A New World for Spies

By Bruce W. Nelan

Most remarkable about the scene were not the security man and woman from the CIA standing outside the Senator's office on Capitol Hill last month. Dennis DeConcini is, after all, chairman of the Senate Intelligence Committee and a frequent host to high-level visitors from the agency. What was unusual was the cast of characters they were there to protect. When DeConcini's heavy wooden office door opened, out stepped CIA Director R. James Woolsey -- accompanied by none other than Yevgeni Primakov, head of the Russian Foreign Intelligence Service, successor organization to the KGB. Picking up their guards, the chiefs of the world's two largest intelligence agencies, once mortal enemies, bustled down the corridor to another meeting.

Virtually unnoticed, Primakov spent four days in Washington in mid-June, meeting with Woolsey and the House and Senate intelligence committees. In several lengthy talks, Primakov and Woolsey discussed how their organizations can cooperate and share information on worldwide threats such as terrorism, the spread of weapons of mass destruction and drug trafficking. The Russian's visit was in return for one paid to Moscow last October by Robert Gates, Woolsey's predecessor as Director of Central Intelligence, who also dropped by the Russian embassy for a drink and a chat during Primakov's stay.

Were he still alive, James Jesus Angleton, the CIA's consummate cold war spook, would have launched a full-scale internal investigation, condemning a conversation of any substance between Primakov, a longtime Kremlin Middle East expert, and Woolsey, a specialist on nuclear and conventional arms control, as treasonous. During most of their careers, the U.S. and the Soviet Union struggled for every square foot of terrain anywhere on earth that one might win from the other. With nuclear war in the balance, Moscow and Washington focused most of their spies' efforts, and spent most of their intelligence budgets, on each other.

The cold war competition has evaporated, but the world has not necessarily grown safer. While the West no longer lives in fear of a surprise attack from the Soviet Union, it worries very seriously when and where some of the 27,000 nuclear warheads on former Soviet soil might slip into the hands of irresponsible governments or terrorists elsewhere on the planet. More than 25 countries are on the road to building weapons of mass destruction -- or buying them from those who have too many arms and too little money. Every industrial state is trying to steal another's high-tech secrets and protect its own. Terrorism is a multifaceted worry, emerging from religious and ethnic conflicts around the globe. Governments -- whole countries -- are being subverted by billionaire drug traffickers.

Against these omnipresent, transnational threats, intelligence is the first line of defense. To combat them effectively, espionage agencies will have to change, quickly, out of their cold war armor and into more flexible, innovative garb. They must recruit different kinds of officers with diverse talents and, more than ever, they must adjust to the accessibility of the post-cold war world and gather valuable intelligence now available from open sources. The world is awash in information, and it is no longer necessary to spy to get much of it. At the same time, governments must expand the number of targets that need watching. The West, Woolsey said, has "slain a large dragon," but still lives "in a jungle filled with a bewildering variety of poisonous snakes."

Last week, on different continents and in different ways, some of those vipers slithered into view. The Kurdish attacks against Turkish consulates in five European countries occurred even though Turkey had warned those governments that they were coming. By contrast, the arrest in New York of eight Islamic fundamentalists as they plotted to bomb buildings and tunnels and assassinate political leaders reflected effective action by the FBI and police.

Impressive as the FBI's work was in the New York case, and as urgently as such skills are needed amid the new world's disorder, major intelligence agencies are dialing back operations. At Primakov's press office in Moscow, the chief spokesman of the Russian Foreign Intelligence Service, Yuri Kobaladze, says, "We have diminished our activities all over the world." The FIS has cut its headquarters staff 40% in the past year and its overseas professionals 50%, shutting down entirely about 30 stations abroad. Its budget has also been cut, says Kobaladze, though he will not provide a specific amount.

"We are partners now," Kobaladze said in an interview, "although it will take some time to find the right way to deal with each other. We have universal problems like proliferation and international terrorism. These are our enemies. That's why we have to cooperate with the U.S. and the rest of the world."

Specific numbers on the FBI's counterespionage staff and budget are secret, but the trend in the U.S. confirms much of what Kobaladze says. Last year, after former Warsaw Pact states briefed American officials on their operations in the U.S., 425 agents were transferred out of FBI counterintelligence to other duties. The Russian intelligence service cut its presence by 25%, and its operatives seem less active and less inclined to take risks, FBI officials say.

Shifting Interests, Shifting Assets. At Woolsey's CIA, at least so far, there has been more rearranging than cutting of resources. While most of the agency's budget formerly went to intelligence on the U.S.S.R., now less than 15% is spent on the former Soviet republics. Some of those resources have been refocused on proliferation and terrorism and on potential crises in the Third World. Large-scale, high-priced covert actions aimed at overthrowing governments are also "a thing of the past," says former CIA Director Gates. From now on, he adds, operations will be "much smaller and aimed at specific problems."

