China ‘twice hacked US navy contractor and stole data on submarine warfare, including secret plans to develop supersonic missile’

Chinese government hackers have twice compromised the computers of a Navy contractor, stealing huge amounts of highly sensitive data related to undersea warfare – including secret plans to develop a supersonic anti-ship missile for use on US submarines by 2020, according to American officials.

The breaches occurred in January and February, said the officials, who spoke on the condition of anonymity to discuss an ongoing investigation. The hackers targeted a contractor who works for the Naval Undersea Warfare Centre, a military organisation headquartered in Newport, Rhode Island, that conducts research and development for submarines and underwater weaponry.

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The officials did not identify the contractor.

Taken were 614 gigabytes of material relating to a closely held project known as “Sea Dragon”, as well as signals and sensor data, submarine radio room information relating to cryptographic systems, and the Navy submarine development unit’s electronic warfare library.

The Washington Post agreed to withhold certain details about the compromised missile project at the request of the Navy, which argued that their release could harm national security.

The data stolen was of a highly sensitive nature despite being housed on the contractor’s unclassified network. The officials said the material, when aggregated, would be considered classified, a fact that raises concerns about the Navy’s ability to oversee contractors tasked with developing cutting-edge weapons.

The breach is part of China’s long-running effort to blunt the US advantage in military technology and become the pre-eminent power in East Asia.

The news comes as US President Donald Trump’s administration is seeking to secure Beijing’s support in persuading North Korea to give up nuclear weapons, even as tensions persist between the United States and China over trade and defence matters.

The Navy is leading the investigation into the breach with the help of the FBI, officials said.

Navy spokesman Cmdr. Bill Speaks said, “There are measures in place that require companies to notify the government when a ‘cyber incident’ has occurred that has actual or potential adverse effects on their networks that contain controlled unclassified information.”

Speaks said “it would be inappropriate to discuss further details at this time.”

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Altogether, details on hundreds of mechanical and software systems were compromised – a significant breach in a critical area of warfare that China has identified as a priority, both for building its own capabilities and challenging those of the United States.

“The United States consistently has been able to use highly compartmented security systems to protect its most innovative and dynamic defence advancements, and any time one of those is penetrated you give up an enormous advantage in surprise,” said James Stavridis, dean of the Fletcher School of Law and Diplomacy at Tufts University and a retired admiral who served as Nato’s supreme allied commander.

“So if it is true that this was a penetration of one of those very compartmented systems, that is a significant reversal for the United States,” he said.

Stavridis had no independent knowledge of the breach.

The Sea Dragon project is an initiative of a special Pentagon office stood up in 2012 to adapt existing US military technologies to new applications. The Defence Department, citing classification levels, has released little information about Sea Dragon.

However, it has said that it will introduce a “disruptive offensive capability” by “integrating an existing weapon system with an existing Navy platform.” The Pentagon has requested or used more than US$300 million for the project since late 2015 and has said it plans to start underwater testing by September.

Military experts fear that China has developed capabilities that could complicate the Navy’s ability to defend US allies in Asia in the event of a conflict with China.

The Chinese are investing in a range of platforms, including quieter submarines armed with increasingly sophisticated weapons and new sensors, Adm. Philip Davidson said during his April nomination hearing to lead US Indo-Pacific Command. And what they cannot develop on their own, they steal – often through cyberspace, he said.

“One of the main concerns that we have,” he told the Senate Armed Services Committee, “is cyber and penetration of the dot-com networks, exploiting technology from our defence contractors, in some instances.”

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In February, Director of National Intelligence Daniel Coats testified that most of the detected Chinese cyber-operations against US industry focus on defence contractors or tech firms supporting government networks.

In recent years, the United States has been scrambling to develop new weapons or systems that can counter a Chinese naval build-up that has targeted perceived weaknesses in the US fleet. Key to the American advantage in any confrontation with China on the high seas in Asia will be its submarine fleet.

“US naval forces are going to have a really hard time operating in that area, except for submarines, because the Chinese don’t have a lot of anti-submarine warfare capability,” said Bryan Clark, a naval analyst at the Centre for Strategic and Budgetary Assessments. “The idea is that we are going to rely heavily on submarines in the early effort of any conflict with the Chinese.”

China has made closing the gap in undersea warfare one of its three top military priorities, and although the United States still leads the field, China is making a concerted effort to diminish that superiority.

“So anything that degrades our comparative advantage in undersea warfare is of extreme significance if we ever had to execute our war plans for dealing with China,” Stavridis said.

The US military let its anti-ship weaponry languish after the cold war ended because with the Soviet Union’s collapse, the Navy no longer faced a peer competitor on the seas.

But the rapid modernisation and build-up of the Chinese navy in recent years, as well as Russia’s resurgent forces at sea, have prompted the Pentagon to renew heavy investment in technologies to sink enemy warships.

The introduction of a supersonic anti-ship missile on US Navy submarines would make it more difficult for Chinese warships to maneuver. It would also augment a suite of other anti-ship weapons that the US military has been developing in recent years.

For years, Chinese government hackers have siphoned information on the US military, underscoring the challenge the Pentagon faces in safeguarding details of its technological advances.

Over the years, the Chinese have snatched designs for the F-35 Joint Strike Fighter; the advanced Patriot PAC-3 missile system; the Army system for shooting down ballistic missiles known as Terminal High Altitude Area Defence; and the Navy’s new Littoral Combat Ship, a small surface vessel designed for near-shore operations, according to previous reports prepared for the Pentagon.

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In some cases, suspected Chinese breaches appear to have resulted in copycat technologies, such as the drones China has produced that mimic US unmanned aircraft.

Speaks, the Navy spokesman, said: “We treat the broader issue of cyber intrusion against our contractors very seriously. If such an intrusion were to occur, the appropriate parties would be looking at the specific incident, taking measures to protect current information, and mitigating the impacts that might result from any information that might have been compromised.”

The Pentagon’s Damage Assessment Management Office has investigated the breaches, according to the US officials. The Office of the Secretary of Defence declined to comment.

Theft of an electronic warfare library, Stavridis said, could give the Chinese “a reasonable idea of what level of knowledge we have about their specific [radar] platforms, electronically and potentially acoustically, and that deeply reduces our level of comfort if we were in a close undersea combat situation with China.”

Signals and sensor data is also valuable in that it presents China with the opportunity to “know when we would know at what distance we would be able to detect their submarines” – again a key factor in undersea battles.

Investigators say the hack was carried out by the Chinese Ministry of State Security, a civilian spy agency responsible for counterintelligence, foreign intelligence and domestic political security.

The hackers operated out of a Ministry of State Security division in the province of Guangdong, which houses a major foreign hacking department.

Although the Chinese People’s Liberation Army is far better-known than the MSS when it comes to hacking, the latter’s personnel are more skilled and much better at hiding their tracks, said Peter Mattis, a former analyst in the CIA counterintelligence centre. The MSS, he said, hacks for all forms of intelligence: foreign, military and commercial.

In September 2015, in a bid to avert economic sanctions, Chinese President Xi Jinping pledged to US President Barack Obama that China would refrain from conducting commercial cyberespionage against the United States.

After the pact, China appeared to have curtailed much, although not all, of its hacking activity against US firms, including by the People’s Liberation Army.

Both China and the United States consider spying on military technology to fall outside the pact.

“The distinction we’ve always made is there’s a difference between conducting espionage to protect national security and conduct military operations, and the theft of intellectual property for the benefit of companies inside your country,” said Michael Daniel, the White House cybersecurity coordinator under Obama.