Deception

by Edward Lucas

  i As well as highlighting the potential, some felt he was downplaying the dangers. A notable occasion was in early 2005 at the Davos World Economic Forum, when opinion was already turning sharply against the evident cronyism and incompetence of the Putin regime. Mr Browder was one of a handful of prominent Westerners to express a strong contrary opinion.

  j Russia was chairing the G-8 (a group of countries that in those days tried to run the world economy). The original G-6, convened in 1975, comprised Britain, France, Germany, Italy, Japan and the United States and then added Canada as a member. As a sop to Mr Yeltsin, Russia was invited to join in 1997. Since 2009, the G-20, which includes the big emerging economies, has largely taken the G-8’s place.

  k Kameya also paid more than the combined taxes paid by the largest retbiler (XS, which paid $57m) and the largest dairy and juice company (Wimm Bill Dann, which paid $42m). Hermitage’s other companies paid a further $272m.

  l They were: Valery Kurochkin, a convicted thief, and Vyacheslav Khlebnckov, a convicted burglar. The three companies were called Instar, Logos Plus and Grand Active.

  m The 5.4bn roubles was paid out within two days via a newly created account at Universal Savings Bank. This was a curious institution. Two nominee shareholders in the bank were also shareholders in the three obscure companies that became the owners of the stolen Hermitage companies. The main beneficial shareholder is a convicted criminal called Dmitri Klyuev, who has past links to other questionable FSB-related transactions. In the summer of 2008, once Hermitage started firing its legal salvos, the bank filed for voluntary liquidation.

  n The federal authorities abolished this loophole in 2002. In 2006 they ended another quirk, a two-tier market in Gazprom shares. This had created a lucrative opportunity for investors (including Hermitage) to buy locally listed ones for foreign clients at a large and legal discount.

  o A farcical but revealing element in this came with the discovery of ‘stolen’ documents brought from Russia to London and then sent back to Moscow from the DHL office in Lambeth, by two men of Slavic appearance (captured on CCTV), falsely giving the address of the Hermitage office in London. Barely forty-five minutes after the package was delivered to a law office in Moscow, the police arrived in search of the documents and confiscated the package, in what looks like a clumsy attempt to frame Mr Khairetdinov, another of the Hermitage lawyers. It is unclear what the package contained. A police protocol lists obviously forged documents, such as a power of attorney issued in the name of a non-existent person (using a surname that had featured in previous lawsuits against Hermitage), official files that would normally be in the custody of the authorities, and ‘documents in foreign language’ with ‘stamps of Belize’.

  p Mr Magnitsky’s lawyer, Dmitri Kharitonov, also says that on repeated occasions Silchenko offered to release him if he would incriminate Mr Browder.

  q Mostly from other bits of the former Soviet Union, they are habitually cheated, abused and on occasion murdered, by their employers, or by the police, or by thuggish political extremists.

  r Ministerstvo Vnutrennykh Del (Ministry of Internal Affairs).

  s He also put Georgia in this category and said that Ukraine was heading there.

  t Many worried that a supposedly defensive alliance was waging an aggressive war against a historic Russian ally. Yet NATO got involved only reluctantly and belatedly, after the multiple massacres in the preceding Bosnian war, and when Russian foot-dragging had stymied efforts to stop a Serbian attack on Kosovo.

  u Of course Western intelligence collects information on Russia too. America’s National Security Agency gathers electronic data from antennae in north-eastern Poland, close to the Russian border.

  v I am concealing the full details of this case out of consideration for his family.

  w Glavnoye Razvedyvatelnoye Upravleniye (Main Intelligence Directorate).

  x I focus in this chapter on solely HUMINT (the recruitment and running of human sources) not SIGINT (electronic intercepts) or geospatial reconnaissance (via satellite). I am also leaving out, among other intelligence professionals, the analysts and reporting officers who make sense of the spies’ work.

  y This former Napoleonic fort, once used by Britain’s wartime Special Operations Executive, is not as secret as perhaps it should be. Its postcode is PO12 2AT; other details including a telephone number are available on the internet.

  z A related problem is that a single money-grubbing source may sell the same, slightly tweaked, information to several agencies: to America’s CIA and Germany’s BND for example. A dubious piece of information checks out from several seemingly different sources, and counts as solid. Yet behind it is just one agent, single-mindedly maximising his income. It is this that lay behind the colossal blunder that Western intelligence made over Iraq’s supposed weapons of mass destruction.

  aa 650 acres.

  ab Mr Edbrook is presumably quoting from another CIA document not yet declassified.

  ac I think this creates horrific problems for real NGOs and should be off-limits.

