February 24, 2000

An Electronic Spy Scare Is Alarming Europe

By SUZANNE DALEY

ARIS, Feb. 23 -- Fears that the United States, Britain and other English-speaking countries are using a cold-war eavesdropping network to gain a commercial edge roused passions across Europe today, even after Washington and London roundly denied the notion.

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The subject kept the European Parliament in Brussels entranced for hours and drew banner headlines across the continent. One political cartoon showed Britain in bed with the United States, despite Britain's membership in the European Union.

The hubbub grew from a report prepared for the European Parliament that found that communications intercepted by a network called Echelon twice helped American companies gain an advantage over Europeans.

Whatever the merits of the latest allegations, suggestions of commercial spying have surfaced regularly in recent years. They have infuriated many Europeans who seem to have little trouble believing that military espionage systems developed in the cold war would now be used to help businesses in English-speaking nations.

Echelon is a network of surveillance stations stitched together in the 1970's by the United States National Security Agency with Australia, Britain, Canada and New Zealand to intercept select satellite communications, according to recently declassified information in Washington.

But Washington and Downing Street quickly rejected the idea that they might be using any secret information to bolster their own economies.

"No is the short answer," Prime Minister Tony Blair of England said in London. "These things are governed by extremely strict rules, and those rules will always be applied."

In Washington, a spokesman for the State Department, James P. Rubin, said, "U.S. intelligence agencies are not tasked to engage in industrial espionage or obtain trade secrets for the benefit of any U.S. company or companies. Although we cannot comment on the substance of the report, we can say that the N.S.A. is not authorized to provide intelligence information to private firms."

The denials did little to quell European fury, especially in France, where Justice Minister Élisabeth Guigou said French companies were being encouraged to encrypt sensitive information to avoid detection by American espionage operations.

She said that Echelon had been set up as a military system, dating originally from 1948, to eavesdrop on the Soviet Union and its allies in the cold war, but that it had been converted to "economic espionage."

"Today," Ms. Guigou said, "it appears that the network has been diverted to the purposes of economic espionage and for keeping a watch on competitors."

The flare-up was prompted by the publication today of a report commissioned by the European Parliament 18 months ago, after initial allegations of commercial espionage.

The 18-page report, which was written by a freelance journalist, Duncan Campbell, and based in large part on other newspaper accounts, said Echelon had been used by the United States to gain the advantage in at least two deals that involved major European companies.

Fears that cold war technology is being converted to commercial use.

Mr. Campbell described Echelon as a vast coordinated system that includes a system of satellites and at least 10 listening posts worldwide that can intercept telephone calls, e-mails and faxes.

The report drew skepticism from conservative parliamentarians, some of whom said it had failed to provide sufficient proof.

Citing "well informed" press reports from 1995, Mr. Duncan said information learned through Echelon had been given to Boeing and the old McDonnell Douglas when they were trying to win a $6 billion contract from Saudi Arabia. His report said the spy network had intercepted calls between Airbus, the European consortium, and the Saudi airline and government officials.

Mr. Campbell also said spy information had helped an American company, Raytheon, win a bid for a $1.3 billion surveillance system for the Amazon forest away from Thomson-CSF, a French company.

But few details were offered about how the information was of any use to the American corporations. Each example was described in just a short paragraph.

In recent years, Echelon has been criticized in the United States as an excessive intrusion into the private communications of Americans and their allies. Some critics said the system emerged from the cold war as a Big Brother without a cause.

R. James Woolsey Jr., who headed the C.I.A. from 1993 to 1995, said in Washington that "basically the United States does not conduct industrial espionage." But he said the government might look into some economic areas, like questions of bribery.

"You collect intelligence on bribery by some of our friends abroad . . . and then you tell the U.S. government so they can try to get the other government not to award the contract," Mr. Woolsey said today at the Council on Foreign Relations.

"But you don't go to the American corporation and say 'Hey, you're about to lose,' " he said.