The Norwegian Intelligence Service’s assessment of current security challenges 2016 FOCUS

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The Norwegian Intelligence Service’s assessment of current security challenges

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FOCUS

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INTERNATIONAL

66

TERRORISM

The threat posed by militant Islamists is serious, and has become increasingly complex.

ISIL, al-Qaeda and their associates are taking advantage of the state collapse occurring in their areas of operations. At present, Norway

is a legitimate yet not high- priority target.

THREATS IN

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CYBERSPACE

In 2015, foreign intelligence activity targeted political decision-making processes, military affairs and high tech- nology. There is a growing threat

to Norwegian interests and businesses.

THE NORWEGIAN INTE LLIGE NCE SERVICE

(NIS)

The Norwegian Intelligence Service Act of 1998, the 2001 Instructions for the Intelligence Service and the 2004 Personal Data Act form the basis of our legal framework. The Intelligence Service

Act sets out our overarching mission, which is to collect, process and analyse

information that pertains to Norwegian interests and relates to foreign states,

organisations and individuals. The act contains a non-exhaustive list of Norwegian interests, and we receive a

prioritised overview of tasks from the authorities annually. Given that NIS is a foreign intelligence service, we are not at liberty to monitor or otherwise covertly collect information on Norwegian

nationals on Norwegian territory.

Our compliance with Norwegian legislation and international human rights is monitored by the Storting’s Committee

for the Monitoring of Intelligence, Surveillance and Security Services

(‘EOS-utvalget’).

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AND AFRICA

Many of the region’s countries are struggling with persistent system collapse and a lack of government control. This has heightened the level of violence and enabled neighbouring states and non-state actors to intervene

in local conflicts in pursuit of their own interests.

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ASIA

Regional arms races are a source of growing distrust among the region’s countries, and regional conflicts have the potential to trigger the use of military force.

Developments are also affected by Xi Jinping’s considerable efforts to raise China’s foreign

policy profile.

RUSSIA

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Russia has proved increasingly willing and able to employ a wide range of means to achieve its politi-

cal aims. The modernization of the armed forces enhances Russia’s ability to exert influence, including

in the High North. The military intervention in Syria represents a

shift in Russian foreign policy.

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Editorial

Lieutenant General Morten Haga Lunde

T

he Norwegian Intelligence Service (NIS) supplies Norway’s authorities with assessments intended to provide the best possible basis for decision- making on matters which affect Norwegian security.

For the purpose of informing the public debate about the many security challenges facing Norway today, NIS has published an annual unclassified assessment every year since 2011.

The global security situation is complex, incorporating as it does everything from changing defence and security policies in Norway’s vicinity to transnational threats and regional conflicts with global implications. NIS collects, processes, and analyses information on states, organisations and individuals that could pose a genuine or potential threat to Norwegian interests. FOCUS 2016 offers assessments on geographic and thematic topics central to NIS’s work.

Developments close to Norwegian borders are particularly significant. The implications of a more confident Russia on the foreign policy stage will remain central to NIS’s work going forward. Russia is proving increasingly willing and able to use a wide range of means to achieve its political aims. In 2016, the country will continue to pursue an offensive foreign policy line, primarily towards former Soviet states. What is new, however, is Russia’s higher ambitions elsewhere, including in the Middle East. The modernisation of the Russian armed forces has improved the country’s ability to further its great power ambitions. The military has become more mobile, responsive and better coordinated. The defence sector remains a top priority and new capabilities are continually being introduced. In the High North, the result of this is that Russia now exerts greater influence over Norway’s – and our allies’ – freedom of action.

The level of conflict in the Middle East and North and East Africa is high, and may become even higher in 2016. The Middle East and North Africa are in the throes of upheaval. The region is experiencing a series of violent conflicts with overlapping fault lines and external involvement. Non-state actors are seeing their scope for

action expanding; this presents a mounting challenge to the region’s already precarious state structures. A heightened level of conflict has also triggered migration on a scale not seen in decades. This development will challenge regional stability and have implications for both European and international order.

Central to NIS’s work is our contribution to preventing terrorist attacks targeting Norway and Norwegian interests. At present, the main threat to Western interests is posed by the two terrorist organisations the Islamic State of Iraq and the Levant (ISIL) and al- Qaeda. Over a period of several years, the international terrorist threat has become heightened as a result of the conflict in Syria and Iraq, with an attendant spike in the number of planned and executed terrorist attacks in Europe. The threat to Western interests from militant Islamists is serious and complex. Although Norway is not a priority target, as a Western country it is considered an adversary by groups including ISIL and al-Qaeda, and therefore a legitimate target. When analysing the terrorist threat to Norway and Norwegian interests, it is important to take into account domestic affairs and how they relate to international developments. NIS therefore works closely with the Norwegian Police Security Service in order to secure as comprehensive a picture as possible of developments which shape the terrorist threat.

Intelligence operations conducted in cyberspace by other states pose a grave and mounting threat to Norwegian authorities and businesses. The digitalisation of society means that data storage and processing is becoming central to all human activity, making society itself more vulnerable. There are states, groups and individuals all seeking information on Norway’s political, economic, technological and military affairs. The intelligence operations being carried out against Norway in cyberspace are technically sophisticated and targeted, making the monitoring of state and state-sponsored threat actors a priority for NIS.

Editing concluded on 10 February 2016.

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“Russia has proved increasingly

willing and able

to employ a wide

range of means

to achieve its

political aims.”

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CHAP. 1

RUSSIA

The military intervention in Syria represents a shift in Russian foreign policy.

The country’s regional aspirations, and its willingness to pursue those aspirations, are

becoming increasingly evident. Russia has become more confident on the foreign policy

stage, as evidenced by its interventions

in Ukraine and Syria.

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New submarines

In 2015, the Northern Fleet took receipt of the first Severodvinsk- class submarine. This is a high- performance nuclear-powered submarine capable of carrying weapons that can be used to attack surface vessels, other submarines as well as on-shore targets. The Northern and Pacific Fleets have both received new nuclear-powered submarines fit- ted with intercontinental ballistic missiles. Both fleets are expected to receive additional new sub- marines in the years ahead.

