The surveillance by the National Security Agency, the government’s chief eavesdropping agency, would rely on a set of sensors deployed in computer networks for critical infrastructure that would be triggered by unusual activity suggesting an impending cyber attack, though it wouldn’t persistently monitor the whole system, these people said.

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Though similar to the late-2009 attacks against Google (GOOG), this effort was a bit less sophisticated. Still, it appears to have been politically motivated and perpetrated by folks with some sort of allegiance to the government of the Socialist Republic of Vietnam.

“The malware infected the computers of potentially tens of thousands of users who downloaded Vietnamese keyboard language software and possibly other legitimate software that was altered to infect users,” Neel Mehta of Google’s security team wrote in a blog post describing the attack.

“While the malware itself was not especially sophisticated,” Mehta added, “it has nonetheless been used for damaging purposes. These infected machines have been used both to spy on their owners as well as participate in distributed denial of service (DDoS) attacks against blogs containing messages of political dissent.”

Which is frightening, because a number of Vietnamese Internet activists have already been imprisoned for attacking Chinese involvement in the bauxite mining project.

[Image credit: Wikimedia Commons]

The perpetrators in the Google case gained access in some instances to the systems where companies store their “source code,” the computer code at the heart of a tech company’s products, says George Kurtz, McAfee’s chief technology officer. With this access the hacker could either steal the source code or modify it.

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“What we don’t quite understand as seriously as we should is the extent of malicious cyberactivity that grows, that is growing now at unprecedented rates, extraordinary sophistication,” Blair told the House Intelligence Committee in the course of delivering his annual threat assessment. “And the dynamic of cyberspace, when you look at the technological balance, right now it favors those who want to use the Internet for malicious purposes over those who want to use it for legal and lawful purposes.” 

Sadly, the former seem to be far more on top of their game these days than the latter, which makes defending our financial, commercial and physical infrastructure all the more difficult.

“Attacks against networks that control the critical infrastructure in this country…could wreak havoc,” Blair continued. “Cyber defenders right now, it’s simply the facts of the matter, have to spend more and work harder than the attackers do, and our efforts frankly are not strong enough to recognize, deal with that reality.” 

English-language searches Tuesday on Google.com for various phrases related to Google and China–such as “Google Leaves China,” or “Google vs. Baidu”–called up an ad that linked to the company’s manifesto on the matter, the corporate blog it issued last week in which it disclosed it was hit by a major cyber attack and said it may pull out of China entirely. The ad, with a heading “Google and China,” invited viewers to “read our public response to recent security issues on the Google blog.”

Similar searches on Microsoft’s (MSFT) Bing search engine and Yahoo’s (YHOO) search engine did not yield the same ads.

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“We actually did an evil scale and decided not to serve at all was worse evil.”

– Google CEO Eric Schmidt on the company’s decision to offer a censored version of its search services in China, Jan. 30, 2006

Evidently Google is taking its informal “don’t be evil motto” a bit more seriously these days. The search sovereign threatened late Tuesday to pull out of its operations in China after detecting a “highly sophisticated and targeted attack on [its] corporate infrastructure originating from China.” Targeted in the assault: The Gmail accounts of Chinese human rights activists.

“These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China,” Google’s chief legal officer, David Drummond, wrote in a post to the company blog.

“We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all,” Drummond added. “We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.”

Shut down Google.cn, and potentially our offices in China? Hmm. What’s the Chinese word for “Bing”?

Drummond didn’t directly accuse the Chinese government of orchestrating the incursion, but he certainly seems to be implying there’s a link. And you’d think one would have to exist for Google (GOOG) to threaten pull out of a country that has more Internet users than the total population of the U.S.–even if its efforts to gain market share there haven’t met with the same success as in the rest of the world.

It’s tough to stake your claim in a country where the government favors the local rival and blocks your traffic if you fail to censor. Baidu’s share of the Chinese search market in the third quarter was 77 percent, up from 75.6 percent. Google’s share for the same period? Just 17 percent, down from 19 percent.

So, to some extent, Google can probably threaten to leave China because the country accounts for such a small portion of its revenue. On the other hand, China leads the world in Internet users and presents a hell of a market opportunity–large enough that Google willingly provided a censored version of its services as a prerequisite for doing business there. Or, rather, it used to.

At $395.50 Baidu shares are up more than two percent after hours on the news. Google shares are down 1.6 percent at $581.01.

Drummond’s post in full, below, as well as another on the safety of data on Google by Dave Girouard, President of Google Enterprise:

A new approach to China

Like many other well-known organizations, we face cyber attacks of varying degrees on a regular basis. In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident–albeit a significant one–was something quite different.

First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.

Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.

Third, as part of this investigation but independent of the attack on Google, we have discovered that the accounts of dozens of U.S.-, China- and Europe-based Gmail users who are advocates of human rights in China appear to have been routinely accessed by third parties. These accounts have not been accessed through any security breach at Google, but most likely via phishing scams or malware placed on the users’ computers.

