June 18, 2018
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U.S. cyberspying report cites China, Russia as main culprits

By Ellen Nakashima, The Washington Post

WASHINGTON — Online industrial spying by China and Russia presents a growing threat to the U.S. economy and its national security, the top counterintelligence agency said Thursday, abandoning the caution American officials typically display when asked to name the countries they believe are most responsible for cybereconomic espionage.

Billions of dollars of trade secrets, technology and intellectual property are being siphoned each year from the computer systems of U.S. government agencies, corporations and research institutions to benefit the economies of China and other countries, the Office of the National Counterintelligence Executive said.

Its report to Congress was released Thursday morning.

The hackers come from many countries and range from foreign intelligence services to corporations to criminals, according to the report, but the report — titled Foreign Spies Stealing U.S. Economic Secrets in Cyberspace — leaves no doubt as to who are the most intent on stealing secrets.

“Chinese actors are the world’s most active and persistent perpetrators of economic espionage,” the report states. In addition, it says, “Russia’s intelligence services are conducting a range of activities to collect economic information and technology from U.S. targets.”

At a news conference accompanying the report’s release, Robert “Bear” Bryant, the national counterintelligence executive, called online spying “a quiet menace to our economy with notably big results.”

“Trade secrets developed over thousands of working hours by our brightest minds are stolen in a split second and transferred to our competitors,” Bryant said

Both China and Russia have routinely denied such charges, and a spokesman for the Chinese Embassy expressed outrage at the report by the counterintelligence office, whose focus is intelligence threats to the United States.

“We are opposed to willfully making unwarranted allegations against China as firmly as our opposition to any forms of unlawful cyberspace activities,” embassy spokesman Wang Baodong said in an e-mail.

A senior U.S. intelligence official, who conducted a media briefing about the report Wednesday on the condition of anonymity, said the government’s unusual candor in naming particular countries was prompted by the severity of the threat.

“From a counterintelligence standpoint and the threat to our national economy, I think we have to suggest and say who we consider the foreign intelligence services and the countries that are doing the most harm,” the official said.

Though conclusive proof of who is behind a computer heist of data is often difficult to obtain, he said: “We have information that certainly the Chinese and Russians are interested in our technology. … It’s part of China and Russia’s national policy to try to identify and take sensitive technology which they need for their development.”

With the domestic and world economies lagging, and U.S. unemployment above 9 percent, cutting-edge technology is key to U.S. economic growth. But it is that very technology that is being targeted by countries such as China, as part of a broader strategy to build its own economy and become a global powerhouse.

In fact, China has set up Project 863 to acquire U.S. technology and sensitive economic information in clandestine fashion for just that purpose, the report said. Last year, Google announced that proprietary data were stolen by hackers in China, which experts called part of a vast campaign of economic espionage.

“We put billions of dollars into research and development,” the senior official said. “It puts [the Chinese] on a par with us if they can take that information and use it for their economy.”

From their perspective, the official added, “What’s the downside? What do you lose? There’s no downside to trying to build your economy on somebody else’s information.”

The pace of industrial espionage activities is accelerating, the report said. Foreign intelligence agencies, corporations and individual hackers increased their efforts to steal proprietary technology between 2009 and 2011, the report said. Some of the thieves are allies — the Israelis and French have targeted U.S. commercial secrets, former officials have noted. But one country stands out, officials say.

“The computer networks of a broad array of U.S. government agencies, private companies, universities and other institutions — all holding large volumes of sensitive economic information — were targeted by cyber espionage,” the report said. “Much of this activity appears to have originated in China.”

Indeed, scores of countries target the United States’ industrial and technology secrets, said Joel Brenner, the former National Counterintelligence Executive, whose new book, “America the Vulnerable,” discusses the threat.

“The leaders of the pack are Russia, China and Iran,” he said. “The Russians are very quiet and very good. But for relentlessness and sheer volume, the Chinese are in a class by themselves.”

The report by the current counterintelligence executive, Robert “Bear” Bryant, comes as other U.S. officials have increasingly spoken out about the massive transfer of wealth taking place through computer networks.

“This is definitely the golden age of cyberespionage,” said Steven Chabinsky, deputy assistant director of the FBI’s cyber division. “Foreign states are stealing data left and right from private-sector companies, nonprofit organizations and government agencies.”

Russia is motivated by a dependence on natural resources, a need to diversify its economy and the belief that the global system is tilted toward the West at its expense, the report released Thursday states.

The FBI alerted more than 100 U.S. companies in the past year that they had been hacked, officials said.

“It’s happening at a breathtaking pace, and it is very, very concerning,” said Rep. Mike Rogers, R-Mich., chairman of the House Intelligence Committee. Rogers recently accused China of “waging a massive trade war” on the United States and its allies that has reached “intolerable levels.” He has urged the United States to join with allies to apply diplomatic pressure on the Chinese to stop.

The head of the military’s U.S. Cyber Command, Gen. Keith Alexander, said that one U.S. company recently lost $1 billion worth of intellectual property over the course of a couple of days — “technology that they’d worked on for 20-plus years — stolen by one of the adversaries.”

Establishing total dollar value of the data lost is exceedingly difficult, because companies do not always report thefts and they do not always know how to accurately assess loss.

But the senior official noted that the value of U.S. research and development is $400 billion. He noted a few cases in which estimates were given in economic espionage prosecutions over the past six years: $100 million worth of insecticide research from Dow Chemical, $400 million worth of chemical formulas from DuPont, $600 million of proprietary data from Motorola; $20 million worth of paint formulas from Valspar.

Some of the corporate pilfering is done by employees on behalf of a foreign company or government. The report gave three recent examples, all involving individuals with a link to China. But rather than walk out of the companies with file folders of paper, the spies used access to computers or removable media such as thumb drives to steal sensitive data.

Of seven insider theft cases prosecuted under the Economic Espionage Act in fiscal year 2010, six involved a link to China, the report says.

The threat is not just to the economy but also to national security, the report states. The illicit transfer of technology with military applications to a hostile state such as Iran or North Korea could endanger the lives of U.S. and allied military personnel.

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