The full scope of changes is not reflected simply in organizational tinkering. International conflict is increasingly becoming a struggle for economic and commercial success, for contracts, exports and market share. This means the successful nations are trying to steal high-tech secrets from one another. The Third World and former communist states do not have the money to buy or build themselves quickly to prosperity, so they are seeking a shortcut by stealing technological, scientific and commercial secrets from more advanced countries.

Woolsey complains that friendly, allied countries are not only conducting industrial espionage in the U.S. but even "bribing foreign governments to give contracts to their countries' companies" rather than American firms. Though these forms of hard-knuckled competition are not new, Washington says it's not going to take them quietly anymore. That accounts for the fuss the U.S. made last month over French efforts to steal American technical and commercial secrets. The CIA issued an official warning that companies attending the Paris Air Show would be exposing their trade secrets to scrutiny by French agents. Hughes Aircraft stayed home, and Pratt & Whitney decided not to display what it had hoped would be its technological showpiece, a new tilting jet-engine nozzle.

Most nations admit they are interested in technical intelligence. "Today's espionage," said Claude Silberzahn, the head of the French foreign- intelligence agency DGSE who was forced out after the flap with the U.S., "is essentially economic, scientific, technological and financial."

Senior U.S. officials admit that, like most countries' intelligence services, the CIA and other agencies have long collected economic intelligence and military-industrial secrets for use by government decision makers. What they have not done, the officials insist, is go out and steal trade secrets to pass on to American firms. The agencies do sometimes tip off companies they learn are being targeted by foreign agents, but they will not get into "offensive" gathering of commercial information for domestic firms. They also routinely gather intelligence on the positions of foreign governments in trade negotiations with the U.S., possible scientific breakthroughs in foreign laboratories, banking decisions and secret deals that impinge on U.S. interests.

Though the Russians are determined to portray themselves as inoffensive, they continue to fund their directorate for scientific and technical intelligence, established in 1925, and concede that they conduct some forms of economic espionage. "Economic intelligence has nothing to do with the stealing of secrets," insists spokesman Kobaladze. "It is the analysis of information."

Actually, it is both. Valuable secrets can usually be stolen only by traditional tactics: bribery, burglary, infiltration. But French counterintelligence officers claim that 80% of today's economic-intelligence gathering can be done by analyzing public sources like academic journals, industrial publications, company brochures and computer data bases.

Better, Smarter Spooks. Traditionally, this kind of analysis is not what American intelligence agencies have done best, in spite of their big spending. "They were very good at estimating the number of tanks and missiles and things of that kind," says former Secretary of State George Shultz. "They misread situation after situation in political and economic terms." Now everyone wants to know how the other fellow's economy is doing and what political decisions the leaders are making. This means a stronger emphasis on "humint," the product of human spies clandestinely gathering information and the analyst poring over openly available materials. "We'll always need spies on the ground," says a senior British diplomat, "and analysts at their desks." David Harris, a retired officer of the Canadian Security Intelligence Service, says spies around the world will have to be more sophisticated. "People must be recruited who recognize the nuances of language and culture," he says. "Most important," says Admiral Bobby Ray Inman, former deputy director of Central Intelligence, "we will need people who can read the languages, the newspapers, and not wait for somebody else to translate them."

In some respects the espionage wheel has come full circle back to the spy in a trench coat. For several decades, technology has substituted for agents in place, under cover, in foreign countries. Technology -- a camera in the sky, a listening post in a spot safely across the border from the target state -- was very attractive because it could not be seized, paraded and put on trial. Intelligence-gatherin g machines are very expensive, but a bargain in other terms.

Recently the CIA has matched its all-time high in funds and assignments to its humint programs, stepping up training of case officers for agent operation. But it was still mainly targeted at the former Soviet bloc, so the agency was not hiring people with the language skills and ethnic expertise it now finds it needs. The Soviet Union has dissolved, and while each of the now independent republics is easier to penetrate, there are many more of them. So the agency is trying to recruit from ethnic communities around the country and among third-country nationals: Swedes, Swiss or Brazilians who might be willing to sign up. "We're having no problems meeting recruiting goals," says an official. "The problem is finding the right people for these new speciality jobs."

Aharon Yariv, a former head of Israeli military intelligence, puts it this way: "The former Soviet states are double-edged swords. On one hand, it's easier to approach them. On the other, all of them need money, and some have military weapons and will sell them. This has to be watched. Instead of one harmful intelligence target, you have a number of easier targets."