RUSSIA

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Russia

Summary

R

ussia has proved increasingly willing and able to employ a wide range of means to achieve its political aims. The leadership’s world view has become more strongly anti-Western, and the Russian perception is that Western countries are working actively to weaken and undermine Russia, including by fomenting so-called ‘colour revolutions’, supporting pro-European forces in former Soviet states and seeking regime change in Moscow. Russia’s domestic and foreign policies are largely aimed at preventing such developments.

Russian ambitions elsewhere in the world, primarily the Middle East, have become noticeably higher of late. Alt- hough the military intervention in Syria was primarily intended to assist a struggling Syrian regime, it also supports Russia’s growing great power ambitions. In future, similar efforts will be accompanied by diplomatic offensives aimed at making Russia indispensible to the solving of international conflicts; this is a trend that looks set to continue in 2016.

2016 will also see Russia continue to pursue the more offensive foreign policy line introduced after President Vladimir Putin’s return to office in 2012. The Kremlin primarily pursues this line towards the states it considers part of its sphere of interest. Former Soviet states with pro-Western policies will continue to be subjected to considerable Russian pressure in the form of economic sanctions, support to pro-Russian forces and – in extremis – the use of military force.

The Russian leadership’s threat perception also goes some way towards explaining the authoritarian shift currently taking place in the country. The Russian political elite is extremely authoritarian and centralised, and power rests with a handful of decision-makers. Putin’s inner circle has shrunk and become more homogenous at the same time, and is now dominated by individuals with defence, intelligence and security backgrounds.

However, Russia is facing long-term economic uncertainty, and this will challenge the political leadership.

Low oil prices and sanctions against the country have made its dependency on energy revenues painfully clear, a situation which will not be improving in the short term.

Russian GDP fell by nearly four per cent in 2015. In lieu of an oil price recovery, renewed growth will require thorough reforms, reforms which the country’s leadership appears unwilling to initiate. Russia’s economic troubles are therefore expected to continue in the year ahead.

In 2016, the combination of tougher domestic policy measures, a strained economic situation and a more offensive foreign policy line will shape Russia and make it a more unpredictable actor on the world stage.

The Russian interventions in Ukraine in 2014 and Syria in 2015 featured a military force that has largely succeeded in its ongoing modernisation efforts. Modernising is a high priority and continues apace despite the country’s current economic woes. Russia’s collective military capability has been reinforced considerably over the past decade, and modernisation efforts have resulted in a much leaner, more mobile and more responsive military organisation. The strategic nuclear forces, air and space forces, navy and airborne forces remain the top priorities.

Key investment areas include airspace and outer space control, as well as long-range conventional precision- guided weapons.

The rebuilding of military infrastructure in the Arctic, which has been going on for several years now, is testament to Russia’s ambition to exert national control in the region. New and modernised equipment has increased capability, and combined with a stronger presence and more exhaustive training, the Russian armed forces are now capable of exerting much greater influence over Norwegian and allied freedom of action in the High North.

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“In 2016, the combination of

tougher domestic policy measu-

res, a strained economic situa-

tion and a more offensive foreign

policy line will shape Russia and

make it a more unpredictable

actor on the world stage.”

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RUSSIA

Thus far, Russia has failed to achieve its aim of increasing Russian influence in Ukraine and loosening Kiev’s ties to the West. Moscow will therefore continue offering extensive support to the separatists in Donbass.

SEEKING CONTROL IN FORMER SOVIET STATES

Russia is employing a wide range of means to increase its control of the members of the Commonwealth of Independent States (CIS). Moscow is also seeking to assert its position as a powerful and influential actor in the

Middle East.

[ FOREIGN POLICY ]

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R

ussia’s top foreign policy priority, to increase its influence in former Soviet states, remains firm.

Most of the states in question are members of the Commonwealth of Independent States (CIS), and the Russian policy toward them is primarily based on a desire to prevent these countries from forming closer economic and security-related ties to the West. The Russian leadership’s thinking equates closer cooperation between the CIS countries and the West with a loss of Russian influence. This world view largely explains Russia’s aggressive behaviour toward some of its neighbours.

Russia’s annexation of Crimea and military operations in eastern Ukraine have made the country increasingly predisposed to use military force in the region. Ukraine aside, Moldova and Georgia are the two countries most prone to Russian destabilisation attempts; the two states have been subjected to Russian pressure for more than 20 years, and have Russian breakaway republics on their territory. Both countries pursue pro-Western foreign policies and are seeking to loosen their political and economic ties to Russia. Moscow has responded with threats, economic sanctions and support to pro-Russian political parties and separatist forces. The Kremlin will continue its efforts to alter the direction of these countries’ foreign policies, and Ukraine, Moldova and Georgia will all be facing considerable political instability and economic turmoil at home.

Ukraine will continue its implementation of sweeping political, legal and economic reforms in 2016, although the pace of reform will be slowed down by widespread corruption and major political differences, including within the government coalition. To complicate things further, oligarchs and right-wing extremist parties exert political power outside the national assembly. On the foreign policy arena, Ukraine stands more united and is led by parties seeking to link the country more closely to Western institutions. Ukraine’s association agreement with the EU came into force on 1 January despite Russian pressure.

In the new Ukrainian national security strategy, Russia is defined as the country’s main threat, and President Poroshenko has raised the possibility of applying for NATO membership following a referendum.

Russia has thus far failed to achieve its main strategic aim in Ukraine, which is to strengthen its influence over the country and weaken Kiev’s ties to the West. Moscow will therefore continue to supply the rebels in Donbass in eastern Ukraine with extensive military and political support, in an effort to force Kiev to change course. In addition to keeping up its military pressure in the east, Russia will be increasing its use of various sanctions aimed at undermining Kiev’s ability to govern.

2016 will see Belarus attempt to form a closer relationship

with other European countries and strengthen its ties to the EU. The country is deeply integrated with Russia, especially militarily, yet Minsk has long sought to avoid dependency on Moscow, for instance by refusing Russia’s proposal for a Russian airbase on Belarusian territory. President Aleksandr Lukashenko has refrained from supporting Russia’s military intervention in Ukraine, and Belarus currently enjoys a good relationship with the authorities in Kiev. Although it risks increasing pressure from Russia, Minsk will seek to continue the current balancing act.

