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KERRY O'BRIEN: For decades, these were the headquarters for the dreaded KGB. Until 1991 when the Soviet Union collapsed, the men in this building controlled one of the biggest and the most feared security services in the world. Tonight, one of its most senior generals, Oleg Kalugin, lifts the lid on his extraordinary 32-year career. He rose to be Chief of Counterintelligence overseeing a global network of foreigners prepared to betray the West. His revelation of a damaging mole recruited from inside Australian intelligence will raise paranoia levels in Canberra. The KGB Spymaster - that's our story tonight.

When former KGB Major-General, Oleg Kalugin, travelled to London last year at the invitation of the BBC, he believed that the Cold War had become history. But when he was arrested and detained upon arrival at Heathrow Airport on suspicion of masterminding the assassination of Bulgarian dissident, Georgy Markov (?) in 1978, he discovered that the legacy of the Cold War is far more potent than just memories.

Kalugin's life-long career as KGB spymaster, much of it spent under cover in the United States, is a fascinating case history of how the Cold War was fought from one of the most talented Soviet operatives of the '60s and '70s. He was the youngest general in KGB history until he fell foul of his masters. Woven through his new autobiography, aptly named Spymaster, is the story of the Russian infiltration of many Western governments and security organisations, including Australia's.

As well as the incompetence and paranoia that characterised the KGB and many other secret services, it's a story of blackmail, assassination, treachery and kidnappings. He dealt with many of the great spies of the era such as Philby, McLean, Walker and Burgess, as well as masterminding some of the most daring Russian espionage operations, including an attempt to bug the US Congressional Armed Services Committee.

Oleg Kalugin's book will be published in Australia later this month, and he joins us, now, from Moscow.

Oleg Kalugin, at the risk of seeming parochial when there's so much fertile soil to till, I'd like to start with your revelations about KGB infiltration of the Australian Security Intelligence Organisation, ASIO. You write on page 137 about an Australian who wrote to the Soviet Embassy in Canberra enclosing top-secret documents and seeking payment. According to your account, he developed into a very valuable mole. Now, when was that?

OLEG KALUGIN: Well, that was roughly 1977, and when he proposed, we - as usual - thought that that was some kind of another provocation, but since this was a mail-box offer by the volunteer, he suggested to correspond and he would put his classified stuff in the mail and we would send back our money. So we thought there was little risk of it and so we started the operation which indeed developed into a major intelligence event in the Western intelligence community because Australia was and is part of this very tight secret brotherhood of the CIA, the British MI5, the Canadians - and New Zealand, of course. And for that reason, a penetration into the Australian Security and Intelligence Organisation was a matter of priority.

KERRY O'BRIEN: How high grade was that information and to what extent did it include American and British intelligence?

OLEG KALUGIN: Well, the information covered all aspects of security and intelligence operations of Australia, partly of the United States and the United Kingdom. We would get papers related to the analysis and political assessments made by the ASIO. We would have operational material about the Soviets who were investigated by the Australian security and, in fact, we took some action, at that time, to withdraw some of the Soviets who were vulnerable to blackmail. In fact, we also managed to get some of the precious CIA documents which they provided for the Australians as well as the British who, as usual, were very friendly and very helpful to Australian Security and Intelligence Organisation.

KERRY O'BRIEN: And did that material include details of operations of Australian and CIA intelligence operations in the region, in parts of South-East Asia, for example?

OLEG KALUGIN: Well, as far as Australia was concerned, I think we had everything we wanted. As far as the United States and Great Britain, it was on a limited scale within the framework of brotherly, friendly exchanges. But since each country trusted each other, we had a fairly good glimpse into the CIA and the British MI5 and 6.

KERRY O'BRIEN: Did you ever ascertain the mole's identity?

OLEG KALUGIN: No. I never knew the identity and even had I known, I would have never said it anyway. This is the rule which I apply to my present-day operations, present-day activities. I never name the names because they would simply damage the reputation and lives of people who, at one time for different reasons, entrusted their lives to the Soviets.

KERRY O'BRIEN: Given the nature of the material, was it a safe assumption that he was operating from inside ASIO?

OLEG KALUGIN: Well, he was definitely operating from either analytical division of the organisation because he provided both intelligence and counter-intelligence information, and the quality of this information was top-notch. In fact, I always suspected that there might have been more than just one person behind him because of the wide range of his access to the classified information.

KERRY O'BRIEN: And as far as you were aware, his motivation was money.

