The U.S. Naval War College is a Navy's home of thought. Established in 1884, NWC has become the center of Naval seapower, both strategically and intellectually. The following issues in national security lecture is specifically designed to offer scholarly lectures to all participants. We hope you enjoy this upcoming discussion and future lectures. Well, good afternoon and welcome to our fourth issues in national security lecture for this academic year. I'm John Jackson and I'll serve as the host for today's event. The series originally conceived as a way to share a portion of the Naval War College's academic experience with the spouses and significant others of our student body. Over the past years, it has been restructured to include participation by the entire Naval War College extended family to include members of the Naval War College Foundation, international sponsors, civilian employees, and colleagues throughout Naval Station Newport and around the world via Zoom. We'll be offering an additional 12 lectures between now and May of 2023 spaced about two weeks apart. We have indicated that people who participate in at least 70% of the lectures can receive a certificate of participation and that includes whether you watch them here, you watch them on Zoom, or you watch them on YouTube. We will use the honor system so keep track of your attendance and towards the end of the series we'll ask you to identify those who've attended the 70% and are interested in that certificate. So we'll make that happen sometime next year. An announcement detailing the dates, topics, and speakers of each lecture will be posted by our public affairs office. I want to alert you to a very special lecture that is not part of our INS series, but is open to our Zoom audience. On Tuesday, 15 November 2022, NASA astronaut Captain Sonny Williams will provide a lecture about NASA and space exploration. It'll take place 1830 to 200 so note that change of time and our PAO office will put out the Zoom connection information just prior to that event. So it promises to be a very, very interesting discussion of what's going on in the world of NASA. Looking a little bit further ahead on Tuesday, the 21st of November, Commander Andrea Cameron will speak about global climate issues. So on with the main event, please feel free to use the chat feature of Zoom and we'll get to as many questions as we can at the end of the presentation. I'm very pleased to introduce our speaker, Dr. James Holmes. Jim is one of the most prolific writers at the college and is known by almost everyone in the maritime security business. He holds the JC Wiley chair of maritime strategy here at the college and he previously served on the faculty of the University of Georgia School of Public and International Affairs. A former U.S. Navy surface warfare officer, he was the last gunnery officer in history to fire a battleship's big guns in anger during the first Gulf War in 1991. He earned the Naval War College Foundation Award in 1994 recognizing him as the top graduate of his class. His latest book, A Brief Guide to Maritime Strategy is a primary selection of the Chief of Naval Operations Professional Reading Program. I'm not exactly sure why, but former Secretary of Defense James Mattis considers him troublesome. So we may want to go into that today, I don't know. His talk this afternoon will explain why it's so hard for the U.S. Navy to prevail in strategic competition or warfare in the Pacific, even though it remains stronger than its competitors. I'm pleased to pass the baton to a friend and colleague, Dr. Jim Holmes. Thanks, Captain Jay. Captain Jay, he actually failed to mention he was my very last Blossom uniform here at the Fleet Seminar Program back in the mid-1990s, and a good Blossom he was. So this is one of my favorite types of events, so I'm glad that you all turned out either here or out in the ether, whether it's on YouTube or on Zoom or whatever you might be on. As Captain Jay indicated, I want to talk about how hard it is to calculate the strength of a Navy and why it is harder for the stronger Navy to amass superior combat power at the place and time of battle if there is a battle, in this case in the Western Pacific, where we think the primary theater lies given the rise of China threats to Taiwan. Everything that we've seen China doing in recent years in the past decade, since the ascent of Xi Jinping, almost exactly a decade ago, November 2012. So let me dive right into it. This project goes back to about 2010 when Robert Kaplan, whom you might be familiar with, he was guest editing an issue of Global Asia, an international relations magazine, headquartered in South Korea, and he asked me and my friend Toshi Yoshihara to write an essay explaining how to calculate the strength of a Navy. There are many different ways of approaching it, and it's a surprisingly hard thing to do to calculate which force has the upper hand at a given place at a given time. As our friends and joint military operations department tell you, it's all about concentrating superior force at the right place at the right time, whoever has the most firepower is likely to win. So a pretty straightforward thing, very hard to do. So yeah, so this is something we've been at for quite a while, and sometimes it leaves you feeling like Rick Grimes from The Walking Dead, because you will find it hasn't been too bad this election season today, of course, is election day here in the United States, but oftentimes, especially in presidential election season, you get these ideas about the Navy, about the size and the configuration of the U.S. Navy, and they're not all untrue. Many of them have a little bit of the truth, but the problem is that people will tell people, especially in policy debates, will take these ideas and they will represent them as a true measure of U.S. naval power, when in fact they're only telling part of the story.  So I hope that I will recruit all of you two to join my hearty band of zombie fighters when you hear people doing this sort of thing out in public. My agenda for this afternoon is pretty straightforward. I want to talk about strategy. I'm a professor of strategy. We talk a lot about strategy here at the War College. So I want to look at the tenets of U.S. maritime strategy just briefly to see what we are trying to accomplish in the Indo-Pacific. It turns out, if we look at our aims, our strategic aims on the Western Pacific, our successive administrations from both parties have seen a 60-40 split between the United States Navy and Marine Corps and Coast Guard as about the right way to balance forces between the Atlantic and the Pacific theaters in order to help us gain the aims that we see fit to pursue in the Western Pacific. And after we think about that, after we think about how to judge the combat power that the Navy, the Marine Corps, and the affiliated joint forces bring to bear, at that point we will flip it around and look at the Red Team and look at why it is so hard to prevail in an away game, which is all we play in the United States military. We're in North America. We're trying to manage events in the rimlands of Western Europe, East Asia, South Asia. Pick your favorite rimland. That's a really hard thing to do from thousands of miles away. It's an expensive thing to do. It's a hard thing to do. And you also have to think about how the adversary might try to forge your aims given its home team advantage. So let's turn it right, turn it immediately to strategy. There is, if you want to get a glimpse of what U.S. maritime strategy is all about, a lot of times it's right up there on the Internet. You can Google U.S. maritime strategy or cooperative strategy for 21st century maritime security, something like this, and you can dig up a trove of documents like this, including the one from the left, which actually was unveiled almost exactly 15 years ago on the stage where I am standing right now. This is the Bush administration's cooperative security for 21st century seapower, which I will use sort of as a proxy for the later ones because I think it's stated U.S. maritime aims very clearly. In fact, I would say probably more clearly than certainly the ones in the middle, which is the Obama administration's update of the cooperative strategy and arguably even better than the Trump administration's December 2020 advantage at sea maritime strategy, which you'll see to the right there. But nonetheless, I think it's actually, in a sense, it's kind of a heartening thing that you see administrations from both parties more or less see the strategic environment and the ways to manage it in very similar terms. I think that's actually a consoling thing considering the lack of the lack of consensus we see so often in Washington these days. I think I would reduce the tenets of U.S. maritime strategy to these three. And again, drawing on the 2007 document, it's all about mounting what the Pentagon calls credible combat power at times in places of our own choosing, chiefly in the Western Pacific and the Indian Ocean, given the strategic configuration there. And also the Persian Gulf, that was back in 2007 when, of course, Iraq was still raging on. We were in Afghanistan and so forth. So I think you've seen a relative deemphasis on the Gulf in the favor of the Indian Ocean and the Western Pacific. But nonetheless, you get the idea. It's mostly the southern and east Asian periphery that we were worried about. The 20s and 20s, it was kind of an interesting document. It was a very cooperative document as the title indicated. It was all about alliance building, as indeed it should be. We can't accomplish much in the world without allies. But nonetheless, even in this very cooperative sounding document, nonetheless, you found a couple of nuggets like this. The United States reserves unto itself the right to impose local sea control in any body of water on the planet or at times and places of its own choosing, preferably with help from allies and friends, but alone if need be. That's a pretty expansive vision. If you think about trying to project naval and military force across thousands of distance in the face of hostile resistance. Also, this occasioned a lot of buzz when the strategy came out. It also declared that the United States sees itself as the chief custodian of a multinational custodian of the system. We will work with our allies and partners to preside over what we now call the rules based international order, which is nothing more than the order that was put in place in 1945 after World War II, built on freedom of the sea, built on a free trade, and all the things that have made us prosperous and our allies and friends prosperous, including some of our adversaries like China over the years. These are very expansive aims. What kind of resource-based do you think you have to dedicate to actually accomplish these things? Well, the Obama