Russian efforts to promote regional economic integration have faltered in recent years, despite the establishment in early 2015 of the so-called Eurasian Economic Union. This is due in part to the unequal distribution of advantages and disadvantages among the Union’s member states – Russia, Belarus and Kazakhstan.

Fundamentally, integration efforts have been hampered by growing mistrust in Minsk and Astana regarding Russian policy and intentions in the region, feelings which have only deepened since the annexation of Crimea. Distrust among the members and the unequal distribution of economic benefits will continue to impede integration.

Efforts to develop the CSTO have also come to a halt after Russia successfully improved the organisation’s military structure and responsiveness. This slowdown is partly due to the fact that Russia has been forced to focus on its military operations in Ukraine and Syria, but is also the result of scepticism among the Central Asian countries toward Russia’s intentions in the region, which in 2013 prompted Uzbekistan to withdraw from the CSTO.

However, Moscow will be using the Taliban’s progress in Afghanistan and mounting instability there to argue in favour of closer security-related cooperation under the auspices of the CSTO.

Russia takes a stand outside its near abroad Russia is seeking to assert itself as a powerful and influential player in the Middle East. Although the Russian operation in Syria is primarily based on political objectives, it will require a steadily increasing military effort which has the potential to spark both cooperation and confrontation.

Russia’s military campaign in Syria, launched in August/

September 2015, represented a shift in Russian defence and security policy. It is the first time since the Soviet Union’s venture into Afghanistan in 1979 that Moscow has interve- ned militarily outside Russia’s near abroad. Russia’s stated aim in Syria is to form an international coalition to defeat the terrorist organisation ISIL, whose stronghold is in the eas- FORE IGN POLICY

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tern part of the country. In actual fact, however, Russia has focused its efforts on attacking other armed rebel groups in western Syria, which has helped prop up the regime of Syria’s President Bashar al-Assad. In 2015, Assad was forced on the defensive in his fight against Syrian rebel groups.

Russia has used the Syrian campaign to cement its role as a key player in the Middle East. Moreover, the campaign has helped detract attention from Russian efforts to destabilise Ukraine. The Syrian campaign is widely covered by Russian media and has helped boost President Vladimir Putin’s popularity ratings.

The Middle East has long been a region where Russia, and before that the Soviet Union, has sought to secure influence. Through energy and arms exports, Moscow has formed closer ties to Syria, Iran and Iraq, as well as Saudi Arabia, Turkey and Israel. The Middle East has become increasingly important to Moscow ever since the dawn of the ‘Arab spring’ in 2011, and Russia shares its opposition to so-called ‘Western-inspired regime change’ in the Middle East with the regimes in Tehran and Damascus.

In Moscow, the Arab spring conjures up memories of the so-called ‘colour revolutions’ that have been a feature of the Russian near abroad since the late 2000s.

The operation in Syria has nevertheless complicated Russian relations with other states in the region, including Saudi Arabia, Israel and Turkey. The relationship with Turkey reached a nadir after the downing of a Russian fighter jet over the Turkish-Syrian border in November. Although Russia is actively seeking a political solution to the conflict in Syria, Moscow risks being pulled deeper into it and suffer the resulting political, economic and military consequences, which would be considerable. Already, Russia has become a more obvious target for Islamist terrorists.

In light of its frosty cooperation climate with the West, Russia is continuing attempts to strengthen its political, military and economic ties to other countries. Asia and the Middle East are central to this, and Moscow has been working to bolster non-Western institutions such as the Shanghai Cooperation Organisation, which includes China and – as of 2015 – India and Pakistan.

The Kremlin has also stepped up its cooperation with China. There are more frequent high-level political meetings, and a number of substantial deals have been signed. The collaboration with China is referred to as a strategic partnership, and is more substantial now than it was a few years ago. Efforts to increase cooperation have mainly taken the form of more extensive energy trade, but also a closer military partnership. After the oil price nosedived in late 2014, and as China’s economic growth has decelerated, the two countries have found it difficult to realise the energy agreements they have entered into. Meanwhile, diverging

security and economic interests are likely to limit the oppor- tunity for developing the partnership into a binding alliance.

Cooperation with the West on Russian terms The relationship between Russia and the West is at its coolest since the Cold War, and the Russian leadership has accused Western countries of seeking regime change in Moscow. Meanwhile, the conflict with the West has helped boost support for the Russian leadership at a time when the country is in the midst of a recession. Although Russia relies on a working relationship with the West, it is expected to remain opposed to it for the foreseeable future.

The conflicts in Ukraine and Syria have complicated the relationship between Russia and the West. In Russian state media, the situation is presented as a geopolitical conflict.

According to the Russian authorities, forces in the West are seeking to topple legally elected regimes through so-called

‘colour revolutions’, by using military, economic, political or diplomatic means. In Moscow’s eyes, NATO and lately also the EU are the prime driving forces behind this Western policy. Russia’s new security strategy, published at the turn of the year, refers to NATO as a threat. Rhetorically speaking, this is a step up from the 2014 military doctrine.

The war in Syria, the emergence of ISIL and the flow of refugees into Europe are all described as consequences of a Western policy whose purpose is to provoke regime change. Nonetheless, Russia has argued that, in light of the threat posed by ISIL and the high number of refugees arriving in Europe, the West should cooperate with Moscow. One of the aims of Russia’s involvement in Syria is to demonstrate to the West that it needs to maintain a good relationship with Moscow.

However, Russia is also reliant on maintaining a working relationship with the United States and Europe. This is partly due to the fact that the EU will remain Russia’s main trading partner despite Russian attempts at finding new export mar- kets. In 2014, 70 per cent of Russian oil exports and 90 per cent of its gas exports were destined for the West. Meanwhile, Western restrictions in the wake of the Ukraine conflict have made the economic situation in Russia more challenging.

Russia’s relationship with the West is characterised by long-term challenges combined with short-term and so- mewhat conflicting concerns, including on the domestic policy front. In 2016, the combination of tougher domestic policy measures, a strained economic situation and a more offensive foreign policy line, both within the former Soviet Union and beyond, will come to shape Russia and make it a more unpredictable actor on the world stage.

