A coffee mug from the NSA that reveals a message when hot liquid is poured into it, one of the holiday gifts available at federal gift shops on Feb. 2, 2013 in Washington, D.C. (Bill O’Leary/The Washington Post)

German media organizations, such as Der Spiegel and Die Zeit, are reporting on Thursday on a spying scandal that threatens to create new controversy over the NSA.

What’s the story?

Previous fallout from the Edward Snowden revelations led to the German Bundestag (federal Parliament) setting up a Committee of Inquiry into the affair, and in particular into the relationship between the German intelligence service (the BND) and the NSA. This committee had a rocky start, with failed efforts to summon Snowden, a former NSA contractor, as a witness and complaints that it did not have access to much of the information that it needed.

Now, however, it looks as though it has uncovered paydirt regarding the relationship between the BND and the NSA. The NSA, in order to target its surveillance, needs ‘selectors’ — identifying information such as phone numbers, e-mail addresses, IP addresses or the like that are linked to a specific individual or business. Under the cooperation agreement between the NSA and BND, the NSA can ask for selectors — but only so long as the predictors are directly linked, for instance, to anti-terrorism intelligence. It appears that the NSA made large numbers of requests that ignored the limits set out in the agreement, and it appears probable that at least on some occasions, the BND gave the NSA the information it was looking for.

This sounds pretty technical — why are people getting upset?

Because it suggests that the German intelligence service cooperated with U.S. efforts to spy on European — and German — companies and citizens. For example, the German intelligence service was asked to provide selectors for EADS, a massive European arms company, Eurocopter, and the French government. It’s a little as if Germany had asked the NSA for information that would have allowed it to spy better on Lockheed Martin, and the NSA had not told the president because it didn’t want to hurt its relationship with the Germans. In addition, the German and French governments are extraordinarily close — to the point that senior German officials often spend time working on exchange arrangements for the French government and vice versa. Even though French spies notoriously have little compunction in their own surveillance activities, this will be quite embarrassing for the German government.

So why did German intelligence cooperate?

According to Die Zeit, the BND failed to notify its overseers in the German government because it feared that this would endanger future cooperation with the NSA. The BND relies on NSA intelligence, even though it does not have as close a relationship with U.S. intelligence agencies as it would like. The result is that it apparently put its relationship with the NSA ahead of its obligations to inform its superiors in the German government.

What’s likely to happen?

This scandal will be moderately embarrassing for the United States, which is currently trying to build international norms against economic espionage. It isn’t at all clear that the United States was committing economic espionage by its own definition (it argues that it can legitimately conduct espionage against economic targets such as businesses as long as it is for strategic purposes, and the information is not passed along to U.S. firms). However, it certainly greatly complicates the story that the United States is trying to tell.

Where it will really hurt, though, is U.S.-German relations. For sure, Germany and the United States will continue to share information where they believe it is in their interests. Germany has a strong desire, for example, to keep track of residents who may have received military training in Syria, and may want to return. Key figures in the German government, such as Wolfgang Schäuble, are strongly committed to intelligence sharing. However, the new revelations will increase the level of distrust between ordinary Germans and the United States, and make it far harder for German intelligence to cooperate beyond the minimum. It is significant that conservative newspapers (such as the Frankfurter Allgemeine Zeitung) which have previously been supportive of intelligence cooperation are treating these revelations as a very big deal. It also appears very likely that the head of the BND will be forced to resign (he was deliberately excluded from the meeting where the revelations surfaced).