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Exploring risks and innovations in sea-based infrastructure

Geopolcast: Season 1 – Episode 8

March 21, 2024

In this episode of Geopolcast, we deep dive into sea-based infrastructure, discussing the intersection of geopolitics, technology and the heightened risks of shipping.
Climate|Credit and Political Risk|Cyber Risk Management
Geopolitical Risk

In this episode, join host Elisabeth Braw and expert speakers Michael Buckle and Rear Admiral Anders Grenstad as they delve into the dynamic world beneath the waves, exploring the threats to sea-based infrastructure, the intersection of geopolitics and heightened risks for shipping and transportation.

Our experts also tackle pressing questions about improving safety with the use of technology and AI, the impact of damage on owners and insurers, and the crucial relevance of insurance policies.

Exploring risks and innovations in sea-based infrastructure

Transcript for this episode:

Geopolcast - Episode 8: Exploring risks and innovations in sea-based infrastructure

MICHAEL BUCKLE: I suspect what we need to start thinking about and start looking at is, what is a normalized set of activity around an asset? And then technology needs to look at changes in those patterns and changes in those movements, marry that to intelligence around politics and geopolitics.

ELISABETH BRAW: A warm welcome to Geopolcast, the podcast from WTW exploring geopolitics and its impact. My name is Elisabeth Braw, and I'm a senior fellow at the Atlantic Council where I focus on the intersection between geopolitics and the globalized economy. I'm also the author of Goodbye Globalization, which was published by Yale University Press in February, 2024.

In each episode of Geopolcast, I'm joined by two expert guests with whom I discuss subjects that matter to people in business and in fact to everyone in the globalized economy, which is all of us. Today, I'm delighted to be joined by two authorities on the crucial subject of threats to sea-based infrastructure.

Rear Admiral Anders Grenstad is a former chief of the Swedish Navy. At earlier stages in his career, he commanded the Karlskrona naval base. In fact, he's experienced the whiskey on the rocks incident when a soviet submarine ran aground in the archipelago of Karlskrona. And that was when Anders was a young Naval officer in 1981. He was also deputy chief of joint operations when Sweden carried out its submarine hunts in the Stockholm archipelago in 2014.

Michael Buckle is the managing director for WTW's Downstream Natural Resources. He has more than 30 years experience in the energy and natural resources sectors and has particular expertise in subsea cable risk management, which is obviously an extremely timely expertise to have at the moment.

Now, two years ago, virtually nobody outside the maritime world was paying attention to sea-based infrastructure. Then an unknown perpetrator sabotaged Nord Stream 1 and 2. And then a few months later, merchant vessels cut the undersea cables connecting the Matsu Islands with Taiwan proper.

And in October last year in the course of 24 hours, someone damaged one pipeline and two undersea cables in Estonian, Finnish, and Swedish waters. The investigations have identified a likely perpetrator, but she is no longer there. Indeed, it's almost impossible to identify and prosecute perpetrators of sabotage against sea-based infrastructure.

And that makes it extremely attractive for hostile states and groups to attack such infrastructure. So Michael, let's start with you since you have been watching this space for decades. When it comes to man-made threats against sea based infrastructure, how does it compare to the picture 20 years ago, 30 years ago even?

MICHAEL BUCKLE: A good question, Elisabeth. From an insurance point of view, I would say we didn't really, really even consider it then. And what we see today are entirely different threat levels that are geared more around economic dependence on energy and the impact that those dependencies have on markets, pricing, on disruption of people and infrastructure. So it's entirely changed.

I mean, 20 years ago the biggest thing we probably ever had was around a rogue fishing trawler hooking up some cables for wanting to get some new nets on board. That was the kind of risk threat that we saw. We certainly didn't see global actors and global infrastructure being damaged with the economic consequences that it can possibly have today.

ELISABETH BRAW: Yeah. So we have moved, in other words, from accidental damage to in many cases, planned damage to sea-based infrastructure.

MICHAEL BUCKLE: Yeah, I would say so. I think threat actors around the world and geopolitics around the world have certainly changed the influence they have on everyone's lives in the past few years. And some of the scenarios we see today certainly didn't exist probably even four or five years ago. So that impact is important. It's a risk that people have to think about, they have to consider. And you have to manage it or accept it or transfer it or try and do something with it.

And think some of the energy risks and some of the energy transition that we're looking at today, it has big implications for society as a whole, for the growth of the planet, for the growth of infrastructure, for economic development. And many of the assets put in place when think of global interconnecting cables, they're there to energize markets, provide price parity in markets. So they do become more of a threat or more of a potential economic destabilizer if they are damaged.

