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U.S. intel braces for Kremlin blowback as result of spy case

- The Washington Times - Wednesday, June 30, 2010

U.S. intelligence agencies are on alert for retaliation by Moscow, including a mass arrest of U.S. diplomats or intelligence officers who could then be used in a swap for 10 people arrested on suspicion of roles as Russian deep-cover spies posing as Americans.

"The goal on our side is to keep this in intelligence channels," said a knowledgeable U.S. official who declined to be identified because of the sensitive nature of the case. "If the Russians play it smart and don't overreact, they can limit the impact on the broader relationship."

Asked about the possibility of expulsions or arrests, the official said: "It's not entirely certain what the Russians might do, but there are some signs from over there that they don't want it to get bigger."

U.S.-Russian intelligence cooperation will continue "when it's in our national interest to do so," the official said, noting that "this case shows not only that we need strong counterintelligence work, but that we can do it, patiently over time."

Two questions were left unanswered by court papers released by the Justice Department on Sunday in the case of a purported network of Russian SVR intelligence service "illegals" rolled up by the FBI after more than a decade of deep-cover work: How they were first discovered and what will happen to them?

Word is circulating in U.S. intelligence circles that President Obama is expected to find a way for the accused Russian agents to be released and sent back under his conciliatory "reset" policy toward Moscow.

The KGB spy service and its post-Soviet successor, the SVR, have been known to go to great lengths to get its captured spies back. And the main power in Moscow today, Russian Prime Minister Vladimir Putin, is a former KGB officer who has promoted former KGB officials to high posts in his government.

Former KGB Gen. Yuri Drozdov, who ran the illegals section of the KGB for some 30 years, boasted in an interview in Moscow in 1992 that every illegal agent arrested overseas, with the exception of those who defected, was freed by the KGB. Each spy was released "in spite of how much it cost or how difficult it was to get him back," he said.

Gen. Drozdov took part in talks that led to the exchange of KGB illegal Rudolf Abel, who was convicted of espionage in 1957 and freed in 1961 in exchange for captured U.S. pilot Francis Gary Powers.

As for how the spy ring was uncovered, Yusill Scribner, a spokeswoman for the U.S. attorney's office in New York, declined to comment.

Counterintelligence sources in Washington, however, said the sleeper network was not uncovered by FBI agents investigating foreign influence operations, something the bureau has resisted since the controversial Chinese intelligence and political influence operation surfaced in the 1990s.

Instead, the counterintelligence sources, who do not have firsthand knowledge but based their views on years of experience, said initial discovery of the illegals network most likely evolved from one of two sources: either an intercepted communication decoded by the National Security Agency or by a human agent, such as a SVR defector or other informant, who was paid for information.

Both methods have been used successfully by the FBI. In the 1990s, an electronic intercept of a Chinese government communication led to the major investigation of Beijing's influence operations, including President Clinton's 1996 re-election campaign, that became known as Chinagate.

The discovery of Russian spying by FBI agent Robert P. Hanssen was the result of a $7 million payoff to a Russian who provided a 1986 audiotape of Hanssen talking on the phone to the KGB.

Such sensitive details about the spy ring are likely to be disclosed during a trial. But if the U.S. government decides that disclosing such details could harm future counterintelligence probes, it may balk at the entire prosecution.

On the other hand, one of the first offers likely to be made to the suspects by prosecutors is for some type of deal that would result in some or all of the accused spies disclosing secrets about their work, some of which is already known to the FBI.

The criminal complaint in the case states that the main mission of the illegals network was revealed in a 2009 communication from Moscow, probably obtained from a clandestine search of a computer. The spies were given a long-term mission to "develop ties in policymaking circles in US" and report back.

The objective was to obtain secrets and other information that would boost Russia's efforts to influence the U.S. government.

According to the criminal complaint, the spy ring was to obtain targeted information, such as U.S. data on how terrorists use the Internet, U.S. policies in Central Asia, problems with U.S. military policy and Western estimates of Russian foreign policy.

One 2006 conversation with Moscow involved data provided by a former congressional aide and a university faculty member with contacts in Congress and the administration in Washington.

Other targets included a former high-ranking U.S. government official who provided information to spies based in Boston, and an official involved in strategic planning and penetrating nuclear warheads.

The SVR in a cryptic message to one of the spies in 2007 stated that it had "no info in our files about E.F., B.T., D.K., R.R." and agreed with the spies' plan to "start building network of students in D.C." The note encouraged developing ties with a source code-named "Parrot," who "looks very promising as a valid source of info from U.S. power circles."

Before Mr. Obama's 2009 visit to Russia, the SVR sought inside information on the U.S. position on the new Strategic Arms Reduction Treaty, on Afghanistan and on Iran's nuclear program.

It also wanted intelligence on four Obama administration officials involved in Russia policy.

A group in New Jersey was told to "try to single out tidbits unknown publicly but revealed in private by sources close to the State Department, government, private think tanks."

Some information on gold markets was used by the Russian Finance Ministry.

The complaint omitted the name of a "prominent New York-based financier" who was described as an active fundraiser for a major political party and who is a "personal friend"of an Obama administration Cabinet official.

"Of course he is a very interesting target," the SVR in Moscow was quoted in the complaint as stating.

While some former U.S. intelligence officials and others have sought to dismiss the spy ring as insignificant, others disagree.

Kenneth E. deGraffenreid, a former high-ranking counterintelligence official, said using illegals is a powerful tool for the Russians because it makes detecting spies very difficult and Russians posing as Americans can operate more freely.

The illegals can be used for both obtaining secrets and supplying information that will assist the SVR in influencing U.S. policies, he said.

"It can be either one," said Mr. deGraffenreid, former deputy national counterintelligence executive, a senior counterintelligence policy post.

In the recent case, "we're seeing a sophisticated intelligence operation that gives the Russians open opportunities to steal secrets, technology and to influence our policies," he said.

Detention hearings were set for all 10 suspects in federal courts in Boston, New York and Alexandria, Va. All are expected to be held without bond because of their risk of flight.

An 11th suspect, Robert Christopher Metsos, was arrested in Cyprus, and his extradition to the United States will be sought.

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