Rear Admiral Anders Grenstad is a former chief of the Swedish Navy. At
earlier stages in his career, he commanded the Karlskrona naval base. In
fact, he's experienced the whiskey on the rocks incident when a soviet
submarine ran aground in the archipelago of Karlskrona. And that was when
Anders was a young Naval officer in 1981. He was also deputy chief of joint
operations when Sweden carried out its submarine hunts in the Stockholm
archipelago in 2014.
Michael Buckle is the managing director for WTW's Downstream Natural
Resources. He has more than 30 years experience in the energy and natural
resources sectors and has particular expertise in subsea cable risk
management, which is obviously an extremely timely expertise to have at the
moment.
Now, two years ago, virtually nobody outside the maritime world was paying
attention to sea-based infrastructure. Then an unknown perpetrator
sabotaged Nord Stream 1 and 2. And then a few months later, merchant
vessels cut the undersea cables connecting the Matsu Islands with Taiwan
proper.
And in October last year in the course of 24 hours, someone damaged one
pipeline and two undersea cables in Estonian, Finnish, and Swedish waters.
The investigations have identified a likely perpetrator, but she is no
longer there. Indeed, it's almost impossible to identify and prosecute
perpetrators of sabotage against sea-based infrastructure.
And that makes it extremely attractive for hostile states and groups to
attack such infrastructure. So Michael, let's start with you since you have
been watching this space for decades. When it comes to man-made threats
against sea based infrastructure, how does it compare to the picture 20
years ago, 30 years ago even?
MICHAEL BUCKLE: A good question, Elisabeth. From an insurance point of
view, I would say we didn't really, really even consider it then. And what
we see today are entirely different threat levels that are geared more
around economic dependence on energy and the impact that those dependencies
have on markets, pricing, on disruption of people and infrastructure. So
it's entirely changed.
I mean, 20 years ago the biggest thing we probably ever had was around a
rogue fishing trawler hooking up some cables for wanting to get some new
nets on board. That was the kind of risk threat that we saw. We certainly
didn't see global actors and global infrastructure being damaged with the
economic consequences that it can possibly have today.
ELISABETH BRAW: Yeah. So we have moved, in other words, from accidental
damage to in many cases, planned damage to sea-based infrastructure.
MICHAEL BUCKLE: Yeah, I would say so. I think threat actors around the
world and geopolitics around the world have certainly changed the influence
they have on everyone's lives in the past few years. And some of the
scenarios we see today certainly didn't exist probably even four or five
years ago. So that impact is important. It's a risk that people have to
think about, they have to consider. And you have to manage it or accept it
or transfer it or try and do something with it.
And think some of the energy risks and some of the energy transition that
we're looking at today, it has big implications for society as a whole, for
the growth of the planet, for the growth of infrastructure, for economic
development. And many of the assets put in place when think of global
interconnecting cables, they're there to energize markets, provide price
parity in markets. So they do become more of a threat or more of a
potential economic destabilizer if they are damaged.
ELISABETH BRAW: And that's exactly the urgent issue that we're facing at
the moment. They are being damaged. And Anders, why is it that it's so hard
for countries to figure out what to do about it? We do have navies and we
do have coast guards. Why is it so hard to protect sea-based
infrastructure?
ANDERS GRENSTAD: For the first thing, we don't have assets enough, the
military assets or coast guard assets to cover everything. If you take
Sweden, 2,700 kilometers of coastline down to a 100 meters of depth. And
it's looking like spaghetti down there. There are so many pipelines, there
are so many internet cables and so on. So that is very hard.
The first time I came across a problem about how important it is with this
watching the pipelines and so on was back in 2007. I was invited by chief
of the Baltic fleet, the Russian admiral. And in his welcome speech to me
he said, now, Anders, you and I together, we have to watch the Nord Stream
pipeline together. And what do you say about that?
ELISABETH BRAW: Wow. How times have changed.
ANDERS GRENSTAD: Yes. And I just told him, well, you watch your own
pipeline. I'm not interested. And if you look to the entire issue here, who
is in charge of watching the cables? Is it the one who put it out, the one
who send the information there? Is it the authorities?