We have already used information gained from this attack to make infrastructure and architectural improvements that enhance security for Google and for our users. In terms of individual users, we would advise people to deploy reputable anti-virus and anti-spyware programs on their computers, to install patches for their operating systems and to update their web browsers. Always be cautious when clicking on links appearing in instant messages and emails, or when asked to share personal information like passwords online. You can read more here about our cyber-security recommendations.

We have taken the unusual step of sharing information about these attacks with a broad audience not just because of the security and human rights implications of what we have unearthed, but also because this information goes to the heart of a much bigger global debate about freedom of speech. In the last two decades, China’s economic reform programs and its citizens’ entrepreneurial flair have lifted hundreds of millions of Chinese people out of poverty. Indeed, this great nation is at the heart of much economic progress and development in the world today.

We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences. We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make Google.cn the success it is today. We are committed to working responsibly to resolve the very difficult issues raised.

Keeping your data safe

Many corporations and consumers regularly come under cyber attack, and Google is no exception. We recently detected a cyber attack targeting our infrastructure and that of at least 20 other publicly listed companies. This incident was particularly notable for its high degree of sophistication. We believe Google Apps and related customer data were not affected by this incident. Please read more about our public response on the Official Google Blog.

This attack may understandably raise some questions, so we wanted to take this opportunity to share some additional information and assure you that Google is introducing additional security measures to help ensure the safety of your data.

This was not an assault on cloud computing. It was an attack on the technology infrastructure of major corporations in sectors as diverse as finance, technology, media, and chemical. The route the attackers used was malicious software used to infect personal computers. Any computer connected to the Internet can fall victim to such attacks. While some intellectual property on our corporate network was compromised, we believe our customer cloud-based data remains secure.

While any company can be subject to such an attack, those who use our cloud services benefit from our data security capabilities. At Google, we invest massive amounts of time and money in security. Nothing is more important to us. Our response to this attack shows that we are dedicated to protecting the businesses and users who have entrusted us with their sensitive email and document information. We are telling you this because we are committed to transparency, accountability, and maintaining your trust.

Twitter co-founder Biz Stone said in a blog post Friday that the San Francisco company’s site was “hijacked” and 80 percent of traffic to Twitter.com was redirected between 9:46 p.m. PST and 11 p.m. PST Thursday. Twitter was operating normally Friday.

During the attack, Twitter’s home page was replaced with a Web site with a black background and a green flag, according to two people who saw it. The site’s headline read, “This site has been hacked by Iranian Cyber Army.”

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Back then, he says, he would discuss virus threats at length before a lawmaker would raise his hand. “You’re expecting some question that might impress you, and they’d ask, ‘Can you tell me what a virus is?’”

Yesterday, however, when he addressed the Senate Committee on Commerce, Science, and Transportation, he was surprised to hear senators fluently discussing botnets and the recent cyber-attack against Estonia.

Exchanging glances with colleagues after the hearing, he recalls, “We made that face that you make when you’re kind of impressed.”

The subcommittee handles a wide range of communications, security and technology issues, and it conducted the hearing, titled “Cybersecurity: Assessing Our Vulnerabilities and Developing an Effective Defense,” to identify security threats and changes the government needs to make to fend them off.

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To keep you abreast of tech news while he’s away, we’re compiling a daily digest of 10 must-read tech stories. Our Tech 10 appears below.

1. Auction Action: Confirming the expected, Google announced today that it would indeed apply to bid for wireless spectrum in the Federal Communications Commission auction in January, writes Kevin J. Delaney in The Wall Street Journal, adding that if the search giant grabs a wireless license, it could become a provider of mobile phone and Internet services, among other things.
2. Facebook Gets a $60 Million Infusion… Hong Kong mogul Li Ka-shing has invested $60 million in Facebook, reports BoomTown’s Kara Swisher, who notes that the billionaire businessman has the right to invest another $60 million.
3. … And Pulls Back on Privacy: The social-networking site, under siege from Move.On and its own members, as well as from “Landmark Partner” Coca-Cola (which, says Louise Story of the New York Times, is holding off on participating in the social-advertising feature) has announced changes to its new Beacon ad system. Observes Om Malik: “Facebook finally backed down, more or less acquiescing to the demands of those concerned about its seemingly blatant abuse of privacy of its fast-growing user base.”
4. Rise and Fall of Motorola Magnate: Ed Zander, CEO of the electronics manufacturer whose mojo with the Razr cellphone brought the company big gains, is resigning in the face of equally disappointing declines to rival Nokia over the last year, The Wall Street Journal reports. Greg Brown, the company’s president and chief operating officer, will succeed Zander.
5. Sprint Rejects a Suitor: Sprint Nextel has turned down a $5 billion investment offer from Providence Equity Partners and SK Telecom of South Korea in exchange for sacking its management, according to the New York Times.
6. Big Brother Online: Government agencies worldwide are increasingly using the Internet to spy on and conduct cyber attacks on their enemies, according to an annual virtual criminology report by McAfee, writes Jon Brodkin of Network World, noting that the U.S. joins China as one of the biggest employers of Internet espionage.
7. Kiwi Teen in Botnet Probe: New Zealand police have held for questioning a teenager suspected of leading an international cyber-crime group, according to the BBC, which adds that the group allegedly hacked a million computers to steal millions from people’s bank accounts.
8. Publishers Want Web Respect: Launching an effort to bring them more power to say what content search companies may make available, publishers have developed a framework to inform online search engines that certain pages, directories or sites must not be indexed, reports eWeek, noting that supporters of the measure to respect copyright include the Associated Press, Reuters and the Association of American Publishers.
9. Sony Hears On-Demand Demands: Starting early next year, users of Sony’s PlayStation 3 will be able to download high-definition video to their devices, according to Variety, which adds that each download will cost about $1.85.
10. Exploding Cellphone Death Greatly Exaggerated:The Korean quarry worker whose death was blamed on an exploding cellphone was actually killed by a co-worker, who admitted he concocted the story after accidentally hitting his colleague with a drilling vehicle, the Associated Press reports.