administration in 2015, this is one of my favorite strategic documents because it actually put even a little bit sharper edge than the 2007 maritime strategy did on this. On page one of that document, I remember sitting in my office up and up in Hewitt Hall, and I opened that document up the day it came out, and I saw this. It's all about freedom of the seas. That means that that's a very strong statement that the United States and its allies and its partners see. We see freedom of the seas as the cornerstone of US maritime strategy. This is the idea that the seas belong to everyone and no one, and it's in direct contravention to what China has tried to do in the South China Sea, which in essence is to assert state ownership, sovereignty over 80 to 90% of that body of water. So strong statement from the other side of the political aisle that we are going to be defenders, chief defenders of freedom of the sea. So kind of, but again, a very ambitious and a very strong statement. Go into the Trump and you see, as I said, it's very similar thinking. So you see people sizing up the strategic environment and what to do about it in very similar terms. The Indo-Pacific is the defense department's priority theater, suggesting that other theaters now take lesser priority. We don't have a new maritime strategy out of the Biden administration, but if you if you parse the national security strategy, which is newly on the streets in the national defense strategy, it's very much very much the same type of thinking as well. So if we have these expensive aims, how do we match up resources with them in order to defend those aims and get our way in the world? This is a 60-40 split here in the United States Navy. Is that enough to prevail against an adversary defending its own home turf as China will be inevitably in any Western Pacific conflict that we might engage in? So that which brings us to talk about fallacious ideas, potentially fallacious ideas about measuring sea power. As we see these guys trying to batter down and get the hardy band from the walking dead. The first idea that I would commend to you that you run into a lot, especially in the elite press, is the idea of that who has the Benjamin's wins, whoever spends the most on defense and national security automatically is going to win should you get in the fight. And I mean that's it seems to make sense. I mean, let me move ahead. There it is. I fooled myself there. A lot of times during election season, particularly you'll run into this is this is from during the 2016 election cycle, but a lot of time you'll run into these routinely. The idea that the United States spends more than the next X powers combined and therefore it's going to steamroll it's going to steamroll any potential adversary it dwarfs the rest of the world and military spending. Pretty strong statement and this I don't think it's I don't think it's quite 14 at this point, but I think but I think it's the next 10 or something like that. So the logic expressed in this graphic seems to still apply even to this day. But think about it, but think about where a lot all that money goes, except trying to manage the world from North America. It costs you it costs you a lot. This is us as zoom walked our latest our latest and greatest guided missile destroyer sitting over at pier two here in Newport in 2015 on a way on the way south to its commissioning and it's in its entering service. Each we have three of these, each of which runs about $4 billion. So somewhere somewhere slightly north of $4 billion last time I checked. All right, about our latest aircraft carrier USS forward, which is packed with fancy technologies like electromagnetic catapults and recovery systems and elevators and whatnot. For now, finally, it actually it actually did pretty well on the shock trials, but we seem to have sorted out a lot of the technological difficulties, which were many that runs about $13 billion. And that's without putting people on it without putting stores, ammunition, airplanes or anything on it. That's just the hall. Again, that's a really pricey bit of the defense budget. And it really cuts into that superior in spending that's implicit in such graphics. These will be a big part of the air wing of the future at the F 35 C stealth fighter, now making its way into making its way into the fleet, each of which runs something like $105 million. So multiply that by the size of a couple of squadrons, you're talking about another couple of billion billion dollars that goes into the cost of that of that vessel. How about this one? This is the Columbia class submarine, the next generation ballistic missile nuclear submarines that we rely on to anchor nuclear deterrence in the US. The Ohio class that's still doing this function entered service. Well, I was still in uniform, which has been a long time ago at this point. These are being built in part right here on Narragansett Bay. You walk out and look to the left past the Newport Bridge and to the north a little bit, that's Clonset Point where sections of the hull are actually being constructed and then fabricated down the road in Groton, Connecticut and in Huntington in Newport News, Virginia. That runs about, we want 12 of these and they run about $9 billion apiece. Last to last, I checked with the Congressional Research Service. So these are big ticket items. And again, they cut into that with that seeming superiority, that vast superiority in defense spending. Or how about manpower costs? Don't have any top gear fans from the BBC from years ago? These guys were always prevailing on this guy, the Stig, a professional race car driver, to go out and test different supercars. He's not dying. I think this is a metaphor for American spending on our soldiers and sailors and aviators. This is not low cost labor. It has been estimated that it cost the United States to put about eight to nine times what it cost the PLA, the People's Liberation Army, to put a soldier, sailor, or airman in uniform. So again, that's a real difference maker for China. And it really cuts, I think it cuts that differential in defense spending down to size. So if you add that all, I think it's a phallus to say that to us, or at least to assume that he who spends the most wins in armed conflict. But actually the next stuff, the next fallacy, the next zombie that we encounter on our quest is this one, which I would suggest is it amounts to who weighs the most wins. Why don't I say that? This is Robert Kaplan, whom I mentioned a couple of minutes ago, one of the greats in the field of international relations and defense studies. In fact, he was standing right here about five, a little bit over five years ago. And he said this, the United States Navy is by far the biggest Navy in the world. The Coast Guard, the U.S. Coast Guard is the 12th largest Navy in the world. If you want to look at it that way, which seems like kind of like a mysterious statement. I don't think this would be kind of lost on Captain Jim Fanell, former of a specific fleet, Intel chief, who published a nice book through the China Maritime Studies Institute here at the college. His chapter contended that China would probably have about 500 ships by the year 2030, whereas we're struggling to get over 300. So numbers of hulls seem to suggest that Kaplan is wrong. In fact, the most recent Pentagon report on Chinese military power, more or less agreed with it now. China has about 355 ships, our aspirational number today. It's building towards about 420 by 2025 and approaching 500 by 2030. So where do you get this idea that the United States Navy is by far the biggest Navy in the world? This was just in an article a few weeks ago from another one of the greats in the field. This is Michael Hamlin from the Brookings Institution. He points out, and he's trying to debunk the Chinese Navy. It has a much touted Navy, but it's really only, and this is where he gets to the point, it's aggregate tonnage. How much that fleet weighs is still only half what the United States Navy weighs. So we're talking about the tonnage of our hulls, how much water they displace. And that's a, I mean, again, that's a useful data point, but does it really tell the whole story about relative power? And I would say absolutely not. I mean, so what? I mean, does the biggest force always win? Well, I mean, if you take it to an absurd extreme, if relative tonnage is the critical determinant of combat power, this is one of the most formidable warships in the world. The Emma Maresk 550,000 tons out of Denmark. It's five times, it's five times the tonnage of the USS Ford, which I showed you before. This is obviously, this is obviously an absurd example of, or basically a counter example to this idea that tonnage is all that matters. I mean, think about it. Does Coach Belichick look for this guy when he's trying to figure out how to get the Patriots blocking, so the blocking scheme is right, so that Mack Jones doesn't get sacked all the time? Probably not, but that would be the biggest and bulkiest guy that he could probably find with his big old belly. Now, if the metaphor is this, if this sumo wrestler, a big beefy guy who packs an enormous amount of combat power into a big frame, now that's useful information, especially if he can sling around his opponents and give them a wedgie. If we can give China's Navy a wedgie, if we're big and bad, that's a good thing. But again, I think this idea that tonnage is all that matters is simply misleading. You hear ways that most need not win. The next idea that I would give you would go, it would be closely related to that. And this would be the idea that the number of holes in the fleet is what matters. And I think that, of course, this is the great white fleet from the age of Teddy Roosevelt, which circumnavigated the globe. I think that's apt metaphor for this idea. You'll see during election years in particular, from one side of the aisle, the idea that numbers of holes do not mean much. And from the other side of the aisle, that numbers are just about everything. So it's kind of an interesting juxtaposition. Generally, people on the right talk about numbers of holes being extremely important. People on the left talk about that, and they downplay the importance of numbers of holes that constitute the fleet. Here's a just a talking point you always oftentimes encounter in this debate is the idea that the United States Navy is now smaller in numbers of holes that it has been since 1917. Actually, in 1916, when the Wilson administration authorized the construction of a Navy 2nd and 9th. And it's actually true in historical terms. You can look it up. We have fewer ships in the fleet than we did back a century plus ago. Interesting. And again, this is something that you normally hear from the Republican side of the aisle, including from Senator Wicker of Mississippi, a big shipbuilding state. We now have the smallest