Readout of meetings with senior defense officials in Taiwan, Japan

DOUGHERTY: Greetings. Joe Dougherty here, Senior Director of Communications at the Foundation for Defense of Democracies. Thanks for joining us today. As Rear Admiral (retired) Mark Montgomery chats about his recent visits to Taiwan and to Japan. And he can also discuss recent breaking news involving the Navy, which he’s quite up to speed on. So we won’t spend a lot of time here with housekeeping stuff. Everything is on the record unless Mark says otherwise. And of course, if you want to chat with Mark separately at another time, we can arrange that. Mark is dialing in from California today. He’s got some meetings and then is on travel — tonight or tomorrow morning, Mark? So if you can’t get ahold of him, make sure you cc me and we will arrange that. But let’s get started. We’ll turn it over to Mark. Thank you, sir, for joining us.

MONTGOMERY: Hey, thanks. Thank you very much, Joe. Glad to see a bunch of friends on here. So I just got back from three weeks in Japan and Taiwan. Full disclosure, a few days of the Japan time, my son’s a surface warfare young officer on a destroyer, I went to go see him, give him my take on mine warfare and what to do if you’re in a minefield as the ship gets ready. But I’ll start with Taiwan and just say I spent two weeks there. I met most of their senior leadership. I spent an extended amount of time with their military leadership. And I still feel like this is a country aggressively preparing for the challenges they face. And I do categorize them as a model ally. And what I mean by that is: Taiwan is a country whose economic productivity fuels our productivity, their chips fuel our productivity.

So when the president sometimes gets pissed about the balance of trade with them, I’m like, “No, no, no, that $70 billion or whatever it is, it redounds to our favor.” Because we tend to take the stuff we buy from them and we put it in [Ford] F-150s and Whirlpool washers, and we sell that stuff around the world. Their chips drive our productivity. So they’re big there. Second thing is in the trade deal we made with them, their foreign direct investment, which I think exceeds $500 billion. If you look at it as a per capita, that dwarfs Japan and Korea and the other people we’ve had trade deals with, they are there to invest in us. Big picture ones. And ones we value in semiconductor and other high advanced technology areas. That’s number two. Number three, they stand hard against an authoritarian ally with us, China. Four, they only buy their military gear from us.

Now, one might note, because no one else will sell them stuff, but notwithstanding, they buy a lot of gear from us using Foreign Military Sales. And then finally, I think they’re approaching, we’ll talk about this, 3.5% GDP, core defense GDP. They’re past 3% for sure. And I think with the special defense budget, they’ll exceed 3.5%. This is a big deal. So this is a model ally as would be defined by our National Defense Strategy (if they would take the time to mention the word Taiwan in the National Defense Strategy, which they managed to not do in 30-some pages). The big takeaways for me though, they do have challenges. And I’d say one of the biggest challenges is interoperability. I think it’s their number one task. I participated in writing something called the Taiwan Enhanced Resilience Act in 2023. I think it was in the 2023 fiscal year NDAA, if not the 2024 one, but I think 2023.

And it was direction to the Biden team, but also to the Trump 47 team that you need to increase our exercises, our planning, our training between US and Taiwan forces. No more “mother may I’s” — get hot. This wasn’t a “you might think about it” guidance. This was direction to do this. And I would say the Biden team did it ad hoc at best and it’s still going slow. And so here’s what I mean by interoperability. People tend to think immediately about technology when they think interoperability. And I agree, there’s three aspects and number one’s technology. Number two are what I would call policy and processes like exercises. And number three are people. And the technology one, they’ve got to figure out both a strategic interoperability, a network that allows them to be both joint and coalition with us, have information and share it with us.

