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Snowdenfreude

An American crypto-company is making a killing off German anger about U.S. spying.

The past year's revelations about U.S. spying on Germany have been disastrous for many American businesses. When documents provided by former National Security Agency contractor Edward Snowden showed the agency was monitoring German citizens' communications, Chancellor Angela Merkel proposed building a Europe-only Internet, which would cut out American Internet firms that cooperated with NSA spying. Then came word that the giant intelligence agency was monitoring Merkel's own cellphone. Berlin responded by canceling a government contract with Verizon Communications, one company that had cooperated with NSA surveillance efforts.

The latest news that the CIA was allegedly running a spy inside Germany's main intelligence agency presumably doesn't bode well for U.S. companies. But at least one firm that specializes in blocking the same type of spying that has so incensed the German public is seeing a boom in business.

Silent Circle, which sells encrypted mobile phone service that shields users' conversation from eavesdroppers, has seen a surge in sales to German customers since July 4, when Berlin announced the arrest of a 31-year-old intelligence service employee for allegedly passing secret documents to the United States. Sales to individual customers have increased 100 percent in the past week and a half, and sales to "enterprise" clients, which include corporations and government agencies that buy many calling plans at once, are up 70 percent, said Mike Janke, the co-founder and CEO of Silent Circle, which has its primary office in Washington, D.C., and counts U.S. intelligence and security agencies among its customers.

Silent Circle's sudden jump in sales suggests that German citizens, corporations, and government agencies are taking steps to keep their conversations away from the prying ears of American intelligence agencies. And, paradoxically, they're turning to an American firm to help them. The company was founded in 2012 by Janke, a former Navy SEAL, and Phil Zimmermann, who developed Pretty Good Privacy (PGP), one of the first widely available encryption programs to help average Internet users protect their personal information. Silent Circle has customers in more than 130 countries.

In the last month, sales to individuals in Germany accounted for 29 percent of all sales in Europe, "which is astounding," Janke said. And in just the past week, which saw U.S-German relations hit a low point after Berlin kicked out the top American intelligence official in the country to protest U.S. spying, Silent Circle's enterprise sales -- which include the German government -- surged 28 percent. "That's a spike" compared to the usual sales patterns, Janke said.

Silent Circle can't be certain that Germans are buying more encrypted phones in response to U.S. spying. But historically, Janke said, whenever stories about government surveillance or data privacy breaches appear in the press, regardless of where they happen, there's often an uptick in German sales. Among Silent Circle's customers, Germans are generally "the most privacy-conscious by far," he said, perhaps owing to the country's own history with intrusive government surveillance and monitoring of its citizens. The new sales "match up exactly with the revelations" about American spies in Berlin, Janke said, which have been leading news in many German newspapers, magazines, and television programs.

Rising concerns about personal privacy aren't unique to Germany. In April, StrikeForce Technologies, a cybersecurity company, reported a sudden 84 percent jump in first-quarter sales for products that encrypt data on computers, as stories about spying and data breaches at large retailers, such as Target, dominated the news. And last month, Google -- which was identified in documents released by Snowden as both participating in NSA spying and as a target of the agency -- reported that 65 percent of Gmail messages were being encrypted while they were delivered, up from 39 percent in December. Google, Yahoo, and Facebook all reported that the volume of encrypted email is rising, as companies and consumers try to protect their information from government spies. Comcast, a major Internet service provider, has announced that it plans to encrypt email, and Microsoft is putting stronger encryption in place for its web-based email service.

German government officials and citizens have been particularly zealous about protecting their private information. For several months now, German officials have been looking for ways to limit their dependency on U.S. telecommunications companies and their data networks. That hasn't been easy, since the majority of the world's telecom infrastructure is located in the United States. Absent a complete decoupling, Berlin sought a so-called "no spy" deal with Washington, under which both sides would agree not to conduct espionage on the other. But the Germans were rebuffed, and that stung the central government. The Germans' decision to cancel the Verizon contract was based in part on the failure to seal the no-spy deal, and revealed a fundamental lack of trust in U.S. companies, which can be required by law to participate in official spying.

