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Feb 2, 2006 | 05:02 GMT

9 mins read

Russia: Implications of the 'Spy Rock' Scandal

By Fred Burton An espionage scandal erupted in Moscow in late January, with Russian officials claiming that British diplomats were using high-tech spying devices that they concealed in local parks and other public areas. The devices in question are fake rocks, hollowed out to contain what the Russians say was data-transfer equipment — used to store and transmit classified information. Considering where the fake rocks were located, it's not likely the technology was being used to eavesdrop on conversations that Russian officials or businessmen were having — unless, of course, whoever was being tracked was known to frequent certain outdoor spots consistently for important conversations. It's much more likely that the devices are what the Russians say they are: high-tech versions of a "dead drop," in which sensitive information is left in a pre-arranged location by one intelligence operative in order to be retrieved by another. On one level, the "spy rock" scandal is simply a reminder that the Great Game between Russia and the West continues: Espionage is a constant in global politics, and in this case there are more than a few throwbacks to the way the game was played during the Cold War. But at a deeper level, the incident — which has been played up by the Russian media — is an outgrowth of a significant shift currently taking place in Russia's foreign policy and overarching geopolitical strategy. Given the Kremlin's very real — and well-placed — concerns about the encroachment of Western influence on Russia's periphery, the "spy rock" case likely will have greater impact than might otherwise be expected, with consequences for political, security and business matters. So far, the incident has not resulted in a great deal of concrete action by either side — the British diplomats have not been expelled from Russia, although two Russians who supposedly were on their payroll were arrested on Jan. 28. However, coverage of the issue has run high in both the Russian and — to a lesser extent — British press. The Russian government retains a certain ability to manipulate the press, and it is logical to assume that — given a certain amount of sensationalism in the coverage and the underlying political dynamics — the issue is being played to the hilt by the Russians, and not necessarily because they are shocked by the behavior of the British. Under any circumstances, it is clear that the "spy rock" case will only add to the atmosphere of apprehension about Western intentions in Russia's sphere of influence. It is not clear to what extent, or for how long, the espionage case might color public statements by Russian or British leaders. But it clearly will have an impact on security and counterterrorism cooperation between the two countries, which — given the extremely close links between British and U.S. intelligence agencies — will spill over to the CIA as well. Even in the event that no serious breaches of state security occurred, the fact remains that gentlemen have been caught (at least allegedly) reading other gentlemen's mail, and there is a price that must be paid. Intelligence-sharing arrangements and the Russian Federal Security Service's (FSB's) relationships with MI6 and the CIA inevitably will be chilled, at least for a time. In practice, both sides could be hurt. The post-Sept. 11 alliance between Russia and the West — fraught though it has been with historical distrust and political tensions — has been important from an intelligence standpoint. Liaisons between intelligence and law enforcement agencies are crucial for sharing leads about potential terrorist threats and providing "best practices" guidance for counterterrorism operations. And in the Russian example, the interests of both sides converge when it comes to the Chechen militancy. In addition to the insurgency being waged against Moscow from the Caucasus, Chechen militants are active in Western Europe and other regions. Information gained by the FSB and other Russian security services can help officials track down militant cells operating in Western Europe or provide leads on Chechen criminal gangs operating in European cities. The overlap between Chechen militants and al Qaeda is another shared concern. The militancy in the Caucasus is part of the global jihadist movement: Chechen fighters have been known to operate in the Middle East and to have fought in Iraq against U.S. forces. These militants are also among the elite jihadists in Afghanistan. They have been deployed in personal security details for important insurgent commanders and as trainers for new recruits. Conversely, al Qaeda operatives have been active in the Caucasus, where they are believed to be linked to militant Wahhabists like Shamil Basayev. Given what's at stake, a complete halt in intelligence cooperation between Russia and the West is unlikely, but any disruption would be cause for concern. The Russians have scored some notable successes against the Chechen insurgents in recent months — causing extensive damage to their command-and-control networks — but the movement still poses a threat. And since the Chechens are waging