Israel Mired in the Pegasus Affair

As long as Israeli software was being used to monitor the Palestinian population, nobody was worried about it. But the Pegasus scandal blew all that apart, with the revelations about listening in on Israeli politicians, and practices akin to those of a gangster state, stirring concerns even among its American allies.


In the first two weeks of February, the “Pegasus Affair” took an unexpected turn in Israel. In a series of articles which added new pieces to the jigsaw every day, the journalist Tomer Ganon of the Israeli economic news site Calcalist drew a picture which damaged the previously favourable image enjoyed in Israel by the cyber-surveillance company NSO and Pegasus, its miraculous spyware capable of unlimited penetration in even the most secure phones. Had Pegasus not established itself as a premier weapon of choice in the “struggle against terror”, the envy of the world powers?

So what was the problem with developing an amazing technology to keep an entire people under control—in this case the Palestinians, but also others elsewhere? Only a few rare Israeli human rights defenders took issue with it. As the Israeli journalist Anshell Pfeffer wrote, “Until the scandal broke, the Israelis had no problem with Pegasus and NSO”.1 Quite the reverse, for most Israelis this technology and its global reach was a source of pride. Pegasus had for years enabled the surveillance of officials from Palestinian NGOs such as, for example, their lawyers who were working on evidence for the International Criminal Court on the actions of the Israeli army (and Hamas) during the Gaza conflict in the summer of 2014. For a great majority of Israelis, tracking these lawyers was a matter of public security.

A gift for the Arab regimes

Pegasus and other similar software products were simply the culmination of decades during which the Israeli security forces had established increasingly intrusive surveillance of an entire population, with no public accountability. The West Bank had been the testing-ground for constantly “improving” techniques. Before long, more than 100 states had turned to NSO and other Israeli companies to benefit from it, knowing that the Israeli vendors would be little interested in the use to which it was put. “Wherever Netanyahu went, NSO was just behind,”2 as Haaretz wrote in 2021. Suspicion that Pegasus played a role in the murder of the Saudi dissident Jamal Khashoggi in 2018 did nothing to harm NSO’s image in Israel. Lastly, Israel’s “cyber gifts” to the Arab regimes contributed greatly to the conclusion of the “Abraham Accords”, that unprecedented alliance between Israel and the Gulf monarchies (and that of Morocco) pushed by Donald Trump.

These capabilities were just too tempting. Inevitably, the day would come when the unbridled and massive use of clandestine cyber-surveillance would be used also to spy secretly on Israelis. And that is exactly what happened. Thanks to the Calcalist articles, we know that Pegasus was also used by the Israeli police for surveillance operations that had nothing at all to do with the “war on terror”. Mayors and chiefs of ministerial staffs were eavesdropped upon, their gestures analysed, their relationships laid bare, their views reported back to those who commissioned the surveillance. It was the same for leaders of the Black Flag movement, which was leading the drive to force Benyamin Netanyahu to resign as Prime Minister. What is more, even his own son, Avner Netanyahu, was tracked by Pegasus.

Scandal! The Prime Minister today, Naftali Bennet, head of the religious-settler camp, explained to the good people that, yes, Pegasus and Israeli spywares certainly play “a very important role in the struggle against terror”, but that they “should not be used against the Israeli public”. In the early days, Internal Security minister Omer Bar Lev constantly repeated, “Move along, there is nothing to see”, but ended up promising to set up a commission of enquiry. Already he is clashing with those from civil society who are demanding a public commission, not a governmental one.

So the crisis of democracy is smouldering in Israel, opening files which were hitherto closed, or which nobody was bothered about. Thus, we suddenly recall that Naftali Bennett made a fortune out of cyber surveillance, selling two such companies to American outfits for $100m ten years ago. We also note that the Number Two in his party, Ayelet Shaked, the Interior Minister, has as her best friend… Shiri Dolev, joint president of NSO. We learn that Yossi Cohen, the recently retired Mossad boss, planned to invest in cyber surveillance in partnership with Jared Kushner, Trump’s son-in-law, and Steven Mnuchin, his former Treasury Secretary. Finally, when the Pegasus affair broke, we discovered that the NSO spokesman is none other that the former spokesman for the Israeli army. And in the US, NSO had chosen Rod Rosenstein to put its case—Trump’s former Deputy Attorney-General. Israeli cyber-surveillance is indeed a private club.

