DANILOFF AFFAIR: A CASE HISTORY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000807490022-3
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: March 9, 2012
• Sequence Number: 22
• Publication Date: September 21, 1986
• Content Type: OPEN SOURCE

A. Declassified and Approved For Release 2012/03/12 : CIA-RDP90-00965R000807490022-3
PJ LOS ANGELES TIMES
n:
21 September 1986
Daniloff Affair:
A Case History
How Superpowers Unwittingly
Lurched Toward Confrontation
5 By MICHAEL WINES and RONALD J. OSTROW, Times Staff Writers
WASHINGTON-When a Soviet citizen named Gennady
arrived in New York 45 months ago, alarm bells went
counterintelligence agents.
As a physicist employed by the
U.N. Center for Science and Tech-
nology Development, Zakharov
was immediately presumed to be a
Soviet spy.
Almost from the day the United
Nations established its headquar-
ters on the bank of the East River
37 years ago, Moscow has used U.N.
positions by the hundreds as cover
for espionage, a practice that
through the years has created
endless security problems for the
United States.
Unwritten Rules
In Zakharov's case, it soon be-
came clear that he was a particu-
larly blatant example. Ignoring the
unwritten rules that leave more
advanced espionage work to agents
with diplomatic immunity as part of
Moscow's U.N. mission, Zakharov,
U.S. officials say, launched boldly
into the business of recruiting
potential spies and pumping them
for U.S. secrets.
"Zakharov was an eager bea-
ver," a government source said.
"He made several approaches that
the FBI learned of as soon as he hit
U.S. soil."
What followed-taken together
with what went before in the
ceaseless skirmishing between the
U.S. and Soviet intelligence com-
munities-has become a textbook
example of how two powerful and
mutually suspicious nations can
find themselves lurching suddenly
and unexpectedly into confronta-
tion.
F. Zakharov
off for U.S.
To U.S. officials, long rankled by
the fact that the Soviets can oper-
ate freely here while Moscow's
police state offers no similarly
sheltered opportunity for U.S.
agents, the course seemed clear:
Zakharov and his masters had to be
shown that such attempts to ex-
pand their spy network in this
country would not be tolerated.
After carefully checking with
higher authorities, as they are
required to do before acting in such
situations, FBI officials in New
York issued orders for Zakharov's
arrest on spying charges.
Unforeseen Results
"This wasn't something that was
done by people who did not realize
the foreign policy implications,"
one Administration official insisted.
"A policy was in place. This was
something done by the proper
processes."
But two weeks after the Soviets'
retaliatory seizure of U.S. News &
World Report Moscow correspon-
dent Nicholas Daniloff for espio-
nage, it is also clear that neither
side could foresee where the Zak-
harov case would lead or easily
control its still-spreading circle of
damage.
"Never in our wildest imagina-
tion did we expect the Soviets to
grab a newsman and concoct a case
against him," a U.S. official ac-
knowledged last week, complain-
ing that Moscow's quick seizure of
Daniloff reflects "the complete ir-
rationality of the Soviet system."
Viewed in a wider context, there
'is a grim logic to the way in which
the arrest of the relatively obscure
Soviet U.N. employee touched off a
seemingly unstoppable series of
diplomatic escalations: the seizure
or Daniloff in Moscow; a halt to the
slow thaw in U.S.-Soviet relations
tlat had begun earlier this year; an
ominous increase in the credibility
gip separating the two powers,
vdith Soviet leader Mikhail S. Gor-
bachev publicly rejecting President
Aeagan's personal assurance of
rbnJoff's innocence; the suddenly
cloudier prospects for a fall sum.
nllt and the carefully timed expul-
slort Of 25 Soviet diploinats from the
United Nations mission in New
lprk-
'TM1@0@ftlY*be"latar
Each side, proce}ding from its
o}m vision of re'Mfty and pursuing
policies based on its own national
interests. took steps that seemed
pNdent, even restrained, to itself
bpt provocative to the other.
I think the Soviets completely
miscalculated I think they thought
we'd bluster a bit and then negoti-
ate an exchange," said William C.
Fuller, a historian and noted Rus-
sian scholar who teaches strategy
at the Naval War College in New-
port, R.I.
"To a very large degree, that's
the history of U.S. -Soviet relations.
You can't study the Cold War
without realizing the information
vacuum both sides are operating
in.,,
The United State apparelitly
miscalculated as well.
