Soviet agents, working from master shopping lists, got amazing cooperation from their victims in the West.

Excerpted from War by Other Means: Economic in America, by John J. Fialka. © 1997 by John J. Fialka. Reprinted with permission of the publisher, W. W. Norton & Co., Inc. Mr. Fialka, a reporter in the Washington bureau of the Wall Street Journal, has covered defense, intelligence, and national security topics for many years. This is his first article for Air Force Magazine. he avenue called of Ludmilla sounded accusatory, then T Rublovsky Chosse is a street terror-stricken. Vet­rov had pulled a that knows how to keep its secrets. It knife and was trying to kill her. meanders through the most exclusive A man walking nearby heard Lud­ suburb of the Russian capital, past milla’s screams. He rapped on the the tall green fences shrouding the car window. Vetrov leaped out and sprawling, forested estates where, in plunged the knife into him. As the years past, powerful Soviet officials dying passerby slumped to the ground, lived in regal splendor. Vetrov fled. Later, he returned, to the The street also has private little astonishment of police, who promptly wooded pockets. In the early 1980s, arrested him. They were shocked to Vladimir Vetrov, a paunchy, well- learn that the killer was a KGB colonel dressed man in his late 40s, used to with a sensitive job in the First Chief park there with his mistress, Lud­milla. Directorate, which handles foreign Vetrov had a huge secret, and, in intelligence. November 1982, it almost came out. By John J. Fialka In truth, Vetrov’s work was far more Behind the car’s steamed-up windows, sensitive than even the KGB link an argument began raging. The voice suggested (though his mistress had guessed the truth). For 18 months or with all of its glaring faults, managed Many Are Called more, he had been a mole within the to match US technology so quickly: There were many willing hands to do KGB, a double agent secretly work- The KGB had been systematically the work. It has been estimated that at ing for French intelligence. Vetrov stealing information from US research any given time during the 1980s at least had in fact given the West its first and development programs. “The as- 1,000 of the 2,800 registered Eastern detailed look at the most lucrative similation of Western technology is so bloc diplomats were intelligence spy scheme in the long history of broad that the US and other Western agents. The bulk of this enormous the . nations are thus subsidizing the Soviet group was engaged in science and Using teams of specially trained military buildup,” concluded one gov- technology espionage. scientists and engineers, the USSR had ernment report. Members of ’s prestigious mounted a systematic economic espio- All of this happened a decade ago. Academy of Sciences were also as- nage campaign of epic proportions. It Vladimir Vetrov is dead, and the se- signed to steal. Alexei Brudno, a was spending $1.4 billion per year on crets he delivered are locked in the mathematician and computer soft- salaries and bribes to obtain secrets of CIA’s vaults, but that does not mean ware specialist, remembers that the thousands of NATO weapons systems that the story is over. The multiple system was effective. Usually, only and related civilian technology. The pathways to steal US technology that scientists who agreed to participate systems had cost taxpayers hundreds the Soviets pioneered and that Vetrov in KGB thievery schemes received of billions and taken years to develop. exposed are still in use. For hostile permission to travel abroad. Western About 60 percent of this technology intelligence agencies, the case of scientists, eager for the contact, often had been stolen from the US. Farewell is an appealing roadmap. shared papers with Russian peers that Vetrov’s papers also provided the Some former Pentagon officials are they wouldn’t give to their NATO col- West with the names of hundreds of convinced that Iraq’s acquisition leagues, especially those who worked Soviet agents and the spies that they of US weapons-related technology for competitor nations or companies. were running in dozens of countries. in the late 1980s was based on the Upon returning, a Soviet scientist was For the first time, NATO strategists same training and even the same es- carefully debriefed by a panel of KGB were able to obtain an accurate picture pionage “shopping lists” used early experts. Often they didn’t bother to of what the Soviets didn’t have. in the decade. introduce themselves. They were only Other US officials believe that the interested in the haul. Phenomenal Success next enemy who uses these techniques The most inventive and powerful Western leaders had known for years may not necessarily be a major power. element of this collection effort was that some thievery was going on, but One who agrees is Kenneth DeGraffen- Vetrov’s