This episode of the Mission Matters podcast features a conversation between Shield Capital Managing Partner Philip Bilden and Vice Admiral Kevin “Kid” Donegan. This episode covers everything from:
The role of cutting edge technology like cybersecurity, drones, and AI in the conflict
The current state of Iranian proxy forces in the Middle East
How the conflict in the Middle East compares to Ukraine
And more!
You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.
As always, please let us know your thoughts, and please let us know if you or anyone you know is building at the intersection of national security and commercial technology. Tune in next month for our next episode!
Maggie 00:00
This episode features a conversation between Shield Capital Managing Partner Philip Bilden and Vice Admiral Kevin “Kid” Donegan. It's a little bit different from some of our past episodes. This one definitely sparked the Model United Nations kid within me with my love of geopolitics back in middle school and high school. This episode does not feature a conversation with one of our portfolio company founders, rather Admiral Donegan, breaks down the current state of the conflict between Israel and Iran. And you know, of course, we have to talk a little bit about the role that technology played in that conflict. We discussed cybersecurity, drones, AI, etc. We cover everything from the current state of Iranian proxy forces in the region to how this conflict differs from the war in Ukraine, I learned quite a lot from this conversation. So really, really appreciate you setting it up, Philip.
Philip 01:30
Oh, it's a pleasure, Maggie. Congratulations to you on these wonderful podcasts. I'm a big one of your biggest fans. So this is a different format. This was a moderated discussion that I had the privilege of hosting Admiral Kid Donegan, call sign “Kid,” it's funny, in the Navy, Top Gun pilots and other aviators all have these wonderful call signs. So we didn't discuss how he got his call sign. That's always somewhat personal issue, but we'll leave that for another another discussion. Maybe you can get it out of him in your in another one of your podcasts. I've known, I've known the admiral for well over a decade. He and I had the pleasure of working together on what was called the Chief of Naval Operations executive panel in his last two years of a four decade distinguished career as one of the senior most Navy and military leaders. And we talked about the Mideast then, and it has only become more more relevant in recent years. And in fact, the the two weeks that surrounded the beginnings and then the cease fire of the Israel and Iran war, the so called 12 day war. Admiral Donegan and I were discussing what was happening as it was happening. And in fact, on the weekend that the United States took action to intervene and to take out the nuclear sites. The admiral was actually in the Middle East. He was in Bahrain where he was there talking to very influential national security leaders, and I was concerned for his safety, and so thankfully, he made it out of that airspace and back to the US with, I think, about 48 hours before we had the webinar. So I think you're the you know, the podcast in this format is going to be highly informative for anyone who wants to understand what were the preconditions of this war action, what were the what was the assessment of the execution of the war plan, both by the Israeli military and intelligence community as well as by the United States, with our friend, General Dan Caine, a former SHIELD venture partner, now serving as the senior most military advisor to the President on all matters military, but in particular on this extraordinary operation called Operation midnight hammer. So it's a fascinating one hour discussion, and I think your listeners are going to really enjoy it and learn something.
Thank you for joining us, and it's such a privilege and a pleasure to be with my friend and mentor of many years, Admiral Donegan, who I had the true honor of serving with on the Chief of Naval Operations executive panel at the very end of his distinguished four decade career in the Navy. The admiral has served in the Middle East and meaningful leadership positions. We're going to hear more about that today, and I think that will help. I. The context to understand some of Admiral Donegan, unique and timely perspective. So kids, so good to see you. Thanks for doing this, and I greatly appreciate it. I will just want to remind the the attendees that, in addition to your distinguished service. You were actually just in the Middle East prior to the cease fire during combat hostilities, and a two Sundays ago, you and I were on text message on signal, the encrypted app, and I was inquiring as to your safety, given that the Iranians decided to take counter measures, counter offensive measures, with 14 intercontinental ballistic missiles raining down very close to you, on us, installations in Qatar. So maybe that's a great place to start. Can you just describe, you know, recent activities, you know, from your being in the region, your where you're, where you were formerly in command positions, and maybe let us know what you were doing, to the extent that you can?
