Pegasus spyware maker NSO Group is betting that the electoral victory of longtime ally Benjamin Netanyahu will restore its fortunes, banking on the returning Israeli premier’s desire to step up his pursuit of Gulf alliances.
NSO has cut staff and reined in costs this year, as the Israeli company struggles to service more than $400mn in debt and is barred from the lucrative US intelligence market by a commerce department blacklisting.
However, co-founder Shalev Hulio believes that Netanyahu’s imminent comeback will provide much-needed political cover for the beleaguered company to begin conducting deals with nations crucial to Israeli foreign policy, according to people familiar with his thinking.
“Don’t worry,” he told guests at a Tel Aviv dinner party this summer over concerns NSO was failing. “Netanyahu is coming back.”
Hulio was banking that Netanyahu would win a general election, a prediction that was proved correct in November. Netanyahu has moved closer to forming a rightwing ruling coalition in recent days.
His return could be crucial to NSO’s future. During Netanyahu’s last 12-year tenure as prime minister, he promoted NSO’s unique technology in order to prise open security relationships with India under the leadership of Narendra Modi, recalcitrant Gulf nations and once unfriendly east African nations.
Deals to sell Pegasus spyware to those nations turned NSO into a unicorn — a tech start-up worth more than $1bn. The contracts also laid the seeds for its recent woes. Pegasus has been traced to the phones of the estranged family of Dubai’s ruler, associates of murdered Saudi journalist Jamal Khashoggi, overseas critics of the Rwandan government and phones belonging to US embassy employees in Uganda.
Netanyahu has made no secret of his desire to secure the diplomatic prize that eluded him in his last premiership: diplomatic ties with Saudi Arabia, which remains officially in a state of war with the Jewish state, despite a clandestine co-operation designed to blunt Iran’s expansion in the region.
In 2017, after an in-person demonstration by Hulio, the kingdom became one of NSO’s largest clients, according to several people familiar with the transactions, despite Israel and Saudi Arabia having no diplomatic relations.
“You can see why companies like NSO will be opening the champagne with Netanyahu’s return,” said Eitay Mack, a human rights lawyer who has repeatedly sued the Israeli defence ministry to stop weapons sales to regimes with human rights issues. “It’s understandable that not just NSO, other companies also see a lot of opportunity, specially with huge arms deals with the Saudis.”
In 2018, after Khashoggi’s close associates alleged that NSO’s Pegasus had been used to track them ahead of his murder, NSO temporarily suspended the Saudi contract, The New York Times first reported.
By mid-2019, a new contract was put in place, with the direct knowledge of Netanyahu, who was then also serving as defence minister, two people familiar with the transaction said.
Soon after, Saudi Arabia used the new contract to hack the phones of 36 journalists at regional rival Qatar’s Al Jazeera news channel, researchers at Citizen Lab found. It is unclear if the lucrative Saudi deal remains in place. At least one Saudi ministry purchased a similar Israeli system, called Candiru, around that time, two people said.
The kingdom’s military is also considering Israeli defence exports, including anti-drone technology to guard its oil installations from Houthi and Iranian aerial attacks, according to weapons dealers who have made recent presentations to Saudi officials.
NSO said “politically motivated sources based on hearsay” had given the FT false information regarding “alleged customers, conversations that never occurred, and the company’s financial condition”.
Netanyahu did not respond to a request for comment.
Shortly after Netanyahu lost his 12-year hold on power, NSO was blacklisted by the US commerce department in November 2021, around the time US officials became aware of the Ugandan embassy hacks.
That move bars any American firm from doing business with NSO. By October 2021, with no new sales to report, Hulio had to arrange a $10mn loan from the New York-based consultancy BRG, which manages the majority stake in NSO that is owned by a constellation of western pension funds and state-backed investors.
Despite representing the majority stake in the weapon maker, BRG is barred by Israeli law from knowing any of its operational details — its customers and its technology are an Israeli state secret.
Since the US blacklisting, NSO had to again borrow up to $10mn from its creditors, who have agreed to let it defer interest payments, according to a person familiar with the transaction. At one point it had completely exhausted a $30mn credit line, according to people familiar with the company’s finances.
In an attempt to rein in international criticism, the Israeli government put in stringent approvals processes for any new sales for the entire spyware industry, including NSO’s competitors. This was designed to make sales to countries with problematic human rights records extremely difficult, according to four people familiar with the situation, unless with the clear blessing of the ministry of defence.
That left European intelligence agencies as the only potential customers for Israeli spyware, including that from NSO’s competitors. According to an arms dealer who failed to close sales, “nobody wanted to touch any Israel interception software at all”.
EU-regulated competitors from Greece, Bulgaria and Cyprus, many of them staffed by Israelis, rushed into the vacuum.
These events left NSO suspended in a peculiar purgatory within Israel’s security infrastructure, described by one recently departed insider as “too secret for a sale and too crucial to fail”.
Israel’s NSO bets its future on Netanyahu’s comeback Republished from Source https://www.ft.com/content/88379bcd-2d99-427f-86e1-bcc841cb609f via https://www.ft.com/companies/technology?format=rss