And they’re looking at a bunch of US systems for that. And I encourage them to get that procurement going. But then tactically, there’s a system called Link 16. It’s how F16s talk to AWACS, talk to ships, talk to Patriot units, things like that. They’ve got a US-style Link 16, one that could communicate with us if they have the right cryptography loaded in the F-16s. But in a lot of the other assets, they have a commercial version that is of marginal value. And here’s how I describe it: If a ship were to leave Japan, a US Navy ship and go out into Sagami Wan, that’s the harbor out there. And a Japanese ship came by, Japanese Aegis destroyer, they’d be up in something called CENTRIXS-J in a few minutes and Link 16, even cooperative engagement capability. We’d be fully interoperable, able to fire on each other’s tracks in minutes or less than an hour for sure.

Then you bend north, head to Korea, drop the Japanese, pick up the Koreans, and you’re in CENTRIXS-K for Korea and Link 16. But then you head south towards Taipei to Taiwan. And you see that Taiwan, a Kidd-class destroyer, former US Navy destroyer comes out, you’re going to be on bridge to bridge radio with them like you’re hailing an Iranian tanker, or you’re going to be on cell phone. That’s not interoperability. We got to get that interoperability going. And I think there’s some FMS cases out there that are like 2028. Look, first of all, my experience with FMS is it moves to the right. So we got to hold the line on that. In fact, try to pull some of the stuff to the left. If they’re our most important war fighting ally against our most demanding peer adversary, they ought to be getting stuff fast.

And that’s one of the ones that get fast. So that technology, strategic and tactical needs to get moving. The processes I talked about are really exercises. And I think our two Navies are starting to exercise a little bit together, but I don’t think they’re advanced enough from what I can tell talking with the Taiwanese Navy. But we also got to get our Air Forces operating together, which means we might need each of us fly to Guam, do the exercise there. Maybe there’s a world where our forces fly into Taiwan and operate out of there. I would do that. I get that the politicians would angst themselves out of it probably, wring their hands together and decide that’s too risky. It’s amazing to me, by the way. We’re willing apparently to fight China to the death of 7,000 to 30,000 Americans in a cross-strait invasion if they try it, but we’re not willing to infuriate them by having our forces trained together openly.

Well, there’s a disconnect there between what you’re willing to do and what you’re willing to deter. And we don’t appear willing to deter things very well. Okay. So you got the technology, you got the processes, and then the people. It is clinically insane that generals and admirals I meet have never met an active duty US admiral or general. Many of the Taiwan generals and admirals today have never met an active duty American, a general or admiral. Who are we fighting? There’s two countries in the world where the United States actively prevents senior leaders from visiting their counterparts: Ukraine, the war we’re in, and Taiwan, the war we’re about to be in. Something is wrong with our Department of Defense, and it’s been wrong for 15, 20 years. Our perception that we don’t need to do this key… We believe in key senior leader management.

We micromanage the crap out of this in 193 countries, but in two of them, Ukraine and Taiwan, we pretend it’s not necessary. Well, for Taiwan, how are you going to have relationships with the people? Look, if you’re a senior leader in the US military and you’re traveling around Asia, you meet leaders from Japan and Korea and the Philippines, and you go back to your office and you get work for Japan, the Philippines, Korea, and Taiwan, which one are you going to forget? This is not right. It is stupid, archaic policy. The only beneficiary of which is the PLA and needs to stop. Okay. That interoperability needs to get moving. And a lot of the things I mentioned are not Taiwan’s problems. Those are US problems, US weaknesses, US lethargy/fear of alienating China. Bad idea. Anyway, so that’s number one.

Number two is procurement. So interoperability and procurement. Taiwan understands they need a low high mix. They get it. I don’t know how much more we need to send groups over to tell them you need to have a low-high mix. They get it. They understand they need a lot of UAS, airborne unmanned surveillance, and USVs, unmanned surface vessels, for the maritime. And they know they need counter-intervention munitions, things like Javelins. But that’s what they need to counter a lodgement. An effort by China to do a cross-strait invasion and lodgement. And I fully support that and they get it. But they also need the high end. They got to have the F-16s. They’ve got to have E-2Ds, which are like mini AWACS planes, very effective mini AWACS planes that are ready to be sold to them except the US is blocking it.

