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Analysis - Do Western states spy for corporate ends?

LONDON (Reuters) - International firms may face a growing threat from espionage in emerging states, but has the West itself been using spies to gain unfair business advantage?

The issue of how governments use eavesdropping has come back into focus as several emerging governments in the Gulf and Asia demand access to encrypted Blackberry smart phones.

Most Western governments already have the ability to intercept almost all messages within their borders and often outside, and they say the economic intelligence they want is the kind that would help them fight crime and terrorism.

Whether they might snoop for commercial gain is a topic on which current and former officials refuse to be drawn, and but some experts say it is naive to assume it does not happen.

Ever since the invention of the telegraph and telephone, the temptation has existed to intercept the messages they convey.

“As long as the technology has been available, I think it is fair to say governments have at least sometimes used it for commercial ends,” said Alastair Newton, one-time foreign office lead official for cyber warfare and now senior political analyst for Japanese bank Nomura. “In the past, the French have accused the British of “spying” on their defence industry and vice versa. They were probably both justified.”

If major powers do use espionage for corporate ends, experts say the main threat is in strategic sectors such as defence.

“With any government, it really comes down to whether there is a belief that the issue is one of genuine national importance,” said one security expert on condition of anonymity.

New Prime Minister David Cameron has said repeatedly that diplomats should do more to promote British business overseas -- but it’s far from clear whether this means its spies should serve the same function.

There are a host of issues around the links between state and business -- not to mention legal restrictions on the use of phone taps. In the UK, authorities need the permission of the Home Secretary before tapping the contents of its citizens e-mails or telephone calls. Similar restrictions exist elsewhere -- although how tightly they are followed is impossible to know.

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BANDWIDTH ISSUES?

While they rarely draw attention to it, the United States and Britain in particular -- also working together with Canada, Australia and New Zealand -- have built up a particularly formidable electronic surveillance network.

The two key responsible organisations -- the U.S. National Security Agency and Britain’s GCHQ -- are the largest intelligence agencies in their respective countries.

They can hoover up large volumes of traffic. But their most urgent task today is to sift this mountain of data to extract messages about militant plots. That in itself limits the time available for any corporate or economic espionage, experts say.

“Their real focus has been stopping the smoking holes in the ground, the 9/11s, the London bombings, the Madrid attacks,” said former US counterterrorism agent Fred Burton, now of security consultancy Stratfor. “They’ve been just so stretched that there is a limit to how much else they can do.”

The idea of a monolithic U.S.-UK alliance may mislead. The two nations can and do spy separately, notably in competitive military technology and in the Middle East, observers say.

Their spy agencies have also sometimes been tripped up by the new electronic world. Experts were left aghast last year when family photos and details of the new head of MI6 were posted by a family member on networking site Facebook.

But continental European states have always openly suspected the Anglo-Saxon network might occasionally be used against them.

A European parliamentary report in 2000 said it believed a powerful global US-UK signals intelligence network called Echelon existed with the potential for industrial espionage.

It reported cases where European firms had their telephones tapped, most likely by intelligence agencies.

But it also noted the difficulties of gauging the scale of the issue -- not least because private security consultants had a vested interest in talking up the threat.

TANGLED OWNSHIP COMPLICATES TARGETING

More recently continental European states heightened their wariness of Blackberry smartphones, which uses servers in the UK and North America that those countries’ spy agencies can read.

Senior officials in France, Germany and the European commission have all been restricted from using them -- and many senior staff at European defence firms also avoid the devices.

Nigel Inkster, a former British Secret Intelligence Service officer and now head of transnational threats and political risk for the International Institute for Strategic Studies, says some other European nations themselves had a dubious record.

“The French in particular have always had more of a reputation for industrial espionage,” he said, pointing to long-circulated suggestions that French spies bugged business class seats on Air France jets to overhear conversations.

But he said the issue was increasingly complicated by intricate international ownership patterns for many companies. Many London listed firms are heavily owned by outside interests including emerging national sovereign wealth funds.

Experts say big Western agencies face increasing challenges from the latest encryption, and the Blackberry case shows their reliance on being given access by manufacturers and operators.

Every new level of sophistication takes more computer power to break, raising the cost. Growing use of Internet phone calls is also testing the eavesdroppers’ ingenuity, although one cyber intelligence analyst said on condition of anonymity: “I suspect they have got around that more than they are willing to say.”

Additional reporting by William Maclean

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