TECHNOLOGY PIRACY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-01070R000100690004-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 11
• Document Creation Date: December 20, 2016
• Document Release Date: March 9, 2007
• Sequence Number: 4
• Publication Date: May 5, 1983
• Content Type: OPEN SOURCE

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RADIO TV REPORTS, INC.
4701 WILLARD AVENUE, CHEVY CHASE, MARYLAND 20815 656-4068
PROGRAM American Interests STATION WETA-TV
PBS Network
DATE May 5, 1983 10:30 P.M. CITY Washington, D.C.
Technology Piracy
WILLIAM SCHNEIDER: Today there continues to be a
serious threat to our national security from Soviet technology
piracy, in which an increasing one-way stream of U.S. technology
is moving to the Soviet Union.
PETER KROGH: The Soviets are modernizing their military
through a vast flow of high-technology from the West. The
Administration calls it a hemorrhage that must be stopped. But
critics say the government is overreacting with policies that
will cripple U.S. industry's hottest exports and blunt America's
edge on the newest frontier of world trade.
REP. DON BONKER: For some people, it's a hemorrhage.
To others, it's harassment of the business community.
KROGH: The Soviet military bloc has an edge over the
West in sheer numbers, fielding more troops, more tanks, more
planes, more missiles. The Western Alliance confronts this
challenge with superior technology. Its arsenal is more advanc-
ed, its weapons presumed more effective, many of them combat-
proven on the battlefields of the Middle East. It is through
this primacy in technology that the West maintains the balance of
military power.
RICHARD PERLE: In the last several years we have
suffered a serious loss of technology from the West. This has
shown up in the form of the increasing sophistication of Soviet
military equipment.
KROGH: Alarms about growing Soviet military might are a
standard feature of Washington's politics. How serious is this
threat? Very serious, according to the Democrats on the Senate
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Investigations Committee. They found that priceless U.S.
technology has made its way to Moscow, contributing to giant
strides in Soviet military strength. Ominous, accoding to the
intelligence community, whose first detailed study of the loss of
strategic technology revealed, quote, Western technical superior-
ity is eroding, as the Soviet Union and its allies introduce more
and more sophisticated weaponry, weapons that all too often are
manufactured with the direct help of Western technology.
Among the examples cited were a new scheme for hardened
missile silos, clearly patterned after American designs; the
rapid development of the Ilyushin-76, a large military transport
with obvious similarities to the American C-141; and catapult
systems like those used on American carriers, common throughout
the West, but, to quote the CIA, beyond Soviet naval experience.
In fact, much of the technology the West takes for
granted is beyond Soviet capabilities. According to one official
charged with frustrating Moscow's acquisition efforts:
WILLIAM VON RAAB: Right now the Soviet Union is
incapable of fulfilling its own ambitious military production
goals. They know they need Western technology, and know specifi-
cally what technology they need.
KROGH: In other words, Western technology is a neces-
sity for the Soviets, not a luxury. The CIA's national intelli-
gence officer for science and technology explains why.
JAN HERRING: Although the Soviets do have good scien-
tists and engineers, their political-economic system is not
conducive to technological innovation.
Take a look at the civil sector. Their oil and gas,
their chemicals, their agriculture, and even their automotive
industry requires large amounts of Western technology to be
productive. In fact, the military sector in the Soviet Union
even needs higher levels of technology to produce the high-
performance weapons that their military planners demand.
KROGH: Technology requiring an investment of hundreds
of millions of dollars and years of research, except that the
Soviets have found a shortcut.
SCHNEIDER: The Soviet technological gains obtained
through a carefully crafted acquisition program are providing
them with significant savings in time and money in their military
research and development programs, rapid modernization of their
defense industrical infrastructure, the closing of gaps between
our weapons systems and theirs.
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KROGH: As a requirement for military modernization,
Moscow's pursuit of Western technology is not left to chance.
According to the CIA, the Soviet effort is massive, well-planned
and well-managed, a national-level program approved at the
highest party and governmental levels.
In this CIA diagram of the Soviet bureaucracy, all the
ministries in blue are known to be heavily involved in procuring
Western technology, six ministries in all, employing as many as
20,000 party cadre in such work. At least one entire ministry
does nothing but pursue technology from the West.