They need surface combatants. And the reason they need these is to deter China in phase zero before the war to track China. You can’t start the cross-strait invasion with China having air power over the island, because Taiwan just quit having air power and maritime power. You can’t fight a lodgement if they get to start with the Chinese Coast Guard and Navy operating three miles off the coast. No one thinks that’s a good idea. The natural conclusion for that then is you need a high-end too. So it is a low-end high-end mix. Here’s the good news. They need to have about a 5% defense budget. They’re going to be able to afford this stuff. Here’s the bad news. They have to buy most of it from America, also known as the world’s worst delivery program ever for weapon systems, Foreign Military Sales. So they got to work on that. I will say there’s an FMS conundrum, a Foreign Military Sales conundrum. Many of these projects are taking four to eight years to deliver from when they put the order in, when they first… there’s an announcement of it to when it’s delivered. Harpoon’s going to be 2020 and delivered in 2028, maybe 2029. A critical weapon, one we all say they really ought to have in eight years. That does not strike me as an urgent effort by the United States in general. And I put most of this on the Department of Defense, not the Department of State. And I put, not the defense industrial base and not the Taiwan… everyone has a little bit of [inaudible] in it, but the Department of Defense is the prime suspect.

Now, here’s the real conundrum on this procurement. Right now, we deliver… if you look over the last 10 years, about average, about $4.7 billion a year of FMS delivery, about $45, $48 billion right in there. Okay. If they go to 5% budgets and they’re supposed to by 2030, the amount they spend on personnel isn’t going to change a chunk. The amount they spend on defense industrial base should change a little. We’ll talk about that in a minute why, but not much.

The whole growth is going to be in FMS. And as we all know, that Foreign Military Sales, the only country that sell to them is us. So suddenly our FMS will go from like $4.5 billion a year to $15 to $20 billion a year. And who here thinks we’re going to get more efficient, more effective at FMS? We suck now when it’s $4.5 billion a year. What’s it going to be like when it’s $15 to $20 billion a year? It’ll either suck as is or worse. So I’m really worried. We got Bridge Colby pounding the table. “They got to be 5%. They got to be 10%.” Well, Bridge, you better fix your FMS program inside your department and stop ranting at the Taiwanese and rant at your own people to get their act together.

And I think one of the saving graces on this is increased of use of DCS, Direct Commercial Sales. One improvement over the last couple of years has been a slight movement of items from FMS to DCS, things that can be seen as Direct Commercial Sales-applicable because they’re dual-use other things. So these are, I think a lot of USVs [Unmanned Surface Vehicles] and UAVs [Unmanned Aerial Vehicles] need to be procured inside that program. It’s faster. It’s smarter. It’s sharper. It’ll get it done. But you can’t move a lot of stuff… In the end, an F-16 is FMS. It’s not DCS. Your big items. But as much as we can move to DCS, the better.

That brings us to the special budget. So I think when put into proper NATO format, that means accounting for Coast Guard and pay and a few other things, their defense budget is just great coming in at about 3% with a special budget that would get up to about 3.6%. But that special budget’s been hung up as is the defense budget by the opposition party in the Legislative Yuan. As most of you probably know, there’s a pair of opposition parties, the KMT [Kuomintang] and the TPP [Taiwan People’s Party] who control the majority in the Legislative Yuan, and they can block a lot of appropriations.

Part of my visit there was I spent almost a whole week hanging out with KMT leaders, very reasonable ones and others. And I spoke with probably 30% of their legislatures, of their 54 legislators in the LY. I think about a third of the half of the KMT gets at their opposition to the defense budget and they’re slowing down the defense budget. It’s been six or eight months in arrears now. It’s counterproductive. The way I explain it to them is, “President Trump doesn’t really know who the KMT is. He doesn’t know who the DPP [Democratic Progressive Party] is. He knows who the TPP is. He is going to collectively hold Taiwan accountable if you don’t get a budget done.” And I think enough of the KMT members are responsible and understand that’s not good for Taiwan.