Despite the delicate state of
U.S.-Soviet relations leading up to
a possible summit, the Administra-
tion, in the words of one govern-
ment source, viewed the Zakharov
arrest as "a routine case" involving
a spy who may have overreached
himself.
Go-Ahead for Arrest
Even such a "routine" case in-
volved high-level supervision. The
FBI decision to arrest Zakharov
was relayed to senior State Depart-
ment officials and perhaps to Sec-
retary of State George P. Shultz; to
top intelligence-agency officials,
and to the chairmen of the House
and Senate intelligence commit-
tees. At the White House, John M.
Poindexter, the President's nation-
al security adviser, gave the
Ro-ahead for the arrest.
CWiab u d
Declassified and Approved For Release 2012/03/12 : CIA-RDP90-00965R000807490022-3
 Declassified and Approved For Release 2012/03/12 : CIA-RDP90-00965R000807490022-3
Siarilsorly, the Soviets folf
lieved that they could Saab
their agent from prlipe
sin*fe swap even one etaplo t
Aaerfcap sutras
This Soviets are widely believed
to have taken the same tack in
batsinasemas > anslr ,
on black-market evyWhey charge* in an apparent atseanpt to fords the
rehwst of two Soviet agent', XU.
dog P. Chernyayev and Vladih A.
NO one in the West knows with
c 4twety haw the Soviets view the
l -Dsniloff a> internal"
P110 1"d ohms hive to bar On tl ,
So" bids to~f t os* pica tltasg~:
did: it," doe Waled State Deport-
ment official said.
But publicly, Gorbachev has ac-
cused U.S. hard-liners of deliber-
ately espkltfng tlu-frestr(o poi-
son suWesPCWW relations, a charge
greeted'bp denials.fa every corner
of the Reagan Administration,
the sulde, the surprise at
ter is amost seriousness of the mat-
"I don't think paanybody believed
the Soviets would go to the bold act
of arresting d ~charging an inno-
American
Administration expert said.
"They really have chosen to esca-
late it, not us."
Viewed through American lens-
es, the Zakharov can forced the
Administration to deal with a Sovi-
et citizen following what one gov-
ernment source called "the classic
style" of espionage: "First a
warm-up where he was getting;
unclassified information, and than
he moves along. with tam about
money and secretiniorme z,.,
Thor afifclafs eondudee that tUic
benefits of arrest and proseciitIjt
incMhng letting the Soviets know
that such spying efforts can and
will be stopped, seemed to- out.
weigh the possible risks, A-?
FBI Iateraaed
In the case that led to hie arrest,
an FBI affidavit states that Zack.
harov approached a Queens Col_
cge. N.Y., computer science stu;.
dent in 1983, professing to be a U.N.
employee who would would pay for
"research time" on robotics and
computer technology. The student,
known by the code name "Btrg,"
immediately informed the FBI and
later met frequently with Zakhar-
ov, receiving money in return for
supplying of unclasgi;-
fled data, much of iitt stolen from
libraries. .
When Birg went to work in
- t September;, _ 1986, for a Queens.
company that makes unclas ifi g
precision ebmponents for military
aircraft engines and radars, Zak-
harov's requests shifted to docu-
ments from the company on its
manufacturing Last Jan. 18, the
affidavit states. Zakhsrov instruct-
ed Big to photocopy the first few
Pages of operating manuals for
machines the company uses to
make aircraft components.
Zakharov later struck a written
espionage agreement with Birg
during a meeting on a subway
platform last May 10, the affidavit
says. Birg agreed to obtain ciasd-
fled data for 10 years and be paid
according to the quantity and qual-
ity of information he fed the Sovi-
ets.
Vfelated apleaege JAWS
In the- Reagan, Administrationts
view, theme were compelling rea-
sons to arrest Zakharov the first
time he violated espionage laws by
seeking and receiving
datafrom.Bfrg. am"
Although at this point the FBI
had Zakharov under surveillance
for 45.mon hs,
postponing a climax
to the case for; a few more months,
say,_ until a sillmmit was over, was
impossible without losing the
chance of an arrest, one Adminis_
tration official said. Once Zakharov
made the request for clasefed
material. Birg had to respond or
Zakharov would slip off the hook.
"It wasn't us that called the
timing," said one Administration
official. "It was whoever was giv-
ing Zakharov's orders."
Tie FBI also feared that it might
forever lose the chance to catch
Zakharov in the act of taking secret
documents if it let the first ex-
change with Birg pass, for it is
common practice for agents to turn
their sources over to more senior
handlers with diplomatic immunity
once the source has been lured into
violating espionage laws. More-
over, Zakharov's visa expires next
March, and he might have left at
any time.
