assessments

Corporate Espionage and Diplomacy in the Post-Al Qaeda Age

8 MINS READAug 19, 2005 | 04:59 GMT
By Fred Burton From Wall Street to inside the Beltway, the clamor over a potential Chinese threat is gaining volume — and despite the very public trade rows that have emerged in recent months, significant attention also is being devoted to corporate espionage by foreign agents. In fact, the FBI — fearing implications for U.S. national security — has begun redeveloping its foreign counterintelligence (FCI) capabilities throughout its U.S. field offices. The issue has reached such a level of concern that federal officials, who have publicly said China poses the biggest espionage threat to the United States today, are exercising greater scrutiny over investments and other business activities relating to China — still viewed by many to be among the world's most alluring commercial markets. Espionage worries — particularly involving potential or growing geopolitical rivals — are nothing new. And the Chinese in particular are renowned for their spying methods and technological reverse-engineering capabilities, as well as for taking an extremely long view of their intelligence, political and military needs. What is new is the political environment that is prompting some of the charges. As China seeks, for valid economic reasons, to attract investment from foreign banks and corporations, it is attracting more Western targets than ever. For its part, the U.S. government has recognized a real and serious dearth of counterintelligence efforts — part of the fallout of the Sept. 11 attacks — that has left the country and its business community vulnerable to spying from allies as well as foes. The efforts it launches to remedy the problem will create new challenges for multinational companies attempting to grow or do business in enticing foreign markets. Welcome to the spy game. The FCI Threat Following the Sept. 11 attacks, the FBI redirected practically all of its FCI assets into the counterterrorism effort — meaning that, for the first time in the bureau's history, practically zero counterintelligence efforts were being launched. The scope of the problem (or resulting damage) is not entirely clear, but it is believed to be quite serious and large. The fact that this is now emerging as a topic of discussion inside the Beltway is, in many ways, a positive sign — at least where the war against al Qaeda is concerned. Though we do not expect concerns about terrorism ever to entirely diminish, it is becoming increasingly clear that the Bush administration feels sufficiently confident about the status of that war to widen the intelligence spotlight to encompass other issues as well. We are returning to a multi-faceted, potentially multipolar system, and seeing the re-emergence of longstanding geopolitical challenges. Though China, as a growing rival, is an obvious example to cite, it is not the only country of concern in the area of corporate espionage. Consider also latent adversaries such as France — or Russia, whose relations with the United States have grown increasingly chilly during the past year and which shares some political objectives with China. These countries draw special attention from the government as having exploited the FCI weakness, as do two significant strategic allies: India and Israel. All of these have profited by infiltrating operatives into the United States, and particularly by targeting the high-tech and defense industries. There is an ugly truth in all of this: Though you may find few true friends in business, you will find none in intelligence. The shifting landscape at the highest level of geopolitics increasingly will affect corporations, even at the lowest tactical level, and present them with a conundrum. In many cases, reaching for low-hanging fruit in foreign markets is embroiling corporations and business people in the espionage game being played by both sides. Ultimately, this could force them to walk a difficult line between market economics and security priorities. How the Game Is Played On the ground, the threats to multinational corporations and business travelers — and the challenges for the FCI efforts — can easily be seen in a handful of anecdotes. For our purposes here we will focus on China, which views technology advancement as its primary means of closing military and economic gaps with the rest of the world and has shown itself to be amazingly adept at stealing technological secrets. Significantly, many of the major U.S.-based corporations that are doing business in China or seeking to expand market share there also have lucrative contracts with the Department of Defense or other federal customers. This generates a swarm of spying activities that can take a number of forms (and often several combined). In our own studies of this issue, we have identified what appear to be certain commonly used techniques — wielded with varying degrees of subtlety. For instance, a business traveler landing in China might be targeted before ever making his way out of the airport. Customs officials have been known to demand special checks of luggage and laptops — often without their owner present — in order to copy hard drives or other sensitive information. Other foreigners, drivers or escorts also can act as spies for Beijing. In some cases, an official car might be offered (without a driver) for the traveler's use, with bugs already planted in the vehicle. One source reported to us that, after refusing a driver and official escort during a trip to Shanghai, he was followed semi-overtly throughout his trip, and his hotel room was searched during his absences. Hotels, in fact, can be a particularly useful venue for intelligence-gathering in China, which does not place heavy emphasis on civil rights. Telephones in hotel rooms are as likely as not to be tapped, and operatives can conduct surveillance or other activities when guests are outside their rooms. There are a variety of technical intelligence-gathering methods that can be used in all sorts of locations. For instance, hotel conference centers and convention centers where executives gather to plan strategies might be bugged. At times, requests that technical countermeasures be deployed in these locations are met with derisive laughter. Spy software, such as Trojan horses — developed for the purpose of transmitting information without a businessperson's knowledge — might be implanted in both connected and wireless Internet portals in hotels, and samples given at trade shows and technology fairs might be similar infected. The traveling businessperson should be wary of technological gifts — which often are handed out as a source of national pride by the Chinese — while remaining mindful that it is culturally important to accept the gift. In addition to high-tech espionage, such as copying files or hard drives, old-fashioned spy methods still serve their purpose. Consider the "honey trap:" Intelligence agents posing as prostitutes might approach travelers to probe for information, or distract them while operatives conduct searches elsewhere. There also are more buttoned-down versions of the game: Speakers or guests at science and technology conferences often underestimate the sensitivity of the knowledge they possess, and might find themselves answering a series of probing questions without ever realizing they are divulging valuable information. Extensive questioning also might come from overly solicitous host-government representatives and hotel staffs. Industrial espionage activities can be much more aggressive where foreign companies that maintain operations in China are concerned. But a serious concern for the FBI now is the activities of Chinese agents operating within the United States. Hundreds of thousands of visitors, students and other nonprofessional spies can be used to gather information, much of it from open sources. In these cases, the FBI usually learns about the threat from intelligence sources and other standard methods, record checks or visa applications. Once a suspected spy has been identified, a full-bore investigation is launched to draw a 360-degree view of the person: whether and how he or she is employed, who that person comes into contact with, where he or she travels and when. The bureau is particularly interested in determining whether the suspect is a bona fide intelligence officer (IO), an agent of influence or a "spotter" — for instance, a visiting Chinese scholar might be used to identify potential recruits among foreign students. Front companies that are established for spying purposes are more problematic. The FBI has virtually no visibility in this area, which might involve — for example — a subcontractor who performs outsourced work for a U.S.-based multinational, and photocopies documents for sending to Beijing. Though some front companies have been discovered in a handful of states, the FBI lacks resources to identify and specifically hunt them down. Business and Diplomacy: A Corporate Tightrope Taken together, these trends and practices constitute a fundamental problem for the U.S. intelligence community, quite separate from any problems associated with terrorism, homeland security or al Qaeda. And though the corporate espionage issue might not grab headlines or cost life and limb in the same way that suicide bombings do, the issue is significant to policymakers who take a long view of U.S. security and global strategies. That, in turn, will have an impact on corporations. In simple terms, the challenge is becoming a question of how one maintains a global work force or business edge in this new political environment. Remaining competitive without running afoul of the FBI or U.S. diplomacy will require high levels of awareness and a great deal of poise.

Article Search

Copyright © Stratfor Enterprises, LLC. All rights reserved.

Stratfor Worldview

OUR COMMITMENT

To empower members to confidently understand and navigate a continuously changing and complex global environment.

GET THE MOBILE APPGoogle Play