And I’m telling them they need to get it done before May 15th, because I think on May 14th or 15th, when there’s supposed to be a Xi-Trump summit, I told them unbeknownst to them, there’s like a national election for Taiwan on May 14th, but there’s only two voters, Trump and Xi, and they need to make sure that Trump’s voting, “Don’t mess with Taiwan.” Really, they want to not be on the menu. And if you don’t want Taiwan to be on the menu, the way to do that is fix this defense budget, the special defense budget before the meeting. Probably before whoever writes talking points in the White House puts the talking points together for the president before the meeting. So get it May 10th or so.

So they’ve got to get this right. And I think there’s a way to get to it. Some of the differences are that KMT wants to remove the DCS portion from the budget. They say DCS, Direct Commercial Sales, is somehow more likelihood to be corrupted by DPP decision making. That’s A, I don’t think it’s true. B, the DCS is what they need for the unmanned UAS and USV. So the last thing I do is pull that out and not fund it. And do I think contracts around the world have a percentage of problematic… are 1% of contracts got conflict of interest in them? You bet. So do I think 1 or 2% do in Taiwan? You bet. Deal with that problem, not with “eliminating DCS temporarily.” So KMT needs to cut that out.

Now look, they still need some kind of face-saving win. One of the things I thought about is they asked for a 30% pay raise across the board. Their troops need more pay. I agree with that. And the DPP has been giving more pay, but probably not enough. So the DPP could give on this and say, “We’ll give a pay raise.” Not a 30% across the board. That’s not how the US does pay raises. Smart countries do pay raises by targeting it. Target it when their first enlistment’s up and they’re going to get out. That’s when you target a pay raise right before then. So they’re like, “Well, you can get out or you can take this 30% pay raise.” You’ll keep some people same at the second point they can get out. Same with the junior officers. Not just an across-the-board 30%. That’s not near as subtle and well thought out as a targeted one. So maybe between the two of them, they could work that out and get that fixed. Bottom line is they’ve got to get the special budget done.

And if there’s another issue I’d want to bring up, it’s reserves and conscripts. They really need to get this right. I think they understand now their reserves aren’t really 1.2 million. The kind of armed military reserves need to be about 200,000 troops, and they need to be organized and trained routinely, like trained… Our [National] Guard trains one weekend a month and two to three weeks in the summer, something along those lines. They need to make sure their laws, which do exist, are really solid on protecting people, soldiers while they do their military obligation as part of reserves.

And then the other thing I’d do is I take one of their active duty brigades and break it apart, take it 3,500 – 4,000 people and sprinkle it across the 20 reserve brigades so each one of them gets a couple hundred active duty people in key leadership and management positions to ensure that the reserve brigades have that active duty integration, active duty alignment. And I’d much rather have 12 great army brigades with 20 good reserve brigades than 13 great army brigades with no great reserve brigades. So I think there’s a smart way to do this. I think they can learn a lot from the Israelis on how they do it or the Estonians, either one, but I think the Israelis in this case are the best example.

And then finally, conscripts. They’re working it. They got the one-year conscription going. I think they need to figure out how to make it more appealing. I would definitely move, say, “No, no, you can’t do it after college.” Right now they have a wide range when they can do it and a lot of kids do it after college. I’d have them do it right out of high school when they’re 19-years-old. Treat it like a gap year, treat it like fun. Get the 19-year-olds in. You might get more women in that way if you do it then and say, “Hey, we’re going to go do orienteering. We’re going to go do drone operations. We’re going to go do weapons training and we’re going to do English language training with a baseline of physical fitness throughout that year.” I think at the end of that, you’ll have more likely people willing to join the military, certainly more likely to join the reserves.

And waiting until they’re 23 means they’re out of college, they potentially have spouses, significant others, kids, job lined up and you’re disrupting all that. Do it when they’re 19, when there’s nothing good to disrupt. So anyway, small things like that, I think that could really make a difference and really focus it on interesting things like that, orienteering and drone operations and things like that, weapons training. Really get at it at that. So that’s the thing.

