Opinion |

NSO and Its Spyware Are Here to Stay

Despite the storm, NSO’s stakeholders aren’t going to crack down on it or its peers. If anything, the scandal has been a big marketing boost

David Rosenberg
David Rosenberg
Internet isn't going to up and vanish and neither is spyware
Internet isn't going to up and vanish and neither is spywareCredit: JOEL SAGET - AFP
David Rosenberg
David Rosenberg

If you take the media coverage of NSO Group and its notorious Pegasus cyberhacking software at face value, you might conclude that the company’s future looks bleak. But that is far from the case.

On one level, it is true that NSO’s business prospects have been dimmed by all the negative publicity. The company is highly leveraged and is cash-flow negative, and it could use an injection of outside capital. But, for the foreseeable future, it’s too radioactive to go public as it was reportedly thinking of doing, and it might have a difficult time raising private capital at this time.

That could be a particularly big problem now that the fate of its biggest shareholder – the PE fund Novalpina Capital – which faces an uncertain future due to internal disputes and may even seek to liquidate its assets.

Moreover, the coronavirus pandemic has been bad for business, according to Moody’s, which downgraded the company's debt rating in June. NSO doesn’t have a lot of recurring revenues; it has to constantly drum up new contracts to keep the business going, and that was difficult with all the travel restrictions. Until a few weeks ago, that problem appeared to be over, as vaccines began containing COVID. Now, the delta variant is making the virus a global threat again.

But, irony of ironies, NSO’s business has almost certainly gotten a big boost from all the media attention, and here’s why.

Not its clientele

As far as human rights activists, the media and much of the public are concerned, NSO is a public menace that needs to be restrained at best, or thoroughly cut down to size at worst. But, fortunately for NSO, none of them buy its products. Nor are they in any position to know who is buying them and call its customers out or boycott them.

The company has two major stakeholders. One is the countries to which it licenses its Pegasus software, and the other is the government of Israel, or more precisely, the Defense Ministry, which approves its exports. Even after the latest media storm, neither is going to be a problem for the company – quite to the contrary.

For NSO customers, and even more so for future clients, the Project Pegasus expose almost certainly is having the perverse effect of making the company’s spyware more desirable than ever. Pegasus’ reputation as an all-powerful tool capable of even bypassing iPhone security and seemingly unequaled in its hacking capabilities was, if anything, enhanced.

NSO’s enhanced image doesn’t just influence rogue governments but nice ones, too, the ones who don’t plan to spy on journalist or dissidents but see it as a powerful tool for pursuing legitimate villains, like terrorists and drug dealers – which, after all, is what NSO says Pegasus is designed for.

No doubt there will be calls for investigations and tighter rules, at least in the democratic countries that, according to NSO, make up a majority of its customer base. But in the end, they are unlikely to fundamentally change anything. Why should a law enforcement agency in a Western country fighting, say, with organized crime refuse to buy Pegasus because other Pegasus customers abuse it?

Vis-à-vis Western countries, the only serious reservation they may have is that NSO is believed to share its data with the Israeli government. The company naturally denies that (because, unlike accusations of human rights abuses, that’s something its customers really do care about) and so does Israel. But it’s hard to believe that NSO doesn’t. For that reason, The Washington Post reported that the U.S. intelligence establishment doesn’t use NSO products. But it’s a market NSO doesn’t have anyhow.

The reaction to the expose by NSO’s second stakeholder, the Israeli government, has been restrained. The Defense Ministry has promised to check whether the company violated export policy. A Knesset committee is looking into possible violations and Defense Minister Benny Gantz is being questioned by the French because President Emmanuel Macron’s phone was on the Pegasus Project list of possibly bugged phones.

Making friends

But this will blow over, and for good reason. As Haaretz reported, NSO’s customer base in many cases closely aligns with Israeli diplomatic and defense interests; it seems that wherever former Prime Minister Benjamin Netanyahu was working to build new friendships – whether it was Saudi Arabia, Hungary or Azerbaijan – NSO was soon selling them Pegasus.

The necessity of this techno-diplomacy is real. Israel faces a strategic threat from Iran, and needs allies to confront it, especially as the United States tries to pare back its role in the Middle East. Alas, Sweden and Denmark can’t be of any help; and the countries that can be are all authoritarian states of one kind or another. Israel can’t pick its friends, nor can it risk not having friends to begin with.

In a perfect world, Israel would be able to offer them things like agro-technology or maybe workshops in the rule of law, but that isn’t valuable currency in this market. Israel leverages its more benign or even positive technological innovations where it can, such as with China and India. But where it can’t, then NSO and others are there to help.

Obsessed as he was by the confrontation with Iran and a worldview that sees Israel as beset by enemies all over, it’s safe to assume that Netanyahu never had a moment’s doubt about sharing cyberhacking and other problematic tools with his authoritarian buddies. Naftali Bennett and his foreign minister, Yair Lapid, seem to take a less binary view of Israel’s place in their world and may be less inclined to share such technology. But it is unlikely they will give up such a valuable political asset either.

The bottom line is that once a problematic technology has developed – be it cyberhacking tools or face-recognition technology in our day or the Gatling gun, poison gas and nuclear weapons in other eras – it can’t be un-developed. The best the democratic world can do is try to exert some control over it, knowing full well that it’s a fool’s errand. It’s not unlike the ultra-Orthodox wishing internet would just go away; it isn’t going to.

To cite just one example of persisting technology despite frowns: Despite all the controversy surrounding face recognition, startups in the field are raising huge amounts of investment capital. Alas, all the world isn’t investigative journalists and human rights activists; there are many more who see things from other perspectives and they are the ones NSO is really answerable to.

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