VADM Donegan 06:14
Thanks, Philip, it's always great to be doing, being involved with anything to do with SHIELD. You're right. Philip, I happened to be in Bahrain on a trip unrelated to necessarily the ongoing conflict. Was fortunate enough that flights flew and I was able to get there. And then, of course, my main job there was to meet with the senior leadership of that country on other matters. But of course, with given all that was going on, we spent a fair amount of time discussing the current, current conflict. Interesting enough, Philip, that was, you know, the very first time that I think I was deployed to the Middle East, was 1983 and it was because the Iranians were refusing to let international inspectors in to look at their nuclear sites. So it's pretty incredible that this Iranian situation that's on the front pages now has its roots in decades of history in the region. So bottom line, I was there on other business, but was fortunate enough to get a chance to engage with leaders. I go to the Middle East on a regular basis, predominantly the United Arab Emirates and Saudi Arabia. In this case, it happened to feed Bahrain. So that's why I was there. And my wife wanted to know what I was doing there, of course, when all these things broke out, but she thought that stuff was over.
Philip 07:38
Well, you certainly have a very timely perspective. In addition to all that you did in uniform, maybe you can just talk a little bit about your command responsibilities during combat operations in the Middle East, specifically with Iraq and Afghanistan, and what it means to be an operations officer within Central Command, the combatant command responsible for the Middle East area of responsibility, as well as commander of the Fifth Fleet, you know, part of the numbered naval maritime fleets in the US Navy. What does that involve? And you know, really, What? What? What has changed over that time to where we are in the last you know, 12 day war, as it's been called.
VADM Donegan 08:26
Yeah, that's super you know, the perspective that I'll give you is one from studying and being in the region a long time. As I mentioned, the first time I deployed, I was a young junior officer to the Middle East, but I also commanded a strike fighter squadron there during operations Desert Storm, and what came after, I commanded an aircraft carrier that was deployed during the peak of the Iraq and Afghanistan war. And as you mentioned, I worked as the CENTCOM Director of Operations. And I guess to put that in simplest terms, I worked for both General Petraeus and General Mattis as their Chief Operating Officer at the peak of the wars in Iraq, when we had 100,000 troops in Iraq and 60,000 troops in Afghanistan. And then we shifted that to go to zero troops in Iraq to 93,000 troops in Afghanistan, all while we were fighting al Qaeda in both Pakistan and Yemen. So that's the stage that I looked at. And one of my predominant jobs, then, when I was director of operations in Central Command, was the Iranian problem set. And as matter of fact, on my it was back in 2010 when I first started there, that this weapon systems and capability that you saw put into play, this, this penetrator weapon was developed, and we actually ran exercises to test it, and then we ran exercises to simulate the entire operation, including launching B twos and flying them halfway around the world to practice this mission. As you can imagine, that's gone on now for some time, and then later, when I got to. Bahrain. I lived there for three years during the time when you saw the rise of the Houthis, one of Iranians proxies come up, and it was my ships that got attacked, and we retaliated against the Houthis with TLAM strikes against the Houthis. And that was back in 2015 so the perspective that we'll talk about today is based on all of that experience. So to speak, Philip, I don't usually talk about that in that kind of detail, but to help, since there's many in the audience that don't know my background, that's that's we'll be talking about. That's the basis that I'm looking at, or the lens that I'm looking at things through today.
Philip 10:38
Yeah, completely understand and appreciate that, and thank you for kind of defining terms and the like for the non military in our audience. So Admiral, yeah, here we are at the end of a 12 day war. We're less than a week into a cease fire, and yet there's been extraordinary military and intelligence and technological activities since the October seven Israeli conflict with with Hamas. But as you just referenced, going back to when you were in uniform, the activities in preparation for the US intervention involving the b2 and the bunker buster have been going on for over a decade. So this is an extraordinary set of events, measured in years, but also in days and weeks. Where are we now? You know, as you assess all of this with respect to the viability of a cease fire, holding the nuclear non proliferation assessment of you know what damage you know has been done to Iran's nuclear facilities, and really just reflections on the past couple of weeks it's been changing by the by the day.