And I would mention one other thing, the Taiwan defense industrial base, I think it’s getting better. They’ll be very good at drones. They’re going to have a red-free drone capacity. In other words, ability to build drones with no Chinese parts in them soon, if not now. The one challenge they have is it’s hard for them to build at scale because you want to have a drone production capability in wartime that could go really high end, but in peacetime is stable, and that’s because you have international sales.

Well, one of the problems they have is they can’t really sell well internationally. China hammers countries that buy Taiwan military products as much as that sell Taiwan military products. So I think the way you do this is joint ventures with US companies where you have the fig leaf of a US company involved in it and that’ll temper… first of all, you sell a lot to America, but also you sell a lot to other allies. And then Taiwan has a great drone production, UAV and USV going inside the country. If it goes into wartime, they shut off their external deliveries, ramp up their internal deliveries in there. They look a little bit more like Ukraine and less like the United States in terms of drone production. So I think that’s really a great opportunity for them. So with that said, Joe, I think those are the major takeaways I had. I’ll pass it back to you.

DOUGHERTY: Very good, Mark. As there we can see, if you’re looking for balls and strikes to be called, coming to FDD is definitely the right place. So we will open up the call to questions and answers. You can use your Raise Hand feature and you can ask the question yourself or you can drop it in the chat and I’ll be happy to read it aloud. Mark, I will get the first question started. And following up on that last point that you had about Taiwan and drones, which I will get to in just a moment because I see Phelim has jumped in and I don’t want to jump ahead of Phelim. So Phelim, over to you for your question. Thanks for joining us this morning.

Phelim Kine: Hi, good morning, Joe. Mark, thanks so much for doing this. I have a Japan-related question, if I may, and that is just within the last week, we’ve seen a quartet of moves by the government of Prime Minister Takaichi Sanae that suggests that they’re charting a much more independent defense strategy, I mean, in spite of that longstanding US-Japan joint defense pact. And so we see that they had a delegation of NATO ambassadors there. They’re talking about a much closer alignment with NATO. They have lifted their curbs on arms exports. They’re pushing a provision in the national security strategy that would allow for Japan to patrol the sea lanes between Japan and Australia.

I just wonder what you make of this, because obviously these types of moves have been sort of in the offings since the Abe days, but there seems to be a bit of a supercharging due to the fact that Takaichi has a pretty solid majority, is very popular. And there seems to be concerns about the solidity or durability of the US alliance, given what’s unfolded in this country toward Japan over the last 16 months. Sorry for the long question.

MONTGOMERY: Yeah. No, thanks. That’s a great question. I’ll attach myself to the first part of your assessment, which is that they’re definitely stretching out, being more international and aggressive. And this is probably saying out loud what Abe said in private, much like her comments late last year about an event in Taiwan being an existential threat to Japan. Look, the NATO one is one in the past we pushed. The current administration’s not pushing it, so that might be seen as a little bit forward leaning from us. But the idea of arms exports is something I think the US government fully supports. We want them… Look, we want all our… There should not be a perception that the US doesn’t want a competitive defense industrial base in the West. We do.

We don’t like it when France says things like, “We won’t buy American,” that’s not appropriate, but we want Rheinmetall to be successful. We want Japan. I think Japan has a good opportunity. I think Japan builds high-quality products. Now, a lot of those are tied to US intellectual property that they’re rebranding, and we’ll have to see if they do an independent product that’s of that high a quality. If so, I think they’ll sell well. They look to Korea and see Korea doing a phenomenal job at this. In fact, if I were to say there was a defense industrial base in the West that’s second to the United States, it’s not Germany, it’s not England, it’s not France, it’s Korea. And I think that Japanese look at that and say, “Hey, we could probably do some of that,” just given their wheeled vehicle skills and stuff that they’ve demonstrated over the years.