Navy since World War I. And by the way, we're building down the Biden administration that the Biden Navy is talking about cutting numbers of ships in the coming years from the current about 296 all the way down to 280 before starting to grow again. So this argument would be even more compelling coming from the Republican side of the aisle. You get a lot of pushback, obviously, from the other side, which doesn't want to be cast as Wecon Defense. This was President Obama's secretary of the Navy, Ray Babis, also from Mississippi, who pushed back against this idea. He basically said ships today are much more technologically advanced. And therefore, you can't assume that you can make a linear comparison between numbers of holes that and numbers of holes now. And that makes sense. I mean, I don't think the Great White Fleet would stand too much. It wouldn't stand too much of a chance against the US Pacific Fleet today, because it would never get in range to actually cut loose with its big guns. So superficially, that makes a lot of sense, doesn't it? But again, but if ships have moved on, technology is marched on. At the same time, so is the threatened environment. It is vastly more threatening out there than it would have been in 1917. So certainly, the Great White Fleet never had to face off against J-20 stealth fighters or all the other array of weaponry that China can put out there in order to make things tough on us operating in their backyard. So I actually do see value in this back and forth debate between the two sides. But again, I think those are both very partial measures of naval power. They're part of the picture, but certainly not the entire picture. The next idea that I would go over with you is the idea that sea power is all about ships. And it seems to make sense, doesn't it? I mean, think about when we watch a movie on midway or whatever from the 2019 ship, the idea would be that sea battles only pit navies against navies. And therefore, that's the critical determinant of sea power. Or you could go back, something that we said a little bit to hear in Newport to this day. And think about the Battle of Jutland during World War I, when the British Grand Fleet goes out and takes on the German high seas fleet in a sea battle remote from land-based defenses that cannot affect the outcome. It's a purely naval battle. And I think that's a lingering image that shapes this idea that ships are all that matters. But we know that we live in an age of long-range precision, firepower. And that if the battle takes place within reach of that firepower, that's going to shape the outcome of an encounter at sea. You have to factor that stuff in as well. Or else you're going to have a false picture of the true balance of naval power. Because again, sea power is about more than navies at any likely battleground today. Think about the array of weaponry that China's PLA has built, shore-based aircraft, shore-based missiles, and so forth, that can reach out scores, if not hundreds or even thousands of miles from China's coastline, to add their firepower to any naval engagement that happens within reach of that firepower. At that point, you have to count a unit of combat. It doesn't really matter where a unit of combat power on the scene comes from, whether it's from a ship or a ship-borne aircraft, or from a land-based aircraft, missile, or whatever the case may be. You have to factor in the aggregate combat power that the two contenders can bring to bear. For example, China apparently has as perfected the world's first working anti-ship ballistic missile. This is the DF-21D, which the Pentagon estimates has a range of about 900 nautical miles from China's coastlines. And it's able to fire against moving vessels out at sea. So that changes, that really alters the calculus when you try to measure one navy against another, and Fortress China can bring this additional firepower to bear. The DF-26, this is a more recent family of anti-ship ballistic missiles, which the Pentagon estimates is having a range of about 2,000 nautical miles off China's coastlines, past Guam, towards Wake Island and Midway. If you think about having to start worrying about enemy firepower, 2,000 miles before you get to the battleground, I think that suggests something serious about naval power at this age of long-range firepower. Here's a picture that I do depict what I just said. This comes out of CSIS in Washington, which is they want to, if anybody specializes in this stuff, they always keep a wonderful table of graphics depicting the different missile inventories of various contenders around the world. And here's how they show the envelope within which the DF-21D and the DF-26 actually operate. Man, look at that outer range arc. That overshadows Japan, Taiwan, South China, all of the South China Sea, Bay of Bengal, all of the Arabian Sea. And this is without putting a ship in the air or an aircraft in the air or a ship at sea from China. If they are able to reach out and touch hostile forces from Chinese coastlines, that's a seriously thing that we have to contend with. And something that the Pentagon is very worried about today, and rightly so. But it's not just shore-based stuff. As the PLA Navy has made it itself into a modern ocean-going fleet, which looks very much like we would expect a modern Western Navy to look, it's also constructed in a flotilla of light missile-armed craft such as conventional submarines and such as surface patrol craft such as the Type 22 Hubei Katamaran. Each armed with eight anti-ship missiles and suitable for doing picket duty, basically fanning off offshore within more or less the same waters overshadowed by the anti-ship ballistic missiles. And again, to make things very difficult for the United States Pacific Fleet and associated joint forces to make their way into the Western Pacific in time of conflict, unify it with forces already in the region, and ultimately reverse aggression. So the idea of the idea is to use this kind of thing to keep us from joining forces and overpowering the adversary. And it's a logic. If I were advising the PLA, I would have urged them to do something very much like this. I like this sort of lurid graphic out of CSBA and under Washington think tank, because it does graphically depict how as you close in on Asian coastlines, you come within reach of more and more stuff, and you come within reach of greater harm from the PLA, as well as the surface fleet operating in conjunction with that. It's not just that. There are a couple of other things you hear about it in the news a lot. China's fortified manufactured outposts now fully militarized in the South China Sea, an experience that China cares about very much. And again, something else we would have to deal with should be getting a scrap with the Chinese. Or think about the gray zone forces. When I started giving a version of this talk 10 years ago, I used to put this slide up and it was always a laugh line because I showed fishing vessels and I depicted them as the vanguard of Chinese sea power. But if you think about what China has tried to do in the South China Sea, it relies heavily not only on the fishing fleet, but on a maritime militia operating within the fishing fleet that essentially fans out into other nations' exclusive economic zones and tries to stake China's claim to sovereignty over those waters. They're backed up by the China Coast Guard, which is backed up by the PLA Navy, which is backed up by shore-based PLA forces, creating a really wicked problem for Southeast Asian states such as the Philippines, Indonesia, Vietnam, pick your favorite contender. So again, if it's an implement of sea power, whatever can shape events at sea for China is an implement of sea power. The fishing fleet is a big part of it. So just to sum this one up, I would just offer that the strongest fleet need not when it is the strongest force. And again, it's all about aggregating all the capabilities available to both contenders at the time and place and action might take place. As Einstein would remind us, you have to be very careful about counting stuff up because not everything that counts can be counted, not everything that can be counted counts. So take all this stuff with a degree of salt. When you hear these ideas out there in the debates, if you sum up these partial ideas, you get things like this. This is Professor John Meersheimer. Another one of the greats in the field, that's why I put these guys up here because these are very reputable commentators. He's been at this forever. He stood on this stage in the mid-80s and critiqued the U.S. maritime strategy of the Reagan administration. He takes all these ideas and this is what he comes up with. He essentially, in his most recent book a few years ago, he said, this is what he said. Essentially, we are 10 feet tall. Here's how he leads off. He says, China does not possess significant military power. And this is long after the PLA is launched into the buildup that we see culminating today. And here's the second half of the sentence. Why does he say that? Its military forces are inferior to those of the United States. Well, I think we've established that you can have the overall superior force, but trying to mount a superiority of force in somebody else's backyard is a really hard thing to do. Those two things, they simply don't reinforce one another. It's possible for the inferior power to win. If you survey history about a third of the time, the inferior force is actually going to prevail. And figuring out how to do that is something that is deeply ingrained in China's political and strategic culture, reaching back to the days of Mao Zedong and even earlier in Chinese strategic history. So from this, he draws the conclusion that China would be making an enormous mistake to pick a fight with the United States. I hope he's right, by the way, but I don't think he is. Because which brings us to the last part of our agenda for this afternoon. Away games are really hard. The visiting team is always going to have to contend much like much like in college football season or basketball season is getting underway. As we speak, you know that there's always going to be advantages that go to the home team or the home court the home court defender to shift gears from sports though. This is this is class of it somebody somebody who you resident students are going to spend a lot of time with he actually explains this logic that the lesser power can win if it does things to make itself stronger at the time and the place it matters. Let me break this down. Well, I mean, he said he basically so this is sort of the motherhood and apple pie part of it is best to be strong, go to gold's gym and work out every day be stronger than your adversary on the whole. So that's a and that's that's certainly true even if hard to accomplish. But he gets and so if you want to do that the best