Counterespionage during the Hawke Government, 1983–1989

Espionage was seemingly everywhere in 1983. Played out over the nation’s airwaves and in its broadsheets, there was an almost continuous deluge of spies being uncovered by the world’s intelligence services. In February, just before the Australian Federal election, the international press reported the arrest in Rome of a Soviet Aeroflot official and his Italian counterpart after they were found with ‘highly important strategic material’.1 Then, on 12 March, the day after Bob Hawke was sworn in as Australia’s 23rd prime minister, the Canberra Times ran a story about the expulsion of an American diplomat from Moscow after he was caught ‘redhanded with secret communications equipment’.2 With an eye to the sensationalist British spy stories of the past, the bordering column reported on the death, aged 69, of the Cambridge-educated diplomat turned Soviet mole Donald Maclean.3 Two weeks later, another of the Cambridge spies, art historian and former MI6 officer Anthony Blunt, also died.4 Revelations of espionage did not stop there. In the first week of April, two Soviet diplomats and a journalist were expelled from London for spying; another four Soviet diplomats quietly left Madrid after being likewise accused; in Munich, the secretary of an air force commander was sentenced to three years’ gaol for spying for East Germany; and France expelled 47 Soviet diplomats and officials for ‘gathering French military, scientific and industrial secrets’.5 But what about Australia, asked one commentator: how was it that no Soviets had been expelled from Canberra, ‘the city of spies’, for decades?6 The inquisitive columnist did not have to wait long. Later that month, the Australian Government declared Valeriy Ivanov, a KGB officer posing as a diplomat at the Soviet Embassy in Canberra, persona non grata and gave him seven days to leave the country.7

The period covered in this chapter, 1983–89, was a complex time for Western intelligence services. There were some failures. In 1984, an MI5 officer from the MI5–MI6 joint section, Michael Bettaney, was sentenced to 23 years’ imprisonment for offering classified information and his services to the KGB.8 In the United States, the press dubbed 1985 the ‘Year of the Spy’, as mole after mole was caught passing secrets to the intelligence services of the Soviet Union, Israel and China. The FBI, which like ASIO was responsible for domestic counterespionage, went further, describing the 1980s as the ‘Decade of the Spy’ given the ‘dozens of spies’ that were identified and arrested.9 Of course, there were successes, too. One of the most famous was MI6’s star double agent, the KGB’s Colonel Oleg Gordievsky, who provided the lead that resulted in Bettaney’s arrest. He was also the West’s key source of the Soviet Union’s conviction, verging on paranoia, that the United States and NATO were planning a pre-emptive nuclear strike against it.10 The relationship between East and West, particularly the United States and Soviet Union, was as strained as it had been in the hottest days of the Cold War. With the Soviet invasion of Afghanistan and the American invasion of Grenada, détente was over. Defections and expulsions were reciprocated by governments on both sides of the Iron Curtain. The defection of Gordievsky and his resultant escape from the Soviet Union to England in 1985—arranged and executed by MI6—for example, resulted in the expulsion of 25 Soviet intelligence officers from London and counter-expulsions of British spies and diplomats from Moscow.11 It was within this atmosphere that ASIO, a small yet important part of the Western intelligence community, operated.

The Hawke Government’s introduction to ASIO and its counterespionage work was a very public one. Spy fever was rife, and the Combe–Ivanov affair, as it became known, was a regular feature on the nightly news. As discussed in Chapter 11, Ivanov had been attempting to cultivate one of the ALP’s own, David Combe, who, on Hawke’s orders, was now the subject of an ASIO investigation. One of Hawke’s senior advisors, Bob Hogg, was then wrongly reported as having breakfast with Combe. Later, Mick Young, one of the Prime Minister’s closest friends and colleagues, resigned after Hawke learned that he had lied about leaking details of the Government’s intention to expel ‘a Russian’ (i.e. Ivanov) and of Combe’s involvement.12 Troubled by the revelations of foreign espionage, concerned that the Labor Government needed to be seen as taking security seriously, and armed with an apparent example of incompetence in ASIO, Hawke announced another royal commission, again to be conducted by Justice Hope, into the state of Australia’s security and intelligence agencies (the Royal Commission on Australia’s Security and Intelligence Agencies; see Chapter 12). ASIO found itself back in the public eye. Tension between ASIO, other public service departments and senior government officials was high in the immediate aftermath of the Combe–Ivanov affair. Activity was ‘very intense’ and the pace of work frantic. Errors were made, tempers tested and officers’ careers damaged.13

Throughout all of this, ASIO’s primary focus, as it had been during the Fraser years, remained counterespionage, and the main threats were still seen as emanating from the Soviet and Asian intelligence services, and their representatives in Canberra, Sydney and Melbourne. As time progressed, and with ASIO receiving more support from the Government—both in resources and policies—the Organisation began to approach the problems of espionage and foreign interference in new ways. This chapter examines how, during the latter years of the Cold War, ASIO combined old and new techniques, and implemented different counterespionage strategies in its attempt to combat threats to Australia’s national security.

