How the KGB penetrated Australia's premier spy agency during the Cold War

A still from  the second James Bond film, From Russia with Love (1963). Source: Kinopoisk.ru

A still from the second James Bond film, From Russia with Love (1963). Source: Kinopoisk.ru

The KGB penetration of Australia’s premier spy agency during the Cold War continues to traumatise the Australian intelligence community and political leadership to this day.

It was the biggest spy scandal to rock Australia, but more than two decades later Australian leaders prefer to sidestep the issue. The penetration of the Australian Secret Intelligence Organisation (ASIO) by the KGB from the late 1970s until the early 1990s – and perhaps later – so traumatised the country’s intelligence establishment that even now the Australian government won’t talk about it.

In hindsight, Australia’s penetration was almost inevitable. Possessing a globe-girdling network of agents, the KGB was the most successful intelligence agency of the Cold War and ran rings around western spy outfits. Russia’s master moles in Britain – Kim Philby, Donald Maclean, Guy Burgess and Anthony Blunt, also known as the Cambridge Four – had devastated western intelligence. The KGB now wanted to complete the pincer by replicating its successes in Australia – a far-flung but key outpost of the Anglo-American empire.

The Aussies were no match for the sheer brilliance of the Russians. Oleg Kalugin, a former KGB general, writes in his memoirs ‘Spymaster’ that the KGB had developed excellent sources in Australia. “We had productive moles in Australian intelligence who passed us documents from the CIA and British intelligence, as well as providing us with information on subjects as varied as the peace movement and the Australian military.”

Unlike the US and Britain – which were intelligence-rich sources – Australia was sparsely populated, hot and dusty. It was targeted for its value as part of the Echelon intelligence gathering network shared by all countries of British descent.

In its mission Down Under, the KGB got invaluable support from its former British assets. Agents like Philby helped sift the good from the bad that was coming in from Australia. Although the KGB actively tried to recruit spies, its primary source of intelligence was volunteers who would offer to sell secrets for money.

Says Kalugin: “I also asked Philby for advice on operational matters and sought his opinion on whether certain ‘volunteers’ who had come to us were genuine or not. In one case, an Australian sent a letter to our embassy in Canberra, enclosing top secret documents and requesting that payment be made to a post office box in the capital. The anonymous volunteer promised to supply more information if we sent the money.”

Suspecting a setup by Australian security services, Kalugin and his officers debated whether to send the cash. The consensus was there was no harm in transferring the funds anonymously to a post office box.

“Thus began a fruitful relationship in which the volunteer (apparently someone in the Australian intelligence agency) supplied us with extremely useful information about ASIO and its American and British partners,” Kalugin says. “At some point, I showed Philby the Australian’s letters and the classified material he had supplied us. I had blacked out references to the country, to protect the security of the operation, but Philby quickly surmised that the volunteer was from Australia and was genuine. Eventually our Australian began passing on so much material that we set up a series of dead drops.... Although I lost touch with the operation after 1980, I don’t think the Australian ever was caught.”

 

Moles galore

There were at least four KGB spies in ASIO. They were all active at least until 1992 when Australia was tipped off by the publication of the Mitrokhin Archives by the traitor Vasili Mitrokhin, a KGB spy who scribbled classified information by hand and took his documents to Britain even as the Soviet Union was collapsing.

However, the episode remains so embarrassing to the Australian leadership that the investigations conducted to track down the spies are still classified. “We’re talking about hundreds of operations that were compromised,” a former minister told The Australian newspaper.

To be sure when a spy agency is penetrated to such an extent as ASIO was, red flags start popping up. The Americans grew suspicious, noting the Australian spooks’ singular lack of success through the 1970s and 80s in cultivating Russian agents. In March 1982, based on information supplied by KGB defectors, the CIA passed on proof to the Australians that their premier spy agency had been compromised.

Soviet and British spy Kim Philby. Source: Archive Photo: Rufina Philby, the Russian wife of the spy.

However, it was Mitrokhin’s information that finally led to the agent. According to The Australian, “One of the 20,000 pieces of paper Mitrokhin smuggled out contained the retirement date for the Canberra mole to whom Kalugin refers....Armed with his retirement date, ASIO could now identify the mole. To its dismay it was a senior manager, someone in a position to do enormous damage to the ASIO and its western allies.”

Suddenly much of ASIO’s past failures began to make more sense. This was probably the reason that whenever the Australians came close to recruiting a KGB officer, they would abruptly leave the country. “This person had full knowledge of the surveillance roster, they knew who was looking at who and when. Countless shifts were wasted at a cost of millions of dollars.”

 

Real James Bond works at the KGB

The key KGB officers responsible for penetrating the Australian spy agency were Geronty Lazovik, the KGB station chief in Canberra from 1974 to 1977 and Lev Koshlyakov, who replaced him but had a cover as the embassy’s press information officer. Dapper and sophisticated, they were a world away from the stereotype of the Soviet spy depicted in Hollywood movies.

Former ASIO agents still seem to be in awe of the KGB. “Lazovik was a star,” one of them told The Australian. “He was urbane and an agent runner.”

According to another agent, “Koshlyakov was one of the most dangerous KGB officers ever posted here. He ran rings around our teams.”

The only slip-up came in 1983 when the Australians became suspicious of KGB agent Valery Ivanov, the First Secretary at the Canberra embassy, and bugged his house. They discovered his growing friendship with David Combe, a senior member of the Labor Party, which was in power.

When Ivanov got expelled, he was “roundly castigated by Koshlyakov for going too far, too soon”.

 

Outing the agents

It is a measure of how brilliantly the KGB handled their Australian assets that ASIO could not gather enough evidence against their employee to guarantee a prosecution. He is said to have lived out his retirement in Australia and is now believed to have passed away.

Worse, up to three other ASIO officers who were suspected of leaking information to the KGB were retired on full pensions on the condition they never disclosed their story. It was operation cover-up on a massive scale.

However, the likelihood that there were more moles in the agency induced a state of paralysis in the ASIO. “The thing which causes more distress than any other thing to a security agency is a sense of unease or a belief that it may have been penetrated,” says former ASIO deputy director Gerard Walsh.

The controversy also impacted Australia in another way; it led the US to limit the intelligence it shared with Australia. For a country that hopes to replace Britain as America’s No.1 sidekick, that was a meltdown moment.

 

Endgame

Paul Monk, a former intelligence analyst with Australia’s Defence Intelligence Organisation, sums it best: “Surely the time has come to discuss this openly and say, ‘Look we did face a serious enemy and we did take some hits’.”

Considering how much American and British intelligence assets were compromised, the Aussies should be counting their blessings at having got off comparatively lightly.

 

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