Netanyahu’s grotesque statements

The affair certainly has its grotesque side. Netanyahu pushed his team to seize on it to demand the immediate withdrawal of the cases against him! Because the police, using this spyware when investigating the corruption allegations against him, had intrinsically broken the law. How many people had been illegally spied on? Thus, Netanyahu’s supporters insist, not only must the cases against him be declared null and void, but the election results must also be cancelled, because their hero had been the target of a campaign of baseless vilification.

The ex-prime minister had moved from defence to attack. The man is shameless and endowed with infinite cheek. For ten years, Netanyahu was the travelling salesman for NSO & Co to monetise Israel’s diplomatic successes. Now, he blames the abuse of spyware for his fall. No doubt he is forgetting his own statements during the inauguration on 3 December 2015 of a new police chief, Roni Alsheikh, a religious settler and the No. 2 of Shin Bet, whom he had chosen himself: “Cyber technology is becoming an important element of all state actions,” he told him. “I believe you will do a great job in cybertechnology. I expect, Roni, that you will use these technologies for policing, also for the daily protection of civilians and for law.3” Look who’s talking.

None the less, the main thing is not about Netanyahu’s personal future. It lies in the very tangible consequences of the Pegasus affair for the state of Israel—and they are more international than domestic. To be sure, as an Israeli writer maintained, “NSO is part of the very heart and soul of the Israeli establishment.”4 But the importance of the Pegasus affair has more to do with its international dimension and its impact on US-Israeli relations. Thus the New York Times Magazine tells us that the FBI announced its intention to buy a limited version of the Pegasus software in June 2019.5 Note, by the way, that the purchase took place … eight months after the murder of Jamal Khashoggi. The sale was preceded by several presentations to FBI officials by NSO experts. Their software had been specially modified to be activated on US territory (Pegasus had excluded the US from the app in deference to its great ally’s interests). In early February 2022, the American Federal Police admitted having “tested” the software before deciding in July 2021 not to acquire it. At the exact moment when the international journalist consortium Forbidden Stories released its Pegasus investigation…

Tensions between Washington and Tel Aviv

The reaction of the Israeli authorities to the revelations showed a failure to appreciate the magnitude of the scandal. In essence, to attack NSO had the effect of weakening the defenders of democracy on the terrorism issue. But in early November 2021, the US Secretary of Commerce put NSO (and another firm called Candiru) on its “entity list”, the official name of a blacklist of bodies and firms whose activities are deemed “contrary to the national security or foreign policy interests of the United States”. According to the New York Times journalists Ronen Bergman and Mark Mazzetti, it was “a very public rebuke of a company that had in many ways become the crown jewel of the Israeli defense industry.”6 The Americans only warned the Israeli Defence Ministry about their decision an hour before it was announced … the flames were starting to spread.

For a brief moment, Naftali Bennett imagined he could persuade Joe Biden to backtrack. Yigal Unna, Director-General of the National Cyber Directorate, declared that “this attack … is part of a general plan aimed at neutralising the Israeli advantage”. Envoys despatched to Washington explained that if NSO should disappear, Russia and China would be the first beneficiaries. The Americans did not budge an inch. NSO’s repeated argument that it was not responsible for how states acquiring Pegasus used it—“car manufacturers are not to blame for what drivers do”—failed to impress the sages of the CIA, who were familiar with that refrain.