Legislative amendments

By far the most significant of Hope’s reforms for ASIO’s counterespionage efforts were his recommendations that the ASIO Act 1979 be amended to include references to ‘acts of foreign interference’ and to permit ASIO to collect and disseminate ‘foreign intelligence’.14 With regard to the former, he was referring to activities ‘by a foreign power which involves threats to any person in Australia’.15 This obviously stemmed from ASIO’s concerns (discussed in Chapter 10) that certain foreign powers in Asia were intimidating, threatening and attempting to influence expatriate populations in Australia. Hope believed that there was ‘a clear interest in the Government having intelligence about any activity of this kind, and it should be part of ASIO’s function to collect it’.16

The latter, foreign intelligence collection, referred to ‘information concerning the capabilities, policies and activities of foreign powers or bodies’ that could be collected inside Australia under a warrant issued by the Attorney-General at the request of other ministers. The exercise of a foreign intelligence warrant was limited to the subject of the warrant itself. Any incidental intelligence collected in exercising the warrant that was not related directly to the warrant itself, but that might be of national security interest, was not to be reported to the requesting minister.17 Before this recommendation, there had been a glaring gap in Australia’s foreign intelligence collection capabilities. ASIO, for instance, had only been permitted to collect information relating to security intelligence and, by law, had to either ignore or destroy information about, for example, another nation’s economic or foreign policies, even where that information affected Australia. Likewise, Australia’s other intelligence collection agencies could collect foreign intelligence, but only where the target was physically located outside Australia. Hope’s recommendations therefore allowed ASIO, acting on a request from either the Minister for Foreign Affairs or the Minister for Defence, and following approval from the Attorney-General, to use its special powers to collect information for other intelligence agencies relating to ‘the defence of the Commonwealth or the conduct of the international affairs of the Commonwealth’, and deemed to be in the ‘national interests’ of Australia.18 This led to greater collaboration between Australia’s intelligence services, saw a reduction in the duplication of work and resulted in some impressive joint operations.

New techniques and capabilities

Counterespionage was, according to Justice Hope, ‘close to the heart of the reason’ for ASIO’s existence.19 Some of its counterespionage methods, as they are called in the intelligence community, had hardly changed since its formation in 1949: agents and contacts still provided information on people or groups of interest; telephone interception and technical operations allowed an invaluable insight into many aspects of a targets’ life; and photography and surveillance, both static (from observation posts) and mobile (on foot or in a vehicle) helped ASIO identify a target’s activities and contacts. There were obvious advances in intelligence collection methods that helped in operations and investigations, including mobile surveillance and photography. Technological advances allowed for some changes, especially in the size and reliability of listening devices ASIO could install, but they were still restricted by the limited modes of transmission for devices available at the time, and consequently ASIO needed a listening post nearby.

Things began to change during the Fraser years. As discussed in Chapters 9 and 10, ASIO’s efforts became more offensive in nature during that time. Rather than defection being a key prize, officers were used in undercover roles to gather intelligence about their targets’ abilities and activities, and to assess their vulnerability and receptiveness to recruitment. The Fraser period also saw a number of technical successes, particularly against Soviet and Soviet bloc officials and premises. The old techniques, however, were still used. It was not until the mid- to late 1980s, with significant technological advances and rapid change, that there was an appreciable alteration in ASIO’s methods and capabilities.

Increased liaison and cooperation with other intelligence agencies, particularly ASIO’s domestic partners, resulted in a more aggressive approach to its investigations and operations. Cutting-edge technology increased ASIO’s capabilities and enabled a range of technical operations hitherto unimaginable. In addition to telephone interception, ASIO was able to intercept communications traffic and, with the help of other agencies, make progress on investigations. As part of this increased activity, ASIO relied on its special powers, as defined in the ASIO Act, which involved an increasing sophistication and complexity of techniques. Each of these intrusive methods required ministerial approval and a warrant before they could be used.

Warrants, however, were not required for bold new tactics employed in ASIO’s face-to-face operations. Agents and contacts were still used, but increasingly, ASIO would ‘dangle’ its officers in front of suspected foreign intelligence officers, or have them ‘walk in’ to a foreign mission in the hope that it would provide evidence of espionage or at least identify intelligence officers and their modus operandi. If the ASIO approach was rejected, it could still have the bonus effect of acting as a deterrent,20 but the benefit of these operations was subject to considerable debate within the Organisation.21 Where required, such as the case discussed in Chapter 9 of ASIO identifying someone as volunteering their services to the Soviet Embassy, ASIO was prepared to conduct ‘false flag’ operations—that is, operations that appear to be carried out by entities other than those who actually planned and executed them. These involved ASIO officers approaching targets in the hope that ASIO could contain any damage before classified material was passed on. ASIO also carried out ‘brass plate’ operations, whereby an ASIO officer—clearly identified as such—was put in touch with target personalities in the hope that having a readily identifiable contact would give those targets someone to approach should they wish to defect. This tactic was used sparingly due to the personal and operational security risks involved, never mind the fact that it exposed ASIO officers.22 From 1988, ASIO also conducted ‘disruption operations’. This tactic was used when ASIO had assessed that a foreign intelligence officer could not be recruited and that there was no prospect of catching that officer engaged in clandestine intelligence activity. Using a variety of aggressive operational means at its disposal, ASIO aimed to make the foreign intelligence officer’s presence in Australia more uncomfortable and thus reduce their usefulness.23 Examples of these techniques and tactics appear throughout this and other chapters in Part 2 of this volume.

A new strategy to counter the Soviets

More important than tactical advances was the introduction of a new counterespionage strategy that guided how the techniques and tactics were used against the RIS. It had always been a challenge for ASIO, as it is for any security intelligence service, to identify espionage activities and thwart them before they damaged Australia’s national interests. Significant resources were required just to cover one intelligence officer, let alone their colleagues and their combined webs of contacts. As mentioned earlier, in the period 1949–75, ASIO’s counterespionage strategy had largely been a passive one of observing and hoping for a defection. During the Fraser years, the aim shifted from defection to the active recruitment of vulnerable intelligence officers. In the period covered by this chapter, however, the strategy employed against the Soviets evolved to become more defensive.

