Welcome to defenseews. I am vago muradian. What deadlining fuel prices mean for e pentagons buet. Plusus a looook at the navys top warship perhaps. The deadliest terrorist attack, two brothers affiliated with al qaeda are secretaried of killing 12 and seriously injuring a dozen others. S. Armed with assault rifleles and clad in body ohey badgered into theeekly charlie hebdo, killing several. They wanted t to push the publication for its aracterizatition of the prophet mo hold. One them was jailed in 2005 after trying too to iraq to fight agagainst american troops. The other went to yemen in 2011 and trained by al qaeda. To discuss the implications are rrie of f the council, andd stephanie, who heads the homeland securit and Counterterrorism Program at the center foror strategic and international studies. Thanks foroining us. This was a stunning attack. Ere is a radicalizatation element europe has beenn dealing wiwith. Several hundred if not several thousands of europeans have gone to fight in iraq, afghanist, syria, yemen and you name it. The questionon now is how lely is an attack like is too happen in the united stat . I think an attkike this is fairlreasableo expect in thenited states. Wealk a about soft target lilike shopopping malzahn or a news room ere indivuals can entnter easily. The one issue we have is access to firearms, whihich iss a conce. W which i is much harder re an it is in francece. Barry . I think it is v very, very likely. We have seenther attacks in the United States not related to extremistt islamism and terrorism from mass murders in schools. So how in a free sociy do you op o with a gun from killing five, 1010 or 1 15 t team . You dont. This is gogoing to happenore and more. The broththers managed to make a preure cooker bomb andnd kill peoplele at the bostonon mathon. He grown terrorism is nothing new here or in you were. Barry immediately after 9 11 , yo were in some cold war thinking to prevent aacks. Can future attacacks be prerevented or effectively deterred at any level . It depepends on the nature of th particularr perpetratators or groups conductining the attacks. The essence of deterrence to apply it to terrorism is to forms. One you can deter by increasing your defenses, deterrence by prevention, better security at soft targets like stephanie mentioned and other types of larger and higher bare quears to such attacks. Secondly detecting the ththreat of retaliation. The saudi have reportedly gone to the families of terrists planning things saying you op this orr we will. The israelis are doing this as well. The is a body of practice that has bui where er time youu can deter terrorists frfrom taking action. There are hundreds if not thousands of acts, espspecially today. But you can do some of this. But u ultitely you need to get at the rt caus. What i would add is we h have a coupuple of stepthat we can te from a travel perective. For r example, you menoned the two brotothersn france had attempteto oactually trelednd receceived training and attempted to fight on the front lines in other countries and come back to france. We have the terroror watch list which is almost 50,000 names long. Some of them are u. S. Citins on tha list. T. It is a tter of knowing who is leaching, where they are going an h are they coming back. It appearso be failure of connecting the dots. They were on the u. S. Watctch list, and the frch stopphe surveillance in part because it is very costly to that kind of surveillae. Are attacks like this, and as tragics it is to s a at whatat point do they go fm beg nuisance things to otherer this . Duri the cold war there were a lot of bombings, that eventually folks we like look,e are e going to go about our l livesnd this is justomething that haens. The oer aument t is tens oof thousandof america die i in trfic acaccides every year. It depends. We now have an ongoing o operaon in iraq and syriaecau of videos of beadings of less than a half dozen americans. That caused a significant response. So it really depends on the nature and political calculus and domestic impact and perceptions of futurettacks. We could sit here and easily come up wh scenariosos where it would trigger that threshold, and we wowould go do aa lot more than we are ing now. Ultimaly, as you suggested it is a question of resource allocation. The ench are going to certnly increase their inteigence, their law enforcement, their counterterrorism and homemeland security now as a result of this. That is going to take resources from other areas but the public in france is going to support that now. The question ultimately is you need to get at the sources of that or it will be turning up oror tururning d down over time of ese types of actities. I would agree, but i would take it one stepurth in termsf understandnding who ion the e list and what kind of tivity they are undtakingng. Mynderststanding is s the two brothers in frfrance were affiliated with a group that was knowno try to radicalize