UNCLASSIFIED
Targeting U.S. Technologies

South Central Asia

Case Study

OVERVIEW

South and Central Asia contains aspiring regional powers and near-world-level players in various categories of accomplishment. Some of the most active collectors in the region engage in active enmities with other countries in the region or nearby.

South and Central Asia remained an active collecting region, registering an increase in reported attempts of over 50 percent from last year. Yet its share of the total reports of foreign collection attempts to obtain illegal or unauthorized access to sensitive or classified information and technology resident in the U.S. cleared industrial base decreased from fiscal year 2009 (FY09) to FY10, from 15 to 9 percent. As a result, it fell from being the third-ranking to the fourth-ranking region, displaced by Europe and Eurasia.

Commercial entities remained the most common collector affiliation, found on two-thirds of all suspicious contact reports (SCRs) linked to South and Central Asia. Requests for information (RFIs) remained the most common method of operation (MO) used by the region's collectors, identified in over three-quarters of the SCRs. And information systems (IS) remained the single most sought after technology.

COLLECTOR AFFILIATIONS

Using commercial entities to seek to obtain illegal or unauthorized access to sensitive or classified information or technologies resident in the U.S. cleared industrial base remained the region's overwhelming favorite, as registered by FY10 SCRs.

Yet as a percentage of the total, the commercial category declined slightly from last year, as did reported attempted collections by government entities, while the percentage attributed to individuals held steady. Government-affiliated and unknown entities increased in percentage from last year. However, in the context of the overall reported attempts, the continued strong preference for using commercial entities as collection agents, at two-thirds of the total, is the most salient factor.

South and Central Asian defense establishments tend to be state-run but include commercial concerns. In FY10, the commercial entities' involvement ranged from large private firms supporting the defense industry to small procurement agents and intermediaries.

Analyst Comment: While there has been some movement within South and Central Asia toward privatization, government-affiliated entities overwhelmingly dominate the defense procurement process. In the few FY10 cases in which private commercial entities without government contracts initiated suspicious contacts to cleared contractors, it is still likely that they were acting pursuant to government needs rather than completely separate profit-seeking projects. (Confidence Level: Moderate)

South and Central Asia defense establishments typically consist of networks of entities responsible for policymaking, planning, and implementation; research facilities; and factories. In general, the public-sector entities are the major components of the state-run defense industry, while the commercial firms support them. Typically, this support role involves securing foreign, including U.S., subcomponents and supplying them to larger, indigenous systems designed by government entities.

Analyst Comment: The Defense Security Service (DSS) assesses that it is likely that the majority of FY10 commercial contacts attributable to companies from South and Central Asia occurred while operating in this support role. (Confidence Level: Moderate)

Analysis of cleared industry reporting indicates that state-run design centers and research institutes issue procurement tenders for the needed components. In effect, state-run defense industries use the tenders to task others to be its suppliers. These tenders are often posted on official South and Central Asia government websites accessible to the public, and are complete with technical specifications. In several instances, DSS linked commercial requests to purchase technology directly from cleared contractors to publicly accessible government global tenders issued on behalf of the defense establishment of a government within South and Central Asia.

Analyst Comment: DSS assesses that the majority of the reported suspicious contacts attributable to South and Central Asia commercial entities were probably in response to government tender processes. It is likely that in many cases these government-issued global tenders serve as the sole mechanism for tasking these commercial entities. (Confidence Level: Moderate)

Commercial defense companies, procurement agents, and U.S.-based middlemen all compete to fulfill these tenders. Numerically, the majority of South and Central Asia commercial entities requesting U.S. technology in FY10 were procurement agents and middlemen. Typically, procurement agents from the region accept the tenders and comb the Internet in search of companies marketing products matching the tender specifications. A majority of the cleared contractors targeted by South and Central Asia procurement agents appear to maintain web pages complete with comprehensive product catalogs and contact information.

Once a procurement agent successfully identifies a company marketing the desired product, he typically contacts the company, often through email, seeking a price quote and additional product information or brochures.

Analyst Comment: DSS interprets that, because many procurement agents seek to satisfy the same tenders as their competitors, the actors are likely persistent in their attempts to obtain illegal or unauthorized access to restricted or classified information or technologies resident in the U.S. cleared industrial base. (Confidence Level: Moderate)

Some commercial entities maintain strong ties with the military and intelligence agencies of their countries and South and Central Asia procurement agents do so openly, but when successful at acquiring sensitive U.S. technology may also pass it on to third parties. Other South and Central Asia concerns may act as front companies to procure military technology, hiding the true end user of the technology, then illicitly smuggling it to their home countries.

