USA: Spying for Free Trade

It is the new Cold War. The United States intelligence agencies, facing downsizing after the fall of the Berlin wall, have found themselves a new role spying on foreign firms to help American business in global markets.

Documents obtained by the Independent on Sunday reveal how the CIA and National Security Agency (NSA) -- propelled by the newly-elected Clinton administration's policy of "aggressive advocacy" to support American firms compete for overseas contracts -- have immersed themselves in the new hot trade war. Targets have included UK and European firms. At stake are contracts worth billions of dollars.

For America's spies an important tool has been the global eavesdropping system known by the code name Echelon, which has come to invoke the tag of the Big Brother of the cyberspace age.

Echelon is part of a British and American-run world-wide spy system that can "suck up" phone calls, faxes and e-mails sent by satellite. America's intelligence agencies have been able to intercept these vital private communications, often between foreign governments and European businesses, to help the US win major contracts.

The implications of eavesdropping business communications are dramatic, according to Dr Brian Gladman, a British former top Nato computer expert.

"The analogy I use is where we were 250 years ago with pirates on the high seas. Governments never admitted they sponsored piracy, yet they all did behind the scenes. If we now look at cyberspace we have state-sponsored information piracy. We can't have a global e-commerce until governments like the US stop state-sponsored theft of commercial information," he says.

Britain's role in Echelon, via its ultra-secret eavesdropping agency GCHQ, has put Tony Blair's government in the dock facing its European partners.

European politicians meet on Wednesday in Strasbourg and Berlin to call for inquiries into electronic espionage by the US to beat competitors. These debates follow two years of controversy about Echelon as its astonishing power has gradually been revealed.

But the real origin of the current row lies in the early Nineties, when US politicians and intelligence chiefs decided that the formidable but under-employed Cold War US intelligence apparatus should be redirected against its allies' economies.

At stake was not just routine international trade, but new opportunities created by the demise of communism and fast-growing markets in countries that US trade officials dubbed "BEMs" Big Emerging Markets, such as China, Brazil and Indonesia.

Perhaps the most startling result of the new Clinton policy came in January 1994, when the then French Prime Minister Edouard Balladur flew to Riyadh to conclude a $6bn (4bn) deal for arms, airliners and maintenance, including sales of the European Airbus. He flew home empty-handed.

The Baltimore Sun later reported that "from a commercial communications satellite, NSA lifted all the faxes and phone-calls between the European consortium Airbus, the Saudi national airline and the Saudi government. The agency found that Airbus agents were offering bribes to a Saudi official. It passed the information to US officials pressing the bid of Boeing Co."

Clinton's government intervened with the Saudis and the contract went to Boeing.

A second contract where US intelligence played a decisive role concerned Brazil. In 1994, NSA intercepted phone-calls between France's Thomson-CSF and Brazil concerning SIVAM, a $1.4bn surveillance system for the Amazon rain forest. The company was alleged to have bribed members of the Brazilian government selection panel. The contract was awarded to the US Raytheon Corporation which announced afterwards that "the Department of Commerce worked very hard in support of US industry on this project".

This is just one of hundreds of "success" stories openly boasted by the US Government's "Advocacy Center" up to the present day. They do not say where the CIA or NSA was decisive in winning the contract, but often brag of beating UK, European or Japanese competitors.

Cases where the US "beat British" competitors include power generation, engineering and telecommunications contracts in the Philippines, Malawi, Peru, Tunisia and the Lebanon. In India, the CIA tracked British competitive strategies in a competition to built a 700MW power station near Bombay. In January 1995, the $400m contract was awarded to the US companies Enron, GE and Bechtel.

Also in 1995, General Electric Power Systems won a $120m tender to build a plant in Tunisia. "They beat intense competition from French, German, Italian and British firms for the project," the Center boasts.

Documents and information obtained by the IoS show that the critical question of whether US intelligence should systematically help business was resolved after the election of Clinton in 1993. He appointed key Democratic National Party fund-raisers, including the late Secretary of State for Commerce, Ron Brown, to senior posts and launched a policy "to aggressively support US bidders in global competitions where advocacy is in the national interest". Soon, every US government department, from the Bureau of Mines to the CIA and the giant, super-secret National Security Agency, was playing a role in landing contracts for the booming US economy.