Both ASIO and the Government recognised that it was easier to contain Soviet espionage if fewer intelligence officers were allowed into the country. ASIO’s new strategy, as explained to the Attorney-General in June 1983, was for any identified intelligence officers to be denied a visa and therefore not permitted entry into Australia in the first place. For those who were issued a visa or were identified as intelligence officers after their arrival, ASIO’s practice was to counter their actions. Although ASIO used offensive means to do this, such measures remained part of the broader defensive strategy of ridding Australia of Soviet intelligence officers. This was a proactive and aggressive approach by ASIO, whose priority had shifted from trying to catch spies to disrupting their spying efforts. If all else failed, espionage activity could be quashed by expelling the person from the country. ASIO had been moving in this direction before the Ivanov expulsion, but it was now the preferred strategy.24

This approach was reaffirmed, refocused and strengthened when Alan Wrigley took over as Director-General. With support from the Government, Wrigley took a hard line against Soviet espionage. During his tenure, ASIO’s objective against the Soviet target was, in Wrigley’s words, to conduct operations ‘in such a way as to minimise opportunities for the Soviet Union to carry out activities prejudicial to Australia’s security’. He added that ASIO’s resources should be used ‘not merely for the purpose of expanding ASIO’s knowledge of Soviet activities in Australia, but for the purpose of supporting action to reduce that activity’. It was best to have no espionage, or as little as possible and, like his predecessor Barnett, Wrigley believed that this could best be achieved through denying visas to those people ‘whose activities are likely to be detrimental to Australia’s security’. Should they be permitted entry, Wrigley was clear that ASIO’s resources should be used to secure either a recruitment-in-place or a defection. If that was not possible, during a target’s first twelve months in Australia, ASIO should focus on collecting enough information to submit a proposal to government to shorten the target’s posting. Wrigley’s approach to the problem was clear: ASIO should have an objective for everything it did, but it should try and stop the problem before it even began.25

Wrigley hammered his message home on 28 April 1987, when he addressed ASIO’s counterespionage staff. He was vigorous in his criticism of ASIO’s work against the RIS: ‘We are here not simply to gather information or to analyse information, but to defeat the Soviet intelligence activity in Australia.’ In this, he believed, ASIO had failed. He felt the Organisation had made little useful contact with most Soviet intelligence officers, and where any existed, he was not confident that renewed attempts were being made. But as far as he was concerned, the Organisation had no idea about the real nature of Soviet activities in Australia, and therefore ‘we are failing in our responsibility to advise government on espionage in Australia’.26

All intelligence collection, he told those present, should be directed at providing ‘the information that helps us most damage the Soviet intelligence effort’. Analysis should be directed not at producing studies, but in helping better direct ASIO’s attack.27 For the first time, ASIO had a strategy that brought resources and government support into the equation, and that recognised ASIO’s need to put itself in a position to inform the Government from its own rather than international intelligence sources. For the first time, Wrigley brought together the Organisation’s operational activity and its reporting requirements to government. This was something previous directors-general had attempted, but it took the iron will of a man like Wrigley, supported by other like-minded officers, to bring it into effect. This included the rapid recruitment, integration and promotion of graduates who provided the analytical impetus that facilitated Wrigley’s reforms.

Government support

This new active counterespionage strategy required government support in order to succeed.28 ASIO therefore worked to improve its relations with Hawke and his ministers, mainly through more regular briefings.29 In January 1984, the Director-General, Harvey Barnett, had proposed that in addition to verbal briefings, ASIO also provide a written review outlining its significant activities. The Attorney-General, Gareth Evans, agreed and asked that this be provided fortnightly and that a copy also be prepared for the Prime Minister.30 Both of these new accountability mechanisms were in addition to any warrant requests submitted to the Attorney-General. It is clear from Evans’ comments on warrant proposals (especially those dealing with supposedly subversive targets) that he read and considered the proposals in more depth than his predecessors, often challenging both the officer who delivered the warrant and the Director-General (through comments in the margins of the warrant itself) about ASIO’s progress in a case or the justification for continuation. In a number of cases Evans declined to sign the warrant until he received more information and was satisfied that using ASIO’s invasive powers was necessary.31 Evans also understood the importance of ASIO’s counterespionage function in protecting Australia from the clandestine activities of foreign governments, and both he and his successor, Lionel Bowen, were supportive of ASIO’s work.32

The need for government support was particularly apparent when it came to decisions that could potentially harm diplomatic or trade relations. One of the most difficult issues, at least in the eyes of the Department of Foreign Affairs was calls from ASIO to refuse visas to foreign diplomats who were considered to have intelligence traces. Visa refusals enabled ASIO to implement its strategy and better prioritise its resources. Combined with the cooperation of overseas intelligence agencies, this approach made the task of the RIS more difficult worldwide—as those identified intelligence officers could not be posted elsewhere if other countries also refused a visa. As shown in Chapter 9, the Fraser Government was prepared to do this. A different issue for the Department of Foreign Affairs was balancing these security requirements with those of foreign relations and trade.33 The debate continued beyond the May 1983 Cabinet decision that a visa would be denied to any Soviet official with an intelligence trace.34 Wrigley later commented that this policy was ‘one of the most important defences against Soviet intelligence activities here, as evidenced by the fifteen Soviet intelligence officers who have, over the past ten years, been prevented by this process from operating in Australia’. The majority of these cases related to those Soviet intelligence officers who, because of their activities on earlier postings, were denied entry to Australia.35It was more difficult, as discussed below, when ASIO advised the Department of Foreign Affairs to have a visa withdrawn or a visa extension rejected when the intelligence officer was already in Australia. On these matters, ASIO and Foreign Affairs still had different perspectives.