way to do that is to keep all your forces together so that you have the best chance of being stronger when it matters and where it matters. But he also but he also goes on to advise us even if you were not the stronger contender on the whole by some of the measures that I went through. Again, it is possible to be stronger even without that absolute superiority. It's possible to make yourself stronger at the at the at the point of conflict. And if you can do that, if you can do that over and over again, when a series of tactical engagements, you can ultimately wear down your opponent, make yourself stronger relatively to the opponent and ultimately hope to go on the offensive and win. That's a that's cause of that's a take from from 19th century Prussia on the on the on what we're trying to do in the western Pacific today in US maritime strategy. So again, here's a in modern terms, this is how I would sum it up think about the old blood the old bumper sticker we used to see we used to see around New England. So to borrow from that, I would say a contender can be globally inferior, but but also locally superior. And if it is, it can hope to accomplish its goals without however, overcoming that stronger foe as a whole. Let's transpose all this on to the theater that that we're operating in courtesy of our friends that our friends at Google Earth. This is of course, is the Pacific theater, which you can barely see any land in. But the logic of battling zombies actually applies here. Obviously, we know that we know that zombies can cross water. So we have so we do have to contend with with trying to transpose these ideas and come up with a winning strategy in the western Pacific. Well, this is a big theater. I see I see a number of you from the theater out there. You know that you know this very well, as well as many of us who have served in the theater in the Pacific have done as well. This is a map from Richard D. Terrison dating from the Second World War. I love it. I love it because it should depicts Japan's outer defense perimeter. This is what Japan was trying to enclose and essentially dominate and make into a co prosperity sphere, basically for the benefit of Japan. It's a big theater. I mean, think about all that water space, trying to try to police all that water space with a compact, a very good but but also complex fleet like the Imperial Japanese Navy's fleet. So they had they had massive ambitions. But there are bigger theaters in the world. Another another map from Richard D. Terrison. Here are the waters that here are the waters that China worries about most. The the solid line and closes the the waters inside the first island chain, which runs from northern Japan down through Taiwan, Philippines and on around to enclose the South China Sea. And the dotted line at the dotted line shows the waters within the second island chain, which runs through from again, Japan down through Guam and terminates near New Guinea. That's all. That's all. That's a very ambitious claim, but there are but again, there are bigger. There are bigger theaters. What do you think the theater for endeavor for the United States military is in the United States Navy? We pretty much have irons on the fire at every theater on the face of the earth. This implies this implies that the PLA is concentrated near potential scenes of action in the South China Sea, Taiwan Strait, East China Sea, or pick your favorite potential battleground. But we're scattered. We're scattered all over the place. So we have Charlton Heston acting as Moses telling us that the highest and simplest law is to keep concentrated politically speaking and strategically speaking. That is a really hard thing to do for a global power like the United States. And why is that? Because I tell you anybody, especially any of you who've served in the Pentagon, you know that every single commitment around the world, whether it's in the Northern Hemisphere, South Southern Hemisphere, wherever the case may be, it has a constituency that thinks that that is the most important commitment on the planet. And it's going to fight it's going to fight tenaciously to make sure that that commitment retains its place and its claim on resources within U.S. strategy. It's really it's really hard to do what strategy requires you to do and demote some some priorities for the sake of what matters most, which which successive administrations have told us is the Western Pacific. But nonetheless, there's so there's something that there's there's something about being a big, globe-spanning power that inhibits you from doing that. We have to confront the tyranny of distance, as I've mentioned already a number of times, as you know, very well. And yet again, another political map from World War Two. Just and I just love this one because it shows exactly what routes are our Lindy's craft had to had to have to traverse to get supplies supplies to allies before the United States entered the war. But again, just just geographically, it's just a really imposing map. It shows not only how long those routes are, but how potentially contested they are given all the places they have to traverse for those for those ships and aircraft to actually reach their destinations. It's simply hard. I mean, it's just hard to project power across that sort of distance. It requires a big a big array of basis logistics capabilities of all types, whether it's whether it's ships or aircraft or what not. And this is this is very, very expensive. And it's also subject to to hostile action to try to cut us down to size and prevent all the all that mask from flowing into different theaters. In fact, I always I always see this image in my mind. This is this is a depiction of the inverse square sloth that's what we encounter in basic physics, which would which depicts nothing more than the idea that a radiation source when I if I transmit light or whatever the radiation source may be, it drops off the intensity of it drops off by the square of the distance. It drops off like a rock. To me, that's a metaphor for for trying to project power from from North America to the rimlands of Western Europe, East Asia, South Asia or pick your favorite pick your favorite zone of potential conflict. You have to have that. You have to have boosters in the form of logistics basis and everything else that that enables forces to actually make their way across that that vast distance of sea and sky. So the cause of it can tell us that what the highest and law of strategy highest and most compelling law of strategy is, but it's really hard to actually obey that law. And it's very, very expensive to do that as well. And we haven't even come to we haven't even come to the to the adversary. The enemy is not a potted plant in strategy. The enemy is the enemy has as many brain cells as you do as much desire, if not more to win than you do. And it has options by virtue of being on home ground and then being able to avail itself of that sort of thing. I always see I always see Paul van or general Paul van Rijper's face when I think about this. He was a he's the quintessential red team. If you want to if you want to test yourself against the serious adversary in an exercise environment, this guy, this guy is the one you want to do it back in the year 2000. He actually played Iran in a in a war game called Millennium Challenge 2000. And he was allotted the resources that Iran would enjoy facing off against the US Navy carrier task force operating in the Persian Gulf. He was obviously vastly outmatched in terms of resources just because that was the configuration of power. But he was so inventive in how he used those resources that he was actually able to sink that carrier task force and really put a lot of egg on the Navy's face. So the Navy did what we always do or what we tend to do when when things don't work out in war games, they change the rules so that the Navy could win. He resigned. But anyway, you get the idea. If you can you can actually take a lesser inventory of resources and use them well in order to defeat a stronger force. And I think that this is a logic that China has taken on home. I mean, think about the great Bruce Lee trying to go into a hostile dojo and actually trying to actually survive and thrive in that dojo in this safari. This is sort of this is sort of the strategic challenge before us in the western Pacific. Think about that. Think about the home field advantage. I mean, this is kind of a silly example. This is Texas A&M University, which claims to be the home of the 12th man. Well, think about it. Think of what what fans do to the visiting team. They try to they try to make as much noise as they can in order to confound the signal callers and cause penalties and other and basically just make mayhem for the visiting team. My University of Georgia this weekend reportedly the decibels were exceeded that of a jet aircraft taking off and that's that's that's the 12th man in operation. It's not just that you can do things to try to you can try to just to distract the visiting team. All your manpower is right there in the theater. All of your resources that you can concentrate to do things to confound your adversary strategy. There's no rules either. I like this. I like this WWE example. It's it because because if there's a referee over over warfare and international relations, he's probably about as effective as that referee standing there watching this poor guy getting tossed out of the ring. There's nobody there's nobody regulating the size of the teams to keep the teams equal in military power, just as there's not here. In fact, it behooves you to try to overpower your foe and fight as unfairly as possible. And I say that's that's an advantage that potentially goes to the home team. Bottom line, the enemy gets a vote in your strategy and the enemy is going to cast it against your success simply because that's the nature of the contest. As I say as I draw to a close here, I would I would be remiss in a lecture on maritime strategy not to mention our second president Alfred Thayer Mahan probably the probably the most influential maritime historian and theorist of all times. He actually in one of one of his later works that we don't read with with our students here. He actually gives us a formula for thinking through these problems. He brings together material aspects he bring it he brings in risk management and he brings in geopolitics, which I think this seems like a very simple simple formula that he's sketching for us. But I think it's extremely powerful and it can help us solve some of these dilemmas that we've talked about by reviewing the material tonight. Well, first of all, I mean sort of the material dimension think about science think about tonnage and numbers of ships and so forth that that I went over with you earlier. Well, it says, obviously, if I'm sizing a fleet to go out and have a fight with my adversary, I need I need a fleet that is great enough to basically contend with the largest force it's likely to meet in battle. So again, that these would be all the material indices such as such as fuel capacity weaponry sensors and all that kind of stuff that make it possible for one force to engage with another with it with a with a reasonable chance of success. So again, there's a lot of risk management. Part of this goes to the personality of the commander, how much how much risk are you willing to bear in an action against a pure rival. So again, material material factors comparing forces, and then and then figuring out what your risk threshold, how much how much military power naval power do I need to give myself a reasonable chance of success against an adversary. This was I mean, this was this is this was a problem that the Royal Navy back and back in its 80 contended with pretty successfully with a via a to what they call the two power standard. They basically could said, if you look back if you if you go back in in European history, typically France and Spain will gang up against Great Britain in a fight. And therefore the Royal Navy should be equal equal numbers of halls, gunpower and so forth to to those to those two powers assuming that they would be the most likely adversary. And at that point, if we're equal in numbers, well, we're Great Britain, we do seamanship and tactics every single day, we will trust to the human factor to make to make the difference in an even in an even fight.  