VADM Donegan 12:09
Well, well, super Philip, what I'll do is I'll take that question in three ways, one in a broad perspective about what's the Middle East look like now, and why is it so different than it was before October 7. I'll dive in a little bit and talk about, if you like, the my assessment of the nuclear capability now, after what's happened that Iran possesses, and then I think it's logical then to kind of move to the ceasefire and if that's going to hold, and what that, what that looks like in the broader perspective. But first, just to set the context, you know, the framework of the Middle East for years, Iran was a country that really didn't spend its fortune on building the best military. Instead, they built really good defensive capability and a really good ballistic missile capability and drone capability. In other words, they built the missile side, not the rest of the conventional arms, and then separately, they built something called proxies. And these are elements that work in one way or another, by and large, to the same purposes for Iran that were spread around the region. And they use those to do their bidding, and then claim when they use those forces, it wasn't them that was using them. So those forces that were their key proxies were Hezbollah, Hamas, the Houthis and militia that they have in both Iraq and Syria, just to name a few. And then they have sleeper cells in other places, including the United States. And those would be the arms that if Israel or the United States would do something, those would be the arms that would reach out and touch back on Israel. Hezbollah would launch 1000s of missiles they had, potentially into Israel, or bases would be attacked that the US owned, if they used facilities. We saw that when they went and attacked a base that we had in Jordan. We've seen them do it in Iraq. So that was the stage that Iran had. That was the power that they had. Well, what's happened since October 7 is the Israelis, by and large, with us, support, certainly, with our equipment and our kit, were able to destroy Hamas. They were able to decimate Hezbollah in a matter of days, including killing all their key leadership, so much so that Hezbollah hasn't done one thing in this into retaliate against Israel since Israel and Iran had been at this attack, the US went in and did a pretty good job weakening the Houthis. And then another thing happened, Iran's closest, really, and only ally in the Middle East, Syria Assad, got driven out of power in a matter of days and had to seek refuge in in Russia. And so now a country that would have been aligned with Iran on this time is sitting not just on the sidelines, but vocally against the regime in Iran. So if you look at that and now combine it to what the Israelis did. Right during this 12 Days of War, they did a couple things. They went in and, of course, took down all their defensive systems. They did that back earlier when there was a previous strike. But then they went in and finished that job off. So they quickly got complete air superiority over the corridors they wanted to operate in Iran and then the Israelis took out key leaders. This is significant key leaders across the Iranian military force, but especially what's called the IRGC or Quds Force, that's the arm of the military that runs all those proxies and owns all those missiles. In other words, they went out there and decimated these and killed these leaders, where they slept in their residence, where they worked, when they were commuting, and they took them out. And if you can imagine how destabilizing that would be, at the same time, they attacked all the missiles and systems and what would be the backbone of support, the places those things are built and manufactured, where more can be replenished. They destroyed those missiles and systems in their own country, while they went after the nuclear sites, with the exception of Fordow, which was deeply buried. And then we saw the United States go in and use that system that you described against it. So what you have now is an Iranian regime that is attacked in the following way. Their military was weakened, their IRGC Quds Force especially weakened. And now that's weakened the Iranian regime, but it's still there. The regime is intact. And so that's the stage that everything's set in now is a tremendously weakened Iran, but you also heard the Supreme Leader step up and say, we won, and that's because his bar for victory is regime survival. Basically, he stood up to the blows that the Israelis could do, the blows the American could do, and is still in control of his country, and all the rest of the stuff, though we build that over time, is the lens that they look at it through, and that's kind of the stage we're in. And that brings us to the nuclear site assessment. But let me stop there before we talk about that, and see if you have any questions on that frame setting.
Philip 17:17
Sure we'll come back to regime status, whether Khomeini will be able to retain his power. You have some insights into some of the diplomatic initiatives with the US administration and the Israeli leadership, so we'll come back to that. But I would like you to touch upon before we go to nuclear, what you saw in the use of technology, techniques, procedures that just led to this extraordinary set of events where the United States, well Israel and the United States, jointly controlled the airspace and had decimated much of the senior leadership of the Iranian Quds guards, and really put a sense of panic in the Houthis in terms of, were they next on an exploding pager?