ASIO, the Department of Foreign Affairs and visa policies

ASIO had never experienced a Director-General like Alan Wrigley before. His Executive Officer, who later rose to senior positions in ASIO, noted that unlike his predecessor Harvey Barnett, Wrigley ‘didn’t care if people liked him or not’; he was blunt and worked on the basis that his decision was final.36 This was acceptable in ASIO where he was in charge, but it created problems when he argued his case for visa refusals with the Department of Foreign Affairs (where people were still unhappy about having been caught by surprise over the way the Combe–Ivanov affair was handled). Indeed, the only success Wrigley had in this regard was within his first six months when, at ASIO’s recommendation, Foreign Affairs told the Soviet Embassy that the activities of one of its officials, Anatoliy Stadnik, were unacceptable and that he would not be granted a visa extension.37 With little protest and no publicity, Stadnik, who was suspected of being a GRU officer, departed Australia in January 1986.38 At the same time, ASIO was considering another case that would further strain its relationship with the Department of Foreign Affairs.

In December 1985, ASIO received a request from Foreign Affairs for a security check on Valeriy Nikolayevich Zemskov, the proposed Minister-Counsellor for the Soviet Embassy. The turnaround for the check was short, and Foreign Affairs issued a visa before ASIO had received responses from cooperating overseas intelligence agencies. When that information did arrive, one week after the visa had been issued, it stated that Zemskov was a KGB ‘Special Reservist’, a category of KGB officer previously unknown to ASIO.39 Special reservists were considered the new KGB elite and operated under deep cover; knowledge of their intelligence affiliation was restricted to only a few within the KGB, and they were trained to employ different and more covert methods than their predecessors so as to allow them to work in the West without being discovered.40With skills in agent recruitment, Zemskov arrived in early February 1986.41 Wrigley was furious, both with his staff, whom he believed had not been strong enough in advocating ASIO’s case (and had failed to escalate the issue to Wrigley himself), and with the Department of Foreign Affairs, for not giving ASIO enough time. He therefore wrote to the Secretary of the department, Dr Stuart Harris, requesting that Zemskov be expelled from Australia as soon as possible.42 His request was denied, and ASIO was therefore forced to devote resources to him that ‘would otherwise be used advantageously elsewhere’.43 It is clear from this example that Hope’s recommendation that ASIO and the Department of Foreign Affairs improve their policies and communication on expulsion cases had not yet been fully implemented on a practical basis.44

The Zemskov case is illustrative of the fact that it was diplomatically easier to deny a visa in the first place than withdraw one at a later date. The Department of Foreign Affairs showed similar hesitancy—with genuine foreign affairs considerations of its own—when it came to renewing visas. In April 1987, for example, the department sought ASIO’s advice on the extension of visas for several Soviet officials. Wrigley recommended that a small number be denied, including those that had come to ASIO’s attention and those that had been identified as RIS officers by overseas sources. ‘The departure of these officials from Australia,’ he told Harris, ‘would disrupt the KGB’s activity here’ and ‘ensure that they did not operate again in any of the co-operating countries’. As had occurred with Stadnik, Wrigley recommended against publicity, noting that cases overseas showed this would lessen any Soviet retaliation and reciprocal expulsions.45 Harris did not agree with Wrigley’s recommendations and went direct to his minister (who then went to the Prime Minister) without first discussing the case with Wrigley. Wrigley was again furious. He told Harris,

I do not believe that the issue is one for your Minister alone, advised only by you, nor one on which the Prime Minister should hear only your Minister’s views where there are differences. Countering the activities of foreign intelligence officers in this country goes to the heart of the existence of my Organization and it is intolerable that my advice on such things should be set aside in such a peremptory way.46

Wrigley reflected on the matter over the weekend before sending the letter to Harris and bringing the matter to the attention of the Attorney-General (and Deputy Prime Minister), Lionel Bowen.47

Wrigley’s protest made little impression on Harris. Wrigley was told that Foreign Affairs was prepared to support firm action where there is ‘convincing evidence’ of Soviet espionage. Wrigley’s response was indicative of the lack of cooperation and communication between the departments, and their contrasting perspectives: ‘Setting aside the matter of whom should be convinced, you did not ask what evidence we had before going to your Minister.’ Moreover, he added, ‘you may be assured that I will not give you chapter and verse in correspondence and you should not expect it’.48 The sensitivity of ASIO’s information, and the Department of Foreign Affairs’ need for concrete evidence continued to present problems for years to come. Wrigley later recalled being

frustrated because we did try to get one or two people expelled who we knew were KGB, and DFAT wouldn’t do it and the result was it consumed a fair amount of energy keeping track of these people when you knew inevitably what they were up to, and the most you could do was to make it harder for them, when the quicker thing to do was to simply get rid of them.49

Wrigley was clearly animated by this issue, and it appears to have added an edge to relations between the Department of Foreign Affairs and ASIO. But in practice, while the acrimony between Wrigley and Harris continued, a productive relationship was maintained at the working level between desk officers in the two organisations.50

