[R-G] [BillTottenWeblog] The Farewell Dossier: Duping the Soviets

[Bill Totten]

by Gus W Weiss (original around 1995)

www.cia.gov/library (accessed October 09 2007)


During the Cold War, and especially in the 1970s, Soviet intelligence
carried out a substantial and successful clandestine effort to obtain
technical and scientific knowledge from the West. This effort was
suspected by a few US Government officials but not documented until
1981, when French intelligence obtained the services of Colonel Vladimir
I Vetrov, "Farewell", who photographed and supplied 4,000 KGB documents
on the program. In the summer of 1981, President Mitterrand told
President Reagan of the source, and, when the material was supplied, it
led to a potent counterintelligence response by CIA and the NATO
intelligence services.

President Nixon and Secretary of State Kissinger conceived of detente as
the search for ways of easing chronic strains in US-Soviet relations.
They sought to engage the USSR in arrangements that would move the
superpowers from confrontation to negotiation. Arms control, trade, and
investment were the main substantive topics. The Soviets viewed detente
as "peaceful coexistence" and as an avenue to improve their inefficient,
if not beleaguered economy using improved political relations to obtain
grain, foreign credits, and technology {1}. In pure science, the Soviets
deserved their impressive reputation, and their space program
demonstrated originality and accomplishment in rocket engineering - but
they lacked production know-how necessary for long-term competition with
the United States. Soviet managers had difficulty in translating
laboratory results to products, quality control was poor, and plants
were badly organized. Cost accounting, even in the defense sector, was
hopelessly inadequate. In computers and microelectronics, the Soviets
trailed Western standards by more than a decade.


Soviet S&T Espionage

The leadership recognized these shortcomings. To address the lag in
technology, Soviet authorities in 1970 reconstituted and invigorated the
USSR's intelligence collection for science and technology. The Council
of Ministers and the Central Committee established a new unit,
Directorate T of the KGB's First Chief Directorate, to plumb the R&D
programs of Western economies. The State Committee on Science and
Technology and the Military-Industrial Commission were to provide
Directorate T and its operating arm, called Line X, with collection
requirements. Military Intelligence (GRU), the Soviet Academy of
Sciences, and the State Committee for External Relations completed the
list of participants.

The bulk of collection was to be done by the KGB and the GRU, with
extensive support from the East European intelligence services. A
formidable apparatus was set up for scientific espionage; the scale of
this structure testified to its importance. The coming of detente
provided access for Line X and opened new avenues for exploitation.
Soviet intelligence took full advantage.

In the early 1970s, the Nixon administration had no comprehensive policy
for economic relations with the USSR. The sale of strategic goods to
Communist countries was governed by the Coordinating Committee of NATO
(COCOM), which administered an Alliance-agreed list of products and data
embargoed for sale. Nixon's policy worked within this system, and, for
the export of products exceeding the approved list, special exceptions
were necessary. And, in a new set of commercial and scientific
arrangements, the United States and the USSR set up joint technical
commissions to assess prospects for cooperation. Topics included
agriculture, nuclear energy, computers, and the environment. As
Kissinger noted:

Over time, trade and investment may leaven the autarkic tendencies of
the Soviet system, invite gradual association of the Soviet economy with
the world economy, and foster a degree of interdependence that adds an
element of stability to the political relationship {2}.

Beginning in 1972, delegations of Soviet specialists came to the United
States to visit firms and laboratories associated with their
commissions. Line X, ever alert, populated these delegations with its
own people: in an agricultural delegation of 100 about one-third were
known or suspected intelligence officers. On a visit to Boeing, a Soviet
guest applied adhesive to his shoes to obtain metal samples. In another
episode, the ranking scientists and managers of the Soviet computer and
electronics industry obtained a visa for the specific purpose of
visiting the Uranus Liquid Crystal Watch Company of Mineola, Long Island
(a firm not among the Fortune 500).

Three days before the delegation's arrival, they requested an expansion
of the itinerary to include nearly all US computer and semiconductor
firms. This maneuver was done to observe (that is, collect) the latest
technology, and it was executed at the last minute so that the Defense
Department would not have time to object. It was legal - Line X had
studied our regulations and turned them to its advantage.

To acquire the latest aircraft technology, the Soviets in 1973 proposed
purchasing fifty Lockheed transports if the firm, then in financial
difficulty, would build and equip a modern "aircraft city" in the USSR.
A similar proposition was put to Boeing (it besieges the imagination to
ponder Brezhnev appearing from the cabin of an Aeroflot 747). Line X
practiced the venerable capitalist technique of playing off competitors,
and, from this bidding, the Soviets sought to gain technical data for
use at home. On a less lofty technical plane, in 1972 the Soviets
surreptitiously bought 25 percent of the US grain harvest, using phone
intercepts of the grain dealers' network to listen to both sides of the
market. The purchase led to higher grain prices for consumers, and
taxpayers provided for a 25-percent-a bushel export subsidy. Those of us
observing these arabesques began to question the USSR's total commitment
to the spirit of detente.


