RUMANIA REAPS REWARDS OF HI-TECH THEFTS
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Document Number (FOIA) /ESDN (CREST):
CIA-RDP90-00965R000403730021-5
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RIPPUB
Original Classification:
K
Document Page Count:
4
Document Creation Date:
December 22, 2016
Document Release Date:
March 9, 2012
Sequence Number:
21
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Publication Date:
March 16, 1985
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3 Declassified in Part - Sanitized Copy Approved for Release 2012/03/09: CIA-RDP90-00965R000403730021-5
-Yr1~"'r
Rumania Reaps Rewardscni'-ru
Thefts
One of the most astonishing failures
of communism is the regularity with
which its political triumph has pro-
duced economic ruin. Whether in trans-
forming Russia from the world's great-
est grain exporter at the time of the
revolution to the world's greatest grain
importer today, or in Ethiopia, where
the intensity of the famine has stirred
the pity of the entire Western world,
communism has invariably destroyed
the national economy wherever it has
come to power. And when the tradi-
tional economic institutions of the soci-
ety prove unable to rescue the country,
the Communist leaders invariably turn
to the secret services to balance the
budget, or. at least to distract the people
from the economic failures.
After their seizure of power, Com-
munist regimes have always consoli-
dated their conquests through the
institutionalized terror of their security
forces. During the nationalization of
the economies of Eastern Europe, the
security forces destroyed millions of
members of the "bourgeoisie."
in the 1950s, for example, Ruma-
nia's Communist party was able to na-
tionalize the agricultural land and col-
lectivize the agricultural system by us-
ing its recently created security forces to
arrest some 50,000 peasants and send-
ing them to concentration camps.
Today, there are 900,000 KGB offi-
cers in the Soviet Union, along with
500,000 border guards and 550,000
militiamen, which brings their total to
one security officer for every 14
citizens, a ratio unmatched in any
Western prison, and barely worse than
the 16-to-I ratio in the other Warsaw
Pact countries. .
The security forces serve other func-
tions, of course, and when the bank-
rupt Eastern European countries be-
came unable to repay their huge for-
eign debts in the mid-'70s, the security
forces were ordered to perform this
mission.
The secret intelligence services of
Eastern Europe were ordered to in-
crease the level of technological es-
pionage and to reduce the quantity of
imports from the West. They were also
told to use corruption, smuggle drugs
and arms, blackmail emigres in the
West, and even traffic in human beings
in order to produce hard currency. The
Rumanian service, the CIE, was in-
structed to raise at least 10 per cent of
the Rumanian annual payment due to
he,West.
rsp-onage Against the West
Since the early days of East Euro-
pean communism, technological es-
pionage has been one of the most im-
portant dollar-makers and money
savers, to the point where in Warsaw
Pact countries foreign trade is subor-
dinated to the goals of technological es-
pionage. As of 1978, more than 60 per
cent of Warsaw Pact countries' com-
mercial representatives abroad were
intelligence officers, and the rest, with a
few insignificant exceptions, were
agents.
Of the Rumanian trade personnel
abroad, 70 per cent were intelligence of-
ficers, and 38 of the 41 heads of Ruma-
nian foreign trade enterprises were
intelligence officers or agents. About
85 to 90 per cent of the engineers, med-
ical doctors, economists and teachers
sent abroad by the Warsaw Pact coun-
tries under bilateral agreements are
intelligence agents. Every cooperative
or joint venture with Western -com-
panies is intensively used to infiltrate to
the west numerous intelligence officers,
and agents, for the purpose of illegally.
obtaining new technology.
Throughout the Warsaw Pact coun-
tries, there are numerous secret
"technological cities" for nuclear
power, electronics, chemistry, etc.,
where Western technology obtained il-
legally is used to develop Soviet science
and industry. In the Soviet Union
alone, there are more than 20,000 KGB
engineers and other highly qualified
technicians engaged in secretly trans-
forming the results of technological es-
pionage into Soviet military and in-
dustrial power-and into hard currency
as well.
Technological espionage pays huge
dividends to the Soviet bloc. In 1978 the
Rumanian government reviewed the
results of a decade of illegal activity,
and found that the product was im-
pressive indeed: over 35 per cent of the
inventory and development of the na-
tion's industry was due at least in part
to espionage.
