia there is a deep fear of US capacity in the cyber field.

Indeed, Russia has been unnerved by the American intelligence ability to gain knowledge of Russia’s Ukraine plans. Fear of US abilities erupted in Russia when President Putin called for unwavering support from his senior ministers for his actions in Ukraine. One Minister, Sergei Naryshkin, who is head of the SVR, Russia’s foreign intelligence service, actually hedged his public support before coming into line. Western reporters say the Russian spy chief is concerned at the ability of the US intelligence.

For a long time, Russia denied that there were cyber gangs attacking US and other international companies seeking ransom.

In an apparent attempt to stop the US from imposing sanctions, several weeks ago the members of the Russia based REvil gang were arrested and assets seized.

The gang has carried out numerous attacks on major global companies, including the July attack on software provider Kaseya and the May attack on the world’s biggest meat-processing business JBS.

Surprisingly Russian and US officials co-operated in the lead up to the arrests in recognition of each other’s skills. That co-operation now stops.

However, it was the first time Russia had admitted cyber gangs existed and there is little doubt that the gangs will now be given full encouragement to resume their attacks.

Australian companies need to be prepared.

In the lead up to this week’s events, Russia was clearly showing its skills in meddling with the conversations taking place in Ukraine social media. The US believes that one of the Russian activities is to become involved in Facebook and other social media site conversations on issues that divide a country.

Need Russia might have played a big role in fostering the community divisions that we now see in the US. This is not an easy area to prove but the Russian social media thrust is likely to intensify as the sanctions gather momentum.

Of particular focus in the cyber war will be the role of the crypto currencies led by Bitcoin. The supporters of the crypto currencies see them as playing a similar role to gold as a safe haven at a time of conflict.

But that status was damaged in the Canadian truckies dispute when large numbers of trucks blocked the US-Canada border over vaccination issues.

The Canadian government used its emergency powers and froze the banking assets of the truckers. That meant they captured the crypto currency holdings but not gold.

The cryptocurrency market saw the dangers in a sanctions war and crypto currencies fell in advance of the latest actions.

US institutions have big stakes in crypto currencies and will be damaged if there is a collapse in the market. The 2022 sanctions war will be an important test for the crypto market.

One surprise in the early stages of this war the stance of China which did not come out and join Russia in a vigorous broadside of the West. China now has a big stake in its Belt and Road initiative which links the east and the west through Crimea and parts of Ukraine. China does not want to destroy its hard won European links which are vital in this project. But it also needs strong Russian support for its own aims. China has a delicate balancing act.

Of course, in terms of the hip pocket, the oil and gas front is of is the major concern in the West.

Russia is one of the world’s largest oil and gas suppliers. If western sanctions disrupt Russian exports or the conflict damages Russian export pipelines travelling through Ukraine then the oil price will jump sharply. And, of course, Russia may resort to curbing its exports to punish the West.

For the moment there is not a high likelihood of serious supply disruptions.

The most immediate fallout on the first round of sanctions came from, Germany’s decision to suspend authorisation of the Nord Stream two natural-gas pipeline from Russia. But because the pipeline is not yet delivering gas it won’t lower immediate supplies to Europe.

But Russia has declared the sanctions an “act of war” so there are a lot more moves to come.