their battle on Russia's home turf, Moscow stands to lose as much as, if not more than, the West if intelligence-sharing relationships suffer extensive or prolonged damage. That said, keeping tabs on some transnational terrorist groups could become more difficult for both sides, at least for a time. Meanwhile, multinational corporations and nongovernmental organizations (NGOs) operating in Russia may find themselves with a new set of concerns, which — though not directly emanating from the "spy rock" scandal — likely will be exacerbated by the fallout from it. Foreign businesses and NGOs already are operating under a cloud of suspicion in Russia, where the government has made no secret of its belief that many are fronts for NOCs (intelligence agents working under "non-official cover," or posing as private-sector employees or activists). Last May, the head of the FSB declared from the floor of the Duma that foreign intelligence services were working to undermine Russian influence in the FSU — and accused NGOs of playing a role in these plots. While it is one thing — indeed, quite a standard thing — for foreign diplomats or embassy attaches to be viewed as intelligence agents for their home countries (a perception clearly in play with the British diplomats in the "spy rock" case), it can be quite another when the government starts to scrutinize corporations, religious organizations and other private entities in the same light. Moscow is clearly on this path: On Jan. 10, President Vladimir Putin signed into law a controversial bill that requires NGOs to register with the Russian government — thus giving the Kremlin greater oversight of their activities and funding streams. The law has been criticized in the West as an attack on civil rights, but Putin insists that it is necessary to Russia's national security. The fact that Putin had signed the bill was not publicly disclosed for a week: The first reports appeared in Rossiiskaya Gazeta on Jan. 17 — following a visit by German Chancellor Angela Merkel, who was known to oppose the measure. It was a few days after that, on Jan. 23, when the "spy rock" scandal broke and the government was able to point to it as a means of justifying the new law. Another key aspect of the legislation is that it specifically gives Moscow power to suspend an NGO's operations in Russia if officials believe the group's actions threaten Russia's "sovereignty or independence." In plain English, that means NGOs have just become even more vulnerable to intimidation and manipulation by Russian government agents than they were before — and will be expected to conduct themselves accordingly. For multinationals and NGOs, the business environment in Russia already entails significant financial and security considerations. Organized crime rings — including the Chechen mafia, skinheads and corruption rackets among government and security agencies — are a fact of life. Last year, the country ranked near the bottom on Transparency International's Corruption Perception Index — tying with Niger, Sierra Leone and Albania at No. 126 (out of 158 listings). Shakedowns, requests for bribes or kickbacks, harassment and official obstruction are not uncommon. But as the climate of suspicion becomes more pronounced, the political pressures — and the costs of doing business in Russia — are likely to go up a notch. The employees and activists affiliated with multinationals and foreign NGOs are not entitled to the kinds of diplomatic protection that CIA operatives, diplomats or other government personnel enjoy in Russia. Given the risks already present in their operating environment, expatriates in these fields must be particularly sensitive to the political overtones of the moment. And if relations between their home and host countries have entered a particularly rocky phase, it might not always be possible to rely on Washington, London or other governments to intervene on their behalf if the Russians give them trouble. The political calculus on all sides can become much more complicated. It might sound strange — particularly given Russia's economic position and the past 20 years of Kremlin policy on Western investment — to state that a relatively minor espionage incident could affect profit and security considerations for foreign-based companies. After the fall of the Soviet Union, multinationals and NGOs frequently operated with wide latitude in Russia, and the government could be counted on to accommodate them when core interests were at stake. However, this has begun to change. During the past year — and with marked emphasis since the beginning of this year — there have been signs that Russia is rethinking its calculus and, as in the days before Yuri Andropov, now will be placing its geopolitical positioning and strategy ahead of economics or business relations. This is a deep and significant shift that will be felt, perhaps in some very unexpected ways, in a number of arenas. The "spy rock" scandal, in its own right, may be nothing more than a tempest in a teapot, but it also should be viewed in the context of Russia's deeper transformation. And in that light, it is a sign that the old ways of doing business very well may be coming to an end.

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