Chemical plants for producing poly-
styrene, polyurethane, synthetic
leather, melamine, dyes, explosives,
radial tires and photosensitive materi-
als were built in all regions of the coun-
try.
Numerous new medical and pharma-
ceutical plants were followed by an im-
pressive number of new metallurgical
installations for high-alloy steel,
metallic carbides and non-metallic
alloys as well as modern steel mills and
rolling mills, and a brand-new alumi-
num industry. New digital machine
tools, light alloy engines and new diesel
engines were other results of intelli-
gence operations.
The nuclear industry reported that it
had received enough information to
build an industrial heavy water instal-
lation and 30 per cent of the com-
ponents of its nuclear reactors.
The government estimated that for
the decade under review, Rumania had
saved between $600 and $800 million by
replacing legal (but expensive) imports
with illegal (but cheap) intelligence
products. And if this seems like an
enormous figure to you, please con-
sider that I knew from first-hand
experience that Rumania lagged far
behind some of the other bloc coun-
tries, such as East Germany, Czech-
oslovakia, Poland and Hungary. On
my last trip to Moscow the then-chief
of Soviet foreign intelligence described
the growing Communist technological
espionage campaign to me as "one of
the most productive and prosperous
businesses in history."
?R~ HUMAN EVEI TS
I A M~rrn 1 9R5
Declassified in Part - Sanitized Copy Approved for Release 2012/03/09: CIA-RDP90-00965R000403730021-5
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Influence Operations
Influence activity has been a.signifi-
cant part of Communist foreign intel-
ligence from the beginning. It was
originally aimed at gaining political and
economic advantages, at penetrating
Third World governments and turning
them into political allies, at trans-
forming emigres into political sup-
porters, at swaying the media, and in
general at gaining prestige.
At the time of the Communist hard
currency crisis, "distinguished" agents
of influence started to be used for ob-
taining low-interest credits and other
financial advantages, increasing ex-
ports from Communist countries, and
acquiring Third World markets. Their
major task became economic and fi-
nancial influence.
started to function as a back channel
for political communications. But
Rifaat soon. began to . work with
Rumania to arrange for lucrative ex-
port deals to Syria, which added signifi-
cant amounts of cash to both the ac-
count of the Rumanian government
and his personal Swiss accounts.
In the Central Africa Republic, the
infamous President Jean Bedel
Bokassa was recruited after a trip to
Bucharest where he "fell in love" with
a winsome Rumanian doctor, of course
a security agent. The doctor was sent
off to Africa with a special Rumanian
airplane and became his "unofficial
wife,". and Bokassa secretly accepted
10 per cent of the Rumanian profits
from having provided preferential ter-
rains for diamond mining.
These are only a few examples of the
small armies of high-ranking foreign
officials recruited as agents of influence
and used to help balance the problems
of a bankrupt economy. The success of
political corruption, and not only in the
Third World, made influence opera-
tions an ever more significant source of
financial profit for Communist coun-
tries. -
Only a very few people in the CIE
knew about these operations, which
were personally directed by President
Nicolae Ceausescu. No other member
of the Rumanian government knew
anything except the prime minister,
who was only informed about them in a
general way. Any suggestion that the
East European countries were selling
Jews and Germans was vehemently
denied by the Rumanian government,
along with the other East European
regimes that engaged in the same prac-
tices.
Because of his position, Pacepa was
in the middle of this monstrous trade
from the outset. For almost 15 years,
Pacepa witnessed Rumanian Jews and
Germans bartered behind the political
scenes, Helsinki accords and propa-
ganda notwithstanding. The Ruma-
nians and other Warsaw Pact countries
were only interested in squeezing out
more money, charging extra for
emigres with better education or with
relatives remaining in Rumania, or for
any other pretext.
In fact, for President Ceausescu the
Rumanian Jews and Germans are
neither a political nor a humanitarian
problem, contrary to his constant
propaganda. For him, they are a source
of money, pure and simple. Since 1972
all the money from these operations has
been deposited only in his personal ac-
counts, some in the Rumanian Foreign
Trade Bank, and some in Switzerland.