OLEG KALUGIN: Yes, only - solely money.

KERRY O'BRIEN: You originally paid funds into a post office box in Canberra. Is that how you continued to pay and how much would you have paid in the time that you were still running the foreign counterintelligence department? Was it a great deal of money?

OLEG KALUGIN: Well, maybe some 50,000 bucks, perhaps. I mean, we would pay 3,000, 5,000 for each delivery.

KERRY O'BRIEN: But that, of course, was only in the period you were there and as I read in the book, it seems that you believe that his operation would have continued long after you'd gone and he was never captured, never caught, never exposed?

OLEG KALUGIN: Oh, yes. Well, not to my knowledge. When I left the intelligence in 1980, he was operational. He had very good access and, in fact, he was considered one of the valuable assets of the Soviet intelligence.

KERRY O'BRIEN: And you also showed some of this material to the British intelligence defector, Kim Philby, when it first came to you, to evaluate how genuine it was.

OLEG KALUGIN: That's correct.

KERRY O'BRIEN: And he was impressed, wasn't he?

OLEG KALUGIN: That's right. He was impressed and he identified immediately that he was an Australian. There was nothing about Australia and no reference to Australia, but he said the guy was an Australian which was really quite a surprise.

KERRY O'BRIEN: It is hard to believe that you would never have tried to identify this mole. Surely, in establishing his bone fides that would have been one of the first things that your operatives would have done?

OLEG KALUGIN: True. We tried to, but in my time we never found out.

KERRY O'BRIEN: Right. But eventually, you moved to dead-letter drops in terms of your contacts with him.

OLEG KALUGIN: That's correct. Mail was cut short after two or three deliveries. We just decided that dead drops would be a far better.

KERRY O'BRIEN: It's a treacherous world you come from, isn't it, a world of traitors and double-dealers on both sides; a world where you spent much of your time trying to exploit the weakness of others? Yet, looking back, you seem, still, to take pride in most of what you did?

OLEG KALUGIN: No, I did not try to hide anything.

KERRY O'BRIEN: No, no, no. I'm sorry. I'm saying you still seem to take pride in most of what you did.

OLEG KALUGIN: Well, I was part of the Cold War. I was a product of the Cold War mentality. I was a dedicated Communist and, at my time, I did my best to be successful. In that sense, I take pride, but if you look at this whole affair from a distance, from my position today, of course, I would have never joined intelligence - had I been younger, had I been a different person, had I lived in a different society.

KERRY O'BRIEN: You acknowledge a role in the killing of the Bulgarian dissident, Georgy Markov, in Britain in 1978. You described the three types of poison that were - I'll let you elaborate and put your context on it in a second. But for our audience, if I could just explain. You describe in your book the three types of poison that were considered for the job: a poisoned jelly rubbed on the body that produced a heart attack; poisoning his food or shooting him with a poisoned pellet. In the end, it was the pellet that got him, but for what? It would seem for a bit of harmless propaganda that Markov was broadcasting on the BBC that the Bulgarians didn't like.

OLEG KALUGIN: Well, as I explained in my book, my only role was the presence in Mr Andropov's office. Well, the matter was raised by the former Chief of Intelligence, Mr Kryuchkov, and Andropov, the former Chairman of the KGB, said then that he was absolutely against any political assassinations, and he was against any involvement of Soviet intelligence in someone else's problems, like Bulgarians. It was at Kryuchkov's insistence that, finally, Andropov agreed to co-operate, but only in instructing the Bulgarians and providing them with weapons, deadly weapons.

I did not go to Bulgaria. I did not instruct anyone. I did not give weapons to anyone, and I do not know, really, how the whole business was operated because there was no correspondence between Moscow and Sofia, at no time. You would find no traces of this murder in the Bulgarian or Soviet files. But when the whole matter was over - when the whole matter was over and we finally knew how it had happened, this is the story which I put in my book.

KERRY O'BRIEN: But the person who actually went, the KGB operative who took the poisons, the weapons, from the KGB laboratory in Moscow to Bulgaria and trained the Bulgarians in it, that person was answerable to you, wasn't he? Wasn't he one of your employees?