And then finally on the patrols, I hope that happens. I think it’s critical. We need each of our allies, the Australians, the Japanese, the Koreans, the Philippines, the Taiwanese, these allies that we think we might be in a war fight with, to be working together as much as possible. I mean, the real step out would be if they started to exercise with Taiwan. I think we’re a ways away from that. And one of the reasons I’m pushing us to be more aggressive with Taiwan is so that we can slowly pull Japan into that.

So look, I agree they’re nervous. Now, second from that, I’ll say intellectually, they are a little concerned about the United States. We have not treated allies well over the past 14 months. Our tariffing and the president’s on-again, off-again tariffing are disruptive and unhelpful. I’m not sure that requesting the foreign direct investment I think was actually a good thing. I think overall, everyone’s going to win on that. He did resolve the US Steel issue in a way that I think was better for Japan than President Biden had left it. So I mean, there’s some positives in there, but there’s also some negatives.

And so they’re right to be concerned. I think probably if you talk to them in private, they’d whisper a little concern about us. But long term, they don’t have a choice besides being allied with us. I mean, I’ll be brutally frank here. I mean, I see Japan and Korea a little bit like the Baltics and Poland. I mean, you have an aggressive authoritarian regime breathing down your neck, which you need to straighten the United States out, not look for a replacement. And so hopefully they’ll work hard with us to do better. And I think the president really enjoyed his visit with Prime Minister Takaichi. I don’t think we’re in extremis there. I do think some of the rhetoric on tariffs has been unhelpful, but yeah, that’s a good question.

DOUGHERTY: Thanks, Phelim. Didi, I see that you have your hand up. Over to you for your question. Thank you.

Didi Tang: Oh, hey, thank you so much for doing this. My question is about the nuclear ambitions in the area. I kind of wonder if you can talk about what you have heard on this trip. In the wake of Iran war and the Venezuela, what are the nuclear ambitions in East Asia? I mean, are they talking about to acquire, to step up, or what have you heard? I would appreciate your intake on that.

MONTGOMERY: Yeah. So I’ll break this up. First, there’s certainly, for nuclear propulsion submarines, an ambition in Korea, which I fully am against. I’m a nuclear operator of Navy ships, of aircraft carrier reactors, and I operated cruiser ones, which are very similar in size to submarine ones. So I know of what I speak here, and I’m going to tell you, it is a burdensome, burdensome… Nuclear engineering in your submarine fleet will become overly expensive. It will drain the Korean budget from very critical other maritime aviation and ground requirements. It is a luxury, not a necessity.

The reason we have nuclear power is so that we can go across the world and impose cost, 8,000 – 10,000 miles, Korea doesn’t need to do that. Korea’s problem is a solid 300 miles away from their ports. I mean, their diesel submarine, they should continue to build high-quality diesel submarines. I know they’d never like this advice, but they should probably talk to Japan, who builds extremely high-quality diesel submarines. But assuming they won’t do that, continue to work with others, build high-quality diesel submarines.

So first, I’d say on nuclear propulsion, please, please, please don’t go down that path. It is a gut-wrenching resource draw that you will never recover from. By the way, if you’d like proof of that, I have a former ship named USS Boise you can take a look at that is nine years into a 18-month availability that we finally had to decommission because it turns out even the world’s most accomplished nuclear propulsion and maintenance fleet can’t keep their act together.

All right. I think you’re also talking about nuclear weapons. I’ll tell you on nuclear weapons, I did not hear a lot of discussion of that in Japan. I did not visit Korea. Obviously you didn’t hear that at all in Taiwan, but I think that that’s, again, a very expensive endeavor. We, China and Russia don’t agree on much, but we agree on non-proliferation. So I think that there would be a lot hard pushback against that. And by the way, I think, I mean, Iran has a varied mix, the bombing campaign and whatever the strategic games are in Iran definitely has a mixed bag. But one of the things you have to say is the nuclear program has been set back quite a bit.