Let's say to me that's the this is the most most most potent word in this entire formula. How do you know how do you know what enemy force you're likely to meet in action? There's a there's a lot there actually a lot in there, because you're asking yourself how much of your enemy's military and naval power, the enemy is going to commit to a fight at a place at a particular time at a particular place on the map. This is a I mean, this is a this is a this is a problem this is a this is a problem that are that are that are own Navy thought about very intensively during the during the days of of of Mahan and Teddy Roosevelt and all those geopolitics minded people around the turn of the last century. And they realized that and they thought the United States Navy, it needed to be big and brawny, but it didn't need to be as big and brawny as you might expect, because the most likely adversary, the Royal Navy, was becoming more and more friendly as the turn of the century came on. Britain had interests all over the world. So therefore the Royal Navy was scattered all over the place. And therefore they concluded that at a time when the when the British had about 200 capital ships, they figured that the United States Navy could get by with about 20 capital ships because that was the largest force that Great Britain would send into the Caribbean Sea, which is what we can mostly cared about back in those days. So again, the lesser power can be the stronger power at the places at the places that matter to it most. And that's why that's what that's what my hands trying to trying to get at. If I'm sitting in Beijing and I'm facing out against it and looking at the United States and its allies, whether it's Tokyo or Australia or pick your favorite ally, how much of those forces are those powers likely to band together in the Taiwan Strait in the South China Sea or some other contingency? And that becomes the benchmark of an adequacy for the People's Liberation Army. So again, we can we can take a professor Biersheimer's logic and say yes, the PLA might be still inferior to ourselves. But does does this formula actually actually provide a lot of consolation because of the because of these factors? So just to just to wrap this up before I open up for Q&A, if we try to solve all this, try to try to integrate all these factoids together and come up with something that's actually meaningful, you obviously have to do the Mahanian thing and obviously try to try to try to try to figure out what the battle power each contender contender brings to brings to bear at the right place at the right time, whether it's through a surface Navy, submarine force, land-based air force or missile forces or so forth. You have to try to sort that out. You have to figure out the likelihood of each side committing a certain percentage of its military power to a fight. China carries a great deal about what happens in the South China Sea, obviously the Taiwan Strait. You have to ask yourself to the extent to which the United States cares about contingencies in those same places, given that we're so far away. But so opportunity costs and direct costs obviously so you're going to come into play as well. And again, you have the element of risk, man, but you simply can't discount this. I mean, if you think about this array of weaponry, anti-access weaponry that I've shown you just briefly here tonight, in a sense, they can basically, the Chinese can basically say to President Biden, what is this worth to you? If you think that you're going to lose a lot of the Pacific fleet or your U.S. joint forces in the region in an afternoon, your global standing depends on those forces. At that point, do you want it enough? Do you actually want it enough to pay the cost and the opportunity cost of victory in the Western Pacific? I think that's really what the Chinese maritime strategy is all about in peacetime. China wants to win with that fighting. I think it's manipulating these variables to great effect in recent years. So bottom line, this is really the question that we have to try to solve. Who wins when a fraction of U.S. forces goes up against the entirety of a hostile force, whether it's the Navy backed up by an air force in a strategic rocket force. And that's a really difficult thing to solve, even if ship for ship, plane for plane, missile for missile, person for person, you are still superior. As indeed, I think we still are. But nonetheless, the logic of strategy suggests that this is still a really difficult problem. So when you hear all these, when you hear things like this from during these debates and election season in particular, have a mentor, let the buyer be aware. So be a critical consumer of ideas like this. And I think we'll go far towards clarifying these debates and coming up with some collective wisdom and doing things right in the world. And with that, I think I will open up for Q&A. Thank you kindly for your attention. And I'm going to wet my whistle because it's a fall upon season is upon us. Yes, sir. Good evening, sir. Is this an analysis of Navy versus Navy in isolation or of an open war? If it is of an open war, how are the Navy's going to influence results on land? That is one. And next is, you've covered all the tangible elements when it comes to a Navy versus Navy comparison. How about intangible or qualitative elements like combat experience or dog trains and tactics which are evolved over a year over years of combat experience? How do you kind of plan to bring them into this comparison? So basically, you asked about the alliance factor and then basically about the human factor. And I think that's, did I get all that? The first one was regarding whether it is a Navy versus Navy in isolation or how the Navy's are going to influence results on land. And second is regarding the combat experience and the tactics and doctrines that US holds advantage. Yeah, that's a great point. It's when you're in one of the key themes that we always stress here at the War College in our courses is that obviously alliance, the alliance factor, this is crucial. If we could pool our combat power with close friends and adversaries, then obviously we are increasing that combat power and that has to really come in, that has to come into the equation as well. You can also, when you're talking about solely Navy on Navy though, you can also think about joint operations, operations between bringing together armies, navies, Marines, or whatever implement of military might you have in your spouse. You can think of those as, you can also think of those as an alliance of a type between the, between in our case, the US Air Force, Navy, Marine Corps, and even the Army and the Pacific, all of the joint forces have embraced their maritime role in the Western Pacific, which I think is a beautiful thing because we're going to need all those services if we're going to actually solve all these problems. So, and I think I didn't get into the Marine Corps, what the Marine Corps is doing, especially under General Berger, the current commandant since 2019, he's been pushing the idea of basically mounting what he calls expeditionary advanced base operations. That means shuttling small bodies of Marines from island to island armed with anti-ship missiles, armed with sensors and so forth to basically help the fleet defend itself and deny command of these waters to the adversary. If we can deny command of the Taiwan Strait to China more or less permanently, that's basically what we need to do. That's what Taiwan needs to do. So, and you can use land forces to actually make that happen. So, in a sense, I'm saying that the logic that I applied to China also could be put to work for us. And we can also try to take command of those waters and so again, deny the adversary control and win control for ourselves. So, that's sort of the joint in the alliance dimension. As far as the human factor, I think it's, especially this year with the war in Ukraine, I think that's really thrown that from what you're saying into sharp relief because we actually, we know that Russia is by material measures, it's probably about 10 times the 10 times the adversary that Ukraine is. And yet, obviously the material dimension as Western powers have put material in there, whether it's Heimars or pick your favorite weapon system, obviously that matters. But again, the human dimension matters. Ukraine is defending its own home turf. It's been trained by Western forces since 2014 when it lost the Crimea. So, yeah, so it has morale effects going for itself, doctrine and all that kind of stuff. And I think that it seems like Russia has been deficient in this, again, sort of like the Royal Navy banking on seamanship and gunnery and so forth to make the difference against foes that are not from a human standpoint, that profession. You have to bring that into mind. I think, and if you ask me, my gut feel from working with all of you every day is that we're still well ahead on that. But again, we're also facing off against the significant material mismatch until we get our stuff together, which I think we're starting to do, but it might be a few years. Another question here in the auditorium. Yes, sir. If you could use your microphone, please, that way our folks on Zoom. Yeah, I can hear you, but people on Zoom won't be able to. Sir, thank you very much for your presentation. I'm a captain from my Italian Navy. During your lecture, you used so many times the word, the verb to win. But my question is, what do you mean with the word to win? I mean, that's something you always have to take in mind. If you're going to get in a fight, what are you actually trying to accomplish? I mean, we're still debating. We're here. What are we, what are we nine months into the Russo-Ukraine War? And we still don't know exactly what President Putin means by actually winning there, which we're still debating that. When I talk about winning, I'm talking about winning naval engagement and then linking that to strategic goals.  