Inheritance Operations
a4b
Although lagging behind other
Warsaw Pact members in this
area, Rumanian influence opera-
tions nevertheless have achieved
some remarkable results.
One salient case was that of the
brother of the shah of Iran. Originally
recruited by the CIE to promote im-
proved bilateral relations between the
two countries, he enabled Rumania to
win bids for contracts to sell and manu-
facture tractors, locomotives, train
wagons and geological research equip-
ment. The "sealed" bids from the other
foreign competitors were simply made
available to the CIE, secretly opened
and photographed. The Rumanian bids
therefore came in at slightly below the
level of the others, and Rumanian com-
panies were able to outbid American
and West German corporations for the
right to build tractor, train and other
assembly lines in Iran, even though the
products were technically inferior.
The agent of influence in this case
received a commission of 10 per cent of
the value of every Rumanian product
assembled in Iran. These millions of
dollars were usually paid in cash, either
into the hands of the shah's brother, or
into secret Swiss bank accounts. In ad-
dition to this handsome fee, when the
Iranian government supported Ruma-
nia with hundreds of millions of dollars
worth of long-term, low-interest loans,
an additional 2 per cent interest was
paid into the same Swiss accounts.
Iran was only one of many countries
where Rumania recruited very high-
ranking officials to help balance the
cash flow problems of the nation; in
Syria, Rifaat Assad, the once-powerful
brother of President Hafez al-Assad,
was recruited for political influence and
Selling Bodies
One of the more profitable enter-
prises for the CIE was the sale of people
as an export commodity. This odious
practice began in the early 1960s, when
two men made a secret agreement for
the sale of Rumanian Jews. The first
was a Rumanian intelligence officer
named Gheorghe Marcu; the other was
an Israeli intelligence representative,
H. Jacober, a British citizen who was
replaced after his death by an Israeli
who represented himself as a deputy
director of intelligence and called
himself Yitzhak Yesahanu.
The Israelis paid thousands of
dollars for each Rumanian Jew granted
an exit visa, and over the years many
hundreds of millions of dollars were
paid to Rumania, along with low-
interest Israeli credits issued through
the CIE as bonuses for increasing the
emigration quotas. For reasons of
secrecy most of the payments were
made in cash, but when large amounts
were involved the money was trans-
ferred through West German or Swiss
banks.
A sale of ethnic Germans was
similarly arranged, based.on a personal
agreement between the same Marcu
and a personal representative of
Hans-Dietrich Genscher, then the West
German interior minister. As in the
Israeli case, suitcases full of money
were transported monthly to Bucharest
via the official airline TAROM, and
special low-interest credits were issued
to stimulate Rumanian enthusiasm for
the emigration of ethnic Germans to
their native land.
When, as a young chemical engineer,
Pacepa was assigned to the security
forces instead of the laboratory he had
always dreamt of working in, "inheri-
tance" was one of the first code names
he heard from the Soviet advisers.
In Eastern Europe, emigres were
considered subject to the same rules as
citizens on the Soviet side of the Iron
Curtain, and the intelligence services
were put to work: emigres were con-
tacted by intelligence agents and in-
duced-sometimes by charm, some-
times by threats-to leave their assets to
their relatives back home, or to Ruma-
nian churches, schools or other institu-
tions. After their death everything was
immediately sold, and the money was
transferred to the Rumanian govern-
ment, with a small percentage (in Com-
munist currency!) going to the relatives
of the deceased.
CO*nu'
Declassified in Part - Sanitized Copy Approved for Release 2012/03/09: CIA-RDP90-00965R000403730021-5
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3,
Not one penny ever arrived in the
institutions to which the inheritance
was nominally bequeathed. If cooper-
ative relatives could not be found, they
were simply invented. Gravestones and
fictitious children or nephews were
created for the occasion. All of these
techniques were passed on by the KGB
to its sister services.
Despite some minor variations and
subtleties from one bloc country to
another, "inheritance operations" are
nothing but cases of extortion. The
most lucrative case Pacepa remembers
was that of "Dogaru," a Rumanian
diplomat in Holland who died shortly
after the Second World War. He had
left a valuable collection of, antiques
and historical documents in a safe
deposit vault in The Hague, with a will
leaving it all to his son, and then only if
the son could take possession in the
Netherlands.