DR. IGOR GLAGOLEV: The State Committee on Science and
Technology [unintelligible] depends on studies, is devoted almost
exclusively to the acquisition of Western technology and...
KROGH: Before he defected in 1976, Dr. Glagolev was an
adviser to the Soviet Politburo and the Central Committee of the
Communist Party, as well as a section director in the Academy of
Sciences. Based on his experience, he told Congress to ban the
transfer of all technology to the Soviets.
DR. GLAGOLEV: All kinds of technology which are
required from the West are used first of all for the military
purposes and for the purposes of the KGB, because these two
situations have the first priority in the Soviet Union.
KROGH: It is the KGB, the Committee for State Security,
which oversees the entire Soviet effort to acquire Western
technology. It is a responsibility not likely to be diluted now
that Yuri Andropov, former head of the KGB, presides in the
Kremlin.
VON RAAB: Their success, until lately, has been
alarming for us, but certainly most gratifying for them. They
have acquired computers, lasers, guidance and navigation systems,
structural materials, and microprocessors, just to name a few.
But all their acquisitions have two things in common.
They have military value and they were acquired with relative
ease.
KROGH: In fact, some of Moscow's most valuable acquisi-
tions have been obtained openly and legally through trade by
purchasing items ostensibly for civilian use and diverting them
to the military. Three examples:
In 1972 the Soviets scored a major breakthrough in missile
accuracy by purchasing American machinery to manufacture indus-
trial ball bearings, the kind of high-speed precision ball
bearings that are also critical to the development of ICBM
guidance systems.
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A few years later, Japan sold the Russians two huge
floating drydocks, quite beyond the production capability of any
Soviet shipyard. The Russians diverted them to the servicing of
their newest aircraft carriers.
And then there was the Kama River truck plant, the
world's largest and most sophisticated, built with American
technology and credit. In 1979 the Soviet Army invaded Afghani-
stan on the wheels of American know-how.
It was Afghanistan which promoted the first U.S. efforts
to ban the sale of all advanced technology to the Soviets. But
the legal trade of technical hardware is only one source of
technology for Moscow. Raw scientific data is another. As the
CIA points out, an open society provides countless opportunities
for information-gathering.
HERRING: From the hundreds of cases of military-
significant technology that we have studied, we have found that
something of the order of 70 percent had been acquired by Soviet
intelligence operations, both overt and clandestine. On the
other hand, we believe that the remaining 30 percent of the
acquired military-
significant technology is just as important. It comes from open-
source publications, from student exchanges, and from just the
uncontrolled sale of technology on a worldwide basis.
KROGH: What they cannot buy, the Soviets can often
learn about in other ways. Critical information is readily
available at scientific trade fairs and professional gatherings,
in popular magazines, technical journals, and government publica-
tions, and through the Freedom of Information Act.
SENATOR SAM NUNN: What I think is ridiculous is that
our Freedom of Information Act is now so broad that if Qaddafi of
Libya wrote in and demanded of the government that he be given
access to certain unclassified information, he could get it. If
Andropov, the head of the Soviet Union, wrote in and signed his
own name and title, under our Freedom of Information Act, he is
absolutely entitled to it.
KROGH: Finally, according to Dr. Miles Costick, an
expert on Soviet industrial espionage, the Soviets tap univer-
sities and private research institutes.
DR. MILES COSTICK: For instance, Massachusetts Insti-
tute of Technology was one of the principal targets because it is
known as a defense contractor and doing classified work for the
United States defense community. The inertial navigation system
for the United States intercontinental ballistic missiles and
intercontinental bombers was developed in the mid- and late '60s
at the MIT.
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KROGH: The prime concern of the intelligence community,
however, lies elsewhere.
HERRING: There has been some military-significant
technologies acquired from our universities. But in the most
part, it's been a very small part of this transfer flow.
KROGH: The real hemorrhage, fully 70 percent of what
the Soviets acquire, is the result of espionage.
October 1982. The Swedish Navy searches in vain for
what it thinks is a Soviet submarine prowling near a highly
classified military base. The sub eludes them. The reason,
according to one authority, is that it was a new mini-sub with
some extraordinary characteristics.
DR. COSTICK: One of them was that it could dive deeper,
all the way to the ocean floor, at depths which no military
submarine could have ever reached.