ELISABETH BRAW: And that's exactly the urgent issue that we're facing at the moment. They are being damaged. And Anders, why is it that it's so hard for countries to figure out what to do about it? We do have navies and we do have coast guards. Why is it so hard to protect sea-based infrastructure?

ANDERS GRENSTAD: For the first thing, we don't have assets enough, the military assets or coast guard assets to cover everything. If you take Sweden, 2,700 kilometers of coastline down to a 100 meters of depth. And it's looking like spaghetti down there. There are so many pipelines, there are so many internet cables and so on. So that is very hard.

The first time I came across a problem about how important it is with this watching the pipelines and so on was back in 2007. I was invited by chief of the Baltic fleet, the Russian admiral. And in his welcome speech to me he said, now, Anders, you and I together, we have to watch the Nord Stream pipeline together. And what do you say about that?

ELISABETH BRAW: Wow. How times have changed.

ANDERS GRENSTAD: Yes. And I just told him, well, you watch your own pipeline. I'm not interested. And if you look to the entire issue here, who is in charge of watching the cables? Is it the one who put it out, the one who send the information there? Is it the authorities?

Is it on territorial waters? Is it on economic zone? Is it international waters? There is a lot of law things that has to be figured out as well. I help out as a guider for the wind power that is going to be put out in the open sea. And they are taking care of their own surveillance.

They are building surveillance system in the air and at the bottom because they know they can't trust just it's the authorities there. But well, if your internet cable is cut, it's one thing. But if your electricity and your need your electricity, that will be hardest issue. So it's up to the civilian provider to do it, but we have to do it together with the authorities.

ELISABETH BRAW: Yes. And Michael, that is where we are today, right? No government has enough money to protect with 100% guarantee all the infrastructure that is out there, as Anders said, the spaghetti of various pieces of infrastructure, and then on top of that, the offshore wind power that is being built in so many places. So what do you think of what is already happening in addition to what Anders mentioned that owners and operators and users of infrastructure are doing? What else are you seeing? And what else do you think will need to happen?

MICHAEL BUCKLE: Yeah. So I wrote down before this call patrol would be impossible because the length of the assets is huge when you aggregate it together. The number of kilometers of cables in the water, power cables in the water are huge. Some of the wind farms are just single point connections to shore.

But the future development around a super grid that allows multiple connections for wind farms to different countries makes it even more of an exposure. I think it's really difficult for operators. I mean, Anders mentioned some of the surveillance that they will put on substations and they will put on some of the subsea assets.

Generally, I see that when we have a technology that can detect a break in a cable or damage to a fiber optic, at that point, it's too late. The damage has already happened. But you know where the damage happened. So I suspect what we need to start thinking about and start looking at is what is a normalized set of activity around an asset in the North Sea or in wherever we might be looking at?

And then probably technology needs to look at changes in those patterns and changes in those movements, marry that to intelligence around politics and geopolitics. And if you think there's a heightened level of risk, what changes are happening that may make that or may make your asset more susceptible to some damage?

We talked earlier, Anders and I, about just generally what's going on in Suez canal and the impacts we've had there, what's happening in the Gulf of Oman and the Straits of Aden. They're all key economic areas where shipping and the transportation of goods and energy is really, really important. So you start to think about physical infrastructure assets, oil, gas, power, carbon capture storage facilities even in future, they will become targetable.

ELISABETH BRAW: That is an excellent point. It's not just today's different categories of sea based infrastructure but tomorrow's categories as well. And crucially, as you said, Michael, carbon capture storage, which will obviously be in the seabed. And as Michael just mentioned, the potential of AI essentially keeping an eye on patterns around sea-based infrastructure, how do you think navies could implement that?

Is that an area where there is already an opportunity to work with technology companies as such solutions available? And could they be easily implemented by navies and coast guards? And then on top of that, how would navies and coast guards be able to collaborate with operators and owners of this infrastructure?

ANDERS GRENSTAD: Thank you for that easy question, Elisabeth. I think it's the wrong way to go because navy and coast guard, it's so few assets have them trying to work only on sea-based stuff that is down there. It has to be to the provider. And of course, they can support it and you can cooperate with it.

I think what the worst thing we can do right now is to be scared or whatever. Hey, they're going to blow everything up here. Are we using our assets wrong? I think that is the main thing about this one. Who should be doing this one? If I was an enemy or whatever, I would like people to get scared and put a lot of money in things that actually doesn't have anything to do with defending it because don't have to do it.

I can just say, hey, I blew up this line. Still is the fact, it takes a lot of assets to really go down there and blow a lot of stuff up. It's not easy. It's easier to blow a pipeline up because you can see that pipeline. But all the small threats that is going on all over the Baltic and somewhere else in the world, it's not like it's just go down there and cut it off.