  ad Ms Chapman and another junior illegal ferried laptop computers between Russia and America, rather more often than planned because of repeated technical glitches. When they worked, the laptops were used to send clandestine radio transmissions to intelligence officers based at Russian diplomatic missions.

  ae Known as the ‘Forest’ or the ‘Sanatorium’, the SVR headquarters is a Finnish-built skyscraper complex in the district of Yasenevo, just south of the Moscow ring-road.

  af Square brackets signify material redacted by the FBI before the complaint was made public.

  ag I contacted Heathfield via LinkedIn, offering him a chance to review this chapter and give his comments. He replied by giving an email address, but never downloaded the file I sent him.

  ah I made repeated attempts to gain Ms Chapman’s side of the story for this book. I received two messages in return from her Facebook account. One read: ‘How can you possibly write a book without 1 decent article in press that is based on some what [sic] true facts? No interview, no nothing . . .’ The other noted: ‘I was the one who suffered and you will be the one to gain? :)’ I responded: ‘I hope my book will sell well but even if I win a Pulitzer prize (which I won’t) you will always be more famous than me!’ I received no answer to this, or to an extensive list of questions.

  ai In fact an intelligence officer based at the Russian mission to the United Nations in New York, under the diplomatic cover of ‘second secretary’. It appears that most if not all the illegals were run from the Russian mission in New York, not from the embassy in Washington, DC.

  aj He gained political asylum in Britain in 2003, taking up a promise made when he brokered the release of two British hostages in Chechnya in 1998.

  ak She is sometimes described as a ‘belly’ dancer and sometimes as a ‘ballet’ dancer. This may be a confusion caused by pronunciation.

  al Luckily my web-savvy son Johnny suggested that I make a screenshot of the Google cache version of the site.

  am Her website (annachapman.ru) gives details of her exploits. Curiously, it was registered in April 2010, before the spy scandal broke.

  an Compared to Russia, the Baltic states are tiny. But so are most countries. Their combined land area is around the size of California; the total population of the three countries is just under 7m, rather less than Greater London (7.8m). Lithuania, with 3.2m, is the largest, Latvia has 2.2m people and Estonia has 1.3m.

  ao The Kreevians died out in the nineteenth century in Latvia. Probably the last mother-tongue speaker of Livonian died in 2009. The Prussian language became extinct in the eighteenth century, though German colonisers adopted the placename. Around ten thousand Vepsians survive, mostly in Russia. The Vends ceased to be a distinct ethnic group in the sixteenth century.

  ap Britain had longstanding commercial and cultural ties with the region. An Anglican church in Riga opened in 1859, built on English soil specially imported by the wealthy me
rchants who traded furs and timber. A Scot, George Armitstead (known as Džordžs Armitsteds in Latvian), was even the city’s mayor in 1901–1912.

  aq Previously St Petersburg, soon to be Leningrad.

  ar Xenophon Kalamatiano was caught trying to scale the wall of the Norwegian embassy, which represented American interests. His interrogator examined his hefty walking stick and found it stuffed with roubles and receipts from his agents. He survived a spell in the Lubyanka and was exchanged for American food aid in August 1921.

  as The Bolsheviks refused to allow the dying man a drink of water, or the embassy chaplain to attend to him. My suggestion to the British consulate in St Petersburg, when it opened in 1992, to name a prize or scholarship after this gallant officer met with a sorry lack of enthusiasm.

  at Both Russian battleships still had their Tsarist-era names with religious allusions: ‘Peter and Paul’ and ‘Andrew the First-called [apostle]’. A French naval force was also in the Baltic but unable to take part in hostilities against the Bolsheviks for fear that the sailors would mutiny.

  au Very roughly, around £250,000 or $400,000 in modern money.

  av It was part of an underground army comprising the remnants of the armed forces of the short-lived Ukrainian republic, anti-Bolshevik Russians based in Poland and others.

  aw It is tempting to speculate that this real-life example may have inspired Graham Greene, himself an SIS officer, with the mysterious giant suction device – in fact a domestic vacuum cleaner writ large – depicted in Our Man in Havana.

  ax Augusts Bergmanis.

  ay Rihards Zande and Ēriks Tomsons.

  az His Lithuanian and Latvian counterparts were Stasys Žymantas, an Oxford-educated émigré lawyer, and Rūdolfs Silarājs, an airman.

  ba After leaving SIS Philby worked briefly for my employer, the Economist, as our Beirut-based Middle East correspondent. Barbara Smith, then one of our Middle East editors, remembers his reporting as excellent but that she had to chivvy him over his lack of productivity. Shortly afterwards we found out the reasons, when he turned up in the Soviet Union.

  bb A CIA officer called David Murphy responded in a similar vein. ‘Even if they don’t send back good intelligence, we’re causing the Russians a lot of headaches.’