RUSSIA

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FORE IGN POLICY

Putin has increased cooperation with China and Xi Jinping by holding multiple top-level summits and signing a number of major collaboration agreements.

Following Russia’s military intervention in Syria, Putin met with Syria’s President Bashar al-Assad in October. Russia is seeking to use the situation in Syria to argue in favour of closer cooperation with the West, which Moscow hopes will lead to the confrontation over Ukraine being resolved, and consequently the lifting of Western sanctions.

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The Russian regime fears that the economic downturn could trigger social discontent and protests.

RUSSIA

GROWING CONCERN FOR DOMESTIC

UNREST

As the leadership’s threat perception becomes cemented and

the economic downturn continues, fear of popular discontent and internal

unrest is mounting. Although Putin’s popularity ratings remain high and the

opposition weak, the Russian people is being subjected to ever tougher

measures to control it.

[ DOMESTIC POLICY ]

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R

ussian domestic policy is largely a reflection of the threats the Kremlin believes Russia to be facing. Both the Arab spring and the 2011/12 demonstrations in Russia heightened fears of internal unrest. In 2011/12, when hundreds of thousands of protesters took to the streets in cities across Russia, the country seemed to be on the cusp of political revolt. A constant fear of uprisings remains in the minds of the members of Vladimir Putin’s inner circle, fears which were further exacerbated by the large-scale demonstrations in Ukraine in 2013/2014, which forced President Viktor Yanukovych to resign.

Fear of political revolt and social discontent has led the Putin regime to gradually tighten its grip on Russian civil society. The authorities are continually expanding the range of measures used to suppress oppositional activi- ties, including tough legislation and sweeping authority for the security services. The media are tightly controlled and freedom of speech is severely curtailed. A string of new measures aimed at limiting foreigners’ scope for action in Russian civil society have been introduced, including legislation which prevents foreign ownership of media outlets and foreigners’ contact with civilian Russian organisations.

Developments in web-based media have followed a similar trajectory to that of the broadcasting outlets, and the Kremlin has consolidated its control of all major Russian internet companies. Legislation regulating web access has been tightened, with blacklisting of websites and indivi- dual web pages introduced in 2012. Subsequent amend- ments have caused thousands of websites to be blocked by Russian internet service providers, offering the Russian authorities powerful tools with which to monitor and suppress domestic opposition. In light of the current situation, domestic control looks set to remain a high priority.

Despite Putin’s high popularity ratings and the Russian public’s limited support for the political opposition, there is a risk of growing social discontent in the year ahead.

The extremely challenging economic situation has put the heavily centralised regime under severe pressure. There is little chance of economic improvement and political willingness to introduce reforms remains low. The population has begun to feel the effects of the economic downturn, and the number of protests has increased slightly in the past year. The current situation is particularly problematic as a new election cycle is about to commence, with Duma elections this year and presidential elections in 2018.

Economic downturn requires tough priorities The oil price fall seen since mid-2014 has exposed the Russian economy’s dependence on oil revenue. Over- all, Russian GDP shrank by nearly four per cent in 2015, and in the absence of an oil price recovery extensive reforms are required to secure renewed growth. Such reforms are unlikely to see the light of day, however, and Russia’s economic woes are expected to worsen.

Combined with Western sanctions, the falling oil price has caused dramatic fluctuations in the value of the rouble, which has seen a sharp devaluation against other cur- rencies. These fluctuations have made it difficult to plan economic activity involving roubles, and the devaluation has put up the price of imports. Russia’s own counter- sanctions exacerbate this, as foodstuffs previously im- ported from the EU and Turkey are now being brought in from elsewhere. Overall inflation is accelerating because Russia relies so heavily on importing finished goods. In 2015, the combination of inflation and recession caused people’s purchasing power to decline sharply.

These negative developments are having a severe impact on state finances. Despite repeated rounds of cuts and the weaker rouble compensating slightly for the oil price fall, the government is aiming for a budget deficit of three per cent in 2016. Although Russia’s government debt is modest, capital market terms are unfavourable and the country’s leadership is eager to avoid borrowing.

The government has therefore resorted to compensating for the deficit by spending a considerable proportion of the country’s reserves.

In 2016, the government budget deficit will run to approximately three per cent, forcing Russia to spend a sizeable proportion of its reserves. If the oil price fails to recover, the government will struggle to finance its own budget from 2017 onwards.

DOMESTIC POLICY

“Overall inflation is accele rating because Russia relies so heavily on importing finished goods.

In 2015, inflation and recession

caused people’s purchasing

power to decline sharply.”

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The sale of clothes and shoes in Russia fell by 20 per cent in 2015, and a number of foreign brands are now pulling out of the country.

If the economic situation fails to improve in 2016, the Russian regime will struggle to finance the 2017 government budget.

RUSSIA

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In previous statements, the political leadership has been adamant that the economy will begin to recover in 2016. However, unless the oil price recovers substantially, the Russian state will struggle to finance its own budget from 2017 onwards.

As shown by the graph, growth rates were already falling while the oil price remained well above USD 100/

barrel, i.e. before the economy was hit by both Western sanctions and the most recent oil price fall of summer 2014.

This suggests that fresh growth will require structural reforms to boost productivity; however, there is little to suggest that the current political leadership intends to introduce such reforms.

Shortly after the Duma elections in autumn 2016, the 2017 budget will be up for approval. In recent years, the highest-priority budget items have been defence, security and social security, primarily pensions. Given that the Kremlin is seeking to finance its defence ambitions as fully as possible, the 2017 budget will highly likely include further cost-cutting measures that will affect the population. The number of Russians living in poverty has increased sharply since winter 2014–15, following a long period of rising living standards. This negative development looks set to continue in the years ahead.

Long-term demographic developments are also disconcerting, and the Russian population will shrink in the coming years. Moreover, the proportion of working-

age people will drop sharply as the large post-war cohorts retire and live longer, while the small 1990s cohorts reach working age. Initially, the relatively low proportion of working-age individuals will limit unemployment at a time of weak economic development. However, unless productivity increases sharply, a lack of manpower could hamper economic growth in the longer term. In light of the challenging economic situation, it is likely to become necessary to introduce cuts in pension payments and raise the retirement age.