Number two, those submarines, being small and not having
magnetic properties, could not be detected by the traditional
anti-submarine warfare technology.
KROGH: Such a submarine does exist. The technology was
developed for civilian deep sea research by an American firm,
then purchased by a Canadian company. By law, it could not be
exported to the Soviet Union. But the Russians got hold of it
anyway.
DR.COSTICK: How were they able to acquire this techno-
logy? Well, they have gone to the firm and made an offer which
was difficult to refuse. They were prepared to pay several times
the price. However, the export license which was required for
such a submarine and such a technology was denied. The Soviets
set up a dummy firm in Switzerland. And export of such an item
to Switzerland would not be controlled because Switzerland is not
a controlled country. That particular firm came and bought this
submarine from the Canadian firm. It was dismantled, placed into
crates, shipped via air freight to Zurich, Switzerland, where it
was immediately re-routed to the Aeroflot -- namely, the Soviet
government airlines -- and shipped to the Soviet Union.
KROGH: The U.S. to Canada to Switzerland to Russia.
Such diversion schemes are all too typical, according to the
Commerce Department's new Office of Export Enforcement, which is
trying to stop them.
THEODORE WU: The Soviet Union and the East Bloc
countries, individually and collectively, want to get their hands
on U.S.-origin and other Western-origin technologies. And we can
see
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that especially in the last couple of years that the number of
suspected illegal transactions, as well as clearly unlawful
export of controlled technologies, are on the rise.
KROGH: As a former U.S. attorney in California,
Theodore Wu had his own close encounter with such practices. In
1980 he helped convict the president of an optical company who
sold laser mirrors like these to the Russians. They look
harmless, but they're similar to those developed for the Air
Force flying laser laboratory for experiments in anti-missile
defense systems. In this case, the initiative was taken by an
American businessman.
aggressive.
But usually Soviet agents have to be more
WU: They gave so-called shopping lists as to what
items
they
want
to get and when they want to get these items, how
much
they
are
willing to pay to get these items. And indeed,
they
have
very
good information as to who manufacture some of
these
items and where these manufacturers are located, and
what
security safeguard, if any, do these manufacturers have.
KROGH: The current Soviet shopping list includes
advanced computers; microelectonics, including machinery for
manufacturing high-speed integrated circuits; and, of course,
laser technology for the development of Star Wars type anti-
missile and anti-satellite systems.
This is the world of high technology. And in the United
States, two regions in particular have become centers of high-
tech industry, the East Coast between Boston and Washington,
D.C., and the West Coast, especially a 30-mile strip just south
of San Francisco known as Silicon Valley. Nearly 1500 companies
are clustered here, including some of the largest in the high-
tech field. This is the home of the silicon microchip, perhaps
the epitome of what is called dual technology. Dual because
microchips are not only the brains of civilian calculators and
computer games, but of the most advanced weapons, as well.
Advanced military technology, reflecting its dual
civilian and military use, is now developed by private companies,
often operating in vulnerable industrial parks like these rather
than in closely guarded government plants. Ask anyone who
believes there is a technology hemorrhage where it starts, and
the answer is the same.
SENATOR NUNN: I think the greatest area is probably in
the private sector and in areas where the Department of Defense
is not directly involved.
HERRING: These companies oftentimes are not capable of
protecting themselves against the HUMINT penetration operations
of the Soviet bloc.
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KROGH: Until very recently, most private companies paid
little heed to security measures. So as much as $20 million
worth of microelectronic gear has been stolen each year just from
California's Silicon Valley alone. Much of it ends up on the
black market or in what local police call a gray market of semi-
legal trade. But for the Russians it's often more like a
supermarket.
For example, Werner Bruckhausen, thought to be an East
German agent, funneled an estimated $9 million worth of electro-
nics to the Soviet bloc by purchasing large quantities of such
stolen goods. He smuggled them out through a network of phony
corporations, part of an international web of some 400 dummy
firms spun by the Soviet bloc throughout the West.
There are also more traditional espionage cases. Marian
Zakarski was a Polish spy masquerading as vice president of a
firm owned by the Polish government. He enticed and bribed
William Bell, a disenchanted engineer at Hughes Aircraft, into
divulging critical information on America's newest warplanes,
like the F-15, the B-1 bomber, the Stealth bomber, and several
types of missiles.