Again, I would not use the president’s term of obliterated. I wouldn’t have used it last year. I wouldn’t use it now, but it’s been significantly degraded and pushed back years, not months. So that should not drive other nuclear programs. And in fact, the US response to that should be indicative of how little we want nuclear proliferation anywhere, but particularly Iran. But thanks. I’m sorry, I did not talk to the Koreans, so I don’t know where they sit on this.

DOUGHERTY: Phelim, do you have a follow-up? Copy that. We’ll go a few more minutes with the Q&A. I was going to follow up, Mark, with, you were talking about Taiwan and drones, and I know that you’ve done some important work with Ukraine and drones, and you’ve done some work there. Any lessons that Ukraine could teach our allies?

MONTGOMERY: Yeah, 100%. That is a connection we need to make. First of all, Ukraine could teach us a lot, and if we’d listened to them nine months ago when they were offering us counter-drone interceptors, the 40-day campaign would’ve gotten a lot smoother for us and our Arab partners, but we didn’t listen to them, and now we are a little bit, and certainly our Arab partners are. But I think that I’ve helped arrange some Ukrainian visits over there, but I mean, that’s very low-key. They don’t have an official government position on that yet in Ukraine. Ukraine’s between a rock and a hard spot. Ukraine is fighting Russia, China, Iran, and North Korea.

That China one’s a big deal. China backstops the Russian economy. They give the Russians microelectronics for their cruise and ballistic missiles. They definitely are killing a lot of Ukrainians, the Chinese, but they’re also bleeding Russia dry. And what I mean by that is they’re keeping this war going by feeding DJI drones to the Ukrainians. They supposedly have a ban, but Ukraine still has a lot of Chinese parts in their drone systems. Now, Ukraine’s working really hard to get off of that. They’ve done a fantastic job dropping the percentages down from 80 to 40 to even lower. And I think at some point when they get around 10%, Zelenskyy will have the flexibility to tell China to pack sand and start working more aggressively and overtly with Taiwan. But until they’re lower on the… have fewer Chinese parts in their supply chain, particularly their drone supply chain. I think President Zelenskyy is wise to pursue the policy he’s on, of being careful.

So in the absence of that, what we need is Ukraine companies to come to America, which they’ve been doing every quarter or so. You’ll see Brave1 or another group bring 10 to 12 companies over here, some of whom are going to joint venture with US companies. Because you have Ukraine’s great intellectual warfighting adaptation that they’ve learned in the drone warfare, mixed with US capital and scalability.

And then you want to pull in Taiwan because Taiwan is pretty close to a, as I said, pretty close to a red-free drone supply chain, or UAS/USV supply chain. So if you had a Ukrainian company come over, joint venture with the US company, then I think it’s perfectly fine for them to work with a Taiwan company to really make a quality product.

And that’s the… To me, that’s the secret sauce. I guess I can’t call it a Reese’s Cup because it’s three of them, but that’s the chocolate and the chocolate and the peanut butter of Ukraine’s war fighting and their intellectual property, their US capital and scalability, and Taiwan’s supply chain. To me, that’s success.

DOUGHERTY: Thanks, Mark. One last question for you, and then we will wrap things up. Actually, it’s combined questions. One, I know you’ve put some thought to the SecNav news yesterday, and I’m wondering if you had some thoughts, early thoughts heading into the US-China Summit that is coming up, scheduled for next month.

By the way, we will be holding a media briefing in advance of that, and we’ll make sure that you all get invites, but I thought maybe Mark, you could share a couple of quick thoughts before we go.

MONTGOMERY: Yeah. So on the Navy thing. So I was not disappointed that SecNav went away, but my beef had to do with the battleship where I think he end-ran the Department of Defense, the deputy secretary and the secretary, to get with the president. And he and the president cooked up an extremely bad idea, which is a very large target, known as a battleship, that’s going to cost $24 to $26 billion minimum for the first one, which is the cost of like 12 destroyers. I could have 1200 VLS tubes, or, to deal with China, or I could have 120.