If you would flip it around and look at it from the red team side, what China wants is to slow us down to enfeeble us before we can unite our forces in the Western Pacific. If it can do that, if it can take the energy out of our counteroffensive, at that point, it's given itself time to get across the Taiwan Strait and try to subdue that, to try to subdue the islands, the islands KMT government. So pretty, it's pretty straightforward to see what China wants. As far as, as far as winning for ourselves, I was talking in an operational and a tactical sense. If we get it, if we, if we, if we get into a fleet tactics situation, what do we have to do to actually prevail in order to defeat that strategy, get our forces, get our forces into the Western Pacific, unite the US Pacific fleet with the seventh fleet and other forces, third, third marine expeditionary force or whatever, and actually, and actually prevail and keep China, and keep China from, from actually doing what it wants to do. We are very much a status quo power in the world. And even in the Western Pacific, we are trying to defend the system as it has existed since 1945. And that mostly means denying China what it wants and trying to get it to, trying to somehow get it to, to abide by the rules set up, set up back then to, to what China has actually acceded for the most part, but now seems to, now that it's strong seems to, seems to think it doesn't have to, after, have to abide by it anymore. So it's a strategy, I'm talking about a strategy, what, what closets would call a strategy of negative aim, where you mostly just wanted to do to feature adversaries aims and keep things the way they are. Gary, do you have any questions from the Zoom audience? We do. And thank you, Professor Holmes for that excellent lecture. So summing up a couple of the questions that came in. What kind of ships or types should the US Navy be pursuing? Do you agree with the current approach? And what about like the regional middle powers? And what naval strategies should they pursue in relation to China? Is there a role for smart mines that can be deployed by stealth bombers or, or how about like, you know, the US agreement to force sub technology to Australia? Is that, is that something that is helpful? Yeah, there's a, I seem to be getting multiple part questions. You all are very academic crowd. I'm getting lots of multiple part questions. The first one is as far as what the United States Navy should be pursuing. I think, I mean, I think we should be pursuing what we are pursuing. But the fact is that we also need a whole lot more of it. What could, I mean, time is not on our side in the Western Pacific. What can we, what can we procure? And what can we do fast in order to multiply our combat power? A big part, I mean, I mentioned General Berger and the idea of expeditionary advanced space operations. I mean, that's, that's about, that's about dispersing forces among islands on land. But you can, you can compliment it with some of the things I showed it with Western counterparts and some of the things that I showed you that China has deployed. And there's been a lot of talk about this over the past decade in particular about taking large numbers of small hulls, basically mounting ship, anti-ship missiles on them and having them fan out in waters that we would like to defend and to keep China from controlling. So, I mean, if you, we know that we know that our major shipyards are taxed to their limit, trying to maintain submarines, build aircraft carriers, doing all this high end stuff. But if you can, if you can reach out to smaller shipyards, for example, on the Gulf of Mexico, or if you can reach out to shipbuilders in the UK or Korea or Japan, if you can get them to build these small craft, and we can militarize them. And if we get, if we can do that in large numbers, at that point, you're starting to harness some of the logic of what China's done. And again, and again, you've made things hard on the adversary. If you take that map of the Western Pacific, and if you look along the first island chain, the entire first island chain belongs to, to U.S. allies, friends, or partners. And if you actually, if you actually control those islands, and if you, and if you actually put Marines or Army troops on the islands and all these smaller steel things in the waters blocking the streets through those islands, you have now confined a China's Navy and merchant fleet to the, to the Western, or within the China seas, rather. And you've actually, you've actually denied them access to the Western Pacific, thus putting the economic hurt on China, and thus giving yourself a lot of military options. If you can, if you can basically seal off that access to the Western Pacific, at that point, your heavy forces, your cruisers, your destroyers, your aircraft carriers, and so forth, they can operate in the backfield in the Western Pacific and try to evade those, all that anti-access stuff while plugging up any points where the PLA actually manages to break through. So that's, that's sort of a very short way of, of explaining, or sort of a big, sort of a big project that I think we've embarked on. It's, it's access versus, it's basically anti-access versus the anti-access is what, is what we're, what we're sort of proposing. As far as middle navies, yeah, I mean, I think, I think that all these smaller scale things, I think you should absolutely avail yourselves of them. I'm not sure I would call Japan a middle rank power because I, because I think it's more than that, but it, during the Cold War, it took advantage, it took advantage of its fleet of conventional diesel electric submarines to do a lot of this sort of thing. The, the Japan Maritime Self Defense Force would, would send submarines out to lurk off these strains and basically constrain communists, communist Chinese and say, in Soviet military movement, not only north-south along, along the Asian seaboard, but especially east-west through those straits. This is, so this is, this is, this is not a new thing that we're talking about doing. You mentioned, you mentioned aircraft dropping and dropping precision minefields, that's happening a lot. This is a big thing that the U.S. Air Force has been doing, whether it's dropping quick strike mines. You also see pictures of, of bombers firing anti-ship missiles, close air support aircraft, the point practicing, attacking island, island strongholds like in the south trying to see. So yeah, a lot of these lower end things are things that are within reach technologically, but especially budget wise of middle powers. And I think that's, I think that's a way to, that's a really way to think about your own maritime defense because a big part, a big part of what the United States would really like to see is that our allies and our friends can take care of their own, their own security to the maximum extent possible. And at that point you have a division of labor in which the United States can go out and do more, more, more ambitious things in China's background or in its, in its backyard. Well, I think one of the goals here at the Naval War College is to get people to think differently and challenge the conventional wisdom and whatnot. And I don't think I've ever seen a better presentation done on this stage that set up the ideas that everybody believes and then consciously knocked them down one by one. So brilliantly done, doctor. Thank you very much and thank you all for coming today.


Welcome once again to the breakfast here on plus TV Africa our first major conversation this morning is on the new CBN ban on Forex To a bureau bureau the shanja operators here in Nigeria the CBN says that there's more than 5,000 of them that have been running and Their concerns that have led to this new policy and this you know ban And it has also directed commercial banks to take over the trade of Forex here in Nigeria We're speaking this morning with Iodile Balugu a foreign exchange trader who's joining us via zoom in Abuja. Good morning And thanks for joining us. Mr. Balugu Good morning. Thanks for having me on the program. Great to have you Let's first of all start with the concerns of the CBN and the reason for this policy or this ban on Forex to BDCs. They of course cited fraud and mismanagement of the whole process Tell us about, you know, what you know about that and how bad it it really is before this decision was taken Okay, over time CBN Going through the regulatory and supervisory Function Things that some BDCs are capable of using their operations as a conduit for illicit Forex flows and graft CBN overtime Thinks that there has been some product actions that has passed through BDC BDC accounts However, what we think from the from this side Not from the regulatory side is that if there are people if there are operations If there are companies that have been found as corporate Then rather than Rather than sanction the old operating the old body of BDC operators Why not pick out those people? Those operations those BDC companies and then sanction them rather than cutting out everybody as a whole Well, do you do you think that would work? You know, and do you also think that the CBN may have tried that and realized that that wasn't, you know working. Oh Well Will it work? Yes, it will work because Everybody that sees that there is sanction and some people have been sanctioned and they are bearing the brunt for being sanctioned Will put their operations in order. It's the same thing that happens in banks CBN sees that some bands are call people of some things They call them to order the sanctioned them and other banks put their books right So it's the same thing that happens. Nobody wants to be caught out of business Nobody wants the source of livelihood to be taken out of them just like that So if truly they have been sanctioned if it has been happening and there's been and they have been sanctioned and people can see They can find evidence to the fact that Companies BDCs operators have been sanctioned then everybody will follow suit and make sure that your books are put in order Okay, can you share an example before move to you know other angles? Can you share an example of? You know what you mean by you know being fraudulent with this, you know, and you know