"[T]he ties revealed between foreign intelligence agencies and firms in the wake of the [NSA] affair show that the German government needs a very high level of security for its critical networks," the Interior Ministry said in a statement at the time, explaining why it had canceled Verizon's contract.

Now, following the arrest of the German intelligence employee, officials are taking even more unusual steps. Earlier this week, the head of the German government's inquiry into the Snowden revelations told a television interviewer that his panel may ditch electronic communications altogether and use manual typewriters for their correspondence. The intelligence employee spy is believed to have been passing the CIA documents about the committee's investigation.

"Unlike other inquiry committees, we are investigating an ongoing situation. Intelligence activities are still going on, they are happening," said Patrick Sensburg, a member of Merkel's party, the Christian Democratic Union, explaining why German officials would choose to use a primitive technology to keep their proceedings private.

Despite the sales successes of a few technology companies, the longer-term economic and political consequences to the U.S.-German relationship over spying are potentially disastrous, and they could ripple throughout Europe.

Across Berlin, there is a growing chorus, including in Merkel's own party, to stop negotiations with the United States over the Transatlantic Trade and Investment Partnership (TTIP). The fact that even moderate voices in Germany feel the spying scandal justifies such an extreme response "is really worrisome," Annette Heuser, the executive director of the Bertelsmann Foundation, said in a conference call organized by the Atlantic Council. Any hope that the deal could be finalized by the end of 2016, before President Barack Obama leaves office, has been dashed, she said.

"The [U.S.-German] relationship is getting out of sync," Heuser said. The perception in Germany among both the political class and many citizens is that "the United States, at the end of the day, doesn't care what the Germans think," Heuser said. "They just seem to be a world power that doesn't care about its core allies in Europe anymore."

Heuser traced the change back to the 9/11 terrorist attacks, when the United States began to more aggressively collect intelligence around the world and, with the help of telecommunications companies, zeroed in on the phone calls and emails of suspected terrorists in Germany. (Members of the cell that hijacked airliners on Sept. 11, 2001, were tied to Hamburg.) The United States has never fully trusted Germany as a security partner, even though both countries share strong economic and military ties, former U.S. intelligence officials say. That explains why the Americans rejected German overtures to form a no-spy agreement. "The idea that we wouldn't conduct espionage of any sort on German soil is unspeakably silly," said a former U.S. intelligence official.

Merkel has been under increasing pressure from politicians to her left and the German public to punish Washington. Her decision to expel the top U.S. intelligence official from the embassy in Berlin followed fruitless efforts by German lawmakers to get some explanation from Washington, and in particular the CIA, about why it was spying on an ally.

Robert Kimmitt, who served as U.S. ambassador to Germany in the early 1990s, said the Obama administration hadn't weighed the costs to its relationship with Germany against the potential benefit of any information it gleans from spying. "I think the intelligence agencies are doing what intelligence agencies do. But just because they can do it doesn't mean that they should do it," he said on the conference call Wednesday.

The White House hasn't officially acknowledged that the CIA was running a mole inside the German intelligence establishment. Since the intelligence employee's arrest, German officials have identified another suspected spy working in the Defense Ministry, and they are reportedly looking for more double agents in their ranks. The spying row recently threatened to overshadow tenuous negotiations over Iran's nuclear program. Secretary of State John Kerry met with his German counterpart, Frank-Walter Steinmeier, in Vienna on Sunday, taking a moment out of the nuclear talks to stress the importance of America's friendship with Germany.

"We have enormous political cooperation and we are great friends," Kerry said, while Steinmeier emphasized the work that has to be done to mend fences. "Ties between the United States and Germany are necessary and essential for both of us," he said. "We want to work on reviving this relationship, on a foundation of trust and mutual respect."

Heuser, of the Bertelsmann Foundation, said she fears the U.S.-German relationship might not withstand news of another spy, and that Washington should find a way to privately come clean about any more agents that it's running. "The relationship is much too unstable to witness all these storms that could come out of" another revelation, Heuser said. "I think [that] would be just another big catastrophe and another nail in the coffin, so to say, of the trans-Atlantic relationship."

Sean Gallup / Getty Images News

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Mission Accomplished?

China suddenly withdrew its controversial oil rig from Vietnamese waters ahead of schedule. Beijing says the rig did its job -- and it may have, in more ways than one.