VADM Donegan 18:10
Super, yes. So, you know, this gets to the heart of SHIELD, really, Philip, when you talk about it, you know, with SHIELD’s, focus being on, on, on autonomy, and being on space, and being on AI, being the enabler for all of those and how they can, how they're coming together for the future. What you saw the Israelis do was facilitated by all of those things. Think of the ability and the deep penetration that the Israelis must have had into the Iranian network to be able to know where all their leaders were at that given time that they needed to know. In other words, and it wasn't just one, it was all of the leaders. Another example, as you mentioned, was their ability to get into the supply chain of Hezbollah, probably equally into the Iranian supply chain, we just haven't heard that. And how do they access that? They assess that access that through some human intelligence, but predominantly electronic intelligence that comes from space. It comes from systems that can understand signals intelligence, but also can understand how networks are put together. So think about cyber right? So clearly, the Israelis had to have access where they penetrated all those networks of the Iranians and then exploited them to understand not just where they were, but what they were doing and how they were making decisions. And then, and then, when they went to employ they didn't just take take the systems out by flying overhead at 40,000 feet and dropping bombs. You probably saw that they had forward deployed elements in the host country of Iran, that deployed drones that helped finish off the integrated missile defense systems, anything that was left from what they took out before. They took that out before their fighters ever got to the airspace, using the same kind of things you saw the Ukrainian Jews, but on on steroids. So then, then what else? Of course, they denied the they would deny, then to blunt any attacks that were coming back on them. They deny. They use those same kind of systems to deny the Iranians the ability to do precision targeting with GPS type denial systems and such. On the inside, the Iranians were doing similar things, denying GPS signals. But the but the kit that the US used was able to be much more. I mean, that the Iranians used could work through all of that problem. So in essence, you saw cyber, you saw space, you saw AI all put to use. Because if there's one thing the Israelis are experts at, it's integrating all that information, infusing that phenomenal intelligence they gathered to make sense out of a picture that they could then exploit in their combat operations.
Philip 21:02
Yeah. Well, thank you for that. It's not by accident that we see as SHIELD. A lot of fascinating companies started by Israeli former military technologists, entrepreneurs, so you were very early to introduce cyber into Central Command. That was one of your duties and innovations as the Operations Officer, technology has changed rapidly and in that time. But how would you assess the use of cyber specifically among all the other asymmetric technologies that we saw and maybe didn't see, but no, we're, we're operative in this operation.
VADM Donegan 21:45
Yeah, I'll have to be careful here, because I was intimately involved with the planning for the operations that we would do here. That, as you can imagine, intertwined the National Security Agency operations, which, which worked for the intelligence community, with CENTCOM, which are the employers of all that, right? And if you think of cyber, you have to think of it. Everyone likes to think about the offensive capabilities of cyber, right? And, and you can go in there and like the Stuxnet virus, and destroy centrifuges without ever having to put somebody on the ground,
Philip 22:20
One of the earliest Israeli use of cyber against Iranian nuclear proliferation going back over a decade.
VADM Donegan 22:29
That's right where they entered a particular set of malware directly into the control systems of the centrifuges can cause them to spin up at a higher rate of speed and basically destroy themselves, if that makes any sense. So one of the things that that's always at play when you have that's the things that people think are the cool things related to cyber. But cyber has many other uses. It has the capability of giving you access, to listen and understand and then further develop networks. And AI gets applied to that, and now you have a much Completer picture of how Iran does things, how they supply things, how you learn their supply chain. And so the other side of cyber is to defend, but it's also to use those accesses to understand so then you can take apart the enemy. And so I would say that when we were in the initial phases of bringing cyber into our operations, everyone wanted to go to that offensive side. But as you can see, the way the Israelis used it there, there was probably offensive elements of their cyber, but the key elements of their cyber was to under to use it as access to understand and augment the things you're getting from space and signals intelligence and stuff, when you actually can, can, can use it to to understand exactly what the enemy is doing, how they're communicating with each other. And now imagine you're one of those Iranian senior officers or generals and all of your buddies got killed, and now they promote you. You don't know what means you can talk on that isn't being listened to, and you don't want to be the next one to go away. And you don't know who even you can talk to, who's a good guy and who's a bad guy. You don't know how the Israelis are getting information on where you are, and you don't know what, who you can give an order to that won't be overheard. So you can imagine the paranoia that it would put in place. And think about that as an amazing use of cyber that isn't necessarily talked about when you get a glom on to we can take out the centrifuges.
Philip 24:38
It's basically a psychological operation in cloaked in technology, Admiral, you were going to discuss the nuclear status now with the three destroyed sites. We're still awaiting, I guess external intelligence on the battle damage assessments, the so called BDA. What's. Your take. I mean, you were involved in the initial planning, you saw what happened. And I want to also ask you, what's your assessment of the Commander in Chief, leadership and Chairman of the Joint Chiefs of Staff and just executing the US part of the operation in this surprise operation Midnight Hammer?