In sum, developments in the Russian economy will force the authorities to tackle a number of serious economic challenges in 2016. Unwillingness to implement the necessary structural reforms will prolong the economic crisis and require the authorities to make painful economic prioritizations between various recipients and sections of society. Even in the short term, continued prioritisation of defence and security will require equivalent cuts in the funding of social benefits such as pensions, healthcare and education. These cuts, should they be made, increase the risk of political opposition and government protests in the time ahead.

Collectively, the deteriorating economic situation, signs of increased social unrest and government restrictions give rise to uncertainty regarding political developments, and tensions in Russian society could quickly spiral into political instability.

9 7 5 3 1 -1 -3 -5 -7 -9

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016**

120 110 100 90 80 70 60 50 40 30 20

Sources: IMF, BP Statistical Review

* The oil price equals the average up to and including the third quarter. The GDP growth rate is the IMF’s estimate for the year as a whole.

** The oil price and growth rate equal the official Russian estimates contained in the 2016 budget.

Real GDP growth, left axis Oil price, year average (Brent, 2014 dollars per barrel), right axis

Russian GDP growth vs. the price of oil

DOMESTIC POLICY

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In February last year, the Russian oil and gas conglomerate Gazprom completed its first wintertime oil shipment from the port of Novoportoskoye on the Yamal Peninsula. Despite setbacks, the Russian authorities have a stated aim of increasing traffic through the Northeast Passage by a factor of 20 by 2030.

RUSSIA

HIGH AMBITION – LOW AC TIVIT Y LEVEL S

Although the Russian leadership is eager to exploit the Arctic’s on- and off-shore resources, a host of challenges

has forced it to revise its regional ambitions and their timeframe.

[ THE ARCTIC ]

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Resource extraction on or near the coast:

Originally based on increased civilian shipping along the Northeast Passage; now, traffic destined directly for Russian ports is

a more realistic prospect.

Russia has identified three areas of interest related to resource exploitation in the Arctic. 2016 will throw up challenges in all three of them:

Deep-water oil and gas extraction:

Due to low energy prices and Western sanctions, a number of projects will have to

be either scaled back or postponed.

The Northeast Passage as an international trade route:

Traffic has declined sharply in recent years, and ice conditions remain treacherous.

D

ue to low energy prices, continued Western sanctions and little international interest in transits through the region, it looks as though the plans for resource extraction in the Arctic and use of the Northeast Passage will have to be scaled back or postponed. Western sanctions have forced Russian oil and gas companies to continue deepwater and Arctic energy projects without Western partners. According to the Russian energy ministry, sanctions have left Russian actors short of over 150,000 components needed to complete the construction of planned offshore platforms in the period to 2020.

On a general basis, the sliding oil price has made capital-intensive and risky projects less attractive. The Russian authorities nonetheless retain the ambition to develop Arctic resources in the longer term, and exploration drilling on the northern continental shelf is therefore expected to continue, albeit at a slower pace than planned. Meanwhile, a floating nuclear power plant named Akademik Lomonosov is nearing completion at a St Petersburg shipyard. It has has been under construction since 2007, and is scheduled for relocation to Murmansk this year. The plant’s intended location is the Russian Arctic’s Chukotka region, and it is expected to become operational in 2021 at the earliest.

Some of the large-scale, long-term projects that began before energy prices fell will continue. Production has started at the Prirazlomnaya field in the Pechora Sea, and construction of a large LNG plant on the Yamal Peninsula continues. In order to achieve the aim of maintaining Russian oil and gas output levels, Russia needs to develop its on- shore resources in the Arctic, especially as older fields farther south will have to be retired in the longer term.

The extraction of natural resources along or near the Arctic littoral remains Russia’s main rationale for investing

in civilian shipping in the High North. Originally, Russia’s intention was to take advantage of the much shorter distance between Europe and Asia compared to the conventional Suez Canal route. Now, however, traffic between the Russian ports along the Northeast Passage is a more realistic prospect. The ice conditions along the route are extremely challenging for much of the year, and the number of vessels using the Passage as a route between Europe and Asia has declined sharply in recent years. In June 2015, Prime Minister Dmitry Medvedev nonetheless indicated that the authorities were planning to increase traffic through the Northeast Passage by a factor of twenty from the current level by 2030. This would require the current fleet of nuclear-powered icebreakers to prioritise this task, or alternatively to increase the number of icebreakers planned for construction. The shipping of liquefied natural gas from the Yamal Peninsula plant could result in a sharp traffic increase along the Siberian coast; the plant in expected to reach full capacity by 2020.

Traditionally, Russia has emphasised cooperation and stability in the Arctic as prerequisites for the extraction of energy resources in the High North, and the country has been keen to portray itself as a responsible actor adhering to the law of the sea in the region. Although this remains a valid view, the Russian authorities have also come to believe that there is a need to tighten national control in Arctic. In the past year, statements by powerful Russian actors regarding the Arctic have focused more on potential threats. From a Russian point of view, this is necessary in response to what Moscow perceives to be a reinforcement of NATO and an offensive Western policy, as well as an alleged resource race in the Arctic. As long as relations between Russia and the West remain frosty, the Kremlin’s approach to the Arctic will likely continue to focus on the threat dimension.

THE ARCTIC

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The SA-21 mobile strategic air defence system was paraded in Moscow’s Red Square in May 2015. This is the same system that was deployed to Syria in November.

RUSSIA

REFORM IN SUPPORT OF RUSSIA’S GREAT

POWER AMBITIONS

For the first time since the Soviet era, Russian forces are conducting military operations outside Russia’s near abroad. This not only represents

a shift in Russian foreign policy, but also offers the reformed Russian military the chance to showcase improvements in weapons systems,

response times and coordination.

[ THE RUSSIAN ARMED FORCES ]

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F

or Norway and our allies, these developments mean that we will see Russia becoming more adept at re- stricting our freedom of action in the Norwegian Sea, the Baltic Sea, the northern Atlantic Ocean and the Black Sea.