Is it on territorial waters? Is it on economic zone? Is it international
waters? There is a lot of law things that has to be figured out as well. I
help out as a guider for the wind power that is going to be put out in the
open sea. And they are taking care of their own surveillance.
They are building surveillance system in the air and at the bottom because
they know they can't trust just it's the authorities there. But well, if
your internet cable is cut, it's one thing. But if your electricity and
your need your electricity, that will be hardest issue. So it's up to the
civilian provider to do it, but we have to do it together with the
authorities.
ELISABETH BRAW: Yes. And Michael, that is where we are today, right? No
government has enough money to protect with 100% guarantee all the
infrastructure that is out there, as Anders said, the spaghetti of various
pieces of infrastructure, and then on top of that, the offshore wind power
that is being built in so many places. So what do you think of what is
already happening in addition to what Anders mentioned that owners and
operators and users of infrastructure are doing? What else are you seeing?
And what else do you think will need to happen?
MICHAEL BUCKLE: Yeah. So I wrote down before this call patrol would be
impossible because the length of the assets is huge when you aggregate it
together. The number of kilometers of cables in the water, power cables in
the water are huge. Some of the wind farms are just single point
connections to shore.
But the future development around a super grid that allows multiple
connections for wind farms to different countries makes it even more of an
exposure. I think it's really difficult for operators. I mean, Anders
mentioned some of the surveillance that they will put on substations and
they will put on some of the subsea assets.
Generally, I see that when we have a technology that can detect a break in
a cable or damage to a fiber optic, at that point, it's too late. The
damage has already happened. But you know where the damage happened. So I
suspect what we need to start thinking about and start looking at is what
is a normalized set of activity around an asset in the North Sea or in
wherever we might be looking at?
And then probably technology needs to look at changes in those patterns and
changes in those movements, marry that to intelligence around politics and
geopolitics. And if you think there's a heightened level of risk, what
changes are happening that may make that or may make your asset more
susceptible to some damage?
We talked earlier, Anders and I, about just generally what's going on in
Suez canal and the impacts we've had there, what's happening in the Gulf of
Oman and the Straits of Aden. They're all key economic areas where shipping
and the transportation of goods and energy is really, really important. So
you start to think about physical infrastructure assets, oil, gas, power,
carbon capture storage facilities even in future, they will become
targetable.
ELISABETH BRAW: That is an excellent point. It's not just today's different
categories of sea based infrastructure but tomorrow's categories as well.
And crucially, as you said, Michael, carbon capture storage, which will
obviously be in the seabed. And as Michael just mentioned, the potential of
AI essentially keeping an eye on patterns around sea-based infrastructure,
how do you think navies could implement that?
Is that an area where there is already an opportunity to work with
technology companies as such solutions available? And could they be easily
implemented by navies and coast guards? And then on top of that, how would
navies and coast guards be able to collaborate with operators and owners of
this infrastructure?
ANDERS GRENSTAD: Thank you for that easy question, Elisabeth. I think it's
the wrong way to go because navy and coast guard, it's so few assets have
them trying to work only on sea-based stuff that is down there. It has to
be to the provider. And of course, they can support it and you can
cooperate with it.
I think what the worst thing we can do right now is to be scared or
whatever. Hey, they're going to blow everything up here. Are we using our
assets wrong? I think that is the main thing about this one. Who should be
doing this one? If I was an enemy or whatever, I would like people to get
scared and put a lot of money in things that actually doesn't have anything
to do with defending it because don't have to do it.
I can just say, hey, I blew up this line. Still is the fact, it takes a lot
of assets to really go down there and blow a lot of stuff up. It's not
easy. It's easier to blow a pipeline up because you can see that pipeline.
But all the small threats that is going on all over the Baltic and
somewhere else in the world, it's not like it's just go down there and cut
it off.
You have to find it. And a lot of them are down in the mud. So I wouldn't
make the problem too big. It has to be solved. But I think the one who puts
it out have to be more aware that he is in charge of seeing to that it's
safe. And of course, with support from coast guard. But coast guard can't
work on international waters. It is in the economic zone.