The issue surfaced again in December 1987, when Zemskov applied for a visa renewal. The Acting Director-General, Gerard Walsh, told the recently renamed Department of Foreign Affairs and Trade that while ASIO would like to object, the source of the information was very sensitive and had to remain secret.51 ASIO’s hands remained tied until November 1988, when Zemskov was named as a KGB special reservist in Reader’s Digest. This gave ASIO an opportunity to revisit the case, using the publicity rather than the sensitive source as grounds for justification. The new Director-General, John Moten, recommended that the Soviet Ambassador be quietly informed that Zemskov’s visa would not be extended beyond the following January.52 The Department of Foreign Affairs and Trade again asked for evidence that Zemskov had engaged in unacceptable activities during his posting. Moten was more diplomatic than his predecessor, but shared his views and did not hold back when explaining that ASIO’s job was to obtain intelligence, not evidence that would stand up in court:

I assume you mean the ‘smoking gun’ situation. I am unable to offer you the video record of clandestine meetings or the sound recording of improper taskings—but … The ‘evidence’ we do have is undeniable and explicit. Zemskov is a KGB officer [and his] activities are incompatible with his diplomatic status. The fact that we do not find him lurking in dark places does not change this.53

Moten asked the department to reconsider his request, and stressed the importance of the two departments working together and trying to understand the other’s perspective.54 Before any further action was considered, in February 1989 Zemskov was recalled to the Soviet Union. No reason was given, but ASIO suspected it was due to the media exposure following the Reader’s Digest article.55 This, and earlier cases, are clear examples that the differences in opinion between ASIO and the Department of Foreign Affairs, and ASIO’s inability to convince the department to act on its recommendations, diminished the effectiveness of ASIO’s strategy.

Together, Moten and his counterpart in the Department of Foreign Affairs and Trade, Richard Woolcott, began to rebuild the relationship, working more closely together. In late 1989, the two departments worked on entry and expulsion policies. Extending the policy to all Eastern European intelligence services, they agreed that where an intelligence officer was identified as such, and where ‘there is a persuasive case’ (rather than evidence) that they were engaged in activities incompatible with their diplomatic status, they be expelled following a joint decision by the Attorney-General and the Minister for Foreign Affairs and Trade. Based on these criteria, ASIO recommended that Valeriy Aleksandrovich Dolganov, an Assistant Trade Representative at the Soviet Trade Office in Canberra, then on leave in the Soviet Union, not be given a new visa to enter Australia in October 1989.56 ASIO had been watching Dolganov since his arrival in August 1987, and its work had recently confirmed his GRU status. The surveillance established that he was attempting to export embargoed computer equipment from Australia to the Soviet Union.57 ASIO finally convinced the Department of Foreign Affairs and Trade, and Dolganov was not permitted re-entry.58

Combating the Russian Intelligence Service

When RIS officers were allowed into Australia, ASIO, in line with its defensive strategy, worked towards disrupting their activities and having them expelled from the country. Building a case for the latter required a lot of work and a determined collection effort, especially given the significant number of RIS officers posted in Australia at any one time. In February 1984, for example, ASIO assessed that there were more than half a dozen KGB and GRU officers in Australia,59 all of whom had to be watched. During the period examined in this chapter, ASIO’s coverage of RIS officers included surveillance of all known or suspect officers; numerous technical operations against known or suspect KGB and GRU officers; several face-to-face operations; and a number of sensitive agent cases. Nikolay Yevgenyevich Fomin, the embassy’s Press and Information Officer, who arrived in March 1984, was considered to be the KGB Resident and was therefore subject to all methods.60 So too was Valeriy Aleksandrovich Ryabtsev, an Assistant Trade Representative at the Soviet Trade Office in Canberra and a suspect GRU officer.61 ASIO believed that Ryabtsev was attempting to procure embargoed scientific and technological goods and knowledge from Australian electronics companies and export them to the Soviet Union, in what ASIO and the Government referred to as ‘technology transfer’.62 In neither case, despite its coverage, did ASIO succeed in shortening their posting. Fomin, for example, was unexpectedly recalled to the Soviet Union in August 1987, possibly withdrawn due to poor performance.63 Ryabtsev also left Australia in 1987.64

Where ASIO did have success was in the case of Valentin Mikhailovich Matyushevskiy. He arrived in January 1985 as the Sydney-based representative of the Baltic Steamship Company and the senior representative of all Soviet shipping companies in Australia.65 His overt duties included meeting the officers and crew of Soviet ships and assisting them while in port, maintaining shipping schedules and dispatching the personal effects of Soviet officials returning to the Soviet Union.66 He made monthly visits to Canberra, where ASIO placed him under limited surveillance.67ASIO’s investigations showed that he enjoyed flexible working conditions, seemed underemployed, was possibly cultivating a source, and associated with at least one identified KGB officer. Combined with information from overseas, this resulted in ASIO’s June 1987 assessment that he was a suspect KGB officer and that future work should be directed towards disrupting his activities and bringing about his expulsion.68 This plan was reaffirmed later in the year, when an ASIO officer who had been in indirect contact with Matyushevskiy concluded that he was not susceptible to recruitment.69

Matyushevskiy’s cultivation of his source soon became more explicit and probing; he began paying the source for access to sensitive information, which was clearly incompatible with his shipping duties.70 In May 1988, ASIO therefore recommended that Matyushevskiy be expelled; this was accepted by both the Attorney-General and Minister for Foreign Affairs and Trade, and the latter believed the best method was to cancel his entry permit. The Department of Immigration, Local Government and Ethnic Affairs, which controlled these permits, agreed to assist, and the next day, 6 May, told Matyushevskiy of its decision.71 He left Australia on 12 May.72 When the Attorney-General, Lionel Bowen, informed Bob Hawke, he noted that the expulsion was the result of an ‘extensive and imaginative investigation by ASIO’.73 ASIO’s own summary concluded that success was possible because the operation had an objective and everything had been geared towards achieving it.74 Clearly, when given a chance to work, the counterespionage strategy paid dividends.

