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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Paul Berliner who wrote (1046)7/10/1999 5:21:00 AM
From: CIMA   of 1301
 
Job Security for John LeCarre

Summary:

Russia's Federal Security Service (FSB), the successor to the
KGB, announced on July 8 that U.S. citizen Justine Hamilton had
been caught spying in the Voronezh region in late June. On July
1, Russia expelled Lt. Col. Peter Hoffman, assistant military
attache at the U.S. embassy in Moscow, also apparently for
espionage. These expulsions come on the heels of the expulsion
from the U.S. of a Russian UN official caught spying in April.
That espionage has been and continues to be actively pursued by
both countries is no surprise. What is unusual is that, despite
the efforts of U.S. and Russian government officials to keep the
incidents low key, the FSB seems intent on publicizing them.
With spy scandals, military maneuvers, and arms transfers,
Russia's hardliners are sending a signal to the West that if it
refuses to treat Russia as a friend, Russia can and will behave
as a foe.

Analysis:

Russian intelligence officials announced on July 8 that U.S.
citizen Justine Hamilton had been caught spying on industrial
facilities in the Voronezh region in June. Actual details of the
incident vary. Russia's Ekho Moskvy radio reported that
Hamilton, a Russian language specialist, was working as an
official representative of the state of Kansas in the region when
she collected "information which constituted a state secret."
Ekho Moskvy said Hamilton had "displayed an active interest in
the region's industrial potential."

The Associated Press carried a slightly different story, citing a
Federal Security Service (FSB) spokesman as stating that
Hamilton, 25, had been part of a Kansas-based university exchange
program since January 1998. Hamilton was reportedly summoned to
the regional FSB headquarters on June 21, where she admitted to
collecting material from the region's defense factories, as well
as passing economic and political information to the CIA. The
FSB spokesman said Hamilton departed Russia on June 23, when her
visa expired, and will not be allowed back in the country. The
U.S. Embassy in Moscow reportedly would neither confirm nor deny
the story.

This report comes only a week after Lt. Col. Peter Hoffman,
assistant military attache at the U.S. embassy in Moscow, was
deemed persona non grata by the Russian foreign ministry and
ordered to leave the country. Hoffman had a week earlier
received word from the foreign ministry that his presence in
Russia was "undesirable." Hoffman's expulsion from Russia was
reportedly seen in Washington as retaliation for the May 1
expulsion from the U.S. of a Russian UN official, who had been
caught red-handed in April attempting to obtain classified
information. The U.S. late last year also refused to allow a
Russian agent to reenter the country when he attempted to return
to the Russian Embassy following a vacation.

It seems only appropriate that, with Russian "Bear" bombers
carrying out missions near Iceland for the first time in a
decade, we should also see a return of the spy game. Not, of
course, that the spy game ever went away, but it hasn't been as
public and political as this in quite some time. According to
U.S. officials, Russia has dramatically increased its espionage
activity over the last six months, and has clamped down on
contacts between current and former Russian military personnel
and Western diplomats. Additionally, while Washington has
attempted to downplay the recent incidents in an apparent effort
to avoid further straining relations, Russia seems to be
politicizing them. The initial request that Hoffman leave Russia
coincided with Russian military flights near the Norwegian and
Icelandic coasts and, in hindsight, with the Hamilton case. His
expulsion also reportedly violated the unwritten rules of
espionage, which reject retaliation for cases in which spies are
caught red-handed -- as was the case with Russia's UN official.
This latest announcement, coming weeks after the reported
incident, also appears political in nature.

First with last December's Operation Desert Fox in Iraq, and
reinforced with Operation Allied Force in Kosovo, Washington has
made it plain that it does not consider Russian concerns to be a
factor standing in the way of the U.S. and NATO's agenda. Moscow
is understandably perturbed, and of the belief that if Washington
will not behave as a friend, then it can only be considered a
foe. Thus the resurgence of espionage and, more to the point,
the public manner in which the issue is being handled.

Fundamentally these arrests change little, except perhaps to
invigorate the careers of spy novelists like John LeCarre, who in
the post-Cold War world have had to resort to tales of Panamanian
intrigue. There always has been and always will be espionage
carried out by the U.S. against Russia and by Russia against the
U.S. But the symbolism is important. The military exercises,
the severance of relations with NATO, the surge in arms sales,
the expulsion of alleged spies -- all are reminders of what could
be if the West chooses to continue behaving as if Russian
interests are insignificant. They also raise the cost of
reconciliation for both the West and for Russia's pro-Western
faction. The Russian military and security services' newfound
belligerence is a lever against both NATO and the Yeltsin
government. Russia's hardliners are not ready to kiss and make
up. They are not ready to return to the status quo ante, if that
means letting things quiet down to Russian impotence circa
November 1998. The FSB and the Russian military are just passing
on a little reminder of how things were, as a warning of how they
could be.

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