own section, the KGB’s the scale and phenomenal success of reid, a former Defense Intelligence “Line X.” the effort—as seen from documents Agency analyst who had pored over the Line X took shape in the 1930s af- supplied by Vetrov—went far beyond Vetrov files as director of Intelligence ter successful KGB thefts of German anything they had imagined. “The Programs for the National Security technology. It had a product: other West is financing two military budgets: Council. In earlier eras, DeGraffenreid people’s research papers, blueprints, their own and that of their adversary,” notes, nations needed industrial bases devices, and machinery. Stealing them, wrote one French official after studying and a sizable body of engineers and the KGB discovered, was one crime Vetrov’s papers. Even “more absurd,” scientists to develop high-tech weap- that paid. KGB defectors say Line X he noted, was that Soviet spies were ons. Now, it may be that a country officials repeatedly boast­ed that Line getting the information largely from that merely has money can do it, “if X not only covered its own costs; the open sources. The West, especially the they went to school on the US,” said value of what it brought in sometimes US, was wide open to people who knew DeGraffenreid. exceeded the annual budget of the what they were looking for. Weapon He added, “It’s not like the informa- entire KGB. secrets were being stolen and copied tion is locked in a safe. It isn’t. It’s a The KGB in general tried to recruit before they were officially deemed more difficult problem as time goes agents from the best universities, but secrets. on. How do you know when to lock Line X itself fed on the cream of gradu- French intelligence gave the Vet­ things up?” ating scientists and engineers—men rov case the code name “Farewell” The Soviet collection effort began like Vetrov, who had initially set out and quickly revealed its secret to the right at the top with a unit called VPK, on a career designing automobiles. intelligence officials of the Reagan or the Military Industrial Commission, Once he was recruited, Vetrov turned Administration, who instantly rec- which was placed just under the Polit- out to be an enthusiastic counterspy, ognized its value. The conservative buro. It drew up vast “shopping lists” handing over vast amounts of infor- new Administration was grappling of needed Western items and used at mation to . As a result, the with a bureaucracy in Washington least six different entities to get them. French, in the months that followed that had for years dismissed Soviet They included the KGB, the GRU (the his defection-in-place, were able to economic espionage as inconsequen- Main Intelligence Directorate of the send to Washington a large roomful tial, and here was evidence that they Soviet General Staff), and spy agencies of documents showing how the KGB’s were wrong. of various satellite countries, such as technology thieves operated in the US. Reagan officials argued that they Bulgaria, Romania, Czechoslovakia, Their techniques included bribery of now knew how the Soviet economy, and East Germany. sources in US corporations; piecing

56 AIR FORCE Magazine / April 1997 together weapon secrets from open systems benefitted from stolen Western Ames, the CIA mole in the employ of files in government agencies, such as research each year. The CIA later toted Moscow, who single-handedly rolled NASA; and development of contacts up a list that ran from the space shuttle up dozens of American espionage op- in major US universities—the most and cruise missile guidance systems to erations in the late 1980s. In fall 1983, heavily used being Massachusetts advanced components from all of the when the KGB finally put the pieces Institute of Technology—to fill in the later US fighters, nuclear submarines, together (with help from Ludmilla), gaps on the VPK’s wish lists. laser-guided artillery, and high-speed it sent for Vetrov. The Farewell material, acquired by computers. Soviet engineers didn’t The mole was brought back from Washington in the summer of 1981, even bother to research such mundane Irkutsk and placed in an isolation had to be closely held because Vetrov but useful things as cold-rolled steel cell in the KGB’s Lefortovo Prison in was still producing. It was kept in armor for their ships; they had the US Moscow. Following an interrogation, the CIA library under the code name formulas. he signed a confession to having spied “Kudo.” Only a handful of officials Equipment from General Electric, for the French. Former KGB officers were allowed to read the blue-bordered Boeing, Lockheed, Rockwell Interna- say that he was executed, most likely documents, which signified a com- tional, and McDonnell Douglas topped in late 1983. partmented level of classification well Line X’s shopping list, while MIT, By then, many of the nation’s tech- above “top