Volunteer cases

Of concern to ASIO since the late 1970s were cases of people who contacted foreign missions to volunteer their services. One memo advised staff that: ‘Even though most volunteers are likely to be harmless, it is essential that every reasonable effort is made to fully identify them and assess their possible intelligence value.’75 ASIO was rightly worried that one or all of these volunteers could engage in espionage by offering their services as spies or passing classified information to a foreign power.76 This memo was particularly useful from 1983 onwards, when ASIO saw an increase in possible volunteer cases.77 ASIO monitored the Soviet Union telephone link very carefully, and was therefore in a position to pick up on any volunteers. In many instances, the Soviet official directed the caller to write to the embassy rather than discuss specifics over the phone.78This was an obvious and sensible precaution taken by the Soviets given the nature of the call. ASIO was aware of Soviet reticence to grasp such opportunities without having first considered the possible implications. Nonetheless, it was still important to identify volunteers and assess what damage, if any, they could do.

The investigation of volunteer cases could involve field research (checking electoral rolls, car registration details and so on), voice recognition, telephone interception, interviews and surveillance. All of these methods, however, relied on the volunteer giving away some leads as to their identity (name, place of employment, location of call or arrangements to visit the embassy, all of which helped with the investigation). If no such leads were given, ASIO largely relied on standard procedures and a healthy dose of good luck. If the volunteer made an appointment to visit a mission, ASIO would undertake operational activity involving a suite of capabilities to identify the volunteer. This also extended to embassy officials who became involved with non-embassy officials. If the volunteer could be identified, ASIO might interview them to disrupt any possible espionage, recruit them as a double agent, clear them of any suspicion or get the police involved for a prosecution.

One of these volunteer cases resulted in the use of special powers against the Soviet Embassy.79 On 21 June 1984, an unidentified male with an Australian accent phoned the embassy and offered ‘confidential’ and ‘highly sensitive’ blueprints. The caller was told to write to the embassy. ASIO’s ACT office immediately sent a telex to headquarters suggesting ‘urgent consideration be given’ to identifying the caller and to assess whether his information was of national security importance.80 The next day, 22 June, Attorney-General Evans ‘listened to the tape with interest’.81By 29 June, ASIO determined that the operation had run long enough, and the investigation had not helped to identify the caller. By coincidence, however, it helped identify a ‘Rory’, who had phoned the embassy on 4 May 1984, and whom ASIO later established posed no threat to national security.82Overall, the ACT office believed that the operation had been ‘useful’, as it gave ASIO’s officers the chance to ‘exercise their skills’, and gave them an insight into the workings of the Soviet Embassy.83 Apart from the advantages of the operation, it allowed at least one counterespionage officer to realise that the Soviet Embassy had a soft underbelly that could be readily exploited.84

Exposure of operations

By 1989, ASIO had witnessed a ‘compressing’ of KGB recruitment operations, where KGB officers now tried to move cases along faster than they had in the past, thus opening them up to a host of difficulties and increasing their chances of being caught.85 Unfortunately, other elements at play hindered any real progress or exploitation on ASIO’s part. Hindsight shows that many of ASIO’s collection efforts against individual RIS officers between 1983 and the fall of the Berlin Wall were redundant. ASIO believed that this was because of the publicity surrounding the Combe–Ivanov affair, and the unfortunate and unintended exposure of certain operations during the subsequent royal commission. In one instance, the second Hope Royal Commission released redacted transcripts of evidence given in camera by ASIO officers. One of these transcripts quite clearly exposed a double-agent case and led to ASIO’s termination of the operation.86 Another ‘walk in’ operation was similarly postponed, never to be rekindled.87 The most damage, however, was felt in technical operations. Although it could not be avoided, the disclosure of Operation Bushfowl—the technical penetration of Ivanov’s home—had an adverse effect on future operations.

As shown in Chapter 9, Ivanov, along with other Soviet officials, had been the subject of intensive operational activity by ASIO, including the use of its special powers. One of these other officials was the KGB officer Vitautas Bernardovich Svirinavichyus.88 At a function in Svirinavichyus’s house on 24 April 1983, two days after Ivanov was declared persona non grata, Ivanov openly spoke about the fact that there were microphones in his house.89 On the basis of Ivanov’s comments, it was clear that the Soviets suspected that their houses were subject to technical surveillance. Svirinavichyus, however, did not return to Australia, so the operations mounted against him were terminated.90

The disclosures following Operation Bushfowl meant that ASIO had genuine concerns about the integrity of its operations,91 although it continued to mount similar operations against other KGB and GRU targets.92 The irony of all of this was that at the end of 1989, Wrigley’s 1987 warning still rang true. After 40 years of studying the RIS, placing its officers under surveillance, and monitoring calls to and from the embassy, ASIO was unable to catch its operatives in the act. While it had a clear understanding of the Soviet Union’s intelligence priorities in Australia, ASIO was unable to establish exactly what the RIS had achieved over the years. It had better, albeit mixed success against other, non-Soviet targets.