The new policy, dubbed "levelling the playing field" by the Clinton administration, included arrangements for collecting, receiving and handling secret intelligence to use to benefit US commerce.

Three Sigint (signals intelligence) reports obtained by the IoS are economic in nature. One details messages between Banque Nationale de Paris offices in France and Delhi, concerned with loans to build an atomic power station near Madras. A second gives details of OPEC negotiations, including French diplomatic messages.

A 1997 report details phone calls and faxes between Pakistani officials in Islamabad and Beijing, and laments that the Chinese-based official was told to send future messages by the diplomatic pouch. The report warns that if this order was obeyed, it would "severely limit our ability to monitor". All the reports are classified "TOP SECRET UMBRA", indicating that highly-sensitive monitoring techniques were used to get the information.

The heart of the new, co-ordinated Clinton trade campaign is the "Advocacy Center" inside the Department of Commerce. The Center is run by the "Trade Promotion Co-ordinating Committee", part of the US Department of Commerce. Declassified minutes of the Trade Promotion Co-ordinating Committee from 1994 show that the CIA's role in drumming up business for the US was not limited to looking for bribery, or even lobbying by foreign governments. For a series of meetings dealing with Indonesia, 16 officials were circulated with information. Five of the officials were from the CIA. Three of the five worked inside the Commerce Department itself, in a department called the "Office of Executive Support". The fifth, Robert Beamer, was from CIA headquarters.

The "Office of Executive Support" is, in reality, a high-security office located inside the Commerce Department. It is staffed by CIA officials with top-secret security clearances and equipped with direct links from US intelligence agencies. Until recently, it was known, more revealingly, as the "Office of Intelligence Liaison".

According to Loch K Johnson, a staff member of the US intelligence reform commission set up in 1993, officials at the departments of Commerce, Treasury and State pass information to US companies without revealing the intelligence source. "At Commerce, there's no code or book to consult to say when and what information can be passed to a US company," he says.

If, for instance, a government official learned that a foreign competitor was about to win a contract sought by a US company, he explained, "someone in Commerce might call a US executive and say: 'Look, you might have a better shot at that contract if you sweetened your bid a little,'" Johnson added. "They pass on the information. But they usually do it in a very veiled fashion."

In 1994, a report to the Congressional (house) intelligence committee said that the "core of the intelligence community in this area [industrial espionage] has focused on alerting US policymakers about government-to-government lobbying efforts to disadvantage US firms seeking international trade. "A review of intelligence reporting since 1986 has identified about 250 cases of aggressive lobbying by foreign governments on behalf of their domestic industries that are competing against US firms for business overseas", the report stated, adding that since the start of the Clinton administration, 72 cases involving $30bn had been under intelligence scrutiny.

In a March article for the Wall Street Journal, entitled "Why we spy on our allies", former CIA director James Woolsey claimed there was only one reason why the CIA tracked European companies. "Most European technology just isn't worth our stealing." he wrote. "We have spied on you because you bribe. Your companies' products are often more costly, less technically advanced, or both, than your American competitors."

Yet some of the earliest deals clinched by US "advocacy" with CIA support are among the most corrupt deals of all time. In 1994, President Clinton signed off on $40bn of business agreements between Indonesia and US firms on one day. Among the deals was a $2.6bn power plant at Paiton, Java. At the time the contract was signed, the US knew one of President Suharto's daughters had been cut in on the deal, and was given a stake in the project worth more than $150m.

Two months ago, the directors of the CIA and NSA appeared before the US Congress intelligence committee. CIA director George Tenet told the Committee: "With respect to allegations of industrial espionage, the notion that we collect intelligence to promote American business interests is simply wrong. We do not target foreign companies to support American business interests.

"If we did this, where would we draw the line? Which companies would we help? Corporate giants? The little guy? All of them? I think we quickly would get into a mess"

Three years before European politicians had heard about ECHELON, news of how the satellite spy system was gaining business for the US was revealed in the US. A May 1995 report by NBC news said that the US National Security Agency was intercepting business faxes and phone calls from stations in the US, the UK and Hong Kong.

• 192 Technology & Telecommunications