secret.” Harvard, the University of Michigan, nological horses had been stolen, California Institute of Technology, and but former Reagan officials said that The Bank Shot Princeton were the Soviet scientists’ getting government, academic, and The documents told a tale of intel- favorite hunting grounds for ideas. industrial leaders to close the barn ligence collection on a gargantuan One official, Maynard C. Ander- door proved maddeningly difficult. scale. When it couldn’t get the right son, then director of Security Plans Within the government, the prevail- hardware or weapon blueprints in in the Office of the Secretary of ing view was that Soviet industry was the US, Line X often found that the Defense, found the Vetrov files amaz- so inferior and Soviet bureaucracy same items could be acquired from ing. Through the magic of economic so cumbersome that US innovation US allies in Europe or Japan, where espionage, as he later put it, parts of would always leave them at least a small bribes worked wonders. “You US industry had become “a Soviet generation behind in the arms race. This pay some engineer maybe $100,000 national asset.” was patently untrue. Vetrov’s docu- for something that costs $5 million. ments showed that some of Russia’s It’s even more profitable than gam- Moving Targets copycat weapons, such as the Soviet bling,” recalled Stanislav Levchenko, While the US expected its heavy Navy’s Kirov-class cruiser, were being a KGB officer in Tokyo during the investments in high-technology weap­ launched sooner than the US systems late 1970s. onry to give it many years’ worth of from which they were copied. When Levchenko was serving in military advantages over the Rus- The FBI, DeGraffenreid recalls, Tokyo, Japan was already reaping the sians, Anderson found Line X’s concluded that the losses were being benefit of its own campaign to collect thefts were cutting that lead in half. overstated. The CIA worried that if technology from the US. The Soviets “What you had as a result of our Soviet students, scientists, and dip- went to great lengths to cultivate slowness [to develop] and the loss lomats were expelled from the US, Japanese collectors of US technol- of this technology was that Ameri- American agents would get reduced ogy and found they cared little about can industry was building weapons access in Moscow, although at that what happened to it once it arrived in against a threat that was really no point much of the was Tokyo. “Japan, Inc.,” functioned as an longer valid. By the time we had off limits to them anyway. enormous intelligence machine, but produced a system, they had already Even within the Department of it had almost nothing in the way of developed countermeasures.” Defense, technology experts argued counterintelligence, allowing Line X Then came that night in November that putting further curbs on openness to flourish in Tokyo. Levchenko recalls 1982 when contact with Farewell sud- would slow the flow of technological that, every two weeks, the 25 Line X denly went dead. What had happened? advances and thus hinder new weapon operators in Japan would produce and No one in the West had a clue. Soviet systems. “It was a very hard case to send to Moscow a ton of samples and authorities had hastily investigated make at the Pentagon,” said Steve documents. the case and prosecuted Vetrov as a Bryen, then in charge of Technology The result was that years of Ameri- common criminal. Lud­milla survived Security Policy for DoD. can sweat, money, blind alleys, and her wounds and testified against him Bryen recalls one fight with of- other frustrations were deftly avoided (though she did not mention her sus- ficials at Nellis AFB, Nev., where he once US plans reached the Soviet picions about his intelligence work). found several Soviet “students” were laboratory. Soviet scientists often joked Vetrov got 15 years for murder and conducting research projects on a that much of what they did amounted was sent to a prison labor camp in supercomputer, a machine useful for to “translations from the American.” remote Irkutsk. designing nuclear weapons and plot- The list of items “translated from It took Soviet authorities some ting missile trajectories. “We finally the American” was vast. Russian doc­ months to figure out that the man they got them to stop it,” said Bryen, “but uments stolen or photocopied by Vet­rov had locked up for a crime of passion can you imagine such craziness?” estimated that 5,000 Soviet military was the Soviet equivalent of Aldrich H. The US academic community was

