After NSO Blacklisting, Israel Fears U.S. Targeting All Israeli Offensive Cyber Firms

The days in which NSO worked in secret with the active encouragement of PM Netanyahu and the intelligence community are over, never to return

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The Israeli NSO Group company, near the southern Israeli town of Sapir, in August.
The Israeli NSO Group company, near the southern Israeli town of Sapir, in August.Credit: Sebastian Scheiner / AP

Like several other things from the Netanyahu era that are no more, the cybertechnology diplomacy of the former premier is now facing a hopeless situation. In his final years in office, Netanyahu boasted about his policy’s three-pronged accomplishment: renewing the economic pressure on Iran thanks to his friend U.S. President Donald Trump; a significant breakthrough in relations with Arab and Muslim countries; and an expansion of Israel’s circle of friends around the world, to a great extent thanks to Israel’s advanced high-tech sector.

When Netanyahu got the royal treatment in the Far East, Eastern Europe or even at a gathering of East African leaders, he attributed it to Israel’s technological and economic power. All around the world, countries wanted to be best friends with Israel because they wanted to benefit from technological progress, he claimed. His audiences would have gotten the impression that Israel was bringing progress and well-being to the world, just as it shared advanced irrigation techniques with countries in Africa five decades ago.

Reality has been less heartwarming. In more than a few cases, what Netanyahu plied to his new friends, many of whom were autocrats who sought to amass additional power for themselves at the expense of their citizens, was offensive cyber technology enabling them to invade people’s privacy and monitor and spy on journalists and opponents of their regimes.

Along with closer relations, ties were forged between Israeli intelligence and senior officials in these countries, laying the groundwork for the purchase of Pegasus, the Israeli NSO firm’s advanced spyware. Haaretz detailed the method in a behind-the-scenes report about a deal put together with Saudi Arabia more than three years ago.

But the days in which that company from Herzliya worked in secret with the active encouragement of the prime minister and the intelligence community are over, never to return. NSO is now caught up in huge problems, following the series of revelations on its activities and the sanctions that the Biden administration imposed on it last month.

Defense officials think the sanctions could soon bring about the company’s collapse and a shutdown of its operations. The company depends upon constant innovation: It’s one Apple or Android cellphone update away from the failure of its products. If it doesn’t manage to hold onto the best personnel in the world, the kind who would continue to find vulnerabilities in the operating systems, they won’t have a product.

Senior officials have told Haaretz that the move by the United States has totally paralyzed the company’s future operations. “They’re not able to buy a pen at a Walmart store,” the officials quipped. If an American company wants to sell them products, it needs a special permit.

And that’s on top of the issue of employees jumping ship: There’s major tension at the company and many staffers are considering leaving. In Israel, there is concern that the Americans won’t make do with spanking NSO and have their sights on the entire Israeli cyber technology market – and that they will try to eliminate from competition all the companies operating in it.

There was surprise here over the strength of the Biden administration’s step against NSO and against another Israeli offensive cyber technology firm, Candiru. The Americans acted against the backdrop of international investigative reporting that disclosed the use by regimes around the world of Pegasus spyware implanted in the cellphones of journalists, human rights activists and regime opponents.

Anger in the United States intensified further when at the end of November, it was disclosed that the Ugandan government is suspected of using Pegasus to infiltrate the phones of American diplomats working in the country. The hacked cellphones were local ones. Pegasus is not deployed against American phone numbers.

At the political level and in the defense establishment, they are still having trouble assessing the considerations that guided the Biden administration, other than anger over the company’s activities. This apparently also is connected to disagreements between the Biden administration and the Bennett government regarding negotiations over Iran’s nuclear program.

The NSO affair is presented as evidence of worsening relations with the administration, which is also reflected in disagreements over settlement construction and the administration’s difficulties in getting Congressional approval for a billion dollars in special assistance to Israel following its May war with Gaza. It appears that it wasn’t understood in Israel that there’s a new administration in Washington with a new agenda and less tolerance for looking the other way on human rights violations.

A smartphone with the website of Israel's NSO Group in Paris, in June.Credit: Joel Saget / AFP

There are 19 companies currently operating in Israel in the offensive cyber technology field. It’s not clear at this stage whether the Americans have put all of them in their crosshairs, out of a desire to head off foreign competition in the field, or whether they will make do with measures against the two companies already on the sanctions list. NSO is considered a leader in finding vulnerabilities through which computer systems and cellphones can be hacked. The company employs dozens of outstanding researchers in the field.

One concern raised in discussions within the defense establishment is that these researchers would look for employment with foreign firms and take advantage of the know-how they’ve acquired to make their services available to other clients. Company employees say that in recent weeks, a gloomy atmosphere has prevailed and many are already looking for other jobs. The employees also said that contrary to what has been customary at the company and other successful firms in the field, this year employees apparently won’t be getting bonuses.

Nevertheless, in Israel it is acknowledged that oversight of contracts NSO entered into was too lax. The Netanyahu government gladly traded in spyware, with the Mossad reportedly assisting in the initial mediation of the transactions.

The company’s claim that it limited its spyware sales to fighting crime and terrorism is considered dubious, because some of the countries that have bought the spyware are autocratic governments that view any opposition to the regime or the work of critical journalists as criminal or terrorist, thereby justifying using the technology against them.

The company’s sales momentum over the past decade is closely linked to the diplomatic and intelligence-related steps that Netanyahu took, which improved relations with countries in various parts of the world, and where NSO’s technology often served as an asset that brought Israel to the table for the improvement of ties. In the past, Netanyahu ordered the defense establishment to advance offensive cybertechnology deals, and it appears he preferred that overly energetic oversight not be imposed on the deals or the parties to them.

Officials in the sector who have no ties to the company have told Haaretz that all of the deals were signed with the knowledge and approval of the defense establishment. This subject is at the heart of the company’s argument that Israel should be defending it: If Israel approved the deals that got it entangled with the Americans, it should find a way to resolve the matter. Otherwise, what’s the significance of approval and oversight by the Defense Ministry’s Defense Exports Control Agency?

But the defense establishment was not always aware of the details, and now there are also difficulties involved in determining what exactly was included in a few of the deals, and whether telephones were later hacked as a result. It’s not out of the question that in the coming months, additional information will be published about the use of Israeli technology on dubious missions.

In the background, there is another threat hovering over NSO: the suit that Facebook filed against it in the United States claiming that WhatsApp, Facebook’s encrypted messaging software, had been hacked. The case is expected to result in the disclosure of documents in another several months that will apparently generate a whole new wave of reporting.

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