VADM Donegan 25:22
Well, it's interesting to bring that up, because, as many of you know, Dan “Raisin” Caine is the chairman now, and he was, you know, he was formerly associated with SHIELD, so Philip, you know him. Well, some of the others out there may not have met him, because he had to step away from that role when, when he took that job. But there's no tougher job than the chairman. When you have a crisis like this, the chairman's job in that time is to is to take the options that the combatant commander, this case, Central Command brings to present to the President. Because what a president wants isn't an answer to the problem. He knows the problem exists. He wants a range of options to choose from. And if you can imagine in this situation, President Trump had many options to choose, including joining Israel, right up front, right and being part of this operation, or, if not joining them, how do at what time should he join? Should he join at all and nd is there, if we join to what level do we join? Do we join? Take for do or join more broadly? And what's our role in defense of Israel? All of those things together are what general Caine would be talking to the president about, and he'd be helping him understand those are called courses of action, which ones the president chooses. Like any CEO of a company, he's not going to want just one option. He's going to want to understand the range of options he can employ and have the right advice on which ones of those so general, Caine isn't controlling operational forces, quite the contrary. He's advising the president on helping him select those, those range of courses of action that would be in the national interests of the United States. And we saw how that played out.
The President didn't choose to join Israel on the front end. He chose to let Israel play this out. We did, of course, provide them the kit, provide them the weapons. We probably collaborated on intelligence. Maybe we collaborated on air to air refueling and things like that, but we weren't directly over Iran with them initially, and then there was a choice made to go in and finish the nuke sites off, but we also defended Israel. We were active participants in in keeping the hundreds of missiles that were fired at Israel, and blunting that effort to significantly reduce their effectiveness when they got to Israel. So let's talk about the nuke site. There's lots of press about it, and lots of people that want to tell you this or that, fundamentally, Iran's if you have to look at Iran's nuclear program, not as one thing, in other words, not as what's in for do you have to look at it as, what if the entire program that gets you to a nuclear weapon, and that includes the centrifuges that spin uranium to get it to the right level and purity that you want right? It also includes, though, the technology to put that on some kind of delivery device. It includes the technology to make the bomb. It includes all the scientists that have knowledge of it. It includes the other leaders that run the programs. And if you put that all together, and you look at what was attacked and what is gone today, Iran's nuclear program as it existed is gone. What remains are elements of it, if that makes any sense. But the string of programs, the entire program itself, is no longer in existence. What is there are there's, there's probably a certain amount of of uranium that's enriched to 60% that is somewhere however, we may find out that the lion's share of that is buried in the taunts, and some of it is probably buried at for do. Their ability to spin centrifuges, to get uranium above 60% is damaged in some way, their key leadership that runs all these programs is gone. Their ability to make the actual bomb itself, the metallurgy and all that goes with that has been decimated. It doesn't exist anymore. So that's how I can make this statement. Over time, we'll understand how much of Fordo was gotten at. Now, not being an expert, and I don't see the BDA today, what we did wasn't designed to collapse the entire internal, all the tunnels that exist in for, do we were, what was, what that operation was designed to destroy those centrifuges that that could spin uranium to a higher level. And as you heard the International Atomic Energy Organization say, uh. They're 100% assured that those centrifuges can't do that anymore, because their tolerances are built that they can't take vibration. They're built to these super tight tolerances because they spin at super high speeds. And if you can imagine, it doesn't take much to damage that. And then when it's damaged, they become unrepairable. So look at the program that way, as opposed to, oh, is it for dough, etc. And think of Natanz. When that site was attacked, it may be years before anyone can even go in there, because there was uranium stored there, and all of that is now buried, and what's contaminated with alpha particles, they may not be able to go in and even inspect it. Does that make sense?
Philip 30:41
It makes perfect sense. Thank you for that assessment. So regime stability or instability, it's your guess is going to be better than most. This is something that's very difficult to plot out, but you spend a lot of time thinking about these issues in uniform and actually in some of your post Navy career life on various policy boards. What are the prospects for Khomeini's regime to remain intact now that their largest source of leverage, the nuclear blackmail you know, has been severely degraded, right?