The Pentagon estimates that Moscow meets 50 percent of
its needs for strategic technology through espionage conducted by
3000 special field agents. For the FBI, it's an increasing
headache.
EDWARD O'MALLEY: Not only are the activities by the
Soviets increasing, but the activities of their surrogates here
in the United States -- and when I say surrogates, I mean the
Eastern European intelligence services -- are on the increase
also.
JOHN MCGUIRE: His story was that he was a Belgium
businessman doing business in Russia, and they were pressuring
him for a long time.
KROGH: John McGuire was the target of what started out
as an indirect approach by the Soviets. McGuire is president of
a Virginia-based firm called Software A.G. of North America,
which produces computer programs for classified use. The key to
unscrambling these programs is called a source code.
MCGUIRE: It's analogous to the chemical formulas or a
Coca-Cola formula. You can drink the Coke, but you don't
understand what the process was to produce that liquid.
KROGH: Among the customers for McGuire's system are the
CIA and the Marine Corps. The Russians wanted McGuire's source
code.
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MCGUIRE: It would save them ten years in understanding
the most advanced version of data base management. It would have
collapsed the time necessary to achieve that sophistication on
their own computers.
KROGH: McGuire was offered nearly half a million
dollars for the code by a Belgian, Mark Degeiter, who admitted
he'd sell it to Moscow. McGuire called the FBI.
MCGUIRE: Under guidance of the FBI, they got a court
order, they tapped my phone, they put a video camera in my
office. We were trying to get Degeiter to come in here and
discuss the situation. He was flitting around the country and
over in Russia and Europe, out in Silicon Valley in California.
And so I had a lot of phone conversations with him over that
period of time, maybe 30 or 40. At which point, we were negotia-
ting. For example, he wanted me to deliver the source code in
Belgium and get paid off in Switzerland in cash. And, of course,
the FBI wanted the transaction to take place under surveillance
in the United States, so that we could apprehend him.
KROGH: Because of McGuire's cooperation and persever-
ance, the FBI finally nabbed Degeiter. But at FBI Headquarters,
the realization that such cooperation is far too rare and
industrial security much too lax led to DECA, Development of
Counterintelligence Awareness, a program to alert more than
11,000 private firms with defense contracts to the danger of
espionage.
O'MALLEY: It's a program where, having identified these
firms, we'll go out and we'll talk to them. We'll talk to them
about our own responsibilities in the counterintelligence area
and how they can be of assistance to us, and perhaps how we can
be of assistance to them. And we'll also tell them about the
threat posed by the intelligence services of the hostile coun-
tries and others.
KROGH: But the FBI's DECA program is only a small part
of the government's plan to halt technology leaks, and the only
part that isn't controversial.
VON RAAB: Through Operation Exodus, the United States
has begun the first major systematic effort to keep critical
technology out of the hands of potential enemies, while facili-
tating trade and commerce with trading partners abroad.
KROGH: There are some 300 ports, airfields and roads
through which to smuggle technology out of the United States.
Exodus is trying to cover all of them, including Baltimore
Harbor. It's a new rule for Customs, which traditionally
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monitors what comes into the country. Now nearly 300 special
agents and inspectors are keeping tabs on what goes out.
But dockside inspections are only a part of the opera-
tion. Like the FBI's DECA program, each local office is respons-
ible for checking out nearby companies, to educate them and
gather information about them.
Senior inspector Steven Knox explains how it's done.
STEVEN KNOX: We go through the exprt register item-by-
item. We will go through communications systems item-by-item.
Here's one which manufactures underwater communications
systems. Our primary question would be, "What is the sophisti-
cation of the underwater communications system?" because it could
be such things as for submarine use, obviously, for naval use.
We will go out. We will pay them a visit.
KROGH: The Exodus program is the cutting edge of a
campaign to control the illegal export of high technology. It is
also a magnet for controversy. Congressman Don Bonker tried to
close down the Exodus program in Seattle and Portland when
exporters complained that legitimate shipments were being
subjected to costly delays.
