Foreign spying in 2004 impaired U.S. military edge

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Foreign spies from nearly 100 nations sought sensitive U.S. technology last year, and technology losses undermined U.S. military advantages, according to an annual U.S. counterintelligence report.

"The U.S. counterintelligence community judges that the technology lost as a result of these efforts has imposed a significant, but difficult to quantify, cost on the United States," stated the report on economic spying, the theft of trade secrets.

"Foreign access to sensitive dual-use and military technology has eroded the U.S. military advantage, degraded the U.S. intelligence community's ability to provide information to policymakers and undercut U.S. industry."

The report, submitted to Congress and made public several weeks ago, was produced by the Office of the National Counterintelligence Executive, a counterspy unit that recently was placed under new Director of National Intelligence John D. Negroponte.

The report did not identify the countries involved in economic spying but said they include the small number of nations that "perennially top the counterintelligence community's list of most aggressive collectors."

A senior FBI counterintelligence official, however, identified some of the nations most active in high-technology spying against the United States as China, India, Pakistan, Iran, Russia, Japan, France and Israel.

In one case, the official said, the Chinese stole the technology for an advanced metal used in U.S. military systems from a university laboratory in Iowa.

"Before the U.S. military could get it licensed, classified and manufactured, the Chinese had stolen it, stolen the marketing strategies, the customer list, and were manufacturing and selling it back to the United States," the official said.

The counterintelligence report said most corporate trade secrets and technology theft took place "without direct intervention by state actors, though most foreign governments involved have not discouraged such theft and themselves often benefited from the transfers."

Major foreign economic spies, however, continued to use their intelligence services and commercial enterprises in stealing or buying the most sensitive and difficult-to-obtain U.S. technology last year, the report said.

Economic spies were able to obtain the data by making direct requests of naive U.S. companies, in many cases by simply asking via e-mail, phone call, facsimile, letter or in person for the sensitive information, the report said.

High-technology targets included information systems, sensors, aeronautics, electronics, armaments and explosives.

The report said the United States remains the primary source of most of the world's advanced technology used for foreign militaries. U.S. technology theft also is used by foreign governments to help make their domestic businesses more competitive.

"The counterintelligence community expects no decline in foreign demand for sensitive U.S. technologies over the next few years," the report said.