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Gotham in the Russian-American SpyWar

January 27, 2015

Yesterday brought front-page news of the FBI’s arrest of a Russian businessman in the Bronx who, according to the information released by the Department of Justice, had been operating as an agent of Russian intelligence for several years, collecting mainly economic information in the United States.

The man in custody is Evgeny Buryakov (39), AKA Zhenya, while his co-conspirators, who have already left the United States, are named as Igor Sporyshev (40) and Victor Podobnyy (27), also Russian nationals. While living in New York, Sporyshev was serving with the Russian trade mission there, while Podobnyy was an attaché with the Russian Mission to the United Nations.

All three were in actuality officers of the Russian Foreign Intelligence Service (SVR). Sporyshev and Podobnyy were serving in “official” cover positions of the kind used by the SVR and its KGB predecessor for nearly a century, while Buryakov was serving in a “non-official cover” position, to use the verbiage cited by the FBI. That is, Buryakov enjoyed no diplomatic immunity, which is why he is in custody now; had the FBI managed to catch up with Sporyshev and Podobnyy there was not much they really could have done since those men enjoyed diplomatic protection. At worst, they would have been expelled from the United States — PNG’d in spy-speak (from being declared persona non grata).

To use proper Russian terminology, Sporyshev and Podobnyy were “Legals” while Buryakov was an “Illegal.” Such spies without official cover have long been the elite of the Kremlin’s espionage arm, a select cadre. During the Cold War they were legendary, not least because while Legals are relatively easy for the FBI, or any competent counterintelligence service, to detect — the odds of a Legal SVR officer being noticed as actually a spy during his or her tour as a “diplomat” in any Western country are high — Illegals are much more difficult to detect and neutralize.

Or rather, they were. During the Cold War, the KGB was careful to not “cross the streams” between their Legal and Illegal networks in the West much, if at all: associating with a Legal, who may be under surveillance, is a good way for an Illegal to wind up on the radar of the local security service. The massive roll-up of the SVR’s Illegals Network in 2010, which was a debacle for the Kremlin, was noticed by the media and the public mainly for the fetching Anna Chapman, red-headed Russian temptress extraordinaire, but represented a historic counterintelligence win for the FBI and the Intelligence Community.

Although the media had a good laugh at the Illegals Network, not seeing much important going on there, the reality was different. While it seems indisputable that several of the Illegals caught in 2010 were not up to the caliber of their predecessors of hoary Chekist legend, this has something to do with the fact that the SVR had to rebuild their networks abroad, which went to pieces after the collapse of the Soviet Union. Over the last fifteen years, Russian intelligence has rebuilt their spy networks worldwide, and sometimes getting spies in the field inadequately prepared, backed by flimsy covers, has been a problem, as the Kremlin values quantity as well as quality. It should be noted that Russian military intelligence (GRU) also has networks of Legals and Illegals around the world, separate from SVR espionage.

As a former counterintelligence officer obsessed with espionage against the West, Putin has pushed hard for SVR and GRU to “get in the game” and they have. Today, Russian espionage against the West, including numbers of operatives and the tempo of their operations, equals its highest levels during the Cold War. Not every operation is a win, as the Chekist-in-Charge is well aware. The sudden loss of the Illegals Network in 2010 was a major disruption and to fill the gap the SVR sent less-able officers like Buryakov to America, perhaps too hastily.

Our counterintelligence was on to him almost immediately. Many leads emerged from the Illegals Network takedown, in multiple countries, and many tantalizing hints, considering subsequent developments, remain officially unresolved. Buryakov did not help himself by meeting with Sporyshev and Podobnyy, but otherwise he had limited ability to communicate with Moscow Center, i.e. SVR headquarters.

The story of his work is standard spy stuff: covert communications, dead-drops, brush-passes, sometimes fumbling efforts to recruit American businesspeople and students. The main target of this SVR network in New York was economic espionage, particularly regarding the financial sector. They seem to have landed no big fish, but it needs to be kept in mind that the DOJ account of the Buryakov ring released yesterday is the unclassified version of the case which always omits much important detail. Russian espionage operations are seldom straightforward, while some defy real understanding for years, even decades.

Significantly, U.S. counterintelligence had an excellent look into this trio’s activities, due mainly to good SIGINT — since the greatest weakness of any spy is the need to communicate. Thanks to this, eventually the banker/spy Buryakov fell prey to a ruse when a slightly-too-good-to-be-true source emerged and he took a gamble that a savvier officer might have demurred from. But the source promised classified U.S. Government information, as well as casino goodies; of course, this source was actually under FBI control, a dangle.

As with the Illegals Network in 2010, journalists and commentators who are ignorant of Russian espionage tradecraft are blowing this story off as being of little consequence, even comedic. There is, however, nothing funny about this case. In the first place, it shows that the Kremlin continues to collect economic intelligence in the West, using various covers to steal information of many sorts. This is a big win for the FBI and U.S. counterintelligence, but luck was on our side here, and that cannot be counted on.

Moreover, Illegals have many purposes, including functioning as long-term sources to maintain agent networks in the event of war, when diplomatic facilities close and Legals get pulled home. Given the parlous state of relations between the West and Russia now, this is not a theoretical concern. The Kremlin, unlike most Western intelligence services, tends towards the long-view and worst-case planning with utmost seriousness.

Ominously, among the things Buryakov was looking to steal included very sensitive information regarding high-speed Wall Street trading, automated trading algorithms, and “destabilization of markets.” If that thought doesn’t worry you, you’re not paying attention. There is a bona fide financial and economic war being waged now between Russia and the West, and Moscow intends to win. The potential threat to remove Russia from SWIFT, the international banking information-sharing mechanism, has reduced the Kremlin to fits. Today Prime Minister Dmitri Medvedev promised that his government’s reaction to booting Russia from SWIFT, which would be tantamount to total financial isolation for Moscow, would be “unlimited” and not merely economic in nature. Western pundits are chuckling at the SVR’s missteps in New York today, but it may be Putin and his spies who get the last laugh here.

 

UPDATE: Over at CrossingWallStreet, Eddy Elfenbein — whom you should be following if you care about your financial future — has added his thoughts on the Wall Street side of this case, a must read.

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