participating or and you know engaging in fraudulent FX transactions there is I believe a Maximum limit of trading that a BDC can involve in daily Are you saying that there's some of them that were going way higher than you know what the limit was? Okay, so based on the guidelines from CBN BDCs are supposed to From the funds that they get from CBN the funds that BDCs get from CBN. You're supposed to use the funds for PTAs For business travel allowance BTA for medical fees for school tuition You're not supposed to go above a limit of them 4,000 for personal travel allowance and $5,000 for business travel allowance That is what that money is meant for Normally if you have to do a transaction outside of the funds that is coming from CBN You're not supposed to do anything more than 10,000 per transaction. That is what's the BDC operation. So you can have like a Five different people come to you in a day, but you're not supposed to go above those limits in dealing with them otherwise the transactions become Suspicious and they are thrown open for investigation by the body by CBN So exactly what what CBN wants is BDCs should abide by those rules There are some people that have been caught. There are some organizations that they think are Doing things that are outside of that, but you find them and then you you put them in order You put them in order. That is what I think from my own hand. Okay the Guests I had earlier This morning had mentioned that he believed that it was a great policy And this was one way to stabilize the Naira instead of having you know foreign exchange being marketed across the whole country You can really just limit the amount of people who have it and of course that is you know pushing it to just commercial banks Have better policies regulating it and all of that. So don't you see that as a positive to this? Okay, good. CBN has very good intentions. Okay, the intention is very good, but are we right for it yet? I don't think so. It's a very good policy if CBN wants Users of FX to get it from the bank then fine However, I will write for it yet as a country. No, I don't think so if I might state The current the current solution that CBN is given right now still looks very short-term in nature in nature Okay We have not addressed the issue of supply as it's where yet because I think that is where the problem is The supply into the country you see that over time CBN has brought in so many policies to encourage people to Influence down into the country and that is the issue. We need to address for for now The Nigeria is not generating enough revenue at the moment to take care of its own expenses and you will see every day For example, the foreign direct investment recently was set to have reduced by about one million dollars That is extra one million dollars that would have come into the economy and would have gone in circulation For what we need to do if you can give me a little bit of time to expand sheets and speak on this we will see that There is reduced income from could all CBN has tried in so many ways to encourage remittances of effects into the country with laudable policies which Some of them have been good. Some of them have been courage influence of ethics, but still it is not enough Nigeria's the country is still in net imports. I will do more inputs than exports in the country Ranging from raw materials to finished goods. The question then arises as a government Are we exporting enough? Are we encouraging our local manufacturers? Are we encouraging our local companies to export out of the country? What is the quality of goods that we are exporting out of the country? Is it? Is it our goods that we're exporting out of the country can they stand side-by-side with other similar goods out there? Outside Nigeria have we created an enabling environment enough to favor the production of such goods Those are things that we can do to encourage the flow of effects into the country as a country There needs to be a clear direction a vision that everyone can see in a glancing towards or where we are headed What we need to do from top to bottom in achieving these goals look at this policy for example Yes, you know that this is what CBN wants the banks to do But there is still no clear direction as to how to go about it even for the ordinary citizen You go to a bank today. You tell them that you need Dollars you need effects and they will tell you to come back tomorrow that they don't have enough CBN equipped the banks enough to be able to meet quiet demands Those are questions that we still need to ask ourselves if you look at other countries for example the When the governor was talking about It is only in Nigeria that they release Effects to be this is you look at other countries for example be this is don't even need to rely on the government And we asked ourselves what those other countries are doing for be this is not to rely on the government Are we doing it here in other times the major source of effects? Constructorism look at Maldives look at seychelles look at Dubai look at even London each rule the ballroom of people that anytime to the intro Airport on a daily basis is enough to generate effects If you have about four million people coming into this country every day with four thousand dollars each You can imagine how much that will be on a daily basis Amounting into inflow of Forex coming into the country those are things we need to do We are looking at the tourism atmosphere in Nigeria and we are saying have we done enough? Have we done enough in terms of exporting other goods outside the country? Have we done enough then one good thing that I also like to state here is this I think CBN has not realized the usually is about supervision and monitoring and Regulating the BDC activities as CBN realized enough the power that lies within technology To really curtail and do this thing very well So there are things that will be done internally simple things that could be done internally Respect to supervision and the controlling the operations of BDCs by each channel's Technology that can curtail the activities of these BDCs We cannot keep on working ordinary and expecting the extraordinary to happen for your country as divers and Multitalented as us. I think there are so many things we look at. I'm not just creating the policies which So looks a little bit short-term ish in nature Let me take a pause there. Okay, Mr. Valogone next question would be the effects that this might have We've seen in the last 48 hours the exchange rate rises as high as five hundred and twenty two Naira to a dollar So so is that one of the effects that you know, we should be worried about is there a possibility that it will continue to rise? Okay, the initial Ike the spike you've seen in the rate is as a result of speculation Like I said when I was talking earlier, everybody needs to have a clear direction You need to know what's what is expected what the Sibian is trying to drive at at the moment the As as much as the BDC operators are panicking. They don't know what to expect from the policies Even consumers who are panicking. They are not sure where what direction CBN is headed Because consumers bear this brunt at the end of the day Like I said earlier when you go to the bank and you have for example for pity sometimes You're supposed to get four thousand and the bank is telling you drop your documents come back into this time And then you go back into this time Maybe the bank is giving you like one thousand five hundred dollars Instead of four thousand and they tell you that that's all they can give you because there are so many people on the queue They have to serve and the money is not enough to go around the queue So they ration it out for customers and consumers are like Um, so everybody is scared if I go to the bank today, will I get effects? Will I get the dollar? So if I have to go to the BDC, let me go to the BDC. BDC is looking at it. I have limited supply From this limited supplier Do I know if it's enough to cater for the number of people that is going to come in? And you know what happens in the comics once the demand is very high and supply is very low Automatically the rates the prices are affected So what you've seen recently is just like a spike that is as a result of speculation And um, it needs to have a clear direction as to The policy however In the long term the forces of demand and supply will come into place and when the direction is a little bit clearer We can all know. Okay. Good. This is where the land Denyra is going to land in terms of its trend against the dollar for example So in the long term first of demand and supply will come into play And that has what that is what has always driven The parallel markets the forces of demand and supply when demands are high you go to the parallel market You see that the rates are high. Yeah, sometimes there was a time CBN was given BDC is quite some influence which is more than what they were given before this recent ban And what happened then most BDCs were making losses because the the supply was so high and it overshadowed the demand So much so that BDCs were closing down operations Back then BDCs were closing down operations because they were running at a loss And it's not just that BDCs come today and they say that this is what we want to do Okay, they agree that today we want to sell dollar at $550 and everybody goes like a band wagon and say my dollar is 550 no it's response basically to market forces So when the supply is high you see that rates go low in the BDC market When demand is high the rates spike up a bit in the BDC market. It's just basic basic forces of demand and supply and over time I believe that This will come into place once there is a direction from the CBN policy What they intend to do and what they intend not to do and everybody will know where the naira really is All right, so there's also a possibility it might even go higher depending on how this turns out Oh, well, so let me give you an example. Sorry. I hope um, I hope I still have enough time to talk about this Yeah, yeah But but I want to I want to you know quickly I'm sure you still have a little bit to say but I want you to respond to this also There's the conspiracy theories that I've said because of the lack of control that you mentioned That you know banks will simply sell to bdc's bdc's then will you know, of course, you know from the back sell to Consumers and that will you know make the the exchange rates continue to even go higher because everybody needs to make some profit Do you see that as a possibility? Oh, well, like you said, it's a conspiracy theory I really don't have so much idea about what goes on in the background and I'm not that well connected to to give you Um, a factual response to respect to that. If it's a conspiracy theory, let's leave it But at the end of the day, um, whether the theory is true or not Like I