You have to find it. And a lot of them are down in the mud. So I wouldn't make the problem too big. It has to be solved. But I think the one who puts it out have to be more aware that he is in charge of seeing to that it's safe. And of course, with support from coast guard. But coast guard can't work on international waters. It is in the economic zone.

ELISABETH BRAW: Yes. Yes, exactly. And Andres, if I can follow up with another question for you. NATO has a new coordination cell looking after these things called the Critical Undersea Infrastructure Coordination Cell. Has it made native waters safer? It is a coordination cell.

It's not a military command, so it can't really do anything. But has it made NATO waters safer? We are speaking on the day, I should add, when Sweden may finally get the final yes vote for its native membership. So this has even greater relevance for Sweden as we speak.

ANDERS GRENSTAD: Definitely. I hope tomorrow morning we wake up and the world is a safer place, for Sweden anyhow. I think it's good that it's coming up to the surface, that we are discussing it like we are discussing in this program right now because it has to come to the surface. And it's not an easy task to just solve like this. But it has to be discussed, and it has to be decided who is in charge of solving what part of these issues.

Because there are two things in the world right now that the Western world and entire world actually need is free trade in sea, the supply chain. And we have to see to that. That one is easy. And we have to be able to use underwater cables and pipes and see to that one works. But we can't use all the resources just for these things. We have to divide it because there are other jobs that all the navies and coast guards have to do as well.

ELISABETH BRAW: Other jobs and an increasing number of other tasks that they have to go after, and not just in their own waters as we've seen in the Red Sea navies from countries far from the Red Sea can be called upon to try to restore order in the Red Sea or indeed in the Strait of Hormuz.

Michael, coming back to you, we have already talked about which role technology can play. And you mentioned AI. Is there anything else you think that can be done on the private sector side that would make this infrastructure, whatever the infrastructure may be, safer? Could it be made safer the way it's manufactured, something like that? Or is it just the case that monitoring and surveillance is the way to go on the private sector side.

MICHAEL BUCKLE: I think Elisabeth, there's a couple of comments to make there. When any investor or developer is going to build an asset offshore, there's a number of risks that they're going to look at, whether that's the technology risk itself, the finance risk, the market risk, the regulatory risk.

And I think sort of the threat of off shore damage by a threat actor is a relatively small risk within that chain. And they're not going to not do the project, as Anders said, just because they think there's a heightened threat there. I think what is important is the damage event to an asset itself is a relatively bearable type loss, whether that's by an individual company or by a group of insurance companies. It's a very bearable loss.

What is harder to bear are the downstream consequences of that, the economic consequences on markets and market pricing. But I think one of the things that companies can do is very carefully map and locate the assets. And say that slightly tongue in cheek because the seabed is a dynamic environment. When you put a cable in the seabed and bury it 3 feet or 4 feet or 5 feet, you hope it stays buried for 4 or 5 feet. And you hope it is where you put it.

But if you go down the line with tides and winds and everything else a few years time, you might find it's not buried to three feet anymore. It's spanning across the seabed, and it's not where you thought it was. It's moved a little bit. And it's the continuous managing and risk managing of the asset that I think is important. And that will give investors and banks and lenders and insurance companies plenty of security around how you look after the asset. If you look after it well, I think you're in a good position.

ELISABETH BRAW: Michael, you mentioned losses. And that raises the question of, who pays? And we know that the Nord Stream sabotage took place in a geopolitical setting. And we don't know yet who did it, but it does have a major effect on the owners and operators and possibly insurers. So in such a situation when sea based infrastructure has been sabotaged and government authorities have been able to identify a likely perpetrator, who pays?

MICHAEL BUCKLE: So to answer that question, I just need to break it up into a couple of parts. So a normal insurance policy will pay for physical loss or damage to the asset by a peril that's not excluded by the policy. Generally speaking, war would be excluded from an insurance policy.

So that becomes a government risk. That becomes an economic risk. Sabotage and terrorism can be covered by insurance policies. There is a big market for sabotage and terrorism. The biggest discussion we see around sabotage and terrorism is really the amount of time allowed to cancel policies if the threat level gets too high.

So we would see anything from 21 days notice of cancelation to 48 hours notice of cancelation. So that cover does exist. But when you get to a heightened environment of exposure, you can generally see your insurance cover disappearing. So we would always say to a client, you should act as if you're uninsured.

But in the good circumstances where you are insured and you have a indemnified loss under your insurance policy, i.e. something that's not excluded and it's based on physical loss or damage, then the insurance market would be paying out those claims. And that's not just one insurance company.

It's a syndicated spread of risk globally. How you manage large losses is you spread them between as many people as you can. And that's the basic principle of insurance and reinsurance. And that's how we spread these risks around the world.