OLEG KALUGIN: That's right. That is correct. I had hundred of employees and he was one of them. He was in charge of intelligence security and knew a lot about these things, that's why he went. But I never denied and I don't deny it in the book that I do bear moral responsibility because I did not expose this foul affair at the time, but that would be simply a suicide, but the fact that I discussed it publicly and exposed it, as the first KGB or any other officer, and made it public knowledge is alone brought trouble to my shoulders, on my head, you know. I do not feel regrets about it. We have to tell the truth, how painful it may be, to us and to me personally.

KERRY O'BRIEN: When you were arrested at Heathrow last year, you basically pleaded that you were peripheral to it, didn't you, and that you were simply following orders?

OLEG KALUGIN: Well, that's correct, but my orders were simply to invite Mr Golaby (?) who was in charge of security to Mr Kryuchkov's office where he was told to go to the lab and do whatever was needed for the job, you know. That was not my order. That was Mr Kryuchkov's order.

KERRY O'BRIEN: Without causing offence, it sounds awfully close to the Nuremberg defence in the Nazi war-crimes trials, doesn't it?

OLEG KALUGIN: Well, let me explain then in more broad terms, and I think I tried to do it several times. The Soviet Union bears responsibility, the Soviet leadership, for all international terrorism wherever it occurred - in Europe or in Asia, elsewhere - because we trained the so-called national liberation fighters, freedom fighters. We instructed them. We gave them weapons; we gave them explosives. We wanted them to be active parts of the international liberation movement. Some of those guys would go their own way, extreme left or right, and they would start killings. In that sense, the Soviets never organised red brigades in Italy or in Japan or in Germany, but in a sense, because we did train them, because we did give them weapons, we all bear responsibility, and I do not deny my own responsibility in that sense in the affair of Mr Markov.

KERRY O'BRIEN: Okay. And you mentioned, in passing, that the poisoned jelly that was considered for Markov but passed off, was rubbed on the Russian dissident, Alexander Solzhenitzyn, in a Moscow store, but he didn't die; he just got sick. What was the purpose there?

OLEG KALUGIN: Well, as I mentioned before, Mr Andropov was very much against political assassinations, but he would not be against reducing the power and the impact of dissidents on Soviet public opinion. And in that sense, he would allow the KGB to do some dirty jobs on trying to damage the health of these dissidents, like Mr Solzhenitzyn. In fact, in my book, I describe a similar case which had happened earlier to Mr Sean Bourke from Ireland who was a friend of Mr George Blake. Before he left Ireland there had been some medicine administered to him.

KERRY O'BRIEN: Just to fill in on that. Bourke had helped George Blake to escape from the English prison where he had been put for betraying British secrets to the KGB. And the KGB - Sean Bourke had gone to Moscow with George Blake but the KGB learnt that he was going to leave the Soviet Union and go back to England, and so therefore, you poisoned him - not you personally - but the KGB administered some sort of poison which damaged his brain.

OLEG KALUGIN: That's right. That's correct. And which, well, eventually, resulted in his early death.

KERRY O'BRIEN: What was the subtlety in damaging this person's brain and allowing him to go back to England rather than simply killing him? What was the point?

OLEG KALUGIN: Well, the Soviets were always paranoiac about security, and they were afraid that Mr Bourke would give out to the British the whereabouts of Mr George Blake and, thus, would jeopardise his personal security. So to just exclude this possibility, they administered drugs to him which damaged his brain and apparently resulted in his amnesia or some kind of forgetfulness, and finally, his early death.

KERRY O'BRIEN: Then there was the Soviet naval officer, Nicolay Artomonov (?) who defected to America. You hatched a plan to lure him to Austria, to kidnap him across the border to Czechoslovakia to face a death sentence back in Moscow. That was in 1975. What happened, and how do you feel about it now?

OLEG KALUGIN: Well, Mr Artomonov was a naval officer in a Soviet cruiser and he - well, he betrayed his country. As a military man, he was sentenced to death by the military tribunal. The KGB's role was either to execute him or to take him back to Russia. He was given a chance to work for the Soviet Union when he was recruited and he agreed to do the job, but he deceived the Soviets twice, his own family, his own nation, his own people, and for that reason, his kidnapping, by all standards, was a thing which could be justified.

KERRY O'BRIEN: But it was a botch-up, wasn't it, because the sedative that he was administered to knock him out and get him across the border was an overdose and he virtually died in your arms as you were carrying him across, didn't he?

OLEG KALUGIN: Well, he died in the Czechoslovak territory after a heart attack which could be due to his stress as a result of kidnapping or could be partly due to the sedative which had been given to him before.