AIR FORCE Magazine / April 1997 57 skeptical, to say the least, of efforts to stocky, perpetually tired-looking his- The privatization of the former clamp down on Soviet access. Bryen tory professor who had helped form Soviet bloc’s espionage apparatus recalls having many wrangles with the first democratic political party in has created a grand specter that will officials at the National Academy of Sofia. As the newly installed minister haunt East-West business and political Sciences. “Nobody on the Russian of State Security, Loudjev found and dealings for years, perhaps decades, side ever traveled over here without fired thousands of spies, but more could to come. There was nothing quite like being tasked [to collect something],” always be found when he overturned the KGB, whose sprawling apparatus he said, “but their argument was that the next rock. conducted foreign espionage, provided good ties with Russian scientists will internal security, performed military lead to a more peaceful role.” US Going Into Business and police counterintelligence func- industry argued against placing rules In late 1991, when he was appointed tions, operated the world’s largest on working with individual foreigners. Defense Minister, Loudjev discovered eavesdropping agency, protected Com- a large network of Bulgarian compa- munist Party leaders and their hoard New Management nies operating overseas. They were set of gold, ran scientific laboratories The Soviet Union is gone, but there up at the request of the KGB in the and psychiatric torture clinics, and are strong signs that intelligence op- late 1980s to steal technology from safeguarded nuclear weapons. erations continue under new manage- the West. He followed convoluted Eastern bloc nations produced ment. Victor Yasminn, a former Soviet trails of government money that led to enormous quantities of files on infor- political dissident who has conducted banks in Liechtenstein, Switzerland, mants and agents, all of which have a 12-year study of the KGB, believes and Austria. There were more than passed into the hands of new authorities the spies of the old regime split up 200 of these companies. Packed with in the wake of the Communist collapse roughly into three fragments: One-third experts and offshore funds, many of of the 1990s. However, the KGB’s huge remained in their old jobs in the new, them went directly into private busi- network of helpers remains hidden slimmed-down state spy agencies; ness, later reappearing in Sofia as and, probably, continues to be of use one-third went into the private security Bulgarian representatives for large to Russian authorities. business; and one-third went into busi- Western companies. The KGB’s ranks always included ness for themselves as entrepreneurs, the best and the brightest—men and bankers, and wheeler-dealers. women who had been allowed to travel Some of the new KGB-derived com- abroad and who had the language skills panies began rich and well connected. and the manners that would appeal The spy agency had thousands of “file to a Western compa­ny. To survive in companies” or well-capitalized fronts the new Moscow, Western businesses overseas that had been used to buy or desperately need­ed to trust some- steal foreign technology. body. They needed muscle to ward However, the distinctions between off extortion attempts, investigators businessman, spy, and crook are not who could spot fraud and criminals, nearly as tidy as they may sound be- and reliable technicians who knew cause, in Moscow, the new lines can how to sweep offices for bugs. Thus, be rubbery, sometimes even nonexis- a huge new market beckoned, and tent. Some of the new businessmen the ex-KGB members responded in still function as spies—moonlight- droves. By the mid-1990s, about 8,000 ing as members of reserve units of private guard and security services Russia’s new External Intelligence were registered in Russia, with some Service, the Sluzhba Vneshnei Raz­ 30,000 employees. vedki, or SVR. The emergence of this strange situ- Adm. William O. Studeman, USN ation raises interesting questions for (Ret.), former deputy head of the CIA, Western companies hoping to tap the said the situation is strange. “We see new markets in Russia. J. Michael companies that are, on the one hand, Waller, a Washington analyst who has legitimate and, on the other, intel- written a book on the evolution of the ligence fronts,” he said. “And, on the KGB, warns US companies to be wary third hand, they are elements of or- and hints that the old game will go on. ganized crime—all simultane­ously.” “American businesses have to un- Deadly games continue. Some good derstand,” he said, “that, while it’s examples surfaced in what the KGB necessary to hire ex-KGB for the short once referred to as its “sister ser- term, it’s possible that the same people vices”—the Eastern bloc spy agencies who are advising you are the ones who that often did Moscow’s dirtiest work. are stealing proprietary information In late 1990, the job of digging to sell to the negotiators on the other through the layers of Bulgaria’s spy side or people who plant agents within agencies fell to Dimitar Loudjev, a your company for the long term.” ■

58 AIR FORCE Magazine / April 1997