others. Knowg that, knowing who t to look at, how to o trackk that, and what access they have to weapons, and what expressed intent they have is importan i i do bacack to sometng said earlier. Here in the unitedtates and in frfrance, therere a loft agencies that have to talk. It shouldnt come as any surprise that ththe more cooks you hahave in the kitchen,n, the more things get kinind of lost in the ps. You both hahave talked about root cause. What are the r solution to this . We are doing some work on at the atlanticic couil this yearar in 2015. You u ultimately have get to societies and policies a and governance that makes people feel they ve dignity freedom of sexexreg, that they have access topportunity a and to jobs. Some of the very raw basic human desires andeeds are not being fulfilled. It is causinging snificant alienation inhese societies. This is a longterm generational struggle. It is not something we can imposese from the wewest intnto regis like the middle east. It is somomething that we have to workith over a very long tim rk on sololutions wh middle eastern p partners, who know thei own cultures, but have to o get to a place where reformsead these sociies to be more functctiona and notot caung so o much alieienation and extmism. M. Stephan . I slilightly disagree with that. It is importrtant to make people iluded societi, but there are s some ndamental difference i am not sure we cacan resolve. It wasn aack ofof wha somome call freepeec but at the e end of the day the two brothers were ups about the depiction of thehe prophet mammed in a si tir cacal newspaper. I am not sure e how yoyou geat the roroot cause off that. Ist jobs or education uslim leaders condedemning it sayingng it is a misreesentatation of isl to behave in that fashion . E have see that stement from ims a religious l leade and it has nonot taken effect. Ow sious ithe effect . At if they h had d anthrax or a nucar dice . How significant is that reat . . I think there is an expectation that something will happ. I amam personally m more woworried about dty bomombs than chemical or biological wilhelmsen. N. Barry . I think it is a matter of time unfortunate. Maybe not next year or five yes, but the experti in bio in particular, it is unfortunately a matter of time, and think k we a behind. G guys, t thank you for joining us. We would love toave you back to talk about thi coming up, the price of oil has fall to its loade level since 2009. Will tha mean a savings winfall for the price f a barrel of oil has dropped below 50. The lowest since 29. That is od news for most of us includesing the pentagon, which is the wods leading oil consumer but it may be too early to say whether cheap oil will solve the defense departmes budget woes. We have the former head of the navys spry corps. He is a management consult apt with alvarez and marsal, a firm that specializ in corporate restructuring. Thanks for being with us. Thank you for having g me. I k know it is dedesigned to be a hedge against things going too high. How does the pentagon buy its oil . The pentagons fuel and centering spry chaiis the mostt integrated sply chain that the department has. It is factory to foxhole, to flight deck and fan tail, with the factories being those refine that takeke crude oil. Depends on a Single Organization theefense logistics organization, to buy th fuel, using eststimates the Services Provide them in terms of consumption. Then they buy it distribute it store it and put it planeside, pierside, dockside wherever needed. What is the structure like though . There is a sense t that the low oil fuelrices now will translate into more immediate savings, but it is slightly more complicated than that, isnt i it is. It takes more time. The team at d. L. Energy buys crueon contractsts from around thee world, and contracts that are set to an index that is measured byy plats. It is an Energy Newsletter that has had indexes for years. Those indexes will drdrive the price lower. The price of fuel has dropped from 120 a barrel in that neighborhood to around 50 a barrel. That a 60 drop. But the price of crude oil is only a piece of the cost of energy for the defefense Logistics Agency and the department of dense. There isis refining cost, which is about another 30 , and also theres the storage, transportation and distribution costs, another 10 . What does this savings translate to roughly at this point . Is that quantifyable . It is. Over a 12month period,d, a 60 drop in the price of crude, the 120 to 50 a barrel savings we are talking about, that represents about 35 of the total cost of energy to the department of defense. Now that turns into in terms of annual consumption, about 4. 