KERRY O'BRIEN: You seem to despise Artomonov and others who betrayed your side as traitors, yet you had great regard for Kim Philby, George Blake and others who betrayed their side. And in the case of Philby and Blake, they caused the deaths of scores of people that they identified. What's the difference between what Artomonov did to you, and what Philby did to England?

OLEG KALUGIN: No difference.

KERRY O'BRIEN: But you respected one and despised the other.

OLEG KALUGIN: Well, because we were enemies in the Cold War. We had our side. You had your own side. I understand entirely the reasons why Mr Kim Philby and the ilk are so strongly disliked, to say the least, or hated by the establishment in Great Britain and in the West in general, and this is quite understandable. For the same reasons, when the military officer defects in a time of war, defects to the other side, he is despised, hated, and is subject to a military tribunal with all the consequences.

KERRY O'BRIEN: When you talk about Yuri Andropov's distaste for killing, the impression I got from your book was that it wasn't so much a distaste on Andropov's part as more a concern that he didn't want to get into a kidnapping or a killing war, if you like, with the Western intelligence services, particularly the CIA. There was one instance where you wanted to kidnap a CIA operative in Beirut using Palestinians and he countermanded that. He said 'We don't want to get into a kidnapping war because they're bigger and better than us and they'd win it'. So it sounds less like distaste than a pragmatic decision.

OLEG KALUGIN: Well, Mr Andropov was a very pragmatic man. I would remember a case from Australia of the former chief of station in Canberra who defected to Australia in the '50s.

KERRY O'BRIEN: Petrov.

OLEG KALUGIN: His name was Petrov - that's correct. He was also sentenced to death in absentia and he was finally located in Australia some time in the late '70s. When the report was given to Mr Andropov with a request to carry out a sentence, he looked at his biography and said 'Listen, this guy is too old. Let him live. Find me new ones. I will then allow you to do the job'.

KERRY O'BRIEN: So was it you ....

OLEG KALUGIN: But Mr Andropov finally was either persuaded - or anyway he gave orders to kill the President of Afghanistan, Hafizullah Amin. That was a real political assassination performed by the KGB in 1979 when the Soviet elite groups trained by the KGB stormed the palace in Kabul and assassinated the President of this country. That was at Mr Andropov's order.

KERRY O'BRIEN: You supervised the efforts of American naval superspy, John Walker, for a number of years. You say that the amount of information he passed was staggering. How much real damage did he do to the Americans in the Cold War?

OLEG KALUGIN: Well, Mr Walker provided information vital to the national security of the Soviet Union. He gave us all the information relating to the United States atomic submarines. He would give us the possibility to track every nuclear submarine everywhere in the Atlantic and, subsequently, in the Pacific. And in the time of the conflict, the nuclear submarines would be the most deadly weapon because they could sneak to the Russian shores and fire missiles which would reach Moscow within minutes. In that sense, by reading all the traffic between the Navy headquarters in Norfolk and the Commanders in Chief of the Atlantic and the Pacific Fleet, we really kept our country safe from a nuclear attack in case of a nuclear war. And we would naturally be ....

KERRY O'BRIEN: Mind you, the Americans would argue that, at the same time, he was betraying their attempts to defend their country from nuclear attack by the Soviet Union. You also reveal a staggering level of KGB penetration of French intelligence in the '60s and '70s and beyond, at the highest level. I think at one point, you said when you were running things, there were something like a dozen top-level KGB moles inside the French intelligence services. How damaging was that and how many of those people have gone undiscovered, unpunished?

OLEG KALUGIN: Well, let me correct you in the first place. They were recruited, not in the '60s or '70s, but in the late '40s and '50s. They were those ideological spies who thought that the Soviets were the way of the future, and they were never detected to my knowledge, and in fact they grew up to become very influential and very significant members of the French intelligence and security - I mean, both organisations. Not to my knowledge has anyone ever been discovered.

KERRY O'BRIEN: Now, amongst the stories that you would regard as intelligence triumphs or coups for your side - and the Americans and the British would also have stories of their own mythology, if you like, of their triumphs - but there are also so many stories of bumbling incompetence in many of the world's intelligence agencies, are there not? Looking back on the massive Communist and Western intelligence efforts over the course of the Cold War, can either side in the intelligence war seriously claim to have played any concrete, significant part in the outcome?