The Russian interventions in Ukraine in 2014 and Syria in 2015 featured a military that has proved largely successful in its ongoing modernisation. Russia’s collective military capability has been reinforced considerably over the past decade, and the enduring aim of the reforms is to make the military more accessible in support of Russia’s great power ambitions.

The defence reform continues to shape developments in capability and force structure, and has resulted in a much leaner, more mobile and more responsive military organisation. The strategic nuclear forces, air and space forces, the navy and the airborne forces are the top priorities in the modernisation plans. Key investment areas include airspace and outer space control as well as long-range conventional precision-guided weapons. In addition to tra- ditional military means, the Russian approach to interstate conflict includes comprehensive use of all means available to the state. This includes both overt and covert use of diplomatic, economic, information-based and technological means. By coordinating the use of such measures, Russia can present an opponent with contemporaneous yet conflicting challenges that will need to be handled by different parts of the decision-making apparatus.

One step taken early on was to transition from a mobilisation concept to a military based on standing forces, high readiness and mobility, all controlled by a joint operational command. Improved responsiveness has enabled rapid force movements and concentrated use of resources, with the staging of regular snap exercises.

Russian capabilities were evident during the Ukraine crisis, and operations in Syria have shown that the Russian forces are capable of launching assaults using long-range precision-guided weapons on short notice.

The reforms have been accompanied by major equipment investments. Given the high priority afforded to the modernisation programme by Putin and his inner circle, the reforms continue despite Russia’s challenging economic situation. However, the authorities have been forced to cut funding to the programmes compared to the original plans.

For now, 2015 appears to have seen the peak of Russian military spending.

In 2015, the country’s defence spending reached the highest level seen in over 20 years. The equivalent of more than five per cent of GDP was spent on military- related budget items, a proportion which by international standards is very high indeed.

In real terms, the budget item ‘National defence’ increased by approximately nine per cent from 2014 to 2015, yet it ended up more modest than originally planned; this cut is largely attributable to the challenging economic situation in Russia. 2016 looks set to be the first year since the turn of the millennium when defence spending is cut in real terms.

When the defence ministry announced its initial budget cuts, it was claimed that these would not affect Russia’s acquisition programmes. Given the current economic outlook, however, it would prove extremely difficult to fully finance the ambitious 2011–2020 armament programme.

The Russian authorities have announced that work on the 2016–2025 armament programme has been suspended for macroeconomic reasons; however, defence spending is expected to remain high, with substantial sums reserved for investment.

Growing willingness to use military force as foreign policy instrument. Russia’s military operations abroad are testament not only to its expanding military capability, but also to its growing military and political self-confidence. The Kremlin believes that by acting resolutely and proactively in recent years, it has deterred other state actors. In a changing geostrategic landscape, Moscow has clearly demonstrated its ambition to expand Russian scope for action on the foreign policy stage.

Its recent international operations have also offered Russia a platform on which to demonstrate and test its new military equipment. Long-range precision weapons are central to Russian thinking regarding future military conflict, and both sea- and air-launched cruise missiles have been used during Russian operations in Syria. Russian and international media have reported widely on this, serving both foreign and domestic policy purposes as well as Russia’s arms industry.

Years of real conflict have afforded the Russian armed forces considerable experience, and the country has solved practical challenges in a pragmatic manner. Based on its use of military force in recent conflicts, Russia appears to have become more liable to use such force in future.

Russian military development is relatively fast-paced and will remain a high priority. Although a challenging budget situation could lead to cuts in training levels, Russia’s new capabilities are here to stay.

THE RUSSIAN ARMED FORCES

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Higher level of more complex military activity a result of improved capability. Over time, the combination of political willingness, economic framework and ambitious modernisation programmes has raised training and exercise standards. The activity itself indicates a higher skill level across all levels and domains.

Russia stages annual live exercises for the strategic nuclear forces, albeit with sporadic exceptions. These exercises are intended to demonstrate and train Russia’s nuclear deterrent and retaliation capabilities, and receive widespread media coverage. In October 2015, Russian media announced that the strategic rocket forces had completed test launches from various platforms across the country. The High North is frequently used as a backdrop for testing and training the use of long-range weapons systems, including weapons that can be fitted with nuclear warheads and carried by bombers and submarines.

Traditionally, the exercise routine in the Russian forces culminates in an annual strategic exercise, usually held in autumn. Since the practice of staging major annual exercises which rotate between the military districts resumed in 2008, exercises have been held across the country. Readiness tests are staged regularly, including in Norway’s vicinity. Although defensive in nature, readiness tests have been known to be used as a backdrop for more aggressive rhetoric.

The Northern Fleet’s naval vessels primarily sail in local waters, but have also been deployed to the Mediterranean and the Indian Ocean. Some vessels have made well- publicised crossings of the Atlantic. Air defence exercises are held frequently. In recent years, strategic bombers have completed long sorties from the Mediterranean in the south to areas near the North Pole.

Over the past decade, overall military activity has reached a stable, high level. Although this is due to a number of factors, the consistent prioritisation of the defence sector is fundamental to it both from an economic and a political perspective. The ongoing armament programmes involve extensive testing of new platforms and systems, and ordinary training activity has its own rationale. However, military activity can also be used intentionally or opportunistically for political purposes. We expect Russia’s multifaceted exercise and training activity to continue in 2016.

Russia improves control and area denial capabilities near Norwegian borders

For several years now, Russia’s extensive re- establishment of military infrastructure in the Arctic has signalled a desire on the part of Moscow to exercise national control in the region. The re-establishment

has come in addition to capability enhancements in the form of new and modernised equipment. Combined with a stronger presence and a higher level of exercise activity, this has enhanced the Russian forces’ ability to exercise control and area denial in Norway’s vicinity.

Russia’s main military strategic interest in the Arctic is global nuclear deterrence, which is the main task of the Russian armed forces based on the Kola Peninsula. In order to improve its national control in the Arctic, Russia has in recent years given priority to military development along the Northeast Passage. The Kola Peninsula and the Arctic are crucial to Russia’s ability to project power. The establishment of a joint Arctic military command in 2014 has improved the planning, coordination and execution of operations in the High North.