The son was recruited by the CIE and
sent to Holland (his wife and child were
of course kept under CIE custody). The
goods were transported to a safe ware-
house in Bucharest, where they were
found to include paintings by Titian
and Tintoretto, and the inheritance was
judged to have a value of at least
$600,000 (in the 1950s; today it would
be worth several millions). The son got
$3,000 (.5?l0 of the value) in Rumanian
currency and was reimbursed for his
travel expenses.
Learning from Yugoslavia and
Hungary, in the 1970s the CIE started
to hunt out retired emigres and lure
them back to Rumania. Persuaded by
an attractive exchange rate for their
pensions and carefully compiled photo
albums about life in their native coun-
try, some went back to die where they
had been born and arranged for the
pensions to be sent to the Rumanian
Bank of Foreign Trade. With very rare
exceptions, the returning emigres never
saw foreign currency again, only
Rumanian lei.
If someone got tired of living in
Rumania and longed to have his basic
human rights back again, he met with
polite refusals for an exit visa. Quite a
few who had no relatives were kept
"alive" after death, in order for them
to continue to receive their pensions.
Behind closed doors, President Ceau-
sescu used to say cynically, "we cannot
nationalize the assets belonging to Ru-
manian emigres, we cannot take over
their properties... but we should find
ways to make them pay for that."
Smuggling
Political smuggling has long been a
Communist specialty. Communism
smuggled arms and ideology, and it
organizes illegal operations and revolu-
tions wherever and whenever it can. But
in 1970 Pacepa was a member of a dele-
gation that visited Cuba, and there for
the first time he saw government smug-
gling conducted solely to raise money
for the regime.
One afternoon, Raul Castro, in his
capacity as overall chief of the military
and security forces, took Pacepa and
others on a "secret visit" to the tech-
nical facilities of the DGI, the Cuban
intelligence service. Everything was
KGB-style, and therefore quite familiar
to him, with the exception of a large
leather, vinyl and nylon luggage factory
working 24 hours a day and manu-
facturing more than a thousand dif-
ferent models of suitcase per day. Every
piece was specially designed with a dou-
ble bottom for the secret transportation
of goods or money.
Raul explained that the suitcases
were just one way of secretly trans-
porting arms and propaganda materials
"to America, Asia and Africa" in their
export of revolution. According to
him, they had recently been used
primarily to produce large amounts of
foreign currency, through the widescale
export of drugs to the United States and
to some West European countries.
When Rumania's desperate need for
foreign currency could no longer be
satisfied through technological es-
pionage, influence operations and traf-
ficking in people, the Rumanian presi-
dent remembered the Cuban way. He
ordered the CIE to learn more about
smuggling, especially from the Soviet
KGB as well as from the Bulgarian,
Hungarian and Yugoslav services, and
as the CIE's deputy chief, Pacepa
participated in many of these discus-
sions.
Basically it turned out that these
intelligence services had actually taken
over the most important national trans-
portation organizations, such as the
airlines, maritime companies and
highway and railway organizations, ap-
pointing undercover officers to the
most important positions and starting
to use these organizations for illegal
traffic, under the protection of inter-
national laws. It also turned out that
numerous international terrorists and
smugglers had been granted asylum in
these Communist countries and were
being used to make contact with the
international illegal market. The goods
bein smuggled were above all arms
and drugs, but cigarettes, liquor and
other highly taxed products were also
moved.
The intelligence services credited
smuggling with producing a sizable
portion of their national incomes.
Based on their experience, in 1973 the
CIE took over ROMTRANS (transpor-
tation for foreign trade enterprises),
and within less than two years most of
the drivers of the Rumanian TIR trucks
had become undercover intelligence of-
ficers trained in clandestine transporta-
tion of goods. The airline TAROM and
the maritime chartering agency NAV-
LOMAR came under CIE control,
with undercover officers in the most im-
portant positions at home and abroad.