OLEG KALUGIN: Well, the Soviets were very strong when communist ideology was strong. Once it started to erode after 1956, with the exposures of Stalin's crimes, the Soviet intelligence slowly has been losing its influence and its recruiting abilities. In fact, by the late '70s, the only ideological spies we could recruit were in Asia and Latin America - none in Europe or any other developed country, and money was the only instrument. The CIA definitely had a better score in the long run, both in the fact that the Cold War was won by the West though, in broad historic terms, it was won by both sides. But let's put it, say, suppose the West. But they were also better, not only in the Cold War business and victory, but also better in recruitment of Soviet personnel. If we, for instance, compare the number of penetrations the CIA made inside the Soviet intelligence and security organisations, there's nothing comparable to the Soviet penetration of the CIA or the FBI. The score is definitely in favour of the Americans.

KERRY O'BRIEN: The KGB is restructured now, of course, and the Soviet Union is no more, but is the KGB in its new forms really different? Can these kind of people really change - those that are still inside the system?

OLEG KALUGIN: They are different because they are no longer as omnipotent as they used to be. The organisation of the old KGB has been dismembered, dismantled. We have, today, five different organisations. None is capable of staging a coup d'etat. None is capable of totalitarian ways the old KGB had such a great experience in. But I must say, the old KGB has retained its psychological and mental dedication to the old order. In that sense, I would say, this organisation still represents the old past, and the reason is not so much simply ideology but also the privileges which they lost. The positions they held in the country are no longer valid. They have become just one of the bureaucracies and they feel painfully hurt and humiliated. For that reason, alone, they may be potentially dangerous to democratic processes in Russia.

KERRY O'BRIEN: And to what extent has Boris Yeltsin himself used them for political purposes?

OLEG KALUGIN: I don't think he trusts it so much as his predecessor, Mr Gorbachev, who actually fell victim of the plot engineered by his KGB boss, Mr Kryuchkov. Mr Yeltsin learned some lessons. He split the organisation as I said and he trusts, today, more perhaps, not the old KGB which is now called the Federal Counterintelligence Service, but rather his own guard - people who protect presidential security and who, in fact, are his trusted lieutenants at this time.

KERRY O'BRIEN: Is it true, as spy-watchers from the West claim, that much of the Russian intelligence effort now is devoted to industrial espionage, trading in economic and technological information, that they, in effect, are there as a money-making operation apart from anything else?

OLEG KALUGIN: Well, this is true, because the political intelligence, subversion, active measures which sapped much of the resources of intelligence - both the Soviet and the Western intelligence services - has now lost its significance. We are no longer interested in subverting of weakening the United States positions in Europe or Latin America and, in that sense, political intelligence has lost its importance. But technological espionage, industrial espionage, watching international terrorism, drug trafficking, points of potential military conflict - these are the missions of the intelligence services, both Russian, American and world wide.

KERRY O'BRIEN: Last question, but it's a long one. You knew Oleg Gordievsky, a KGB colonel who defected in the '80s. He's written a review of your book for the Spectator, which surprisingly is not unflattering. But he finishes with this comment, referring with your fall from grace with the KGB hierarchy in 1980, and I'll quote and he's talking about your motive in writing the book and in what you say: 'The inevitable conclusion is that Kalugin crossed over to the democratic camp and started criticising the KGB for revenge and from wounded vanity. If there is a path from which a former Soviet official must tread to change his psychology from communist autocrat to liberal democrat, then Kalugin has not even managed to go halfway down it, but neither has it been completed by the vast majority of contemporary Russian democrats'. What do you say to that summation, if you like?

OLEG KALUGIN: Well, let me say one thing. Mr Sakharov, one of the most respected persons both in Russia and the West, was an ardent supporter and an admirer of Stalin, but finally, he broke with the regime and became one of the foremost dissidents in Russia. Mr Yeltsin was a party secretary, a typical party functionary, and yet, he took the side of democracy. With all the weaknesses and errors he has been making on his way, why do they deny - and I do not talk about Mr Gordievsky because he has a special story; he betrayed his own country. I'm talking about other people from other walks of life. In the KGB. In fact, in the KGB, you might be surprised, there were far more liberals than in other walks of life in Russia because they knew better many of the things which ordinary Russians did not know. They had chances to compare things and they had chances to make their own decisions, which I made - though perhaps not in the '70s or '80s because you would never have heard of me then - but in 1990 when I felt that I would do my contribution and all my experience would be helpful to the democratic process in my country.

KERRY O'BRIEN: Oleg Kalugin, thanks very much for talking with us.