Such cases once were resolved
with quiet expulsions rather drop
arrests, but since the Chernev
and Enger cases in 1978, it has. been
official policy to arrest and try
foreign agents who lack diploma
immunity.. To allow Zakharov to
escape arrest, officials Ergue, would
have broken precedent and opened
up a vast new pool of Soviets in the
United States for active espionage
work.
"We can control diplomats
through the (1983) added,
,ions Art." one U.
"bout we don't have thd" iliasne de
facto ability to control (Zakharov's).
movements. He can fly to Toledo
and meet with somebody and ?we
have no way at knowing-it unless
we're watching him...
One official said this week that
the authorization} for the arrest was
seen as. "a difficult _calL" The
Administration was aware of the
potegtiaffor Soviet retaliation.
Three- weeks after Enger and
Chernyayev.were arrested in 1978,
for example, the Soviets arrested
businessman Crawford. The United
States resisted any suggestion of W.
swap at the time, and Crawford
later was expelled from the Soviet
Union. The Soviets: toter traded
five dissidents for the t o spies.
Mirror-Incase Reaction
But Administration officials also
noted that several other East-bloc
spies had been jailed without out-
right Soviet retaliation since 1978.
Moscow's reaction to Zakharov's
arrest appears to be a mirror usage
of Washington's reaction to Zak-
harov's espionage activitiesr And to
Soviet leaders, the
ar-
rest of Daniloff may have
as logical as the arrest of Ze khacov
appeared to the White House.
Zakharov's arrest can at a time
when the Soviet espionap net-
work had taken a Yearlong batter-
ing, beginning with the breakup of
the Walker spy ring in the United
States and extending through a
string of KGB defections, U.S.
officials believe that the KGB suf-
fers a serious morale problem.
Officials say the Soviets may
have been angered by the initial
refusal of a federal magistrate to
grant bail to Zakharov. But they.
noted that New York attorney
Martin Popper-Zakharov's law-
yer, as w f.11 as Enger and Cher-
nyayev's ttorney in 1978-inex-
plicably did not consult with the
State Department on bail matters
before going before the court, as
protocol dictates.
'Closed the Deer'
Enger and Chernyayev initially
were denied bail b t, after pressure
from then-Sec of State Cy-
rus R. Vance, ere quickly re-
leased to the vier ambossa$or
and spent littl time. In jail bee
being swapped. to Zakharov's case,
"the defense counsel., closed the
door' to granting bail - "it
W
could be opened,., said b
W
Baker, assistant FBI directo
r foe'
congressional and Public aff s - ,, ,
Cofl>(}f1Uld
Declassified and Approved For Release 2012/03/12 : CIA-RDP90-00965R000807490022-3
 Declassified and Approved For Release 2012/03/12 : CIA-RDP90-00965R000807490022-3
.,anea- nmencan omruu say the powers have been sufficiently
Sh cets ? may have felt it vital to chastened by theZakharov contro-
rbasure KGB agents abroad that, versy that further serious miscal-
tlty would not be left twisting in culations-if, in fact, they were
tie wind should they be caught in miscalculations-are unlikely.
the act. "Zakharov's a peon," one
US. official reasoned. "But he's one "It could disappear overnight. I
offtheir" think there is a lot of effort right
Moreover, Soviet officials dis- now to make it disappear," the
liked Danilolf,?whose own grandfa- intelligence official said. "I don't
tier held a high post in czarist think it is going to end here and
Russia's military machine and now. There'll be back and forth, tit
whose fluency in Russian gave him for tat, until both sides think their
more contacts with Soviet citizens honor is defended, and then there
than many of his Western press
colleagues had. Arresting him was
a delicious way to gain a lever for
Zakharov's release while muzzling
an increasingly sophisticated
Western reporting corps.
The relatively muted American
outcry over Crawford's 1978 ar-
rest-and the Reagan Administra-
tion's own strident attacks on the
press for gathering and publishing
classified information-may also
have suggested to the Soviets that
Daniloff a seizure would stir no
alarm, one government intelli-
gence source said.
Many government officials ap-
pear to believe that both super-
And U.S. officials will a
er asterisk to their well thumbed
history of Soviet-American coon.
terintelligence battles.
"When' it comes to espionage,"
one government source said, "the
rules are only cited by the Soviets
when they get caught. In short,
there are no rules of the gads.?
Declassified and Approved For Release 2012/03/12 : CIA-RDP90-00965R000807490022-3