The White House decision to put NSO on the blacklist of banned companies finally penetrated the brains of Israeli leaders. The implications were threefold. Firstly, the “cyber diplomacy” of the Netanyahu era, whereby the sale of surveillance equipment induced states to support Israel, had suffered a grievous blow. At the end of November, the Israeli Defence Minister announced that the number of Israel’s clients enjoying the Pegasus product had shrunk from 103 to just 37. Saudi Arabia, the UAE and Morocco found themselves excluded from the list of beneficiaries—so much for the Abraham Accords. That was not enough to shift Washington.

Secondly, the Pegasus affair had a deeper impact on Israel’s international image. The information unearthed by Forbidden Stories began to show a country which in many ways was behaving like a gangster state. The fate of Tomás Zerón de Lucio became an example of Israel’s embarrassing acquaintances. Zerón was the boss of the Mexican police, and he negotiated the delivery of a big Pegasus package from NSO. He was suspected of organising the 2014 massacre of 43 students, and since 2019 the new Mexican presidency has been accusing him of “torture, abductions and falsifying evidence”. So Zerón fled—to Israel, where he remains. In October 2021, Mexico again demanded his extradition. Naftali Bennett refused.

A degraded image in the USA

Finally, at least in the US, it was Israel’s methods of monitoring the Palestinians that the Pegasus affair helped make the focus of media attention. The country’s image had already suffered a sharp deterioration with the Gaza bombardments of spring 2021. With NSO, it was the unrestricted monitoring of the Palestinians which seized media focus. For example: In November 2021, the Washington Post published a detailed investigation of “a broad surveillance effort in the occupied West Bank to monitor Palestinians by integrating facial recognition”, complementing the cyber-surveillance of the Palestinian population that had been going on for years. The programme, the report said, was based on a proliferation of cameras and on “Blue Wolf” hacking of smartphones. It affected the entire population “including children and the elderly”. An Israeli soldier told the paper that the system “sometimes sees into private homes”. Another soldier who served in Hebron called it “a total violation of the privacy of an entire people.”7

The newspaper put a series of questions to the army spokesman. His response: the improvement of surveillance techniques depends on “routine security operations [that are] part of the fight against terrorism and the efforts to improve the quality of life for the Palestinian population in Judea and Samaria”. The Post reminds us that these techniques are banned in many US cities as a violation of privacy. And that the European parliament voted in November 2021 to ban facial recognition technology in public spaces. In Israel itself, its use was rejected by the authorities. But, as the Washington Post wrote, “Israel applies different standards in the occupied territories”. The more we learn about NSO and its ilk, the more information circulates on the methods used to monitor every moment of the life of another people, and the more Israel looks like an archetypal identity power marrying cutting-edge technology to a contempt for the law.

Israeli leaders were less concerned about the damage to the country’s image than about the potential economic consequences of the Pegasus affair. First of all, the entire high-tech sector was hit by a chilly wind of rejection of Israeli cyber-surveillance start-ups. According to Haaretz, they were already being called “cyber mercenaries”. The same phrase was used in the complaint brought by Meta, the parent company of Facebook, against NSO and Cowebs, another Israeli spyware company. Facebook charged that NSO “activates counterfeit accounts for its clients that conduct surveillance online, including on social networks”. Facebook took on four other Israeli companies (Black Cube, Bluehawk, Cognyte, and Cytrox) which it accused of operating “below the radar” to spy on a host of people. The Facebook file, Haaretz concluded, “is part of a wave of events showing that the technology sector’s patience with spyware companies is wearing thin” as these “mercenaries” proliferated.8

This “loss of patience” was evident, for example, when Microsoft publicly accused the Israeli start-up Candiru of selling a software capable of hacking information systems.9 In December 2021, Apple for its part told 11 diplomats at the US embassy in Kenya that their phones had been hacked by Pegasus.10 Nine more diplomats were to follow in Uganda. All their phones had been linked to State Department email addresses using iCloud, Apple’s storage system. NSO had been caught red-handed directly targeting US interests.