VADM Donegan 31:25
This is a real interesting question, so I'll frame it this way, anytime the United States is involved in trying to impose a regime change, we really weren't successful, except you could argue once with Japan, and that's because of unconditional surrender that happened, and we rewrote a constitution for the country and helped implement it under MacArthur, spoke to Germany, again, an unconditional surrender, but maybe less successful, because we only got the world, only got about half that right at the time, and Germany got split up, and it Didn't work out the same way. But beyond that, our track record for regime change is not good, and the reason is because it's very difficult, it's impossible, probably, to build a military plan that can get you regime change. What you really want in Iran is a revolt, right? You want the people of Iran to cast the leader out, and then that puts you in a different stage. It's unlikely to have that happen in Iran, at least in current times, so that may come over time, but it's unlikely, and that's because the regime has built a system, a network of command and control, that suppresses any kind of revolt early. And I'll give you one example, if you remember the women's issues that came up that started to gather attention about a year and a half ago, and and everyone thought this was going to be the beginning of something in a matter of a few months, that was put down, and it's put down with the regime that roots that out as systems. And and people know that if, if they get vocal, them, not just them, but their families, end up in prison and jail and off somewhere. So, so the regime change thing is, is not something you design a military operation for. What you can do is topple a government and have a failed state, right? And so could that happen? It's unlikely now, because the Supreme Leader is still there, and if he were to be killed as an individual, that mechanism for the would still exist with a different leader.
Philip 33:33
So you and I have had some discussions recently about the role of the Trump administration having a restraining influence on the Israeli leadership? Do you want to just provide a little bit of color there?
VADM Donegan 33:50
Well, one of the problem, you know, one of the most interesting relationships that exist is probably the one between Bibi, Netanyahu and Trump. But no one really knows what that relationship is, except the two of them. But it certainly had, you know, it's, it's had its ups and downs, but where, where they collaborated, you know, you'd have to argue has been in this operation was, well, right in the end, Israeli did the lion's share of the fighting with us, kit, and when needed, of course, you know, campaigned hard to have the US do what they could do in Fordo. Not that the Israelis didn't have a plan on for dough, but they knew they couldn't be as successful probably, as we. We could and the US did choose the operation to go after for dough. But after that was over. I thought that, you know, the US was really clear that we weren't going to be in it to go much farther than that, that that's where we wanted to go. And then President Trump wanted to influence Netanyahu to cease the fighting at. That point that that the nuclear program was decimated enough, as I described, and, you know, and we were sharing, of course, and had the same intelligence the Israelis had, and, and at the time, he probably understood the, you know, this revolt versus regime change problem set that I described, because everyone's been studying it hard and convinced Netanyahu to stop at the same time, though, Netanyahu, just days before, was indicating, even before that, that he was going to that they had probably achieved the key objectives that they wanted to and I'd say this, that I don't think the Israelis would stop if they hadn't successfully gotten through everything that was on their list that they believe that they could still get at. So that kind of brings us to the ceasefire. Philip, which is, I would say that it's, you'd have to look at it. It's probably a one sided ceasefire. The Iranians have stopped. The Israelis are watching. They're doing their own BDA, they're understanding. And I believe that in their mind, they reserve the first right of refusal to go back in there if they find something that they should have gotten that didn't get serviced. I hope that doesn't happen, because I think, you know, there's a great opportunity for Iran to be at a table now, somewhat disadvantaged, but we have to be cautious, because Iranian, the Iranians, if there's one thing that they're experts at is negotiations. They correct. They are really good at that, and they understand the interplay of the international community very well, and use and use that, you know, use entities against each other to buy them time reconstitute and rebuild and those elements of the nuclear program that remained, and other things that they have, they're bargaining chips now for them at the table,
Philip 36:47
You had mentioned previously, sleeper cells in the United States. How concerned should all of us as Americans be whether, and this would not have been the first attempt by the Iranian regime to have assassination efforts against specific leaders.
VADM Donegan 37:11
So now, a matter of fact, as you know, the Iranians tried to years ago, had tried to assassinate an, you know, an Arab leader here in the United States, it was failed and foiled in but the example you know that that whole operation is is what they have as part of when I mentioned proxies and goods force and terrorism, it's why the United States designated the Quds forces a terrorist organization, because they do have those sleeper cells out there. And they're not just in US countries. They're in our allies countries. They're in Arab countries. You know they and what I what I can say about it, is you can never say they're not you know that that's not an issue, but you can imagine it couldn't be higher on the priority list of the United States intelligence services, the Israeli intelligence services and the intelligence services of our allies and partners, and no matter what you see at summits and G sevens and such about people not getting along, the one place that the collaboration across intelligence agency is, is, is, is intertwined, is when it comes to counterterrorism and the passing of this kind of information. So I won't say, Don't worry all as well. There's just not some business, not a reason for Iran to do that right now. They're in a position now to to negotiate from what they believe, where they still hold some cards to play. One of them is, do I even participate with the, you know, Atomic Energy Commission? Do I walk away from, from the nuclear proliferation treaty that allows inspectors to come in? That's a card to whatever is left to their of their nuclear program to to the other things, like the other weapons they have. The Israelis destroyed a lot of their long range ballistic missiles and drones, but they still have 1000s of missiles that can range all the Arab countries that are virtually untouched other than their leadership and command and control has been attacked.