 

NOTE: This story was updated Wednesday afternoon.

More than two months after China sparked a regional crisis with the dispatch of a billion-dollar deep-water oil rig to waters claimed by Vietnam, Beijing announced that the rig had finished its work ahead of schedule and was heading back to China.

The big question now is: What does this really mean?

Opinions are divided on how to read the move -- as unexpected as the initial placement of the rig in disputed waters in early May -- but few outside observers believe Beijing is ultimately backing down from its aggressive claims of maritime rights in the South China Sea. Indeed, the fact that foreign ministry officials said the move had been made for commercial reasons, reiterated their claims to the disputed waters, and left the door open for the rig to return suggests that the maritime battles between China and its neighbors are far from over.

Indeed, Vietnamese officials warned China Wednesday not to send any more rigs or to repeat what Hanoi believes are violations of its exclusive economic zone, which extends 200 miles off the coast. Last week, Vietnam's foreign ministry again demanded the withdrawal of the rig and on Wednesday reaffirmed the country's claims to the disputed Paracel Islands.

For the moment, China is ignoring Hanoi's demands and painting the rig's relocation as a purely commercial move.

Early Wednesday, the two Chinese firms operating the rig said that they had finished drilling two exploratory wells in waters not far from the disputed Paracel Islands, about 120 nautical miles off the coast of Vietnam. The firms, China National Petroleum Corporation (CNPC) and China Oilfield Services Limited, said that the rig found some oil and gas prospects in the region, and was withdrawn ahead of the arrival of a typhoon. The companies had earlier said that the rig would operate until the end of the good weather season in mid-August.

Many Chinese users of Weibo, a Twitter-like microblogging service, criticized the withdrawal, Reuters reported, suggesting that Beijing had backed down to pressure from the United States and others. But Chinese Foreign Ministry spokesman Hong Lei told reporters the rig's withdrawal was a purely commercial decision.

"The oil rig is relocated in accordance with the relevant company's plan of operation at sea. It has nothing to do with any external factor," he said.

The United States "welcomes" news of the rig's withdrawal, State Department spokesperson Jen Psaki said at a briefing Wednesday, but she said she would not speculate on the reasons that drove Beijing to retire the rig ahead of schedule. She added that Secretary of State John Kerry had last week reiterated U.S. concerns with Chinese actions in the region, "and those have not all been addressed."

CNPC, meanwhile, said that it would study the geological data from the two wells and then decide on its next steps for the project, leaving the door open for a replay of the contentious deep-water operation, which has led to numerous low-intensity skirmishes between Chinese and Vietnamese coast guard vessels since May.

"The big question is whether the rig returns next year or not," said M. Taylor Fravel, an expert on Chinese maritime claims at the Massachusetts Institute of Technology.

Most observers accept at least part of the official Chinese explanation. The typhoon clearly played a part in the redeployment of the expensive rig, which Chinese officials have for years viewed as a strategic, rather than a purely commercial, tool. And it's entirely possible that the rig finished drilling the exploratory wells ahead of schedule thanks to favorable weather earlier this summer.

Beyond that, there are several other possibilities. China may have felt that it sufficiently made its point by dispatching a rig to disputed waters and successfully operating it despite vehement protests and limited tactical responses from Vietnam and others. The United States, for example, repeatedly denounced Chinese actions as "provocative," but did not seek to force the issue.

Or China may have decided to throttle back the controversial operation in light of the blowback it sparked around the region. Massive anti-Chinese riots gripped Vietnam in the days after the rig's placement. The Philippines, Japan, and Australia have all announced closer defense ties with the United States, in part because of China's aggressive and sweeping claims to big chunks of the South China Sea. The United States and Japan pointedly took issue with China's maritime grabs at a regional security meeting in May. And the issue topped the agenda for U.S. diplomats in Beijing last week at a big strategic summit with Chinese counterparts.

"Of course, moving the rig does not mean that China is backing down. However, it is clear that China underestimated the Vietnamese and international reaction to the deployment of the rig," Fravel said. "As a result, an earlier-than-scheduled withdrawal of the rig, from a tactical perspective, might be undertaken to reduce focus on the issue."

Anthony Wallace - AFP - Getty