Fabulous export revenues under threat

Ultimately the worst consequence of the American decision to blacklist Pegasus is economic in nature. In no other state in the world does the sale of arms and security equipment make up such a big part of GDP as in Israel: this sector alone employs 10% of the country’s workforce. In recent years, spyware had become a new, rapidly developing source of revenue. According to the Israeli National Cyber Directorate, it generated a turnover of $3.4bn in 2021, amounting to 41% of all security sector sales, including arms. With the Forbidden Stories report and the US prohibition decision, this whole industry with its exponential growth faces the fear of losing important markets. It is not Israel’s Gallipoli, but anxiety prevails among the bosses of these firms and their employees. The worst-case scenario would be if Washington were to apply its decision to ban NSO to the letter, because for Israel, the problem is not NSO being prevented from selling its products in the US, but rather the fact that if the American government banned US companies from selling the components needed for spyware development to NSO or others, these start-ups might have to shut up shop very swiftly.

In this climate, NSO’s Israeli fellows showed little solidarity with it. It is every man for himself. NSO and Candiru traded accusations of having derailed their beautiful profession. Fears of bankruptcy multiplied. Candiru was hanging by a thread, its engineers already looking for jobs elsewhere. NSO’s bosses were said to be looking for a buyer.

But if NSO, Candiru or others were to disappear, who believes the whole industry might collapse? The stakes which allowed Israel to profit from the dubious but highly useful skills of these companies would not have disappeared with them. Others would likely take their place, with the renewed approval of Israeli leaders—and the acquiescence of their clients. The Israeli economic daily TheMarker is already tipping the recently created Paragon, which specialises in hacking networks like Messenger, Signal and WhatsApp, and which has been recruiting heavily since NSO ran into trouble. Its existence was revealed by Forbes magazine, which said Paragon had taken stock of its predecessors’ mistakes: “Autocratic, undemocratic regimes will not figure among its clients.” Believe that if you will.

In the meanwhile, Israeli and foreign candidates for buying up NSO and Candiru are eagerly awaiting the moment when these companies will be on their knees, in the hope of recruiting their most brilliant engineers and their expertise. But on the American side, the climate does not seem to favour a simple return to the good old days. On 7 January, the National Counterintelligence and Security Center, the main US counter-espionage agency, called on American citizens to “be more aware of the threats to freedoms and democracy that companies like NSO represent”.11 A recent editorial in the Washington Post, entitled “Blacklisting this Israeli spyware firm is only the first step”, reflected a demand that is growing in American society.12 Imposing currently non-existent strict regulation on such companies has become an urgent necessity, it argued. An effective international regime to control cyber surveillance seems unrealistic in the world as it is today. But the adoption of some jointly agreed collective norms is an idea which is gaining ground. Nothing could alarm Israeli leaders more.

1Anshell Pfeffer, “Israelis didn’t care about NSO and Pegasus – until this scandal”, Haaretz, 5 February 2022.

2Amitaï Ziv, “Where Netanyuahu went, NSO followed: how Israel pushed cyberweapons sales”, Haaretz, 20 July 2021.

3Anshell Pfeffer,“Pegasus scandal is a massive can of worms about to erupt all over Israel’s elites”, Haaretz, 7 février 2022

4Amos Harel, “Police Using Pegasus Spyware against Israelis shows NSO is an arm of the State”, Haaretz, 18 January 2022.

5Ronen Bergman and Mark Mazzetti, “The battle for the world’s most powerful cyberweapon”, The New York Times, 28 January 2022.


7Elizabeth Dwoskin, “Israel escalates surveillance of Palestinians with facial recognition program in West Bank”, The Washington Post, 8 November 2021.

8Sagi Cohen, “’CyberMercenaries’: Israel spyware industry is getting damned around the world”, Haaretz, 21 December 2021.

9Reuters, “Microsoft says Israeli Group sold tools to hack Windows”, 15 July 2021.

10Washington Post,NSO Pegasus spyware used to hack US diplomats’ phones”, 3 December 2021.

11Julian Barnes, “Biden administration warns against spyware targeting dissidents”, The New York Times, 7 January 2022.

12“ Blacklisting this Israeli spyware firm is only the first step”, editorial in The Washington Post,e 5 November 2021.