Same Puzzles; Smaller Pieces. The Warsaw Pact has also broken up, with one former member, Czechoslovakia, splitting into two nations. Another, East Germany, has disappeared from the chessboard. The dirty cold war espionage battles in the middle of Europe have eased dramatically. "The information river is westbound now," says a former officer of the Czechoslovak security forces who is now a private consultant in Prague. "Until 1988, Polish agents were trained in Moscow," says Jerzy Jachowicz, a Warsaw journalist who covers intelligence matters. "Now they are trained in the U.S., France and Britain." That new westward orientation was emphasized last month when Woolsey paid official visits to his counterparts in Warsaw, Prague and Budapest.

Even so, signs of the old days in Europe have not entirely vanished. The KGB used to have 1,000 of its officers based at Karlshorst in East Germany. Now that the country is unified, the KGB has become the FIS, and its agents, as well as those of the GRU, the Russian military intelligence organization, have moved into the barracks of the Russian-army troops still stationed in the united Germany.

"Their main focus," says a report by the security service of the German state of Baden-Wurttemberg, "will be information gathering in the scientific- technical realm." Agents from Hungary, Czechoslovakia, Poland and Romania are still operating in Germany, says the report, as are those from China, "especially at universities." In a warning that probably applies to all industrialized nations, the German security report says Iran, Iraq, Libya and Syria are running clandestine intelligence operations aimed at "the development of atomic, biological and chemical weapons."

Japan too finds itself a major target for technological espionage, especially from Russia. Last August, Vladimir Davydov, a trade representative at the Russian embassy in Tokyo, left the country after police charged his Japanese associate with trying to obtain semiconductors and telecommunications equipment that are barred from export. Since World War II, Japan has relied on the U.S. to provide its strategic intelligence, and so it has only small equivalents of the CIA or the National Security Agency, which intercepts and deciphers electronic communications. If Japan joins the U.N. Security Council in a few years, as is likely, it would be the only permanent member without a full-scale intelligence establishment.

Husbanding Resources. Intelligence is still, for most countries, primarily an early-warning system. It must detect preparations for military attacks, the development of threatening nuclear or chemical weapons, or in the case of the former Soviet Union, any illicit movement of nuclear warheads and strategic missiles. In the U.S. that means the intelligence arsenal must include satellites carrying high-resolution cameras and electronic eavesdropping devices. Such systems are extremely expensive. Most of the money in the annual budget, says former CIA chief Gates, "goes to sustaining the infrastructure, especially of the satellites, the worldwide, day-to-day coverage from space."

Now Woolsey is proposing an overhaul, a consolidation of the satellite programs that would combine several kinds of instruments on one platform. The innovation would save money in the long run but cost a lot in the short run. To pay for it, Woolsey has been lobbying congressional committees for a $900 million increase in the national intelligence budget of about $28 billion. Senator DeConcini says Woolsey is making a "tremendous push" for a budget increase this year, "but that's hard to do without the Soviet threat." The argument that intelligence agencies now need more money is one "I'm trying hard to believe," DeConcini jokes.

But the new intelligence emphasis on worldwide threats of proliferation, terrorism and narcotics does not come cheap. "Compared with my days as a young officer, the demands today are far more dangerous," says Ambassador to South Korea Donald Gregg, a former CIA station chief in Seoul. "Terrorists and drug types are merciless and very hard to deal with." The narcotics trade and state-supported terrorism, adds Inman, "are not played by the gentlemanly rules of the espionage world. When you try to penetrate them and they suspect you, they don't put you in jail. They shoot."

After decades of lurking in the shadows, intelligence services will have to work hard to adapt to using open sources of information, the flood of raw information available to everyone from television, newspapers, journals, computers. Intelligence officers suffer from the impression that information is no good unless they stole it or paid for it. "The principal problem is with analysis," says Morton Abramowitz, a former chief of intelligence and research at the State Department, now president of the Carnegie Endowment for International Peace in Washington. "A major question is whether we're making use of the vast amount of nonsecret information. There are so many people who know more than the government does."

And in the end, even if the budget is not cut, the intelligence collection is foolproof and the analysis flawless, it can all still go wrong. In the summer of 1990, for example, CIA's National Intelligence Officer for Warning predicted flatly that Iraq was about to invade Kuwait. George Bush refused to believe it, preferring to accept the personal assurances he had received from Egyptian President Hosni Mubarak and other Middle Eastern leaders. In recent years, the agency has produced several full-dress estimates on Yugoslavia. Though the scenarios were correct, says a U.S. official, "they seem to have had almost no impact on policy" -- probably because they offered only unwelcome news. Intelligence can be an important tool for decision makers, but no more than that. It is up to the politicians to make wise policy.

CHART: NOT AVAILABLE

CREDIT: TIME Graphic by Joe Lertola

CAPTION: WHERE THE SPOOKS ARE

Major players:

And their prime targets:

With reporting by James O. Jackson/Bonn, Jay Peterzell and Bruce van Voorst/Washington, Ann M. Simmons/Moscow, with other bureaus