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INTRODUCTION:
Industrial espionage is a significant issue today, costing global economies an estimated $500 billion annually. This illegal practice affects various industries, including technology and defence.
In the context of the Russia-Ukraine war, cyber espionage is particularly rampant, with state-sponsored actors targeting intellectual property and trade secrets.
Industrial espionage impacts national security because sensitive information can enhance the military capabilities of adversarial nations, influencing both Russia's war effort and Ukraine's defence strategies.
Industrial or corporate espionage is more frequently national in nature and takes place between businesses or firms, whereas political espionage is carried out or coordinated by governments and has an international scope.
Obtaining intellectual property, such as knowledge about industrial manufacturing, concepts, methods, and formulas, can be considered a kind of industrial espionage.
Alternately, it can entail the isolation of confidential or operational data, such as pricing, sales, marketing, research and development, policies, customer datasets, potential bids, planning or marketing plans, or shifting manufacturing sites and compositions.
It might cover things like trade secret theft, bribery, blackmail, and electronic spying. In addition to private companies, governments can be the target of espionage operations.
Why am I saying all of this to you?
A few days ago, a long-kept secret about Cold War-era political and industrial espionage came to light.
The US prohibited the transfer of "dual-use" technology, or goods having both military and civilian uses, to the Soviet Union for many years. That was the height of the Cold War. Sanctions intensified further after the Soviet invasion of Afghanistan at the end of 1979.
By the early 1980s, the FBI knew that the Soviet Union was in dire need of US-made microchips, which at the time were transforming a wide range of digital equipment, including military systems.
Moscow spies were hard at work, pilfering or secretly acquiring such dual-purpose technologies.
It was essential for Soviet space shuttles, air defence systems, ballistic missile programmes, and electronic espionage platforms.
The very reason the Soviets considered infiltrating Silicon Valley was to gain as much access to this technology as possible.
Moscow spies illegally obtained thousands of pieces of Western microelectronics worth hundreds of millions of dollars in the late 1970s, according to CIA estimates.
Despite the ongoing confrontation between Russia and Ukraine, Russian intelligence services continue to search the globe for prohibited American technology.
The current sanctions have temporarily restricted, but not entirely prevented, the flow of prohibited commodities. Russia has even surreptitiously imported appliances like washing machines and refrigerators in order to remove microchips for use in military hardware, according to reports.
Almost all countries engage in this practice. The nature of industrial espionage varies for each nation.
But circumventing technology-focused sanctions gives US and foreign intelligence services a chance to start extremely covert sabotage operations aimed at changing critical technologies before they get to their intended target.
US covert activity in this region has a long and sordid history.
A White House initiative to penetrate Soviet supply channels for technology may have resulted in the 1982 explosion of a major oil pipeline in Siberia.
Additionally, US intelligence services have been in charge of plans to destroy North Korea's missile capability and implant defective technology into Iran's nuclear enrichment and missile programmes.
However, the majority of sabotage activities remain hidden from public view, and little is known about their actual mechanisms.
The US intelligence services are currently looking at ways to break into Russia's illicit supply networks in order to halt their war machine, since relations between the two countries are at an all-time low—possibly the lowest since the 1980s.
In the green Cow Hollow district of San Francisco, an FBI agent named Rick Smith entered the Balboa Cafe early one morning in 1980.
He recognised a familiar face as he walked up to the bar to place his drink order—someone Smith had met a year prior.
Although the man was born in Austria, he lived in Silicon Valley and was an entrepreneur who served as a go-between for American software firms and European nations eager to acquire the latest high-tech goods.
Attempting to deal with the Soviets did not seem particularly suspicious at the time.
For instance, lawful trade between the US and the Soviet Union totalled $4.5 billion in 1979, of which $200 million was in high-tech goods.
Attempting to deal with the Soviets did not seem particularly suspicious at the time.
For instance, lawful trade between the US and the Soviet Union totalled $4.5 billion in 1979, of which $200 million was in high-tech goods.
But Smith was already "prepared" for this meeting; he had already tracked the Austrian.
Smith and the Austrian identified commonalities during their first meeting. The Austrian was a well-mannered, well-educated, and worldly man.
In addition to his native German, he was a proficient speaker of English and a keen skier.
Thus, throughout the discussion, Smith didn't need to say much to persuade the Austrian. That evening, over cocktails, the two began formulating a plan, which they refined over several meetings in the ensuing months.
Under the FBI's instruction, the Austrian volunteered to pose as a thief, willing to sell technology that was prohibited to the communist Eastern Bloc.
Operation Intering, a large, multi-year, transcontinental operation that had never been publicized before, was about to begin.
Moscow and its allies would receive the defective technology from the FBI and Austria.
Empty the Soviet bloc's coffers, reveal to American counterspies exactly what technologies they are pursuing, and expose their intelligence officials and covert American accomplices.
