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Russia: Economic Espionage No Threat To West

Washington, 27 February 1997 (RFE/RL) -- Former KGB major general Oleg Kalugin says Russia does not pose a threat to the West in economic espionage because the country does not have an economy strong enough to support or implement most trade secrets its agents obtain.

Kalugin spoke Monday in Washington at the start of a two-day conference on economic espionage sponsored by the Society of Competitive Intelligence Professionals, a private organization.

Kalugin's speech was entitled "Economic Espionage: The View from the Other Side." It sought to explain how the Soviets went about gathering industrial, economic and military secrets from the West and what Russia is doing in that area today.

Kalugin, who now resides permanently in the United States, is currently the chairman of Intercon International USA, a business organization, and the author of the book, "The First Directorate: My 32 Years of Espionage Against the West."

According to Kalugin, Soviet intelligence agencies spent decades focusing primarily on obtaining military technology and related scientific information from the West. Their greatest successes, says Kalugin, were in the areas of nuclear physics, atomic energy and missile and aviation technology.

Kalugin says the Soviets did not begin stealing economic secrets in earnest until the late 1970's. He says this was due in part to the fact that many top Soviet officials were secure in their belief that Marxist economics and ideology would prevail over capitalism. As a result, the Soviets didn't bother with trying to steal economic information from the West unless it was directly applicable to military use.

Kalugin says that viewpoint began to change in the late 70's when a younger generation of bureaucrats began to see how the Soviet economy had stagnated. It was then, he says, that the Soviets began their first real foray into economic espionage.

Kalugin says the effort to steal trade secrets was set up under the auspices of the foreign counterintelligence directorate of the KGB of which he was in charge at the time. Kalugin adds that the first methods employed for the operation were simple.

He was instructed with a dual task -- first, to combat the efforts of foreign governments to bribe Soviet officials into revealing their own trade secrets, and second, to effectively manipulate the gold market to favor the Soviet Union. As the operation expanded, Kalugin says, other goals were added such as the acquisition of agricultural, educational and electronic trade secrets from the West.

According to Kalugin, this determined focus on economic espionage marked a new era in the evolution of the Soviet intelligence service.

Today, Kalugin says, the Russian intelligence service has turned to other goals. He says that the transition from a totalitarian state to a "sort-of democratic state" has changed the very nature of economic espionage in Russia.

Kalugin says that in the early 1990's a separate directorate of economic espionage was established within the Russian intelligence service. This division was initially run by Aleksey Shcherbakov, who is today the number two man in Russian intelligence.

Kalugin says Shcherbakov recently spoke about the challenges facing Russia today in the area of economic espionage, stating that one of the main objectives was to determine the scale and consequences of foreign influence on Russia's economic development.

Kalugin notes that this is a dramatic departure from the formerly aggressive nature of Soviet and then Russian economic espionage methods which constantly sought a specific piece information that would lead to a major breakthrough for the economy.

Kalugin says he believes the change accurately reflects the Russian mentality of today where he says, "there is a fear of foreign competition, a fear of NATO, a fear of everything."

Kalugin adds: "Their obsession with secrecy, their obsession with defensive mechanisms which would protect Russia is perhaps today even more apparent than in the old days (when) ... the Soviets felt that despite their weaknesses in economic areas, they were still arrogant because they were propped up by ideology."

"Today there is no ideology," Kalugin says, adding: "There is nothing to bolster their efforts. The country is impoverished and their economic performance is not one of stabilization, as they claim, but of a continuous downslide."

Kalugin says Shcherbakov also spoke of concentrating economic espionage on reintegrating the territories of the former USSR. Kalugin says this comment by Shcherbakov clearly shows that Russia is much more concerned about the economic reintegration of its neighbors, such as Ukraine, Georgia and the Baltic States, than it is about the West. He says this new focus on economic espionage is the result of the desire of many top Russian officials to "take these countries back under the Russian wing and protection."

Kalugin says Russia is changing the methods of collection and application because the old methods were never really that successful. He adds that although the Soviet Union was quite good at stealing economic secrets, in most cases the cumbersome Soviet bureaucratic system prevented them from being effectively utilized before they became useless or out-of-date.

The same applies to Russia today, Kalugin says, because the economy is simply in no shape to absorb or put to use most, if any, of the economic secrets it might be able to acquire.

In an exclusive interview with RFE/RL, Kalugin said that in general, the West has little to fear from Russia in terms of economic espionage mostly because Moscow's attention is currently focused on its neighbors and also because the Russians are incapable of providing significant competition on the global market.

But he warned this may soon change, adding: "At some point, Russia, I'm sure, will be a competitive power. Then whatever the Russians steal or obtain through other methods, by using their intelligence service or just scientists willing to cooperate, it may become detrimental to the interests of American business."