Operation Dragon

by R. James Woolsey

  German archive documents state that Stalin was euphoric that day. He told Ribbentrop: “The Soviet government takes this new pact very seriously. I can guarantee, on my word of honor, that the Soviet Union will not betray its partner.”6 At the 1940 May Day parade in Moscow, Dekanozov appeared at Stalin’s right atop Lenin’s mausoleum,7 the highest honor ever accorded by the Kremlin to a head of the Soviet espionage service. And no wonder. Lithuania, Estonia, Latvia, Bessarabia, Northern Bukovina, and portions of Poland and Finland were now Soviet property. As soon as the August 1939 pact and its secret protocol were signed, Stalin tasked his spy services to Sovietize his new properties. The Latvian chapter of this operation was headed by Andrey Vyshinsky, who later Sovietized Romania and Bulgaria. Vyshinsky was an NKVD officer who had worked under cover of public prosecutor during Stalin’s purges. In 1939 Stalin transferred Vyshinsky to the INO, gave him the undercover position of deputy commissar for foreign affairs, and charged him with managing the “peaceful” incorporation of Latvia into the Soviet Union.

  The Red Army occupied Latvia on June 17, 1940. The next day Vyshinsky arrived in Riga as Stalin’s special envoy. There he forced Karlis Ulmanis, the Latvian president, to appoint a “people’s government.” According to the INO plan, only two members of the new government were to be openly avowed communists: the minister of interior and the chief of the national police.

  After Vyshinsky succeeded in installing his government, he delivered a speech from the balcony of the Soviet embassy in Riga, assuring the population that Moscow did not have the slightest intention of including Latvia in the Soviet Union. A couple of days later, however, with the help of an INO group he had brought with him to Riga, Vyshinsky ordered his newly appointed Latvian chief of police to arrest President Ulmanis and the main leaders of the Latvian opposition and deport them to the Soviet Union. Then he forced the new “people’s government” to schedule parliamentary elections in two weeks and set up a Working People’s Bloc controlled by INO undercover officers to run the elections with a single list of candidates.

  Vyshinsky’s elections took place from July 14–15, 1940, without secret ballot. Only the counting of the vote was secret; it was conducted by the Ministry of Interior, now headed by Vyshinsky’s man. The results claimed that 97.8 percent of the votes were for Moscow’s candidates. Soon after that, a few Latvian communists working for the Comintern in Moscow whom Vyshinsky had brought with him launched the slogan “Soviet Latvia.” Speaking again from the balcony of the Soviet Embassy, Vyshinsky expressed his hope that the newly elected people’s parliament would fulfill the wish of that slogan. That, of course, was exactly what happened. On July 21, 1940, the malleable parliament proclaimed Latvia a Soviet republic, and two weeks later Moscow’s Supreme Soviet incorporated it into the Soviet Union. “I worked with Comrade Vyshinsky on that operation,” Sakharovsky used to tell Pacepa, “and in 1943 I became his deputy for Sovietizing Romania.”

  By the time Stalin incorporated Latvia into the Soviet Union, Germany had already conquered most of Europe. Now Stalin again feared that Hitler would turn his armies against the Soviet Union. Therefore, in August 1940, he sent Dekanozov to Berlin once more. His new task was to tempt Hitler to move against the United Kingdom instead of toward the East by offering him a secret trade agreement under which the Soviet Union would be instrumental in breaking the economic embargo the Western powers had imposed on Germany.

  On September 27, 1940, Hitler concluded the Tripartite Pact with Italy and Japan. A week later Dekanozov was in Berlin again, and during a walk in the woods he let German foreign minister Joachim von Ribbentrop understand that Stalin was ready to join the Axis. On November 12, 1940, Stalin sent a Soviet delegation to Berlin to discuss the details of his future cooperation with the Berlin-Rome-Tokyo axis. Again, except for Molotov, all his envoys were intelligence officers: Beria, the chief of the NKVD; his deputy, General Vsevolod Merkulov; and the pygmy Dekanozov.