said, it will always bear its, um, effects on the market That's when you see where the rate lines at the end of the day Whatever thing that happens at the background And will always come to the forefront at the end of the day to determine what the rates what the rates will be I was going to say something earlier with respect to that. Um Sometime 2016 something like this happened when there was a ban from cbn And before the ban happened before the ban happened, um, dollar was at about, um, 270 65 70 there about At the end of the day because of the shortage of demand banks couldn't meet the demand from clients from the citizens alike And then they had to the pressure was so much on the bank and they had to fall back on the parallel market When they fell back on the parallel market because the parallel market the PDC's and so they had little supply Demand was high Rates went up and at the end of the day when cbn was going to realize that this thing needs to be reversed because We are not yet right for it Rates had already gone as high as 495 nera from about 270 nera within the space of about 10 11 months 10 11 months we are looking at an increase of about close to 50 percent So I hope that does not happen at this time and at and this time an age where Things are not so easy for the common citizens things are not so everybody is trying to put in things That can end them a source of livelihood I hope that does not happen because the resultant effect of that is if it happens Then even the tomato seller In the market to tell you that ah, oh god, you know see how much they sell dollar now Everything goes up inflation and everything. So I hope cbn has just put in a lot of things as a background to ensure that Um, the effects the negative effects that might come from these are being curtailed Well, we have seen you know similar knee-jerk reactions A lot of times, you know in in Nigeria. So Hopefully like you've said, you know, they've put in the checks and balances There's one of the stories that we shared in the news this morning And that is from bank CEOs who met and said they are ready and they will be able to handle it Uh, should Nigerians trust those statements? Well, the statement is just coming out Nigerians can Be at ease. Whatever happens is that what cbn is trying to do? Let me put this straight. What cbn is trying to do is at the interest of every Nigerian What the bank CEOs are trying to do is at the interest of every Nigerian What bdcs have been preaching is at the interest of every Nigerian I can tell you for a fact that before this came up before the ban came up the association of the root the change um Um operators in Nigeria I've met with cbn time and over again to see how these rates can be reduced So we can just say that the bdcs are the bad eggs The bdcs are also trying to look for what can be done to reduce the rates So what everybody's working on is at the interest of every Nigerian However, the approach from every angle from every industry might be different The way we are looking at it the way bank the bank CEOs are looking at it The way cbn is looking at it might be different and there needs to be a convergence of ideas You can't just take out a key stakeholder And then say that you are ready to work with another key stakeholder Everybody automatically as much as you want the interest of every Nigerian Would also try to protect his own interest because that is why we exist as companies so Whatever the bank CEOs are doing to ensure that these needs are being met Fine as long as it works in the interest of every Nigerian But what I would like to say also is that We have undermined in Nigeria so much so we've undermined the power of technology um in my company for example We put in a lot in technology to see how we can reduce the effects of the shortage of the supply in the in the in circulation and if we can come together and Find a channel through which it is easy to pass money from one place to the other legitimately Which technology can achieve you don't have to send in paper Document here and there we have the big end. We have so many things going on for us that we can work with So it's not just easy to say I was trying to talk to someone Yesterday and I was saying it's not just easy to say that because a baby is crying from headache You cut off the head Okay. Yes, it's a solution to cut off the head. The baby will stop crying automatically and the baby will stop to exist however There are better solutions to cutting off the head Thank you.  So I want to um, you know, ask what you know next You know for the thousands of them across the country that seem to have been put out of business Um, what what does you know, what are the conversations like in those spaces? Okay, so for bdc is what I can tell you for For sure is bdc's the ban has not The ban is on the release of effects from cbn to bdc's It has not stopped bdc operations Okay I can tell you for a fact that bdc's will always have a way to source for effects from the normal consumer out there That wants to buy 100 dollar 500 dollar wants to exchange somebody that is just traveling into the country As some smalls depends on him or her. There will see the ways in which we can source Effects from one consumer to the other okay, um The supply is no The supply will definitely reduce because one of the major sources of supply is from the cbn So if for example, somebody goes to the bank now and is unable to get his pta or his pta complete Or a medical fee or school tuition complete the person still has to fall back to the bdc To see how we can augment to make sure that such demands Are being met. So there will always be business for the bdc as long as their licenses are not revoked yet. They can still operate um It's it's it's mind. It's like removing the engine What is happening to the bdc to the bdc knows like removing the engine of their operations, but One way or the other Walk will still go on and yes, they what they do the volume might be reduced but what will still go on One way or the other i'm going to actually two final questions the first one I'm not sure if you would want to speak on this, but Can you share with us from your time as a you know as an operator? Do you think that there are tiny loopholes here and there through which bdc operators can get? From the banks now and still sell. Do you think those loopholes still exist in our system? Um, like I said, I said something when we're starting this discussion. I said Nigeria is not right for some things yet. Yeah Okay um cbn has tried to put in a lot of guidelines restrictions respect to bdc operations And yet cbn is still coming out to say that some bdcs have been found wanting respect to meeting the the Ropes of the guideline Some have been found as has been conduit for illicit funds and so on and so forth despite all these that has been put in um, some people are still some operators are still Doing what is not expected of them It's just like that. So have we done anything to make sure that what they were doing is being curtailed now I don't think we've put that in place. So even if the thing is going to the banks The same way it was done before it might still continue like that And that is why I said it's like having a view if you you have a building The building the structure. There's a structural defect. You can just remove the roofing sheets and say that the building is okay Okay, there has to be some work that is being done at the foundational base to make sure that some things are being caught out to Prevent such occurrences later in the future no matter how much you paint the building Disruptive defects will still be there. Yeah, absolutely. And, you know, if you can in a minute or less Share with us once again ideas of CBN all the Nigerian government should be able to adopt to increase the inflow of Forex into Nigeria We seem to Not put in too much effort into that. There's so many so many ways that this could be done Okay, um, I stated a few things earlier, which I would like to reiterate on the first respect to tourism tourism is You see african countries that don't have any resources and they've worked on tourism and Every everybody from every country wants to go there to even have a visit You're going to such countries Most people leave you're going with your family four thousand is not even in four thousand dollars Is not even enough for you to go with your family by time you look at hotel expenses You go there. You don't want to spend three days You're looking at spending about a week or close to two weeks hotel expenses accommodation Feeding you have to go to tourist attraction tourist attraction centers You have to pay to be able to use any of the facilities You look at it and then you find other people don't even just go to one country nowadays So you see somebody for example going to a country like, um, singapore And then you go to dubai first in transit You spend a few days in dubai transit before you go to singapore You spend some days in singapore and then on your way But maybe you're coming through another country like There's tourism is one area we need to look at The government needs to be able to designate Some places in nigeria some states in nigeria some key areas in nigeria that would be good for tourist attraction That is number one number two. Um, what goods are we manufacturing out there? We have the crude oil apart from the crude oil What else is nigerian known for in the global space for um exports? That can stand out. You see there was a time the government was telling the importation of um things as small as toothpick To speak if there's a country that is producing that toothpick and is sending it was in nigeria But I can tell you for sure that even the toothpick we produce in nigeria today Is not of the standard and quality of the toothpick that were imported So if we export our own toothpick, is there any country that is willing to buy from us? We need to look at the quality of the goods that we produce here So there are so many areas we can look at and say that nigeria needs to do better as a country Like I said earlier they replace for ambition and we need to be ambition ourselves And let us run through the mind of every citizen that at a glance I can say that This is what nigeria stands for and this is where nigeria is headed towards All right. Ayodhili Balogu. Thank you so much for your time this morning Interesting conversation and we look forward speaking with you again I hope I'm not speaking too much. Thank you Thanks for joining us All right, stay with us here on the breakfast. We're now going to be speaking with Ibrahim Ushinowo He's a risk management expert and Ussay and Neni They're joining us next to speak on the reconciliation between Attiku Abu Bakr and Yasum Wike and what this means Um for the strength of the PDP as an opposition party and of course for 2023 That comes up right next after the short break