US Computer Export Policy

In late 1973, President Nixon asked his Council on International
Economic Policy to determine which computers and associated production
technology might be prudently sold to Communist countries. This study
was necessary because detente implied the expansion of commercial
opportunities with Eastern Europe and the USSR; a new and more liberal
set of COCOM rules was required to fit these prospects, however illusory
they may have been. Data processing was the most important product
requiring review. I was put in charge of the project, and I was also
made responsible for the broader problem of technology transfer. The
computer study was the first review of technology policy within detente;
it sought to assess the economic gain to the United States from computer
sales set against the national security risk from those sales.

Not surprisingly, the study concluded that the USSR was short of
computers and the means to pay for substantial computer imports. Our
analysis presumed that the Soviets intended to use their foreign
exchange to best advantage by purchasing the most powerful computers,
those that also held the most national security risk (large computers
were used for nuclear weapons calculations and cryptography). The report
concluded that the export potential for American data processing to the
USSR was small and the risk great if the more powerful computers were
allowed for sale. The study recommended raising moderately the power of
machines allowed for COCOM release, while at the same time restricting
the sale of technology.

Export of the largest computers was to be prohibited. In National
Security Decision Memorandum (NSDM) 247, 14 March 1974, US Policy on the
Export of Computers to Communist Countries, President Nixon approved
these recommendations, and they became the new export guidelines. As a
result, the Soviets were excluded from importing significantly powerful
Western computers, detente notwithstanding.

If the Soviets were to reach comparability with the United States in
computers, their engineers would on their own now have to create designs
and produce equipment. Line X would have to use its espionage resources
to supplement what could be developed at home. NSDM 247 eliminated the
West as an open source available to the Soviets, but Western
intelligence was unaware of the collection apparatus the Soviets had
deployed to obtain the technology.


Strong Suspicions and Skepticism

In the early 1970s, there were no US intelligence collection
requirements for technology transfer and scientific espionage, and few,
if any, reporting sources. But, by observing the behavior of Soviet
delegations visiting US plants and by keeping in mind the clever 1972
grain purchase, a few government officials began to suspect that a
master plan was in place to obtain our know-how. Direct evidence was
nonexistent - only anecdotal clues were at hand. In their intelligence
history, the Soviets could point to the success of the atom bomb spies,
and they also had to their credit collection against industrial
technology in Germany during the 1920s. After World War II, the Soviets
copied the American B-29 and the Rolls-Royce Nene jet engine (the copy
powered the MiG-15). Two former members of the Rosenberg network had set
up the modern Soviet microelectronics industry. Soviet intelligence was
professional at ferreting out science and technology and had the results
to prove it. The Soviets were adept at copying foreign designs. In the
style of Sherlock Holmes, the clues could almost speak for themselves:
the USSR was behind in important technologies, their intelligence was
accomplished at collection, and detente had opened a path.

Those suspicious of a Great Game in technology espionage found that the
US Government was not 221 B Baker Street {8} - we could make little
headway in persuading officials in charge of intelligence requirements
that the United States was facing a significant threat. We received
discouraging responses to our pleas for help: "No evidence" of a grand
design; "not usual Soviet practice"; "no requirements and no interest";
"no sources". It seemed to have escaped these authorities that having no
evidence does not mean it is not true. The system defied movement.

A few alert colleagues were dispersed among the executive departments.
In one episode, the Department of Commerce discovered a Line X effort to
obtain an embargoed computer through a dummy corporation set up for this
one transaction; officials intercepted the shipping container and
substituted sandbags. (A note was enclosed, but it would not be
politically correct to quote it.) In 1975, the Apollo-Soyuz spacecraft
docking was used to gain intelligence access to the US space program.
This project was conceived by the Nixon administration as part of
detente, and President Ford had no choice but to continue the effort. To
the consternation of NASA, a few weeks before the launch
counterintelligence suspected that one of the Cosmonauts was a KGB
officer who had been collecting away over the course of the project.


Presidential Interest

President Carter was the first chief executive to take an interest in
technology loss. During his administration, CIA had begun to report the
diversion of computers from the West into the Soviet defense complex,
and he wanted details. In response, the Agency assigned staff to this
endeavor and produced a more complete picture of technology loss than
had been available since the start of Directorate T.  Carter also
ordered the first comprehensive study of technology transfer,
Presidential Review Memorandum 31, a document that only distantly
addressed the threat from clandestine collection. It was largely a
missed opportunity, but Carter responded to the Soviet invasion of
Afghanistan by instituting sanctions, canceling several computer sales,
and stopping equipment destined for the Kama River truck plant.