ELISABETH BRAW: Yes. Yes, exactly. And Andres, if I can follow up with
another question for you. NATO has a new coordination cell looking after
these things called the Critical Undersea Infrastructure Coordination Cell.
Has it made native waters safer? It is a coordination cell.
It's not a military command, so it can't really do anything. But has it
made NATO waters safer? We are speaking on the day, I should add, when
Sweden may finally get the final yes vote for its native membership. So
this has even greater relevance for Sweden as we speak.
ANDERS GRENSTAD: Definitely. I hope tomorrow morning we wake up and the
world is a safer place, for Sweden anyhow. I think it's good that it's
coming up to the surface, that we are discussing it like we are discussing
in this program right now because it has to come to the surface. And it's
not an easy task to just solve like this. But it has to be discussed, and
it has to be decided who is in charge of solving what part of these issues.
Because there are two things in the world right now that the Western world
and entire world actually need is free trade in sea, the supply chain. And
we have to see to that. That one is easy. And we have to be able to use
underwater cables and pipes and see to that one works. But we can't use all
the resources just for these things. We have to divide it because there are
other jobs that all the navies and coast guards have to do as well.
ELISABETH BRAW: Other jobs and an increasing number of other tasks that
they have to go after, and not just in their own waters as we've seen in
the Red Sea navies from countries far from the Red Sea can be called upon
to try to restore order in the Red Sea or indeed in the Strait of Hormuz.
Michael, coming back to you, we have already talked about which role
technology can play. And you mentioned AI. Is there anything else you think
that can be done on the private sector side that would make this
infrastructure, whatever the infrastructure may be, safer? Could it be made
safer the way it's manufactured, something like that? Or is it just the
case that monitoring and surveillance is the way to go on the private
sector side.
MICHAEL BUCKLE: I think Elisabeth, there's a couple of comments to make
there. When any investor or developer is going to build an asset offshore,
there's a number of risks that they're going to look at, whether that's the
technology risk itself, the finance risk, the market risk, the regulatory
risk.
And I think sort of the threat of off shore damage by a threat actor is a
relatively small risk within that chain. And they're not going to not do
the project, as Anders said, just because they think there's a heightened
threat there. I think what is important is the damage event to an asset
itself is a relatively bearable type loss, whether that's by an individual
company or by a group of insurance companies. It's a very bearable loss.
What is harder to bear are the downstream consequences of that, the
economic consequences on markets and market pricing. But I think one of the
things that companies can do is very carefully map and locate the assets.
And say that slightly tongue in cheek because the seabed is a dynamic
environment. When you put a cable in the seabed and bury it 3 feet or 4
feet or 5 feet, you hope it stays buried for 4 or 5 feet. And you hope it is
where you put it.
But if you go down the line with tides and winds and everything else a few
years time, you might find it's not buried to three feet anymore. It's
spanning across the seabed, and it's not where you thought it was. It's
moved a little bit. And it's the continuous managing and risk managing of
the asset that I think is important. And that will give investors and banks
and lenders and insurance companies plenty of security around how you look
after the asset. If you look after it well, I think you're in a good
position.
ELISABETH BRAW: Michael, you mentioned losses. And that raises the question
of, who pays? And we know that the Nord Stream sabotage took place in a
geopolitical setting. And we don't know yet who did it, but it does have a
major effect on the owners and operators and possibly insurers. So in such
a situation when sea based infrastructure has been sabotaged and government
authorities have been able to identify a likely perpetrator, who pays?
MICHAEL BUCKLE: So to answer that question, I just need to break it up into
a couple of parts. So a normal insurance policy will pay for physical loss
or damage to the asset by a peril that's not excluded by the policy.
Generally speaking, war would be excluded from an insurance policy.
So that becomes a government risk. That becomes an economic risk. Sabotage
and terrorism can be covered by insurance policies. There is a big market
for sabotage and terrorism. The biggest discussion we see around sabotage
and terrorism is really the amount of time allowed to cancel policies if
the threat level gets too high.
So we would see anything from 21 days notice of cancelation to 48 hours
notice of cancelation. So that cover does exist. But when you get to a
heightened environment of exposure, you can generally see your insurance
cover disappearing. So we would always say to a client, you should act as
if you're uninsured.