  bcThe Mutual Security Act allocated $100m to fund anti-Soviet guerrilla warfare.

  bd Nikolai Balodis.

  be An American-trained Lithuanian, Jonas Kukauskas, was captured soon after being parachuted into Lithuania in April. Faced with torture, he agreed to betray his leader, whose grave has never been found.

  bf Ludis Upãns, cited in Bower as ‘Lodis’ Upans.

  bg His real name was Nikolai Urm. He worked until retirement in the electrical department of the John Lewis department store and died in 2005 in the drab London suburb of Neasden, where a rusty horseshoe (characteristic for Estonian homes) over the doorway of his house in Bermans Way is the only remaining sign of his remarkable career. If by any chance his niece, Karen ‘Kim’ Toley, should read this book I would be most grateful to hear from her.

  bhI would be glad to hear from anyone who can identify the SIS officer on the left.

  bi He returned to Estonia for several visits in the 1990s, donating money for a war memorial and enjoying a belated recognition for his efforts. He passed on coordinates for the place near Murmansk where he buried his transmitter. A former Estonian official has the coordinates and plans to retrieve it when practical.

  bj I shall be delighted if I am misinformed.

  bk He had been conscripted in the German army briefly in 1944, but did not serve in Rebane’s unit.

  bl In past years the recruitment interview has been conducted by men of varying build, height and hair colour. All introduced themselves as ‘Major Halliday’.

  †The statues are available from gift shops, at a price of around £200 (including postage and packing). A solid silver version is also available, but was presumably thought too expensive.

  bm For Státní bezpečnost (State Security).

  bn Mr Savisaar had found some evidence of Simm’s misuse of public funds, in a complicated story involving a dentist’s chair bought for his then wife’s clinic.

  bo I have no desire to reveal details that will mean little to the reader but perhaps make life easier for Russian intelligence.

  bp It is worth noting that Estonia experienced extreme international pressure in the 1990s to be softer on military and security personnel from the former occupation regime who did not wish to return to Russia. Had the authorities been allowed to adopt tougher rules, it would have been far harder for Zentsov (and perhaps others like him) to ply their trade.

  bq It has since been crippled by political wrangling and corruption scandals.

  br The logical absurdity of this was not properly teased out: if Russia was friendly, then why would drawing up defence plans for its weak and vulnerable neighbours be provocative? And if Russia was so easily provoked, could it really be counted as friendly?

  bs I find that implausible, as even a national intelligence agency would hesitate to compile such information in a single list and distribute it internally, for fear of the damage done if it leaked. The risk of sharing such sensitive material with twenty-plus other agencies of varying trustworthiness would be huge and such a step unlikely. It is possible that this CD was a list of past Russian agents, rather than active or suspected ones. That would still be useful information for the SVR.

  bt I am withholding his name, in accordance with the sensible convention that serving intelligence and security officers should not be identified.

  bu Stay-behind operations were a staple of NATO planning during the early years of the Cold War, and envisaged well-organised networks of saboteurs and spies working to disrupt Soviet rule after an invasion of Western Europe, with access to secret arms caches. They included the notorious Operation Gladio, which degenerated into political mischief-making in Italy.

  bv Chiefly the European Bank of Reconstruction and Development and the European Investment Bank. If things go badly wrong, the International Monetary Fund and European Central Bank provide bailout packages.

  A Note on the Author

  Edward Lucas is a senior editor at the Economist. He has been covering Eastern Europe since 1986, with postings in Berlin, Moscow, Prague, Vienna and the Baltic states. He is the author of The New Cold War (2008), published in more than fifteen languages.

  By the Same Author

  The New Cold War

  Copyright © 2012 by Edward Lucas

  This electronic edition published in June 2012

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  Published by Walker Publishing Company, Inc., New York

  A Division of Bloomsbury Publishing

  LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA

  Lucas, Edward, 1962–Deception : the untold story of East-West espionage today / Edward Lucas. — 1st U.S. ed.

  p. cm.

  Includes bibliographical references and index.

  eISBN 978-0-8027-1305-6

  1. Western countries—Foreign relations—Russia (Federation) 2. Russia (Federation)—Foreign relations—Western countries. 3. United States—Foreign relations—Russia (Federation) 4. Russia (Federation)—Foreign relations—United States. 5. Espionage, Russian—Western countries. 6. Espionage, Russian—United States. 7. Deception—Political aspects—Russia (Federation)
I. Title.

  D2025.5.R8L83 2012

  327.12470182’1—dc23

  2012005559

  Visit Walker & Company’s website at www.walkerbooks.com

  First U.S. edition 2012