The Arctic air warning chain and the new early warning radars will improve Russia’s situational awareness of movements originating from the American continent.

Russia began positioning the SA-21 strategic air defence system on the Kola Peninsula in autumn 2014; the system has a stated range of 250 kilometres, and is identical to the system Russia deployed to Syria in November 2015.

A series of surface vessels and submarines are currently either in construction or being phased in, and the Northern and Pacific Fleets have taken receipt of new nuclear- powered submarines equipped with intercontinental nuclear missiles. Furthermore, the first SEVERODVINSK-class submarine has been transferred to the Northern Fleet;

this is a high-performance nuclear-powered submarine capable of delivering weapons against surface vessels, other submarines and on-shore targets. The Northern and Pacific Fleets are expected to take delivery of a number of new submarines in the years ahead.

New land force equipment, command systems, anti- aircraft systems and intelligence equipment are also being phased in. The prospect of dedicated Arctic brigades has figured in Russian media since 2011, and the first brigade of this kind was established in Alakurtti in late 2013.

Russia has announced the establishment of another in the Yamalo-Nenetsk area in 2016; this is a location roughly 1,600 kilometres east of the Norwegian border. Collectively, the establishment of these two brigades will reinforce the Russian army presence in north-western Russia.

From a Russian perspective, these predominantly defensive measures enable Moscow to exercise national control in the Russian Arctic and protect the nation against threats from a northerly direction. Moreover, it improves Russia’s ability to restrict Norwegian and allied freedom of action in the northern Atlantic Ocean, the Norwegian Sea, the Baltic Sea and the Black Sea.

RUSSIA

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1 2

3

4

5

Russian forces train extensively in the High North; this photo is from an exercise near Murmansk. Russia’s first Arctic brigade was stationed at Alakurtti in late 2013.

THE RUSSIAN ARMED FORCES

Strategic sorties

In recent years, Russian strategic bombers have conducted long sorties from the polar region in the north to the Mediterranean in the south. The arrows indicate approximate routes. The sorties form part of testing programmes and exercises, but are also used for political posturing.

1. Alakurtti: Arctic brigade

2. Severomorsk: Northern Fleet headquarters 3. Franz Josef Land: new runway and air warning radar 4. Novaya Zemlya: air warning radar and strategic air defence 5. Salekhard: Planlagt arktisk brigade

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DAMASCUS KIEV

MINSK

MOSCOW

CHISINAU

SYRIA UKRAINE

MOLDOVA BELARUS

RUSSIA

ALEPPO CHINA

THE HIGH NORTH

Russia’s operations in Syria are the country’s first outside its near abroad since the Soviet era.

Moscow is seeking to increase its influence elsewhere in the world as well.

RUSSIA SUMMARISED

Syria

Russia will be asserting itself as a powerful and influential actor in the Middle East. In Syria, its stated aim is to establish an inter- national coalition against ISIL; in practice, however, Russia has bolstered the Assad regime by attacking other rebel groups.

Its operations in the country have enabled Russia to strengthen its diplomatic ties to the West and detract attention from Ukraine.

Although Russia is actively seeking a political solution in Syria, Moscow risks being pulled deeper into the conflict itself, with all the attendant political, economic and military consequences that would bring. The Russian involvement in Syria has shown that Russia is capable of deploying long-range precision- guided weapons on short notice.

Ukraine

Despite Russian pressure, Ukraine’s association agreement with the EU came into force at the turn of the year. The country’s new national security strategy de- fines Russia as a main threat, and President Poroshenko has raised the prospect of applying for NATO membership following a referen- dum. Russia has consequently failed to achieve its aim of increas- ing Russian influence in Kiev, and will uphold its economic sanctions and support to the rebels.

Moldova

Ukraine aside, Moldova is the country most prone to Russian destabilisation efforts. The repu- blic has been subjected to Russian pressure in various areas for more than 20 years, and has a Russian- supported breakaway republic on its territory. Despite this, Moldova pursues a pro-Western foreign policy, which Moscow has responded to with threats, economic sanctions and support to separatist forces. Pressure will continue to build in 2016.

Russia

Summarised

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DAMASCUS KIEV

MINSK

MOSCOW

CHISINAU

SYRIA UKRAINE

MOLDOVA BELARUS

RUSSIA

ALEPPO CHINA

THE HIGH NORTH

In autumn 2014, Russia began positioning the SA-21 air defence system on the Kola Peninsula. The system is identical to the one de- ployed to Syria in November 2015.

The Northern Fleet has taken receipt of brand new nuclear-po- wered submarines carrying inter- continental ballistic missiles. The first Severodvinsk-class subma- rine has been transferred to the

Fleet, with more to come.

Early warning radars and the Arctic chain of air warning ra- dars enhance Russian situational

awareness of movements from a northerly direction.

The land forces are receiving new equipment, and new control sys- tems, air defence and intelligence equipment are also in the pipeline.

The first dedicated Arctic brigade was established at Alakurtti in 2013, with a second announced in

the Yamalo-Nenetsk area, which lies 1,600 kilometres from the

Norwegian border.

China

Due to its deteriorating rela- tionship with the West, Russia is seeking to bolster its relations with other countries. It has expan- ded its cooperation with China through energy projects and mili- tary contracts, as well as frequent top-level meetings. The two coun- tries refer to their relationship as a strategic partnership. However, diverging security and economic interests are likely to limit the chances of a binding alliance.

Belarus

Although Belarus is closely integrated with Russia, it has long sought to avoid a unilateral dependency on Moscow. It is looking to form a closer relationship with the EU and European countries, and abstained from supporting Russia’s intervention in Ukraine; its links with Kiev are solid. Belarus will continue to pursue its current balanced policy, and consequently risks being subjected to mounting pressure from Russia.

The High North

Due to the region’s trove of untapped resources and its military-strategic significance, Russia maintains a particular focus on the Arctic and the High North. This has prompted large-scale military investments in the region; these are primarily defensive in nature and aimed at threats from a northerly direction. Additionally, Russia has improved its ability to restrict Norwegian freedom of action, and that of our allies, in the Norwegian Sea, Baltic Sea, the northern Atlantic and the Black Sea.