The CIE resident chief in Turkey was
appointed general director of Ruma-
nian customs, in order to be able to
coordinate all these smuggling opera-
tions. Some of the foreign criminals
who had been used by the CIE for
assassination and other terrorist ac-
tions abroad, who were hiding in
Bucharest to avoid capture by Interpol
or the Western police, were formed into
a secret "contraband" section of the
CIE.
These jointly inspired measures
opened a new CIE era, both for smug-
gling high-technological commercial
and military equipment into Rumania
from the West, and for sending drugs
and arms there. Secret, unwritten
agreements with the Bulgarian, Hunga-
rian and Yugoslav intelligence services
opened the way for massive smuggling
operations, run into the Middle East
and into the Western Hemisphere.
American cigarettes produced in
Yugoslavia and Scotch whiskey pro-
duced under license in Bulgaria or il-
legally in Rumania started to be secretly
exported and sold to international smug-
glers. Unmarked or falsely marked
crates containing arms without serial
numbers or other generic markings
were sent on open Black Sea waters,
air-freighted to Lebanon, and trans-
ported by ships or TIR trucks to West-
ern countries. And then, in 1977, Presi-
dent Ceausescu secretly ordered that
the whole great quantity of drugs that
had been confiscated over the years
should be exchanged for money.
In 1977 and 1978 alone, the CIE sold
Western smugglers more than 200
pounds of drugs. The Rumanian presi-
dent quickly discovered that cigarettes
and whiskey were child's play com-
pared to the money that could be made
in the drug business.
Declassified in Part - Sanitized Copy Approved for Release 2012/03/09: CIA-RDP90-00965R000403730021-5
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46
Recent Events
This set the pattern for the future, as
the economic crisis of the Soviet bloc
intensified in the late '70s and early
'80s. Shortly before Pacepa's defection
in 1978, the CIE quota for producing
dollars was increased from 10 to 20 per
cent of the annual Rumanian debt pay-
ment, and making money became the
CIE's major objective.
Scientific and technological es-
pionage received more manpower than
ever before, together with orders to in-
tensify to the utmost the theft of West-
ern technology to replace expensive im-
ports. Unlimited quantities of arms
were made available to promote their il-
legal export.
The words "drug trafficking" were
never pronounced, but the code name
for this activity became a terror: more,
and more, and more "Sauerstoff" was
demanded. This is the German word
for oxygen, and drugs, like oxygen,
seemed to come from all directions,
without having to be produced. Pro-
ducing dollars exceeded all other CIE
activities, including political and
military espionage. It had become clear
to Ceausescu that economic disaster
was much more threatening than
NATO's military forces.
It is easy to see that this situation can
only have intensified in the years since
Pacepa's defection. The Rumanian for-
eign debt has ? surpassed S10. billion;
causing impossible payments of S2.3
billion in 1981 and 1982, and an expen-
sive rescheduling of the 1983 debt pay-
ment.
This crisis is not limited to Rumania
alone, for many Warsaw Pact countries
face similar burdens, and they have
reacted to it in the same manner: with
the failure of their economic systems,
they have become criminal nations, try-
ing to raise the necessary funds through
illegal means on a global scale.
At a recent Congress of the Ruma-
nian Communist party in Bucharest,
the economy was one of the most im-
portant subjects under discussion.
Everything from long-term economic
plans to ways to save toilet paper were
discussed, but there was no word about
these secret and disreputable ways of
producing a significant part of the na-
tional income. Sooner or later they will
become well-known and condemned.
Secretary of State George Shultz
recently said. that "the complicity of
Communist governments in the drug
trade is cause for grave concern among
the nations of the free world." What he
may not realize is that the massive
involvement of these governments in
drug trafficking is the direct result of
the failure of the Communist economic
system, and that the Communist na-
tions are trying to solve their problems
by stealing from us, and by sending us a
flood of drugs and arms. In this way,
we are all paying a price for the failure
of communism. . ^
Mr. Pacepa, former deputy director of the
Rumanian secret intelligence service, defected to
the West in1978. He is the highest ranking Soviet
bloc intelligence official ever to defect to the
Kest. Mr. Ledeen is senior fellow in interna-
tional affairs at the Georgetown University
Center for Strategic and International Studies
in H'ashington. D.C.
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