US defence company terminates negotiations to purchase surveillance equipment from NSO Group

A proposed sale created “severe counterintelligence and security issues for the US government,” according to the White House, and as a result, American defence contractor L3 Harris halted negotiations to purchase NSO Group’s monitoring equipment.

According to a person familiar with the negotiations, the proposed acquisition is now “definitely” off the table due to the White House objections, which was first reported by the Guardian and its media partners last month.

The announcement, which has been made by the Guardian, Washington Post, and Haaretz, comes after a turbulent time for the Israeli surveillance firm. In November of last year, Joe Biden’s administration put the company on a US blacklist after finding that it had acted “contrary to the foreign policy and national security interests of the US.”

According to a person with knowledge of the discussions, L3 Harris had checked any potential agreement for the technology of NSO with its US government clients and had received some encouraging indications from the country’s intelligence community.

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“We are unaware of any evidence of support or involvement from anyone in a decision-making, policy-making, or senior function,” a US official claimed, appearing to contest that characterization. The intelligence community “expressed concerns and was not supportive of the transaction,” the US person added.

According to sources, when word of the talks was originally reported, a top White House official raised serious doubts about any prospective transaction, which took L3 Harris off guard. Last month, a senior White House official made the remark that any potential agreement may be viewed as an attempt by a foreign government to get around US export controls. A transaction with a blacklisted company involving any American company, especially one that is a cleared defence contractor, “would spur intensive review to examine whether the transaction poses a counterintelligence threat to the US Government and its systems and information,” the senior White House official further stated.

According to a person with knowledge of the discussions, once L3 Harris realised the extent of the “definitive opposition,” “there was a sense [in L3 Harris] that there was no way L3 was moving through with this.”

There is no way for L3 to be aligned if the [US] government is not aligned, the person said.

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There were further issues. It is unclear whether Israeli officials would have approved a deal that gave control of NSO’s licences away from Israel to a US company. The Israeli ministry of defence would have had to approve any acquisition of NSO surveillance technology by a US company.

The US government, the UK, Australia, New Zealand, and Canada, which make up the “five eyes” intelligence alliance, as well as some Nato allies, would likely be the only customers for NSO’s capabilities if a deal were to be reached, according to a person with knowledge of the negotiations last month.

The individual said, however, that there were still a number of unanswered issues with the sale, such as whether the technology would be kept in Israel or the US and whether Israel would be permitted to continue using the technology as a client.

An inquiry for comment from NSO was not answered.

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