  Stalin believed that those talks were successful, and on November 20, just before their end, he appointed the INO chief as Soviet ambassador to Germany. Dekanozov presented his letters of accreditation to Hitler on December 19, 1940, without knowing that on the previous day the Führer had approved Operation Barbarossa for the invasion of the Soviet Union, ordering his troops to be ready by May 15, 1941. On June 21, 1941, Hitler’s armies crossed the Soviet border, and for the first few weeks, the assailants met no organized resistance from the Red Army.

  The Soviet intelligence operation leading to the Hitler-Stalin Pact is one of the most embarrassing moments in the Kremlin’s history. For one thing it demonstrates the Kremlin’s Nazi-style anti-Semitism. This may be why soon after World War II, Stalin purged the word “Nazism” from the Russian political vocabulary, replacing it with “Fascism.”

  Stalin’s successor, Nikita Khrushchev, framed the three main players of this operation—Beria, Merkulov, and Dekanozov—as spies and had them shot. “Dead men don’t have memories,” Sakharovsky told Pacepa at that time.

  SOCIALIST INDUSTRIAL ESPIONAGE

  Pacepa spent twenty-two years (1956–1978) managing or supervising Romania’s slice of the Soviet bloc’s scientific and technological (S&T) intelligence effort. During that period, the bloc’s intelligence community developed the purloining of foreign science and technology into a fine art practiced by a very large and well-trained machine.

  Stalin’s effort to Europeanize the Soviet Union was born in 1943 at the height of preparations for the Red Army’s decisive offensive against Nazi Germany. Like everything else in socialist Russia, it was built on a foundation of theft. Head of Soviet state security Lavrentiy Beria proposed to Stalin that modernization of the backward Soviet economy proceed by seizing any German-owned plants located in Soviet-occupied Germany as war booty. Beria would create a special NKVD unit to secretly remove whole factories from the countries “liberated” from the German yoke and transplant them, along with their technically trained employees, to the Soviet Union.

  In a rare expression of admiration for another person, Stalin pronounced it a brilliant idea and approved on the spot “Operation Kh.” He ordered that it be given top priority. The designation “Kh” (X in Cyrillic) stood for the Russian word “khozyaystvo,” meaning “economy,” because it was an operation to revive the war-torn Soviet economy.

  Within a few months, a new economic intelligence arm called “Line Kh” appeared in the Soviet foreign intelligence service and began frantically training officers in how to dismantle industrial plants for relocation. In 1944, when the Red Army left the Soviet borders behind it and marched westward, the INO began setting up “Kh rezidentury” (i.e., intelligence stations) in all the European countries that the Red Army had “liberated.”

  Beria’s first success was Peenemünde, the German research center where Wernher von Braun and Walter Dornberger had designed the infamous V-2 rocket that terrorized London during the war. The Kh unit took everything home—Germans, equipment, blueprints, documents, and notes, then blew Peenemünde sky-high. Back in the Soviet Union, the military experts poring over their loot found that the V-2 wasn’t even the best thing the Germans had invented. The Wasserfall (Waterfall), a surface-to-air missile, had been their latest technological invention, and its data enabled the Soviets to create their first long-range ballistic missile, the dreaded Scud.

  After World War II, the Soviet Union suddenly had two commercially successful products exported to the West: photographic lenses and Pyrex glass. The technology, equipment, and experts to produce them had been stolen from German companies at the end of the war. One was the ZEISS optics and precision instruments firm, at that time the world’s leading producer of lenses, microscopes, and photographic equipment. The other was the Schott glassworks, the world’s largest supplier of Jenaer and Pyrex glass, a heat-resistant product invented by German chemist Friedrich Otto Schott and used in the manufacture of thermometers, cookware, and optical and chemical equipment.

  Both companies had been
located in Jena, and both were relocated to the Soviet Union by the INO’s Kh unit. The operation was a dramatic race between Beria’s unit, which was hurrying to dismantle the Jena optics industry, and the American Army, which was trying to preserve it. Working in a frenzy, the Americans were able to save some one hundred German scientists from the Jena optics and glass companies by hiding them in the American Zone.