REP. BUNKER: Opeation Exodus is a new and, I think,
unwarranted dimension to the enforcement program under the Export
Administration Act. There was no Operation Exodus a few years
ago. It was conceived in the White House and funded by the
Department of Defense. And now they're coming to Congress,
asking for $30 million to carry out an enforcement function that
is already being implemented by the Department of Commerce.
KROGH: But when it comes to deterring illegal exports,
the Commerce Department has not done its job, according to
critics, who charge that because the department's main function
is to promote trade, it is ill-equipped and uninclined to police
its own customers, the export industry.
Commerce has responded to this charge by creating a new
Office of Export Enforcement, headed by Theodore Wu, who has been
defending his efforts before Congress.
WU: And we are now well on the way to becoming a highly
specialized, trained export enforcement investigative arm that is
well supported by intelligence operations.
KROGH: But Wu has not pacified the critics, including
Senator Sam Nunn, whose 18-month investigation of technology
leaks led him to propose transferring all law enforcement
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functions to Operation Exodus and its experienced personnel from
the Customs Service.
SENATOR SAM NUNN: So this is right up the alley of
Customs. It's what they've been doing for years and years. And
I think it makes all sorts of sense to put law enforcement
functions in an agency that has law enforcement history and
background and capability.
KROGH: The trade industry has been aroused by the
Exodus controversy, knowing that it masks a profound policy
dispute over export controls now being fought out within the
Administration.
FILM NARRATOR: CBEMA, the Computer and Business
Equipment Manufacturers Association, is the voice of our industry
in Washington, D.C.
KROGH: Trade organizations such as CBEMA are fighting
rigid export controls that they fear will squeeze them out of the
world market without impairing Moscow's access to advanced
Western technology.
FILM NARRATOR: Remove export barriers for all products
and services that are not subject to genuine national security
interests.
KROGH: They are especially upset by the Administra-
tion's failure to revise the Pentagon's list of critical military
technology, items barred from export because of their supposed
strategic value. Critics claim the list is too big, too incon-
sistent, and simply unrealistic.
Dr. Hylan B. Lyon, a CBEMA spokesman, formerly served as
White House Science Adviser to four Presidents.
DR. HYLAN B. LYON: Anything can be used for military
purposes. All technology in the U.S. is used by the military.
What you have to do is decide which items make a significant
contribution to the Soviet military. The weight of evidence is
that a minicomputer or home computer won't make a significant
contribution.
KROGH: Even some of the strongest supporters of tighter
controls agree.
SENATOR NUNN: The government has to have credibility.
And to have credibility, we have to have a list that's narrow
enough that businesses believe that we really do know what we're
doing. If the list is too long, if the list contains many items
that can be purchased off the shelf, so to speak, in this country
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or in other countries, then, to that extent, businesses get
turned off.
KROGH: Moscow's access to advanced technology from
other countries is a turn-off to American businessmen faced with
stringent export controls. They point out that U.S. efforts to
block construction of the Soviet gas pipeline failed precisely
because France, Germany, and other members of the West's Coordi-
nating Committee on Trade, called COCOM, refused to withhold
their own technology from Moscow.
DR. LYON: You can make the assertion that almost any
technology that the U.S. has also exists within COCOM. So if the
Soviets want to acquire Western technology, they can acquire it
from any one of those sources.
REP. BONKER: If we're going to say to a U.S. manufac-
turer, "You can't export because this is a dual-use item," or
whatever; and France and Japan and England and West Germany and
other countries don't comply with similar license requirements,
then the only result of the program is to injure U.S. industry.
KROGH: U.S. industry is concerned that the Admini-
stration is trying to launch an all-out economic war against the
Soviet Union. They don.'t think such a war can be won. They
don't think they should be used to fight it. But they fear that
high technology, the U.S. trump card in the highly competitive
world of international trade, can be squandered by restricting
instead of promoting exports.
But the final battlefield will be in Congress, as it
moves toward renewal of the Export Administration Act, which
expires in the fall, legislation which, unexpectedly, is becoming
a focal point of U.S. policy toward the Soviet Union.
REP. BONKER: There are hawks in the Congress and hawks
in the Administration who would like to see a cutoff of almost
all our high technology, who have rather paranoid sentiments
about the so-called hemorrhaging of our technology.
SENATOR NUNN: The whole thing is, you're not paranoid
if they're really after it. And I think the Soviets really are
after our technology.
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