Philip 39:20
So okay, let's talk a little bit about your relationships and perspectives with Gulf allies. We've talked a lot about Israel, but MBs and Saudi, the UAE, Bahrain et cetera. And then I want to expand the aperture to think about what's happening in North Asia, with China, as well as the current and active hostilities on the European continent, with Ukraine and Russia. And what lessons are being drawn from the military and political leaderships in those areas based on what they're seeing on the ground in Israel?
VADM Donegan 40:00
So if you can imagine, and you're a you're a China, you know, or you're a Russia, you're looking at this whole operations through a different lens than we just discussed, right? So let's take your Putin for example. You're somewhat ecstatic because you're going to have a free hand while this is all going on, to continue your operations that you know, when the world tends to jump on one problem at a time. And so for if you looked at the news cycle and the attention of world leaders during these 12 days, there was little about Ukraine going on. And even though the horrific things Putin was doing, he continued to do so for so from that lens, you know, Putin is watching this, comforted that the attention isn't on him at that moment in time. But if you're China, it's a different lens. First of all, you get the majority of your energy from the Middle East. So you don't want there's lots of talks about Straits of Hormuz closing, you don't want that happening. So you're behind the scenes ensuring that you can still get your oil and energy right, and they pay for it at a regular price to the Gulf nations. A large portion of the GDP of both Saudi Arabia and the UAE, and to some extent, Qatar, comes from dollars paid by the Chinese for that energy, then the China gets at a huge discount the black market oil that Iran is not supposed to sell. They're selling that crude to the Chinese. So basically, you want the Straits of Hormuz open. So does Iran, because they continue to then get money from the Chinese, who are the only folks really buying that oil from them. But the other thing you're looking at in China is you're looking at two things, Ukraine and this war, and seeing different ways of warfare being fought. In Ukraine, you saw this innovative use of drones, innovative use of technology, commercial Fast, fast fast reaction time to refine weapon systems and make them work to where the Ukrainian was. The Ukrainians were able to decimate the Russians Black Sea Fleet without a navy, right? That's innovation, but now you watch what the Israelis did, and see this way of war fighting that not only went in and took out targets, but did it from internal to the country and decimated leadership at the same time with with precision accuracy and get into the supply chains. So if you're China, you're probably looking at all of what you see and saying, okay, you know any future war is going to have dimensions that I better really understand my vulnerability to before I take that step going forward. And then one you didn't mention is North Korea. So if you're the leader in North Korea, your lesson is clear. Uh, never give up your nuclear weapon. So, you know, thinking you better and you better be careful where they are.
Philip 43:09
Ukrainians would agree with that. Ex Post Facto after the fact, yeah, yes, yeah, yeah, massive leverage. Uh, given up, or, you know, at risk.
VADM Donegan 43:20
If we talk about our Arab nation partners, let's just talk two of them for a second, Philip, because I think they're super important to especially to SHIELD and and those in tech, you know, between Saudi Arabia and and the UAE, you have two of the largest investors in tech in the world, right, the and they've decided both those countries to go all in when it comes to moving forward with the United States in the development of AI and and you're not going to see a change to that and that it means their sovereign wealth funds are looking at in different ways. Saudi Arabia is doing it different than the UAE. Are looking at the right firms to be involved with in the United States and globally, but specifically in the United States, to get on the cutting edge, and they want to be part of it early, so they can have claim to the utilization of it if needed, of those capabilities as they're developed, if that makes sense, and it can be by having part ownership, or it can be by co-development, like G42 is doing in Emirates.
Philip 44:33
Fascinating, because you were very early to identify G42 specific to the UAE in their artificial intelligence ambitions. So I suspect you would agree with the overall assessment that these asymmetric technologies that are fundamentally commercially developed technologies by mostly startup founders, scrappy startups coming out of. University labs and the like, as opposed to large research labs, you know, DARPA being, you know, the prototypical one going back from the Cold War. Um, and not necessarily coming from large defense primes. So these technologies are, were very much on display. They're not going away. That's why we set up SHIELD to go after them. But you know, we when we when Raj Shah and I decided to do SHIELD several years ago, before actually having a fund business and a full team. This was before Ukraine. This is before what we just saw, and it's unfortunate that the world's going in this direction, but that's not our decision. It's going in this direction. You and I were talking earlier about alternatives to GPS. Can you just share what happened when, when you were in the region last week in terms of your lack of GPS and how that even happened?