Analyst Comment: While DSS assesses that many entities acting in response to tenders are legitimate, it is likely that many others attempt and will continue to attempt to illicitly acquire protected technology. (Confidence Level: Moderate)

In comparison to the large commercial category, FY10 collection attempts attributed to government and government-affiliated requests for U.S. technology each made up 11 percent of all reporting with South and Central Asia origins. Most incidents appeared to involve end users seeking to support ongoing projects by directly purchasing systems or acquiring technical information instead of going through the global tender process. Almost all of these incidents involved overt requests in which individuals identified their affiliations and, in some cases, the end use of the requested technology.

Analyst Comment: Despite the seemingly overt nature of many requests, it is likely that seemingly legitimate requests from some South and Central Asian entities were intended for malicious end users; however, DSS could not confirm such diversions of technology during FY10. (Confidence Level: Moderate)

Examples of government agents targeting cleared industry involved military attachés at the region's various foreign embassies in Washington, D.C., expressing interest in purchasing systems, or eliciting professional and personal information from cleared contractor employees at social events.

Government-affiliated scientists and engineers working at research centers reached out to their U.S. counterparts to request information, including pricing and specifications for sensitive systems as well as personal information. In one incident, an entity from South and Central Asia requested contact information, photographs, and lodging information for cleared contractor employees who met with foreign researchers while attending an overseas conference.

Several FY10 SCRs concerned entities listed on the Department of Commerce's Entity List, and it is likely that some commercial entities were acting on behalf of other organizations on the Entity List.

Analyst Comment: The primary method that government entities use to task procurement agents to acquire certain technologies appears fairly transparent. But because it is very likely that additional tasking avenues outside of the official tender processes exist, not all commercial requests can be linked to specific tenders or government end users. (Confidence Level: High)

Figure 12

METHODS OF OPERATION

As with collector affiliations, proportional rankings remained much the same regarding South and Central Asian MOs between FY09 and FY10. While RFIs declined slightly as a percentage of the total, the other categories retained their relative positions. RFIs accounted for over three-quarters of total regional SCRs, far outpacing the number of reports in the next most common category, solicitation or marketing.

The majority of the RFI attempts were requests to purchase defense technology and inquiries to cleared industry employees asking for pricing information, product brochures, and system specifications for export-controlled or sensitive systems. Many of the contacts with commercial origins were likely in response to government-issued global tenders. Consistent with past years' reporting, the requests often constituted responses to advertisements and solicitations on cleared contractor websites.

In FY10 industry reporting indicated that most RFIs consisted of emails to cleared contractors requesting technical details and pricing information concerning military systems. Notably, DSS observed that a number of legitimate business relationships—initiated via email contact—developed between South and Central Asia entities and cleared contractors. Previous industry reporting indicated that several direct approaches by procurement agents from the region resulted in legitimate sales of export-controlled systems to countries within South and Central Asia.

Analyst Comment: Procurement agents from the region likely view direct email RFIs, even when unsolicited, as a legitimate and successful means of initiating a business relationship and conducting business. The reliance on this method by legitimate entities means that not all entities requesting information intend exploitation. (Confidence Level: Moderate)

However, it is difficult to differentiate between those contacts that constitute attempts to violate export control laws through end-use misrepresentation and those that are wholly legitimate. It is likely that suspicious entities conceal nefarious requests among the numerous legitimate ones, and that some otherwise legitimate entities almost certainly have conducted illegal technology transfer. (Confidence Level: Moderate)

The second most common MO used by South and Central Asia collectors was solicitation or marketing, followed by seeking employment and conferences, conventions, and trade shows. Throughout FY10, businesses from the region regularly contacted a number of cleared contractors in an effort to market their own products or services. Many of these offers involved the outsourcing of work such as software design back to the region.

In FY10, DSS saw a continuation of a trend, first identified during FY09, of the increased use of U.S.-based procurement agents and middlemen to facilitate foreign requests for U.S. technology.

Analyst Comment: Many of these U.S.-based businesses appeared to operate similarly to procurement agents in South and Central Asia. It is likely that countries within the region direct the unauthorized transfer of defense technology. (Confidence Level: Moderate)

Figure 13

TARGETED TECHNOLOGIES

The number of reported collection attempts targeting technologies from the Militarily Critical Technologies List (MCTL) increased in all the most targeted categories, with reports in some doubling and even tripling. Within the proportional rankings, there was varied movement among the targeted technologies between FY09 and FY10.