The Soviet Bloc would unintentionally purchase millions of dollars' worth of American items that had been tampered with by Intering. Communist spies, unaware of their deception, will receive a genuine parade in the Warsaw Pact capital as a reward for successfully securing this forbidden technology from the West.
However, as the operation gathered steam, it became riskier, risking more than just the Austrian's life.
Cooperation, careful preparation, and a little bit of luck are necessary for double agent operations to be successful.
The Bureau initially attempted to obtain its new assets by collaborating with a few gullible Soviet officials on board.
Naturally, this was easier said than done because Soviet diplomats and intelligence spies were always on the lookout for Western spies.
The Austrian was not a trained spy, so initially he needed some guidance from his FBI supervisors.
The FBI returned the Austrians to Vienna, the main Cold War espionage hub. Both Communist and Western officials could operate in the city with a certain degree of confidence and safety because it was neutral territory.
The Austrian arranged a meeting with the Soviet embassy and got ready to pitch state-of-the-art computer and microelectronics technologies in Moscow's Silicon Valley.
Initially, the Austrian drew little attention from the Moscow spies. Although they showed some curiosity, their main request was for secret information, which he was unable to provide.
The Austrian technology appeared to be of no interest to the Soviets, who instead gave it to their partners in the Eastern Bloc.
It was all charade, though.
The Soviets goal was to get the plan past their "allies" in the Eastern Bloc, not to obtain microelectronics or other banned technology.
The East Germans brought the Bulgarians, another ally from the Soviet bloc. However, American intelligence was aware that Moscow would be the final user of this prohibited technology.
Using its associated services, the KGB distanced itself from these technology transfer activities. As a result, the Russians were able to pursue other espionage targets with greater resources.
Moscow knew that Western nations did not scrutinize trade with Eastern European nations as much as with the Soviet Union.
The Austrian ties now offer a fantastic opportunity. The plan was for the Bulgarians, in collaboration with their Russian and East German allies, to acquire the banned technology, but not before the FBI took the initiative.
It took some time to get the business started, but by 1982, Intering was operating at full capacity.
It was more than the agency could handle. In collaboration with other foreign and US government organizations, technical specialists were required. To disrupt the parts en route to the Bulgarians, the FBI also needed to establish a specific location.
The key transhipment hub was London, where US officials intercepted and occasionally discreetly modified the hardware.
The operation took place across continents and nations. US officials received information from an East German electronics industry employee who was an undercover US intelligence source.
The primary route for supplies was through a technology broker based in the Netherlands.
The Bulgarians used a dummy business named INCO to import prohibited technology. One shipper's base was in Toronto.
Cosmotrans, a crucial intermediary for the Bulgarians, owned a warehouse in Zurich, Switzerland.
In certain cases, the cargoes seemed to straddle China.
Every nation's intelligence services were actively involved and working to the fullest extent possible.
Furthermore, the operation appeared to be a huge benefit for the Bulgarians and, implicitly, for their Soviet "overlords."
American intelligence had no trouble determining that the Soviets had intentions beyond simply pilfering or unlawfully acquiring Western microelectronics to integrate into their military gear. Their goal was to covertly imitate the whole computer industry in the United States.
In fact, by 1981, covert agreements between Soviet and Bulgarian intelligence services allowed Bulgarian spies to get high-tech, export-banned machine tools that were required by Russian firms to produce data storage devices and other modern manufacturing products.
The FBI started providing the Bulgarians with disc drive testing equipment in 1982. Thanks to these drives, computers can now permanently store and retrieve data.
The bureau mediated an arrangement to supply hard disc coating equipment to the Eastern Bloc through an Austrian business.
Additionally, the FBI sold crucial equipment for making magnetic drives—"servowriters"—to the Bulgarians in secret. In 1983, the FBI shipped a second cargo of servo printers to the Bulgarians at a cost of a quarter of a million dollars, despite the compromise of the first shipment.
The FBI sent $3 million worth of computer equipment to the Eastern Bloc in that same year.
The FBI was in charge of numerous such shipments. They quietly altered some of the technology before the Bulgarians could obtain it.
Some are useless at all.
The Eastern Bloc received part of it in its purest form to keep things moving forward and allay any doubts.
The manufacturers of this equipment were unaware that their products were being used in a transatlantic espionage game and sold to the Eastern Bloc, likely illegally.
It took a lot of work to execute the internship programme; FBI agents stationed in San Francisco could not do it on their own.
The enterprise was too big, too intricate, and too delicate to oversee from one office.
It was also necessary to involve Washington. Approval was required from the Department of Justice, the Pentagon, and the White House.
However, not every Washington player agreed with this. Even though a large portion of the equipment was unapproved, Defence Department officials were worried about delivering prohibited American technology to Moscow.
The government claimed that the Pentagon frequently viewed double agent technology transfer activities with scepticism.
To the uninformed, it seemed as though the FBI was giving America's geopolitical adversaries access to state-of-the-art technology.