VADM Donegan 46:06
Yeah, sure. Before let me just finish one thought that you just brought up there, and then we'll do the GPS piece. What's crystal clear to me that the reason that you're seeing this heavy investment in AI being to the earlier stage companies is because it's about speed to innovation, right? It's about the it's about what you saw in Ukraine, right? How can I take something and rapidly develop it? And when you talk about primes, it's harder for them to have that same cycle of speed, and although some are are working on it. So what the, what's, what's really cool about this is these Arab nations, especially the UAE and Saudi have decided, when it comes to AI to invest, to be with the United States and not China and and that was a hard, singular decision that they made. MBZ in the UAE, made that decision to step away from China and join with the US, because they see the future being in those same companies you described. If that makes sense, they know that we're going to do it not just in the right way, but will also be profitable, and will, our American businesses will drive it to the right answer, right So, and they couldn't get that with China. There's no way they could get that and and, you know, NBC was supposedly said it was easiest decision. MBZ is the leader of the United armor Emirates. It was the easiest decision he made to align and make sure G 42 his work was with the United States and not China. So GPS, you know, is interesting because it's kind of indicative of technology, right? It's what allows our weapon systems to be super precise, right? And there's different ways to guide, etc, but the advent of GPS weapons changed warfare right before to get a weapon on a precise target, you needed a laser. You needed something because the inertial measurement units weren't as precise, right? They could get it through the window of a building, you know, to hit this particular whatever. So, but then what came up, just like you see in drone technology now, counters to that, right? So, okay, if I have something I want to protect, I can put GPS jammers all around that target, and then it can never be struck to the precision that the weapon system could have. It may get close, but it may not get as precise as they want it to be. And think about a bunker busting bomb trying to hit one tiny little shaft to get to go down as an example. Well, when I was in the entire time I was in the Middle East, my iPhone here, and I've got it in front of me, it never told me where I was accurately for the duration of that conflict, and the time was never corrected. You know, I was in Iran one day and in Europe the next day. Because obviously, you know the coalition forces, the you know, the allies of the US are using GPS jamming so that the Iranians can't target but the Iranians were also using it, and they were using it in the waters of the of the of the of the Arabian Gulf. And if you go and just do a Google search, you'll see that there have been almost ship collisions and ships going off course that are trying to drive back and forth through the Persian Gulf because GPS isn't working anymore, or wasn't working. Reports are now. It's kind of back to normal, and they also so that kind of technology is classic. We see the same thing in drones, right? Drones have a capability. So where's the technology going in drone defense, right? And how do I counter the drones? And then it's just the technology starts to just build on itself, but, and those. Countries that understood it, like the United States, we can still deliver those precision munitions where we wanted to, despite GPS jamming and Israelis using us kit, were able to do the same thing.
Philip 50:10
Fascinating. Admiral Donegan, thank you so much. This has been a fascinating conversation. You and I get to have these frequently, but for many of our investors and friends, this is rare and is certainly privileged. I am much more optimistic today than I was even a couple of weeks ago, just given the massive shift in facts on the ground in a volatile part of the world, I think there are many lessons on deterrence that are being absorbed, as you point out, with adversaries the United States that will take note, the technologies that Shield Capital is supporting are very much on the ascendant. Going to be increasingly important. And you know, good guys and bad guys may have access to it, but we're supporting the good guys and mission matters. That's why we do this, in addition to generating returns for our investors. So just want to thank you and very grateful for everything you've done for me personally and for Shield Capital, and I hope you'll be at our California event so that some of the people that you haven't met are able to spend time with you.
VADM Donegan 51:27
Well, thanks. I'm also optimistic, Philip, I think, from the Middle East, time will tell on how we capitalize on what's been achieved. Be careful, though, the Iranians, you know, want to slowly rebuild and you know, and that can happen over time. They got a big hurdle to get through, but there's tremendous opportunity now for maybe sustaining this change in the Middle East for the good.
Philip 51:53
Fantastic. And with less than two minutes, I think we'll leave it there. Shield meeting, start on time and end on time, sir, thank you so much. Greatly appreciate it. Thank you.
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