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A number of countries in the Middle East and North and East Africa are struggling with persistent systemic collapse, leaving a growing number of areas without government control. The high level of conflict in the region

is at risk of rising further in 2016.

THE MIDDLE EAST AND AFRICA

CHAP. 2

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Tartus

The Russian naval base at Tartus in Syria is the only one of its kind outside the former Soviet Union. The Russians have defined the Tartus base as a logistics facility and technical support base.

THE MIDDLE E AST AND AFRICA

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T

he regimes have lost control in two ways: firstly, they have been rendered incapable of exercising efficient political and administrative control, and secondly, they have lost much of their people’s loyalty. The level of violence is rising, fuelled by non-state actors’ increasing scope for action and other states’ intervention in local conflicts, in pursuit of their own interests.

In the Middle East, civil war has reduced the authorities in Syria, Iraq and Yemen to controlling only parts of their national territories.

The involvement of external actors and their economic, political and military support to opposing parties in the conflicts limits the prospect of resolution. Meanwhile, militant Islamist groups such as ISIL and al-Qaeda are exploiting the lack of government control to acquire and cement local dominance. Local militant groups are joining forces in powerful regional networks; this is a consequence of the erosion of these countries’ government apparatuses, and serves to further undermine national control.

Similarly, there are no signs of a solution to the conflicts plaguing many African countries. Libya lacks a government with territorial control, which has offered militant groups with a regional agenda greater scope for action in the country. This affects the security situation in neighbouring countries, including Egypt. There is little to suggest that the situation in Mali will stabilise in the year ahead. In the Horn of Africa, the Somali conflict is becoming regional as militant groups originating from Somalia come to affect the security situation in nearby countries. In South Sudan, the civil war will rage on in spite of the peace deal signed by the warring parties.

The violence and lawlessness seen across the Middle East and Africa holds great significance for Norway and our allies. Conflict and the lack of government control across a number of countries have led to the breakdown of border controls, triggering migrant flows on a scale not seen for decades. The flow of refugees headed for Europe will continue in 2016 as the underlying conflicts remain unsolved. This will put pressure on the entire region and have a negative impact on neighbouring countries with limited resources and capacity to handle the refugees. Moreover, state collapse has turned several of the region’s countries into safe havens for the training and planning of attacks on Western and Norwegian interests.

The Middle East and Africa

Summary

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The rhetoric in Iran and

Saudi Arabia’s tussle for

regional influence is riddled

with sectarian undertones,

exacerbating the region’s

religious fault lines.

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The people of the Middle East will continue to be faced with a number of major challenges, many of which are related to the lack of legitimate authorities to provide security across parts of the region. This photo shows a market in Sanaa, Yemen.

The Norwegian Intelligence Service’s assessment of current security challenges 2016 FOCUS

2 0 1 6

FOCUS

66

80

THE NORWEGIAN INTE LLIGE NCE SERVICE

(NIS)

The Norwegian Intelligence Service Act of 1998, the 2001 Instructions for the Intelligence Service and the 2004 Personal Data Act form the basis of our legal framework. The Intelligence Service

Act sets out our overarching mission, which is to collect, process and analyse

information that pertains to Norwegian interests and relates to foreign states,

organisations and individuals. The act contains a non-exhaustive list of Norwegian interests, and we receive a

prioritised overview of tasks from the authorities annually. Given that NIS is a foreign intelligence service, we are not at liberty to monitor or otherwise covertly collect information on Norwegian

nationals on Norwegian territory.

Our compliance with Norwegian legislation and international human rights is monitored by the Storting’s Committee

for the Monitoring of Intelligence, Surveillance and Security Services

(‘EOS-utvalget’).

Contents

26

50

06

Editorial

T

“Russia has proved increasingly

willing and able

to employ a wide

range of means

to achieve its

political aims.”

RUSSIA

The military intervention in Syria represents a shift in Russian foreign policy.

The country’s regional aspirations, and its willingness to pursue those aspirations, are

becoming increasingly evident. Russia has become more confident on the foreign policy

stage, as evidenced by its interventions

in Ukraine and Syria.

Russia

R

“In 2016, the combination of

tougher domestic policy measu-

res, a strained economic situa-

tion and a more offensive foreign

policy line will shape Russia and

make it a more unpredictable

actor on the world stage.”

SEEKING CONTROL IN FORMER SOVIET STATES

Russia is employing a wide range of means to increase its control of the members of the Commonwealth of Independent States (CIS). Moscow is also seeking to assert its position as a powerful and influential actor in the

Middle East.

R

GROWING CONCERN FOR DOMESTIC

UNREST

As the leadership’s threat perception becomes cemented and

the economic downturn continues, fear of popular discontent and internal

unrest is mounting. Although Putin’s popularity ratings remain high and the

opposition weak, the Russian people is being subjected to ever tougher

measures to control it.

R

“Overall inflation is accele rating because Russia relies so heavily on importing finished goods.

In 2015, inflation and recession

caused people’s purchasing

power to decline sharply.”

HIGH AMBITION – LOW AC TIVIT Y LEVEL S

Although the Russian leadership is eager to exploit the Arctic’s on- and off-shore resources, a host of challenges

has forced it to revise its regional ambitions and their timeframe.

D

REFORM IN SUPPORT OF RUSSIA’S GREAT

POWER AMBITIONS

For the first time since the Soviet era, Russian forces are conducting military operations outside Russia’s near abroad. This not only represents

a shift in Russian foreign policy, but also offers the reformed Russian military the chance to showcase improvements in weapons systems,

response times and coordination.

F

Russia’s operations in Syria are the country’s first outside its near abroad since the Soviet era.

Moscow is seeking to increase its influence elsewhere in the world as well.

RUSSIA SUMMARISED

Russia

A number of countries in the Middle East and North and East Africa are struggling with persistent systemic collapse, leaving a growing number of areas without government control. The high level of conflict in the region

is at risk of rising further in 2016.

THE MIDDLE EAST AND AFRICA

T

The Middle East and Africa

The rhetoric in Iran and

Saudi Arabia’s tussle for