  In the end, however, the Soviets came out the winners. Through months of hard digging, the Kh unit was able to find many of the scientists and technicians in those two important industries and deport them to the Soviet Union. The Soviets also carried off most of the technical equipment from ZEISS and Schott. Both the machinery and the German technicians “proved to be worth more than their weight in gold,” according to what Pacepa was later told.

  Within a few years, the city of Jena was reborn in the Soviet Union. Prominently displayed in the Soviet wedding-cake-style city hall of the new town was the doctor’s degree that in 1841 the University of Jena had awarded Karl Marx in absentia, a bonus discovered by Beria’s officers in a musty old Jena archive.

  Between 1922 and the German occupation of Romania in 1940, Pacepa’s father managed the service department of the American General Motors company in Romania. From his father, Pacepa learned that the new Soviet automobile industry had been created in the same way. Stalin himself had given the name Pobeda (meaning victory) to the first Soviet passenger car built with equipment confiscated from General Motors, the manufacturer of Opel in Germany. GM was one of the largest American industrial firms in Germany. Before World War II it had produced more cars than any other European facility.

  On the unforgettable day of October 24, 1959, Pacepa, who had just ended his term as chief of Romania’s intelligence station in West Germany, arrived at his office earlier than usual to write his final report. That was not to be. An hour or so later, he was standing at attention in front of Alexandru Draghici, the minister of interior, who was just back from a meeting in Moscow, telling him that Khrushchev’s new “technological revolution” had consumed everyone’s attention there and that new KGB chairman “Comrade [Aleksandr Nikolayevich] Shelepin himself took the floor twice to address this subject.” “Read this,” Draghici ordered. It was an official appointment of Pacepa to chief of Romania’s newly created department for technological intelligence, called S&T, from the Romanian stiinta si technologie (science and technology). In layman’s terms: industrial espionage.

  Pacepa’s meeting with the minister of interior was not to be his last surprise that day. A baggy-panted KGB adviser was waiting for him at the DIE,8 Romania’s foreign intelligence service. “Privet,” he greeted Pacepa tersely in Russian, giving him that typical KGB bone-crushing handshake. He then switched to fluent French. “I am Boris Alekseyevich, and I came from Moscow to introduce you in your new job.” A chauffeur-driven Pobeda dropped both men at a lakeside villa in Snagov, a small weekend retreat township some thirty miles north of Bucharest.

  “Believe me, Ivan Mikhaylovich, you’re going to make history,” Boris Alekseyevich said as soon as a maid had brought a generous supply of malossol caviar and vodka. The KGB adviser started his story back with Adam and Eve. “The period between the October Revolution of 1917 and the outbreak of World War II was an era when political considerations held sway in Soviet foreign intelligence.” It was a time, Boris explained, when the Soviet leadership believed that communist ideology provided the key to everything, including the Soviet Union’s industrialization. After the October Revolution, the Soviet Union had looted rich Russians, later the country’s huge reserves of oil and gold, and after the war from Germany—he said with disarming frankness—from “you and your sister countries.”

  After the war, however, Stalin realized that he should pay attention to technological development as well, but he did so by pursuing technologies with potential military applications for nearly fifteen years. The KGB’s Line Kh’s military-technological intelligence thefts had lifted the Soviet Union to superpower status. In 1958 alone, the advisor said, over four thousand Soviet military equipment and weapons system research projects had benefited from Western hardware and technical documents obtained illegally by Line Kh. The budget for military technological intelligence and equipment theft included in the Soviet Union’s sixth Five-Year Plan (1955–59) had risen to over 500 million dollars. It was estimated that in 1960, Line Kh would save the Soviet rocket industry alone roughly sixty-thousand man-years of scientific research. Nevertheless, it was unfortunate, the Soviet advisor added, that Stalin’s vision had stopped there.

  It had taken a Nikita Sergeyevich (Khrushchev) to discover Stalin’s mistake, Boris Alekseyevich explained. Now Tovarishch Khrushchev had transformed Line Kh into a KGB directorate and ordered it to get involved in stealing domestic technologies from the West as well. That would be a piece of cake for us, Boris Alekseyevich thought, because while very important to the communist movement, most civilian technologies were not classified in the West. For the first time in history, the Soviet bloc would really be in a position to fulfill its historic destiny as the gravedigger of capitalism.