President Reagan came to office intent on reversing what he saw as the
"window of vulnerability" favoring the Soviets in strategic weapons. He
also believed that the USSR's economy did not work and that the Soviet
system was on the way to collapse. His intuition led him to believe the
Cold War could be won. Joining Reagan's NSC staff were those of us who
thought similarly and entertained the idea that economic pressure would
have some effect. The NSC staff sought to fashion policies to take
advantage of the USSR's low productivity, its lag in technology,
oppressive defense burden, and inefficient economic structure. Reagan
was the first president for whom this line of thought would have been
even remotely acceptable.


A Defector in Place

Into the receptive climate of the Reagan administration came President
Mitterrand, bearing news of Farewell - that is, Colonel Vetrov. In a
private meeting associated with the July 1981 Ottawa economic summit, he
told Reagan of the source and offered the intelligence to the United
States. It was passed through Vice President Bush and then to CIA. The
door had opened into Line X.

Vetrov was a 53-year-old engineer assigned to evaluate the intelligence
collected by Directorate T, an ideal position for a defector in place.
He had volunteered his services for ideological reasons. He supplied a
list of Soviet organizations in scientific collection and summary
reports from Directorate T on the goals, achievements, and unfilled
objectives of the program. Farewell revealed the names of more than 200
Line X officers stationed in ten KGB rezidents in the West, along with
more than 100 leads to Line X recruitments {3}.

Upon receipt of the documents (the Farewell Dossier, as labeled by
French Intelligence) CIA arranged for my access. Reading the material
caused my worst nightmares to come true. Since 1970, Line X had obtained
thousands of documents and sample products, in such quantity that it
appeared that the Soviet military and civil sectors were in large
measure running their research on that of the West, particularly the
United States. Our science was supporting their national defense. Losses
were in radar, computers, machine tools, and semiconductors. Line X had
fulfilled two-thirds to three-fourths of its collection requirements -
an impressive performance.


Interest in Technology Transfer

Overnight, technology transfer became a top priority, rising from the
basement of Intelligence Community interest. CIA set up a Technology
Transfer Intelligence Center, and the Pentagon created groups to assess
damage and find ways to tighten technology controls. But careful study
of Farewell's material suggested that more than just a few committees
could come out of this wealth of intelligence. With the Farewell
reporting, CIA had the Line X shopping list for still-needed technology,
and with the list American intelligence might be able to control for its
purposes at least part of Line X's collection, that is, turn the tables
on the KGB and conduct economic warfare of our own.

I met with Director of Central Intelligence William Casey on an
afternoon in January 1982. I proposed using the Farewell material to
feed or play back the products sought by Line X, but these would come
from our own sources and would have been ''improved", that is, designed
so that on arrival in the Soviet Union they would appear genuine but
would later fail. US intelligence would match Line X requirements
supplied through Vetrov with our version of those items, ones that would
hardly meet the expectations of that vast Soviet apparatus deployed to
collect them.

If some double agent told the KGB the Americans were alert to Line X and
were interfering with their collection by subverting, if not sabotaging,
the effort, I believed the United States still could not lose. The
Soviets, being a suspicious lot, would be likely to question and reject
everything Line X collected. If so, this would be a rarity in the world
of espionage, an operation that would succeed even if compromised. Casey
liked the proposal.


A Deception Operation

As was later reported in Aviation Week and Space Technology, CIA and the
Defense Department, in partnership with the FBI, set up a program to do
just what we had discussed: modified products were devised and "made
available" to Line X collection channels. The CIA project leader and his
associates studied the Farewell material, examined export license
applications and other intelligence, and contrived to introduce altered
products into KGB collection. American industry helped in the
preparation of items to be "marketed" to Line X. Contrived computer
chips found their way into Soviet military equipment, flawed turbines
were installed on a gas pipeline, and defective plans disrupted the
output of chemical plants and a tractor factory. The Pentagon introduced
misleading information pertinent to stealth aircraft, space defense, and
tactical aircraft {4}. The Soviet Space Shuttle was a rejected NASA
design {5}. When Casey told President Reagan of the undertaking, the
latter was enthusiastic. In time, the project proved to be a model of
interagency cooperation, with the FBI handling domestic requirements and
CIA responsible for overseas operations. The program had great success,
and it was never detected.

In a further use of the Farewell product, Casey sent the Deputy Director
of Central Intelligence to Europe to tell NATO governments and
intelligence services of the Line X threat. These meetings led to the
expulsion or compromise of about 200 Soviet intelligence officers and
their sources, causing the collapse of Line X operations in Europe.
Although some military intelligence officers avoided compromise, the
heart of Soviet technology collection crumbled and would not recover.
This mortal blow came just at the beginning of Reagan's defense buildup,
his Strategic Defense Initiative (SDI), and the introduction of stealth
aircraft into US forces.