Mixed results against other counterespionage targets

Unlike its defensive strategy against the Soviets, ASIO’s approach to the majority of other espionage targets was a combination of offensive, passive and defensive strategies. Where ASIO knew more about a target, such as the Eastern European intelligence services, its approach was generally a combination of the passive and defensive methods, with the aim of deepening its knowledge while at the same time building a case for expulsion. Where less was known about a target, ASIO adopted a more ‘aggressive operational strategy’ centred around agent recruitment.93

One example of ASIO’s mixed fortunes was its work against an Asian communist outpost. Earlier coverage had failed to uncover any cases of that nation’s intelligence work in Australia, but those within ASIO remained convinced that it was happening under their noses, and predicted that it would increase as diplomatic relations improved. A special operation, the ACT office believed, was ‘the only way’ ASIO could uncover the nation’s intelligence activities.94 A warrant was signed and a handful of ASIO officers was tasked with mounting the special operation.95 This operation eventually uncovered someone offering classified material in return for favours, which enabled ASIO to deploy surveillance and identify the individual. Although its intelligence product was limited, the special operation was proving useful in building ASIO’s knowledge of suspect intelligence officers and assisting with offensive operational planning against them.96 That was until the special operations techniques suddenly stopped being effective.97 It was later learned that the target had identified ASIO’s intrusive techniques without raising any diplomatic protest.98

With regard to the Czechoslovak Intelligence Service, ASIO considered itself rather well placed. As shown in Chapter 10, it had effective surveillance of the Sydney Consulate-General until the mid-1980s, when the operation was terminated as it was no longer providing sufficient material to warrant its continuation. ASIO was also aided by the fact that the Czechs had their own problems. For example, the Consul-General in Sydney, Jan Kuzma, whom ASIO assessed to be an intelligence officer, was recalled home in early 1984 after being caught shoplifting for a second time.99Then, in March 1984, the Commercial Representative at the Consulate-General in Sydney, Petr Stepanek, approached a Sydney businessman about his dissatisfaction with the situation in Czechoslovakia and his desire to remain in Australia. The Department of Immigration and Ethnic Affairs was advised, and after Stepanek ceased working with the Consulate-General on 28 April, he was granted permanent resident status. On 3 May, ASIO advised both the Attorney-General and Prime Minister that ‘ASIO has already received a considerable quantity of intelligence from Stepanek’ and that ‘a great deal more information’ is expected from further debriefs.100 Subsequent debriefings revealed that the Czechoslovak Intelligence Service was interested in information about the Australian Army, defence cooperation with the United States and defence technology.101ASIO was confident that it knew the aims, priorities and activities of the Czechoslovak Intelligence Service. In addition to its own coverage, ASIO was assisted by information provided by an overseas defector.102 This information, however, also showed ASIO that the Czechoslovak Intelligence Service had been operating a widespread agent network in Australia for many years using émigrés from the 1948–49 and 1968–69 Czechoslovak immigration streams.103 Clearly, there was much that ASIO still did not know.

The same could be said for its coverage of Bulgarian intelligence officers. For much of the period covered in this chapter, ASIO focused its efforts on Todor Kostov Todorov, a Consul in Sydney. In May 1983, a Bulgarian émigré told ASIO that Todorov had tasked him to obtain information on, among other things, US bases in Australia and the local Bulgarian community.104 There followed a combination of agent, surveillance and technical operations.105 Despite this, and Todorov’s obvious security consciousness, ASIO never really knew what he was up to and could go no further than assessing him as a suspect intelligence officer.106

ASIO’s knowledge of Polish intelligence interests was similarly restricted. The only case of note during the period of the Hawke Government commenced in 1988, when a Polish diplomat walked into a foreign consulate in Australia and requested political asylum. His reasoning was that he had been recalled, feared prosecution and wished to remain in the West.107 He was not an intelligence officer and claimed that he had no information about Polish intelligence activities being conducted from either the Polish Consulate or the Polish Embassy. He did, however, have access to a list of trusted contacts of the consulate, which he handed over. He believed the reason for his recall was that he had been critical of the former Consul-General. ASIO intelligence, however, showed that he was in poor health and had large medical bills.108 The Government rejected his application.109ASIO therefore interviewed him. The ASIO interviewers believed that there was little justification for ASIO supporting his application for political asylum in Australia.110 When interviewed again a week later, however, he was more forthcoming,111 but he was paid $500 for his time and informed that his application was unsuccessful. He left Australia shortly afterwards.112 In the assessment of the Acting Deputy Director-General, engagement with the Polish diplomat had been useful as he had ‘provided a cheap and easy insight into his Colony’, that is, the Polish diplomatic community in Australia.113

ASIO’s coverage of the East German Intelligence Service was better. In March 1985, weeks before the staff moved into their Canberra premises, operational activity against German Democratic Republic (GDR) officers was intensified.114 Afterwards, the operations were assessed as having provided ‘no significant intelligence’, largely because the East German presence in Canberra was deemed negligible. Rather, the priority lay with the GDR Consulate-General in Melbourne.115 Its Consul-General, Dietmar Burckhardt, had been identified as an operational intelligence officer, and ASIO therefore focused its operational attention against him, to ascertain what he was up to, the extent of his contacts and whether or not he could be recruited.116 In a rather imaginative operation, carried out in collaboration with another intelligence service, officers from ASIO’s Victorian office were able to establish that Burckhardt was the only East German intelligence officer in Australia.117 The results impressed the Attorney-General, Lionel Bowen, who included it as one of his examples of ASIO’s ‘aggressive operational strategy’ when briefing the Prime Minister.

Another of Bowen’s examples was ASIO’s excellent work against the Hungarians.118 Through some well-placed sources as well as a brief special operation, ASIO was able to foil a Hungarian technology transfer case, and knew precisely what the Hungarian intelligence service was up to and who its sources were in Australia.119 But Bowen saved his greatest praise for ASIO’s work against the Chinese.