ELISABETH BRAW: But the fact that the number of cases of sabotage have taken place within the context of geopolitical tension, Anders, then raises the point of, what constitutes an act of war? And that's something that the American courts in the first instance are trying to determine.

But a question that faces everybody in the private sector and in navies and coast guards today, what constitutes an act of war? And so from your perspective today when you look at threats and risks and sabotage to sea-based infrastructure, how do you know what constitutes an act of war?

ANDERS GRENSTAD: I don't think you can talk about an act of war in the long because we have been now for a couple of years in the gray zone area where things are happening. You have the cyber warfare that hits you. You have the media thing that the fake media is coming in from all over the world, this happened and that happened. And the only thing you can do actually is to see what have happened and not what people say it's going to happen because we are in the gray zone area.

ELISABETH BRAW: Yes. Nobody declares war anymore. It just sort of sneaks up on us. And on that point, Michael, if I can briefly mention the Houthis, some observers, analysts, Red Sea watchers have flagged up the risk of the Houthis targeting undersea infrastructure next. If you were the operator of undersea infrastructure in the Red Sea, how would you go about trying to make sure that it stays as safe as possible?

MICHAEL BUCKLE: I mean, it's very difficult. Once your infrastructure is in place, there's not much you can do. You can raise your awareness of the situation. You can look for changes in behavior. But once your infrastructure is in place, it's pretty much in place. And I would tend to step back and go into before you build infrastructure, how should you build it to minimize the threat? How should you make it as safe as possible?

So a lot of the decisions we need to take in future are more in the front end engineering space around design and protection and duplicity and not single points of failure. That's the best way to manage the risk in the longer term because then you're just open to the vagaries of what's going to happen and you have very limited levers to pull on how you're going to manage it, I'd suggest.

ELISABETH BRAW: Yeah. That is good advice. And Anders, I'll finish with you with a similar practical question. If you were still chief of the Swedish Navy and you received a report of a suspected intruder near pipelines in Swedish waters or in the Swedish exclusive economic zone, what would you do?

ANDERS GRENSTAD: Well, whether you're aware of it and if you have assets there, yes, we would send it there. But just like when we were hunting submarines for 50 years in this country, when you get, hey, there's a submarine over there. It's already gone when you were there. It already has happened. And that is the problem with it.

Of course, the Swedish Navy today and other navies, they will act if they get an alarm. That's like police would act if somebody is dialing 911. But when you're there, the murderer or whatever has already taken place. And now we can start investigate it and see who did it.


ANDERS GRENSTAD: That's why I think we have to see to that we are not damaged that hard if just one line is broken because it has to have double assets and things, like it will keep on working. And it doesn't matter if it's internet, if it's gas pipelines or electricity from wind farms. We have to see to it that it's going to work even if somebody is trying to do something about it.

And it's not that easy to do it. It's easier to be a pirate on the ship or shoot the missiles to a merchant ship than to go down 70 meters and try to find something and cut it off. And the blowing up of the Nord Stream must have taken a lot of planning to be able to do it like that. And I think today, it is an awareness. It would be hard to do what has been done.

ELISABETH BRAW: Yes. And on that note, I think in a couple of years' time, we'll have to come back to the subject and see what private operators, owners, insurers, navies, and coast guards have collectively come up with to try to keep the infrastructure as safe as possible. But as you said, Anders, and as you also said, Michael, it's not going to be possible to just rely on navies and coast guards to keep the infrastructure safe.

And with that, thank you, Anders Grenstad, and thank you, Michael Buckle. And above, thank you, all, for listening to Geopolcast. In upcoming episodes, we'll examine political risk, oil and gas trends, and much else. To get the episodes as soon as they are released, make sure to subscribe to Geopolcast. And you can find us via your usual podcast players. And please recommend us to your friends and colleagues. Until next time.

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Podcast host

Elisabeth Braw
Senior fellow at the Atlantic Council

Elisabeth is a Geopolitics expert who has been consulting with the WTW Research Network since 2019, specifically exploring grayzone aggression and looking at its implications for risk managers. This work forms part of a wider research programme on geopolitical risk, including the importance of China and security impacts of climate change.

Elisabeth is also the author of Goodbye Globalization, which was published by Yale University Press in February, 2024.

Podcast guests

Michael Buckle
Managing Director, Downstream, Natural Resources WTW

Michael leads WTW’s Downstream Natural Resources team with more than 30 years experience in the energy and natural resources sectors and has particular expertise in subsea cable risk management.

Rear Admiral Anders Grenstad
Former Chief of the Swedish Navy

In the early stages of his career, he commanded the Karlskrona naval base. Anders also experienced the whiskey on the rocks incident when a soviet submarine ran aground in the archipelago of Karlskrona. He was also deputy chief of joint operations when Sweden carried out its submarine hunts in the Stockholm archipelago in 2014.

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