Other technologies had to work if some components were compromised. There was always the danger, a genuine fear, that the operation meant to deter US rivals might unintentionally gain from the transfer of so much intact technology.
And what if some modified technology provided during the Intering wasn't sufficiently tampered with to stop its use, as some US officials fear?
The Bureau adapted technology in various ways.
During the lengthy travel to the Eastern Bloc, several experienced what seemed to be "accidental" wear and tear.
In other instances, when Soviet Bloc agents turned on equipment, the FBI would interfere with them, causing "accidental" voltage overloads.
Subdued forms of sabotage can gradually erode machine components or microchips, or create highly sophisticated instruments that require a high degree of precision but are barely noticeable.
In each of these instances, the agency had to hope that its sabotage efforts were successful enough to genuinely stop the shipments—if not successful enough to raise red flags.
What about technology, which remains untouched?
The FBI needed to provide the Soviet Bloc with high-tech equipment. After all, the Austrian needed to supply the right items to win over his "partners" on the other side to survive.
So, what were FBI officials thinking, and what was the right proportion of modified to unmodified technology required to keep up the pretence?
These operations have always entailed additional risks, including the potential for human casualties. The intelligence service could compromise such equipment, endangering innocent lives.
Just a few of the potential consequences of a burned-out electricity grid in the wintertime include road accidents, massive fires, and people freezing to death.
In the end, the FBI came to believe that the technology was intended only for the Soviet military and intelligence services, not for use in the infrastructure of the general public.
For his part, the Austrian had to stay under wraps and continually prove his credentials to his Soviet Bloc interlocutors, all the while fulfilling his obligation to supply subpar goods on behalf of a foreign intelligence operative that was interfering.
That threat quickly became more than just a theoretical worry.
By 1983, Intering was fully operational.
Two Bulgarian intelligence operatives, who oversaw the technology transfer operation on Moscow's behalf, were close friends with the Austrian. He received payment.
The credit for obtaining this state-of-the-art technology from the United States went to Bulgarian spies.
In celebration of their triumph, the Bulgarians put together a parade.
A real parade of the equipment they purchased from their Austrian service provider in San Francisco.
The FBI in London, however, tampered with the cargo. Everything was useless. "What we wanted to do was design a process, but give them fake stuff to discredit them," Smith explained.
The Bulgarian spy, overcome with embarrassment, insisted on meeting the Austrian in Vienna.
That's when the FBI began to receive alarm calls.
"They were furious," Smith remarked. "They informed him that either the FBI had compromised him, leading to the alteration, or he had been involved from the outset." He was involved right from the start.
Operatives from Bulgaria insisted that the Austrians come to Sofia for more discussions. Smith remembered that this was out of the question.
The Bulgarian side was more than just threatening empty words. It's uncertain what actions the Austrian and his Soviet allies might take if they agreed to travel across the Iron Curtain to Sofia. Bulgaria's adversaries faced danger even in the West; in 1978, Sofia's agents killed a well-known dissident in the streets of London while he was carrying an umbrella with a poisoned tip.
The FBI agent no longer posed a risk to the Austrian. He was revealed.
Operation Intering successfully planted sabotaged electronics worth millions of dollars to Moscow and its allies.
However, it was now finished.
Federal authorities in Southern California prosecuted a whole covert network of illicit technology exporters in 1983. The indicted individuals included two Californians who served as the network's American suppliers, a Dutch collaborator, and two government officials from Bulgaria.
A few years later, there was another such indictment against illicit technology exporters.
When Californian authorities dismantled these Bulgarian technology export networks, they made no mention of interference.
There was no mention of compromised computer hardware.
There was absolutely no mention of the Austrian.
And to those who collaborated closely with him, the Austrian remained a mystery, too, as if he were some sort of phantom presence, watching over these prosecutions with invisible eyes.
Why did he accept the FBI's offer to work undercover?
Even the bureau agents who handled the case are not fully sure why he did what he did.
Did he do this out of pure enjoyment and because, like the majority of Austrians, he despises Russians?
Operatives in the counterintelligence field are accustomed to dealing with a wide range of individuals, including mercenaries, altruists, benefactors, and honest and dishonest people.
In many ways, the Austrian served as an example.
However, FBI officials also understood that the Austrian was primarily concerned with his own objectives, which might not always coincide with the bureau's. The FBI couldn't track down all the foreign works from their source. That uneased them.
What if the FBI was unaware of the Austrian's business dealings with the Bulgarians or other nations in the Eastern Bloc?
However, throughout the entire situation, the Austrian performed admirably.
He made money twice: once as an FBI asset and again as an alleged Eastern Bloc spy, selling profitable but illegal high-tech products.
The Bureau ultimately awarded the Austrian around $100,000 for his services as a US intelligence asset. To them, it was well worth the expense.
He eventually made his way back to Europe following the end of the Cold War and made a sizable fortune there in real estate.
Finally, I'd like to know who the Austrian was.
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