2 billion in savings. The question is how does that money get back to the services . That is the real issue in the end. How does that happen . You guys are also looking at futures contractsn terms of hoit is structured. How does that savings m manage to get to the services . You talked about it at t the beginning and menoned that shock absorber. That shock absorber is a working capital fund. So the services need budge that they can depend on, and they build them, which guarantees they build a budget based on the cost of fuel. D. L. A. Provides that to them, an estimate at least, over year in advance. That means that when a ship pulls in at a navy pier or at a foreign location, or ann air force airplane lands they will pay the same price. As a result ofhat d. L. A. Has an expectation t that their estimates will cloly mirror actual consumption and execution. In 2013hey were pretty good. Some years they are a little off. Now with fuel pces going down the defense working capital fundd will starto build cash. And how does that cash get back to the services ultimately . Two ways. Sometimes, not very often, e o. S. D. Comptroller can take cash from that fund and give it to ththe servicesor their readiness accounts. But generally, and usually what happens is they will lower or raise prices. Now there were price decreases. The most notable one was in the summer of 2012. It was only th and very steepep, but it was followed by an e equally high raise three months later athe beginng of the next fiscal year. So it is possible they may want to o keep that money in that fund based on oil prices spiking back up . Certainly. Inbout 30 sececonds will low fuel prices impede efforts to develop green fuels and synthetic fls that are now very, very expensive . Some of th contracts that have already been let will be executed. We are seeing a commitment on the part of the navy, and the secretary has made comments about the economics. It is not just fuels. They are looking at other things like Nano Technology enabled luebke capitals and things like that lubricants and thingsgs like that toecrease frictions. Sir, ank you for joining us. My pleasure. I stood outside, assessing the situation. I knew it could rough in there but how rough . There was no way to know for sure. Hey guys. Daddy, its pink but hey. A new house its a blank canvas. And we got a great one thanks to a really low Mortgage Rate from Navy Federal Credit union. Pink so shes a princess. You got a problem with that . Oorah oorah open to the armed forces and their families for over 80 years. Navy federal credit union. Late last month defen secretary hagel haganan approved a navy doctor he cped the combat shims at 32 ims. Owe asked the navy to desn a more lethal and survivality design for the final 20 years. On the eve of the sir pass navy social securities trade show in washington is ron of t con congressional search service. Ron, it is an honoro have you back. Thank you for having me here. What e goingng to be the top themes we are going g to hear they sh nex week . O major theme youou will hear is distributed nefality. Ththis is a term somhave introducuced ia journal ticl that came out this month. They did that with the intntent ofof introducinghis conceptt at the surface navavy vent. What t does t that mean . Based on the journal article it appears to mean two things. First of all, making better use of your surface cbatants by adding additionall longer range wilhelen giving em additional pun at medi and longer rings so you complicate the enemys task of having to worry about more adversa shims, and also coming up with noah opetional concepts for those ships to operate thein surface e action grooms inays groups in different ways. Agel drovehe smallll surfaface combat initiative. What is your assessment of the navys decision to do andnd essentiay keep the l. C. S. Sign . You areight. The changes t to the l. C. S. Design that were announce late last year and there are 10 or 12 of them, include ding aew over the horizonn missile for ships. Therere werere otheer things f missiles. Adadditional equipment for Antisubmarine Warfare and improve the ruggedness of theship to thstand bale damages. There are a l of anges to the s ship. These chahanges will now be presented as a part of ththe budget smillings thawill go to Congress Next february. Part of thee budget can include assessing t the merits of thisew design. One of the c criticisms s theseship babasicallyomesith 57 millimeter gun anand a flit deck. Itit is going to get a bigger gun is o one of the tngs they want toed a as wellll . Actuaually that i notne of the thingngs on the list. Theres andditional small gun and a an impved r defense missilile, but a bigger gun is not e of the improvements the navy has announced. Lets talkk about the programs onon the docket. The new flight three burkrke is one othe things, a more cable version of the burke destroye a new am bib u yuss ship and the e new oiler. You have the ohihio replaceme program, which is a replement for the ohio class submarine. That is going to take e a large chk of the navys budget in the future. How is the nav going to square thoseeosts . That is one of the central question regarding the affordrdability of the ship building pgram. We are getting closer