Posted by Associate Editor John Sullivan.

To keep you abreast of tech news while he’s away, we’re compiling a daily digest of 10 must-read tech stories. Our Tech 10 appears below.

1. Auction Action: Confirming the expected, Google announced today that it would indeed apply to bid for wireless spectrum in the Federal Communications Commission auction in January, writes Kevin J. Delaney in The Wall Street Journal, adding that if the search giant grabs a wireless license, it could become a provider of mobile phone and Internet services, among other things.
2. Facebook Gets a $60 Million Infusion… Hong Kong mogul Li Ka-shing has invested $60 million in Facebook, reports BoomTown’s Kara Swisher, who notes that the billionaire businessman has the right to invest another $60 million.
3. … And Pulls Back on Privacy: The social-networking site, under siege from Move.On and its own members, as well as from “Landmark Partner” Coca-Cola (which, says Louise Story of the New York Times, is holding off on participating in the social-advertising feature) has announced changes to its new Beacon ad system. Observes Om Malik: “Facebook finally backed down, more or less acquiescing to the demands of those concerned about its seemingly blatant abuse of privacy of its fast-growing user base.”
4. Rise and Fall of Motorola Magnate: Ed Zander, CEO of the electronics manufacturer whose mojo with the Razr cellphone brought the company big gains, is resigning in the face of equally disappointing declines to rival Nokia over the last year, The Wall Street Journal reports. Greg Brown, the company’s president and chief operating officer, will succeed Zander.
5. Sprint Rejects a Suitor: Sprint Nextel has turned down a $5 billion investment offer from Providence Equity Partners and SK Telecom of South Korea in exchange for sacking its management, according to the New York Times.
6. Big Brother Online: Government agencies worldwide are increasingly using the Internet to spy on and conduct cyber attacks on their enemies, according to an annual virtual criminology report by McAfee, writes Jon Brodkin of Network World, noting that the U.S. joins China as one of the biggest employers of Internet espionage.
7. Kiwi Teen in Botnet Probe: New Zealand police have held for questioning a teenager suspected of leading an international cyber-crime group, according to the BBC, which adds that the group allegedly hacked a million computers to steal millions from people’s bank accounts.
8. Publishers Want Web Respect: Launching an effort to bring them more power to say what content search companies may make available, publishers have developed a framework to inform online search engines that certain pages, directories or sites must not be indexed, reports eWeek, noting that supporters of the measure to respect copyright include the Associated Press, Reuters and the Association of American Publishers.
9. Sony Hears On-Demand Demands: Starting early next year, users of Sony’s PlayStation 3 will be able to download high-definition video to their devices, according to Variety, which adds that each download will cost about $1.85.
10. Exploding Cellphone Death Greatly Exaggerated:The Korean quarry worker whose death was blamed on an exploding cellphone was actually killed by a co-worker, who admitted he concocted the story after accidentally hitting his colleague with a drilling vehicle, the Associated Press reports.

Posted by Associate Editor John Sullivan.

In its annual report to Congress, the U.S.-China Economic and Security Review Commission accused China of enlisting engineers and scientists to acquire critical U.S. technology “by whatever means possible–including theft.” Said an official familiar with the report, “What the government cannot get through licit means, they are conducting an aggressive program of industrial espionage to acquire.”

To what end? Why, “cyber attacks” on American infrastructure, of course. Said Commission panelist USSTRATCOM Commander General James E. Cartwright, “I think that we should start to consider that [the sense of disruption and chaos] associated with a cyber attack could, in fact, be in the magnitude of a weapon of mass destruction.”

An unsettling hypothesis to say the least, although to be fair, not every panelist bought it. Said James Lewis from the Center for Strategic and International Studies: “The effect [of a cyber attack is] usually to solidify resistance, to encourage people to continue the fight, and if you haven’t actually badly damaged their abilities to continue to fight, all you’ve done is annoy them, and what many of us call cyber attacks [are] not weapons of mass destruction but weapons of mass annoyance.”