National Security Directive

On 17 January 1983, to define his policy for political, military, and
economic relations with the USSR, Reagan approved National Security
Decision Directive (NSDD) 75, US Relations with the USSR, a document
spelling out purposes, themes, and strategy for competing in the Cold
War. It specified three policy elements: containment and reversal of
Soviet expansionism, promotion of change in the internal system to
reduce the power of the ruling elite, and engagement in negotiations and
agreements that would enhance US interests. In economic policy, NSDD 75
highlighted the need to control technology; Farewell's reports had moved
those writing the Directive to put emphasis on preventing technology
loss, and the President had agreed (so a KGB defector working for a
foreign intelligence service put his stamp on a part of presidential
policy). Later in 1983, Reagan proposed the SDI, which Gorbachev and the
Soviet military took far more seriously than American commentators. SDI
would, if deployed, place unacceptable economic and technical demands on
the Soviet system. Even Reagan's 1983 "evil empire" speech had its
economic effect, for immediately thereafter the Soviet military asked
for a budget increase, this on top of already-bloated defense expenditures.

Two events beyond presidential control dovetailed with NSDD 75. The
Federal Reserve's restrictive monetary policy of the early 1980s led to
a fall in gold and primary product prices, sources of Soviet foreign
exchange. And the discovery of Alaskan North Shore oil contributed to
the 1986 fall in petroleum prices, cutting the revenues not only of OPEC
but also of the USSR. Coincident events and deliberate government policy
had the twin effects of adding to the burden on the Soviet system and of
shifting the superpower competition to advanced technology, where the
United States held a clear advantage.


Good-by to Farewell

About the time I met with Casey, Vetrov fell into a tragic episode with
a woman and a fellow KGB officer in a Moscow park. In circumstances that
are not clear, he stabbed and killed the officer and then stabbed but
did not kill the woman. He was arrested, and, in the ensuing
investigation, his espionage activities were discovered; he was executed
in 1983. CIA had enough intelligence to institute protective
countermeasures.

In 1985, the case took a bizarre turn when information on the Farewell
Dossier surfaced in France. Mitterrand came to suspect that Vetrov had
all along been a CIA plant set up to test him to see if the material
would be handed over to the Americans or kept by the French. Acting on
this mistaken belief, Mitterrand fired the chief of the French service,
Yves Bonnet {6}.


An Important Contribution

In 1994, Gorbachev's science adviser, Roald Sagdeev, wrote that in
computers and microelectronics - the keys to modern civil and military
technology - the Soviets trailed Western standards by fifteen years and
that the most striking indication of their backwardness was the absence
of a domestically made supercomputer. The Soviets considered a
supercomputer a "strategic attribute", the lack of which was inexcusable
for a superpower {7}. Line X did not acquire designs for such a machine,
nor could Soviet computer scientists build one on their own - and NSDM
247 had stopped Western help. As for Farewell, his contribution led to
the collapse of a crucial collection program at just the time the Soviet
military needed it, and it resulted in a forceful and effective NATO
effort to protect its technology. Along with the US defense buildup and
an already floundering Soviet economy, the USSR could no longer compete,
a conclusion reached by the Politburo in 1987.

When historians sort out the reasons for the end of the Cold War,
perhaps Farewell will receive a footnote. It would be deserved.


Notes:

{1} Kissinger, Henry A. White House Years. Boston: Little, Brown and
Company, 1979, pages 1, 142.

{2} Kissinger on detente. Thomas G Paterson and Dennis Merrill (Eds),
Major Problems in American Foreign Relations, Volume II, 1995, page 600.

{3} For a primary source from a former KGB officer, see Oleg Gordievsky
and Christopher Andrew, KGB: The Inside Story. New York, Harper Collins,
1991.

{4} Schweizer, Peter. Victory: The Reagan Administration's Secret
Strategy that Hastened the Collapse of the Soviet Union. New York: The
Atlantic Monthly Press, 1995, pages 187-90.

{5} Conversation with James Fletcher, Administrator, NASA.

{6} Porch, Douglas. The French Secret Services. New York: Farrar, Straus
and Giroux, 1995, page 448.

{7} Sagdeev, Roald Z. The Making of a Soviet Scientist. New York: John
Wiley & Sons, 1994, pages 298-301.

{8} http://221bakerstreet.org/
_____

Gus W Weiss has served as a Special Assistant to the Secretary of
Defense and as Director of International Economics for the National
Security Council.

https://www.cia.gov/library/center-for-the-study-of-intelligence/csi-publications/csi-studies/studies/96unclass/farewell.htm

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