to where we will beooking at procurementundi for the ohio replacemement boats. They are due inin 20e21, with major advce funding i in 23019. We a are going cser where we will have toegin accomdating the ohio rereplacement program on top of the other ship buildin programs. But thee nav and congress and a that is the drive to put this in a Strategic Fund th no longer comesut ofhe navys buet is the solution . Rig the was a provision just passed that creates a seabad deterrent fund, that creates a pot of money elsewhere, that was away from the navys regar shihip buililding budget the nanavy hasas sai thathe ohio replacemenent program is itits top priority and that it will bebe fufunded, even if it comes at the expense ofther pgrams, such as other navy ship building prograrams. Byby creating that nd, whwhat thehe new w years eve i is doing or at the creors of the fund are hoping will achieve is otection of thfundining for all the other ship building programs. They say dont build attack submarines but if you dont do that, you dont get the leveraging effects othe higher run rates . If you cuack on attack submarine production during the time that we are producing the ohio replacement boats iwill reduce theommills of scale e of susubmarine production and increase their cost at the margin. So the navy ilooking foror a chlenging time as it, two through all of these major progra or the next couplof years . I think so. In fy16 we have a s shift to the flight three design. We have a review of the m modifieied l. C. S. S. Design. We have a review of the navys decision of how to design the new l. X. R. And finanally we have the fir of the navys new oilers. There is a lot offer t the dket this yea sir, thank you for joining us. In this weeks money mint, sponsored by navy federal c credit union, gentleman net tells us how to building savings when Interest Rates are low. Everyone wants to know when Savings Rates are going to go up. Even though they havent increased, there are still ways to build your savings in any rate environment. You may alrdy kw about certificatesr c. D. s, they are grade for fixed returns. But you may not know about ce ificate l laddedering it is a way to stagr the timing of maturity on your certificates. You y your certificates s in a range of different matities and rol the maturely certificate into the longest rung of the ladder this. Is a safe way to maximize returns and haveccess to your funds. Certificate laddering gets you the higher yield on longer terms rtificates and gives you a happened in the lower russian. Make sure you choose certificates in line with your savings goals. This way you can accs your funds on a second time table for. Shortterm goals like saving for a car, you choose three, six, nine or 12 months. Or you can use a fiveyear ladder for longer goals like saving for kids funds or homes. You can keep the ladder going on for years. It sounds complex, b once you start, it is really easy. You will be amazed a at how much you can save andd howuch fafaster i can do it. Thanks very ch. We will see you next week. If y you have any financial questions, please l let us know online. Coming up, my notebook. The brute a execution o of a dozezen editors, wrers and popoliceman in brace reminds us that years after 9 11, terrororism remains a threat. Two brothers b born and raised in france bece radicalized a attacked the mazinine that moed the prophet mo hold. One was jailed for trying go to iraq to fightmerica. They kept a a low profile apparerentlyly promptiting france to duce surveilillance save money. One traveleled to men in tressel for al qaeda training. Ile f far more europeans than americans fuad with radicals i in afghantan,raq,yria and lebanon, it is only a tter of time before attacksks happen hype it is ti to learn lessons to help prevevent future attacks. Charlie help do i known worldwdwide, which is the ogan i am charlie in frenc stead of 67000, 1 million copies will be print this week. Terrorism is a perersistent threat that aims to some y use weweaponons omassss destrtruction. Men who ha repeatedly demonstrtrated thingss slipped through the net. Rened vigilance, better cooperatation as well as enough money for the job are critical. Thanks foror jning us. I am v vago muradian. Join uss at defense newsws for interviews with cmanders of naval forsearn, and plans to crease defenses in the faulk laan islands. If you have any suggests for future covag email l me. I will be back next week at t sa time. Unti then, have a great [music] we should be thinking gods thoughts. What does he think . How does he want us to think . How does he want us toto live . And in the process of f doing so remember this. When youre thinking his thoughts, youre thinking the most powerful thoughts tre are. When youre thinkiking his thoughts, youre thinking and beginning to see what hes thinking about you. Next on in touch, taking your thoughts. [music] heartaches, broken pieces ruinelives are why you died on calvary