The Chinese Intelligence Services

Despite its successes against the PRC intelligence services outlined in Chapter 10, ASIO later came to realise that its initial strategy to identify and combat Chinese espionage was ‘inappropriate’ for the problems faced. Basically, it had approached the PRC intelligence services in the same way it approached the Soviets, but those means failed to take into account the PRC’s widespread use of alternative means of cautiously cultivating and running agents, the possible use of front organisations and the importance of attacking PRC diplomatic representation.120 This shift in understanding how the PRC intelligence services operated also led to a shift in how ASIO attempted to tackle the issue. Following an examination of its targeting strategy in the mid-1980s, ASIO sought to focus its efforts on threats of greatest significance rather than attempting comprehensive coverage.121 Specifically, ASIO recognised that with a population of some 250,000 Chinese in Australia; an increase in their diplomatic representation in Canberra, Sydney and Melbourne; and a growth in PRC state trading organisations from three to 44 since 1983, the PRC intelligence services had an unlimited pool from which to seek possible recruits. ASIO could not know what they were all up to.122 Neither could it afford to be defensive.

The Attorney-General told the Prime Minister in 1989 that ASIO’s change in approach against the PRC intelligence services was ‘now producing the sort of results which Australia needs’. In this case, ASIO’s work had proven to the Attorney-General, at least, that it could operate successfully against and adapt to any new security threat.123

It was important, Bowen told Hawke, for the Government to continue to support ASIO’s broad-ranging efforts, including against the Chinese target, and increase its budget to allow operations then underway to come to fruition.124 Bowen’s points were noted and Hawke accordingly approved an increase to ASIO’s budget.125

China began negotiating for a more suitable location for its embassy soon after moving into its Watson premises in 1973. Situated away from other diplomatic missions, on the outskirts of Canberra, it was insufficient in size and location for China’s needs and status. In 1981, the Australian Government offered the PRC a block of land in the sought-after suburb of Yarralumla, just to the west of the British High Commission. The offer was accepted but financial constraints prevented tenders for its construction from being called for until 1988.126 Construction eventually went ahead and was closely monitored by ASIO. In May 1995 extensive publicity in the Sydney Morning Herald and on ABC Four Corners, apparently based on leaks from disgruntled Australian intelligence officers, claimed that Australia, in conjunction with overseas intelligence partners, had installed technical devices while the embassy was being built. So sensitive was the story at this time that Gareth Evans issued a suppression order, via the Federal Court, to block its publication. The legal case was eventually dropped, and more details and Chinese criticism emerged. One story speculated that Beijing may demand a new building, while another described the alleged operation as ‘common knowledge in Canberra’s defence, political and media communities. It seems everyone was in on the secret except the public.’ Common knowledge or not, the government, in accordance with its time-honoured practice, has never confirmed nor denied the operation’s existence.127

In many respects, the PRC intelligence services were still an unknown quantity at the end of 1989. ASIO knew that they were interested in technological intelligence and defence research and development, and expected that their efforts in this regard would increase following the embargoes placed on China after the Tiananmen Square crackdown in June 1989. But, as one report stated, catching them was a different matter: ‘They have a long tradition of espionage on which to draw and have developed a sophisticated tradecraft which is both effective and difficult to detect.’128 The PRC intelligence services were patient; their intelligence interests were not always apparent, and this caused problems for ASIO. By the end of the Cold War, the magnitude of the Chinese security challenge presented a growing problem for ASIO. On the balance of probability, ASIO was likely to see only a small proportion of the intelligence personnel and evidence of their activities.


The euphoria that accompanied the fall of the Berlin Wall was felt in different ways. For many, it marked an end to the Cold War and heralded what appeared to be a safe and prosperous future for Europe. For others it felt like a victory after decades of sparring. But for those in the intelligence world, the battle was not over. When it came to the Chinese, the end of the Cold War appeared to mark merely the start of their increased intelligence effort. The Soviet Union and the Eastern bloc may have dissolved soon after, but the spying did not stop. In the words of ASIO’s Deputy Director-General, Gerard Walsh: ‘while I am greatly encouraged that a number of Eastern European countries which aggressively targeted us have now purchased a ticket on the train ride to pluralist democracy, I do not consider it axiomatic that each will automatically complete the journey without hitch or stop.’129 And he was right; espionage continued.

On a local level, however, the fall of the Berlin Wall marked the end of a mixed decade for ASIO: its varying counterespionage strategies, moulded to fit the strengths and weaknesses of its own and its enemies’ abilities, had produced varied results. For all its work, and all the money spent, however, ASIO had little to show in the way of success. The PRC intelligence services were a relatively new beast, and ASIO knew that much was occurring that it would never learn of, but when it came to the Soviet Union and its Eastern European partners—whose intelligence services ASIO had been watching for 40 years—the story was more depressing. ASIO may have been on the winning side when the Iron Curtain was lifted, but it had had few victories against the RIS. Many of the reasons or explanations for this were clear and innocent: in the period examined in this chapter, more Soviet intelligence officers were permitted visas, or had their visas extended, than ASIO would have liked; some operations were exposed by the media and in the second Hope Royal Commission; and, to be fair, the limited size and resources of ASIO were stretched trying to cover a host of threats, espionage and terrorism alike. But, as is discussed in the next chapter, there were more disturbing reasons for ASIO’s failures. The question had to be asked: had ASIO, like the other Western intelligence services, been home to traitors and moles?

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