But in the good circumstances where you are insured and you have a
indemnified loss under your insurance policy, i.e. something that's not
excluded and it's based on physical loss or damage, then the insurance
market would be paying out those claims. And that's not just one insurance
company.
It's a syndicated spread of risk globally. How you manage large losses is
you spread them between as many people as you can. And that's the basic
principle of insurance and reinsurance. And that's how we spread these
risks around the world.
ELISABETH BRAW: But the fact that the number of cases of sabotage have
taken place within the context of geopolitical tension, Anders, then raises
the point of, what constitutes an act of war? And that's something that the
American courts in the first instance are trying to determine.
But a question that faces everybody in the private sector and in navies and
coast guards today, what constitutes an act of war? And so from your
perspective today when you look at threats and risks and sabotage to
sea-based infrastructure, how do you know what constitutes an act of war?
ANDERS GRENSTAD: I don't think you can talk about an act of war in the long
because we have been now for a couple of years in the gray zone area where
things are happening. You have the cyber warfare that hits you. You have
the media thing that the fake media is coming in from all over the world,
this happened and that happened. And the only thing you can do actually is
to see what have happened and not what people say it's going to happen
because we are in the gray zone area.
ELISABETH BRAW: Yes. Nobody declares war anymore. It just sort of sneaks up
on us. And on that point, Michael, if I can briefly mention the Houthis,
some observers, analysts, Red Sea watchers have flagged up the risk of the
Houthis targeting undersea infrastructure next. If you were the operator of
undersea infrastructure in the Red Sea, how would you go about trying to
make sure that it stays as safe as possible?
MICHAEL BUCKLE: I mean, it's very difficult. Once your infrastructure is in
place, there's not much you can do. You can raise your awareness of the
situation. You can look for changes in behavior. But once your
infrastructure is in place, it's pretty much in place. And I would tend to
step back and go into before you build infrastructure, how should you build
it to minimize the threat? How should you make it as safe as possible?
So a lot of the decisions we need to take in future are more in the front
end engineering space around design and protection and duplicity and not
single points of failure. That's the best way to manage the risk in the
longer term because then you're just open to the vagaries of what's going
to happen and you have very limited levers to pull on how you're going to
manage it, I'd suggest.
ELISABETH BRAW: Yeah. That is good advice. And Anders, I'll finish with you
with a similar practical question. If you were still chief of the Swedish
Navy and you received a report of a suspected intruder near pipelines in
Swedish waters or in the Swedish exclusive economic zone, what would you
do?
ANDERS GRENSTAD: Well, whether you're aware of it and if you have assets
there, yes, we would send it there. But just like when we were hunting
submarines for 50 years in this country, when you get, hey, there's a
submarine over there. It's already gone when you were there. It already has
happened. And that is the problem with it.
Of course, the Swedish Navy today and other navies, they will act if they
get an alarm. That's like police would act if somebody is dialing 911. But
when you're there, the murderer or whatever has already taken place. And
now we can start investigate it and see who did it.
ELISABETH BRAW: Yes. Yes.
ANDERS GRENSTAD: That's why I think we have to see to that we are not
damaged that hard if just one line is broken because it has to have double
assets and things, like it will keep on working. And it doesn't matter if
it's internet, if it's gas pipelines or electricity from wind farms. We
have to see to it that it's going to work even if somebody is trying to do
something about it.
And it's not that easy to do it. It's easier to be a pirate on the ship or
shoot the missiles to a merchant ship than to go down 70 meters and try to
find something and cut it off. And the blowing up of the Nord Stream must
have taken a lot of planning to be able to do it like that. And I think
today, it is an awareness. It would be hard to do what has been done.
ELISABETH BRAW: Yes. And on that note, I think in a couple of years' time,
we'll have to come back to the subject and see what private operators,
owners, insurers, navies, and coast guards have collectively come up with
to try to keep the infrastructure as safe as possible. But as you said,
Anders, and as you also said, Michael, it's not going to be possible to
just rely on navies and coast guards to keep the infrastructure safe.
And with that, thank you, Anders Grenstad, and thank you, Michael Buckle.
And above, thank you, all, for listening to Geopolcast. In upcoming
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