  From his bottomless accordion briefcase, Boris Alekseyevich produced a volume that was almost as thick as a bible. “Here’s your collection program for 1960,” he explained. “It weighs more than Romania’s whole foreign trade plan.” As he flipped through the pages of his book, he commented that the largest iron and steel works in the world was going up near Novokuznetsk, as well as a huge oil refinery on the Amur River and a gigantic factory in Moldavia for tractors for orchards and vineyards. In his grand vision, industrial towers and chimneys had begun springing up over Russia’s endless steppes like mushrooms after a summer rain, all guarded by endless rows of rockets boldly pointing their noses toward the West, and large underground factories building those rockets at the same rate that General Motors was manufacturing cars. “That’s where Tovarishch Khrushchev’s total technological espionage is going to take us.”

  The KGB colonel slammed his book shut and handed it to Pacepa. “You really should learn Russian,” he said, exuding all the authority of the power behind the throne. “We have one big job to do, you and I.” His pale blue eyes looked at Pacepa long and hard. “We are not here to record history, Ivan Mikhaylovich,” he said. “We’re here to make it!”

  “Dogonyat i peregonyat!” Boris Alekseyevich closed solemnly, quoting Khrushchev’s famous slogan about economically catching up with and overtaking the West in the space of ten years. “In the course of history, ten years is a mere second, isn’t it?” Slapping the table in front of him, Boris Alekseyevich continued. “That is what Tovarishch Khrushchev told us after he got back from his long visit to America.” There, he explained, Khrushchev had spent more time touring farms and factories than discussing politics with Eisenhower. Once back home, he had visited Directorate T. “We don’t have time to reinvent the wheel. We’ve got to steal it!” he told us. “Don’t raise your eyebrows, Comrades. I intentionally used the word steal. Stealing from capitalism is moral, Comrades.” Boris Alekseyevich was now shouting and banging the table with true Khrushchev-like energy. “We must steal from capitalism!” the KGB colonel shouted once more, casting his voice in as close an imitation of Khrushchev’s as he could manage.

  Even today it is still a mystery to Pacepa why most of the Soviet advisors known to him took such pains to ape whatever Soviet leader happened to be in power at the moment. Under Stalin, they all wore military-style tunics buttoned to the neck, walked slowly, and spoke softly. Under Khrushchev, they switched to either ill-fitting clothes or raucous tones of voice. It was a Soviet peculiarity that Pacepa has never been able to explain. During Nicolae Ceausescu’s long period in office, Romania succumbed to a cult of personality even more idiotic than Stalin’s had been. But Pacepa never knew any Romanian who tried to stutter like Ceausescu.

  CHAPTER 4

  STEALING AMERICA’S NUCLEAR BOMB

  Soon after World War II broke out, Joseph Sta
lin became worried that the world’s big boys had bigger weapons than he did, so he set out to steal the Americans’ nuclear bomb technology and famously succeeded. After becoming head of Romania’s technological espionage service, Pacepa learned some of the details.

  At first, Stalin tried to stay out of the fight by making a pact with Adolf Hitler, the most immediate threat. But Hitler double-crossed him by suddenly and without warning invading the Soviet Union on June 22, 1941, in Operation Barbarossa. The crisis pushed Stalin to consider the fact that the Americans had many brilliant Nobel Prize scientists working on game-changing weapons, while the Soviet Union had no scientists of that caliber. To catch up he set out to steal and copy the technology, ordering his chief intelligence official, Lavrentiy Beria, in mid-1941 to get cracking on the operation.

  Beria assigned Vasily Zarubin—a senior intelligence officer then in New York and later the Washington, D.C. station chief—to the job. He passed the buck to Grigory Kheifetz, his talented station chief in San Francisco. Officially assigned to the Soviet consulate there, Kheifetz was also known around town as “Mr. Brown” and had close working relationships with members of the American Communist Party (CPUSA). That fall of 1941, Kheifetz began hearing rumors that the United States Army was planning an atomic research laboratory in the nearby California desert and that Albert Einstein himself had told President Roosevelt he believed an atomic bomb was realistically feasible.