Huawei in America: An NSA Retrospective

In September 2012, my report,

Dan Steinbock

Subsequent hearings by the House Intelligence Committee suggested that Huawei had engaged in security violations, but did not provide evidence of such wrongdoings. The White House’s own investigation did not indicate that Huawei had engaged in violations. The House Intelligence Committee’s own report was heavy on bold accusations, but light on serious evidence as critical evidence remained “classified.”

Thereafter, Huawei’s conduct became subject to increasing scrutiny in the European Union, India, Australia and other nations that shared security interests with the U.S., and relied on conclusions based on classified information. Now, they all have found their own leaders, governments and major companies have been under the NSA surveillance – like Huawei.

Recently, New York Times and Der Spiegel disclosed the infiltration by the NSA into Huawei. These reports were based on leaked documents obtained from the former NSA contractor Edward Snowden. Now, we can reconstruct what actually happened as Huawei has been under NSA’s surveillance for at least seven years.

Huawei is the world’s largest telecom equipment maker, which generates over $39 billion in annual revenues, with offices in more than 140 countries. But unlike many other Chinese multinationals, it grew up in the private sector in Shenzhen. Currently, four of every five major telecoms operators worldwide cooperate with Huawei. Despite its global success, it has been rebuffed by the government time and time again.

And yet, as I argued in The Case for Huawei in America, its U.S. expansion could generate billions of dollars in capital investment and tax revenues; thousands of well-paying, high-skilled job; contribute to US R&D and innovation in a strategic industry; upgrade U.S. competitiveness; and enhance efforts to secure infrastructure security in America.

While the U.S. marketplace welcomed Huawei, the U.S. government did not. Despite repeated bids, Huawei’s efforts to win a major contract from the top-tier US carriers, AT&T, Sprint, T-Mobile and Verizon, were repeatedly frustrated, by US regulators, Congress, government agencies.

In one way or another, all of these concerns, conclusions and condemnations relied on the NSA’s evidence, which remained classified – until the new disclosures.

Reportedly, the NSA began a covert program against Huawei in 2007, when Huawei became an approved supplier to Vodafone and signed a contract with British Telecom, two giant operators. As Huawei had matured to a global player and hoped to expand in America, the NSA hacked into its networks.

In 2010, Huawei was included in the Global Fortune 500 list for the first time and began an effort to increase its presence in the U.S. That’s when the NSA’s Tailored Access Operations unit, which routinely breaks into hard-to-access networks, hacked into Huawei’s headquarters, including the personal communications of its founder Ren Zhengfei. The operation was conducted with the involvement of the White House intelligence coordinator and the FBI. Concurrently, stories about Huawei’s alleged “espionage” began to proliferate in the U.S. media, but the ultimate sources were “classified.”

As US security and defense dominance relies on its information and technology communication (ICT) infrastructure, a huge moral hazard prevails in the NSA activities. By deterring Huawei’s US expansion, the government has enabled the US-based Cisco to retain its eroding share in global networking, and Apple in the smart-phone market. When US companies lose leadership in key ICT sectors, the NSA, which relies on their technologies, must obtain the missing industrial capabilities in other ways.

After the 2012 Congressional hearings, the CBS 60 Minutes featured Huawei as a “proven security espionage risk.” And yet, the very same NSA analysts, who presented Huawei as a Chinese espionage machine, had been hacking its HQ for six years. Indeed, US suspicions of Huawei are partly based on NSA’s own activities, particularly the “back doors” built into computer hardware and software.

In the 60 Minutes interview, the chairmen of the House Intelligence Committee, Mike Rogers and Dutch Ruppersberger suggested that “the Chinese government could exploit Huawei’s presence on U.S. networks to intercept high level communications, gather intelligence, wage cyber war, and shut down or disrupt critical services in times of national emergency.”

Since both US allies and foes purchased Huawei’s equipment, the NSA hoped to ride on Huawei into the network infrastructure of all these nations. The NSA objective was to become precisely the kind of Trojan horse that Huawei was accused of, on the basis of NSA’s data.

The goal of the operation “Shotgiant” was to engage in network surveillance in “high priority targets – Iran, Afghanistan, Pakistan, Kenya, Cuba.” If ordered by the president, the NSA would have engaged in offensive cyber operations; conceivably in, through and against those nations.

In addition to signals intelligence and backdoor plugs via Huawei, the NSA used its networks to crack two of China’s largest mobile networks to track Chinese military units and the locations of the Chinese leadership.

With the NSA, counter-terrorism can also be deployed as a pretext for clandestine surveillance to compete with other countries in business, industrial and economic fields. Reflecting “state capitalism” in America, the NSA’s “Special Source Operations” focuses on “corporate partnerships” with major US companies, including AT&T, Verizon, Microsoft and Google, while NSA’s “Follow the Money” branch has hacked the interbank financial telecom traffic (SWIFT), while cooperating closely with the US Treasury Department.

The NSA and Britain’s GCHQ intelligence service have also infiltrated German companies and collected information about Chancellor Angela Merkel and over 120 other state leaders.

Even as the Obama administration sought to improve US-German relations after initial NSA disclosures, it obtained a top-secret court order permitting it to monitor communications related to Germany. Similar authorization has provided for measures targeting China, Mexico, Japan, Venezuela, Brazil, Russia, among others.

By infiltrating private and public communications, the NSA has a unique capability to create “strategic tension,” even when and where such tension does not exist. However, the ultimate problem is not just the conduct of the NSA at home or even abroad, but the premise that its current technology edge will remain only in America.

Today, all technologies diffuse far more rapidly than in the pre-Internet era. By the same token, it is only a matter of time until these technologies will be adopted, embraced and, in some cases, improved by other major multipolar powers in the advanced and emerging world.

What is desperately needed is multipolar cooperation among counter-intelligence forces worldwide, ideally through G20 initiatives. What is not needed is comparable conduct in Western Europe, Japan, China, India, Russia, and elsewhere, with NSA-style blueprints of action. In such a Hobbesian world, one man’s nationalism is another man’s terror.

In the absence of serious, internationally coordinated multipolar cooperation, we all are heading to – as Snowden himself recently put it, a world in which mass government surveillance is “setting fire to the future of the Internet.”

Dr. Dan Steinbock is Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see www.differencegroup.net.