I’m not a PhD in math, but 1200 kicks the crap out of 120. I could have 12 spy radars or one. I could have 12 Aegis Compass systems or one. This is where the Navy’s headed. That’s the distributed networks, and [Navy Secretary John] Phelan and the president went the wrong way.

Also, on the frigate replacement, I’m not opposed to him getting rid of the Constellation frigate, but the replacement, picking a Coast Guard cutter, that is no A/S [anti-submarine] undersea warfare system, no air defense system, no vertical launch system, and is extremely noisy, was the exact opposite of the requirements the Navy would’ve given him for a frigate. But he didn’t use the Navy to figure that out. He figured it out on his own talking to friends at … somewhere. I’m not sure where.

So bad decisions. Now, ironically, the one thing I did like was he was maintaining Secretary Del Toro, his predecessor, in the Biden administration’s interest in working with Japan and Korea on shipbuilding. That needs to go forward. We absolutely need to be building console ships. Those are kind of the oilers, ammo ships, and roll-roll, roll on, roll off ships, in concert with the Japanese and Koreans.

In other words, make an agreement with the companies, build the first two in their yard, while they train and invest in, along with US investment, in a US yard to modernize and train a workforce, and then build the follow on ships in the US yard. So the US gets better at ship production. Japan or Korea make money, we make money, and the Navy gets ships much faster and much cheaper than the current system, which is completely dysfunctional.

So overall, I’m not disappointed he’s gone, but I hope one of his initiatives keeps its sea legs.

DOUGHERTY: And Phelim does have a follow-up question, don’t you, Phelim?

Phelim Kine: Yeah, hi. Sorry. Mark, any thoughts on the wisdom of the apparent dismissal of the head of the Navy, Phelan, in the midst of a war with Iran?

MONTGOMERY: Yeah. So I should have said that when I was talking about him. It’s irrelevant. The service secretaries are truly, train and maintain and procurement. They’re not war fighting. I’m much more bothered by the dismissal of General George from the Army in the middle of it, or the broad dismissal of Admiral Franchetti and a raft of senior female officers in the Navy.

As I said, George and his and his Vice Chief General Mingus, and the Chief and Vice Chief of the Air Force, those dismissals bother me much more than the service secretaries. They’re important for the department, they’re not important for military operations, as almost all know. We execute our military operations through the combatant command, Admiral Cooper, and through the Secretary of Defense and the president, with advice from General Caine, the Chairman of the Joint Chiefs.

Phelim Kine: Thanks.

DOUGHERTY: I think we can wrap up the call there. If you’d like to have a separate conversation with Mark in the coming days, please email [email protected] and we will arrange that.

We will get the video link out to you quickly today, and we’ll also aim to get the transcript to you within 24 hours. Mark, go ahead.

MONTGOMERY: Yeah, Joe, I just want to say when I say I’m going back, I’m doing about three trips a year to Taiwan right now. Craig Singleton, our China lead, is doing two to three as well.

We’re still doing tabletop exercise with them, like the energy one we did last year. We’ll do another one on communications.

We’re pressing for, we want to help. We want societal resilience to get stronger in Taiwan. We’re working hard on that. And so our initiative is mostly in that. I worry less about the cross-strait invasion. I mean, someone needs to worry about it. I’m… Admiral Paparo, number one.

For us as a research think tank, our job, our best advice is put into how do we counter Chinese cyber-enabled economic warfare campaigns? And so that’s what we’re working on. I should have said that at the beginning, and I’ll be back in a couple of times this fall, as will Craig and a couple of our more junior personnel working those tabletop exercises. And when those are done, happy to give briefs on those as well. Thanks, Joe.

DOUGHERTY: Absolutely, Mark. Thanks. Thanks for taking the time, Mark, today from California. Thank you to all the reporters on the call today. We know that you’re busy. There’s a lot going on and you chose to be with us, and we are grateful for that. This does conclude today’s call. Thank you.