The largest decrease was in the percentage ascribed to the combined category of lasers, optics and sensors (LO&S), from 27 percent last year to 18 percent in FY10. Electronics and aeronautics systems also registered relative declines.

Increases in the percentage of reported attempted collections linked to South and Central Asia occurred in the IS; positioning, navigation, and time; and marine systems categories.

Industry reporting indicated South and Central Asian entities directed their technology acquisition efforts during FY10 toward categories that span the MCTL spectrum, representing a wide variety of technologies with multiple applications. As military and defense systems in the region age, they will need increasingly scarce replacement parts.

Analyst Comment: DSS assesses that it is likely that South and Central Asian entities intend to use the varied technologies they seek to support force modernization requirements and/or system upgrades, both in response to the perceived threat from each other and in support of domestic counterinsurgency efforts. (Confidence Level: Moderate)

With the above overall picture in mind concerning the many technology areas targeted in FY10, four MCTL categories received the most attention, accounting for a combined total of more than 50 percent of reporting: IS; LO&S; aeronautics systems; and positioning, navigation, and time.

In FY10, IS was the most targeted category. Types of technologies targeted included secure communication systems, signals intelligence systems, and advanced modeling software. Further scrutiny of the requests revealed that their specific technology foci included software security programs, inertial navigation systems, and communications security equipment. A large component of collection attempts by South and Central Asia entities in FY10 targeted technologies used to integrate existing systems.

Within the LO&S category, collecting entities targeted several specific technologies, including up-to-date night vision systems and a variety of electro-optical and thermal imaging systems.

Analyst Comment: The majority of requests for export-controlled imaging systems were for large quantities; these are likely intended to equip operational military or other state-controlled forces. Smaller numbers of such systems appeared destined for use in the monitoring of laboratory testing procedures; such systems will likely aid in the indigenous research and development of other, unknown systems or technologies. (Confidence Level: Moderate)

Table 4

ANALYTICAL FORECAST

Collection efforts in South and Central Asia are driven by several factors. The region currently lacks the indigenous capability to produce much of the military technology it desires. While some countries may have successfully reverse-engineered relatively sophisticated systems, indigenous defense industries are still developing a limited spectrum of technologies likely intended for integration into existing defense systems. It is very likely that South and Central Asian defense industries for the foreseeable future will not be able to produce the sophisticated defense systems many countries in the region feel they need to counter perceived threats, whether from each other or insurgents, and will continue to target U.S. industry information and technology. (Confidence Level: High)

These factors mean that South and Central Asia collecting entities will probably continue to look outside the region for needed technologies. South and Central Asian defense industries and militaries will probably show no hesitation in looking overseas to procure defense systems when domestic commercial, government, and government-affiliated suppliers fail to meet expectations. South and Central Asia remains reliant on U.S., European, and other foreign-supplied military systems and technology to support modernization efforts, and it is likely that collection entities will continue to target U.S. technology into the near future. (Confidence Level: Moderate)

Collectors from the region will almost certainly continue to target IS and LO&S technology in support of ongoing military systems development, integration, and/or reverse-engineering efforts. (Confidence Level: High)

Parts of the region are slowly evolving and the United States is working to ensure the evolution is in a positive direction. Thus, the United States is moving closer to some countries in the region, with export restrictions reduced, and organizations removed from the U.S. Department of Commerce's Entity List. Such steps will likely lead to increased contact between foreign defense industries within the South and Central Asia region and the U.S. defense industrial base, including joint military projects. (Confidence Level: Moderate)

DSS assesses that cleared contractors involved in joint projects are likely to be the focus of even more intense collection activities. While industry reporting does not indicate that foreign intelligence entities directly control the targeting of U.S. technology, DSS assesses that it is unlikely the disparate network of South and Central Asia research establishments and public- and private-sector companies, encompassing both the commercial and government-affiliated categories, will not be employed in a similar MO in the future. (Confidence Level: Moderate)

Intra-regional hostilities, inter-regional alliances, and the desire for commercial profit all remain factors. Therefore, DSS assesses that transference of U.S. technology from South and Central Asia to third parties remains likely, and the various resultant relationships remain subject to exploitation. (Confidence Level: Moderate)

In the short term, DSS assesses that the commercial and government-affiliated public-sector defense companies, procurement agents, and intermediaries that are characteristic of South and Central Asia defense establishments will likely continue to generate the largest volume of reporting as they seek to procure components needed for military modernization efforts. (Confidence Level: Moderate)

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UNCLASSIFIED