Suspected Spy-Ring Paymaster Vanishes, As Russians Mull Conspiracies

By Patrick Goodenough | July 1, 2010 | 4:19 AM EDT

The police station in the southern Cypriot city of Larnaca where the bailed-out Russian spy suspect Christopher Metsos failed to report on Wednesday, June 30, 2010. (AP Photo/Petros Karadjias)

( – Police in Cyprus issued an arrest warrant late Wednesday for the suspected paymaster of an alleged Russian espionage ring operating in the United States, following his disappearance a day after being released on bail pending an extradition hearing.
The latest development in the spy saga comes as Russian commentators charge that the FBI’s arrest this week of 10 alleged deep-cover agents was a conspiracy designed to foil the Obama administration’s bid to “reset” relations with the Kremlin. Both governments, however, have played down the possibility of a serious rift.
Despite some scoffing about a scenario straight out of a Cold War-era spy novel – from invisible ink to encrypted Morse code messages – some U.S. analysts caution that the episode reveals troubling issues that need to be tackled.
Acting on an Interpol “red notice” issued at the request of the U.S., Cypriot police early Tuesday morning arrested a 54-year-old named Christopher Metsos as he prepared to board a flight in Larnarca on the island’s south coast, bound for Budapest.
Hours later, a Larnarca district court judge released Metsos on bail, ordering him to surrender his Canadian passport and report to police daily between 6 and 8 PM until an extradition hearing scheduled for July 29. Cyprus media reported that he also posted bail of 20,000 euros ($24,400), plus another 9,000 Canadian dollars ($8,440) in cash.
After he failed to report to Larnarca police on Wednesday evening, a warrant was issued for his arrest, police spokesman Michalis Katsounotos told Cyprus media outlets.
“It is highly unusual for Cyprus courts to issue bail for foreign nationals pending extradition,” the Cyprus Mail commented after Metsos’ release. “In court hearings prosecutors frequently cite the risk of flight via the north.”
Cyprus has been divided for 36 years, with the northern region recognized only by Turkey. Amid peace talks the border between the two was opened in 2003 for the first time since the division. Northern Cyprus has flight and ferry links to Turkey, as well as a ferry service to Syria.

President Obama and Russian President Dmitry Medvedev chat ahead of lunch at Ray's Hell Burger in Arlington, Va., on June 24, 2010. (Official White House Photo by Pete Souza)

Ten suspects under arrest in the U.S. have been charged with failing to register as foreign agents, and eight of them also face charges of conspiracy to commit money laundering.
According to the U.S. Justice Department, Metsos acted as paymaster for a ring of mostly Russian “illegals” tasked to infiltrate U.S. society and provide information to the SVR, Russia’s Foreign Intelligence Service.
The long-term goal of the operation, reads the criminal complaint, was for the agents “to become sufficiently ‘Americanized’ such that they can gather information about the United States for Russia, and can successfully recruit sources who are in, or are able to infiltrate, United States policy-making circles.”
The complaint describes Metsos as “a secret SVR agent who is based abroad, and who has repeatedly entered the United States to meet with certain Illegals and, among other things, to pay them on behalf of [SVR headquarters] Moscow Center.”
It recounts that he was covertly filmed obtaining money from a Russian based at the Russian Mission to the U.N., handing some over in a bag-swap maneuver at a Queens train station, and burying some in a park in upstate New York, from where it was recovered two years later by other suspected ring members.
‘Ulterior motives’
The complaint describes a “multi-year investigation” that includes surveillance and undercover operations going back to the early 2000s, until as recently as Saturday, the day before the arrests were made. The ring was reportedly rounded up now because one the members had been about to travel to Moscow.
The view from some in Russia, however, is that the arrests were timed to disrupt warming ties between the two governments. Just three days earlier, President Obama met with President Dmitry Medvedev in Washington, and pledged to support Russia’s quest to join the World Trade Organization.
“Are we going to hear from Moscow about the ‘reactionary forces’ again at work trying to undermine the fragile detente of the ‘reset’?” American Enterprise Institute director of Russian studies Leon Aron wondered on Tuesday.

Russian President Dmitry Medvedev and Prime Minister Vladimir Putin meeting at the Gorki residence outside Moscow on Monday, June 28, 2010. (AP Photo/RIA-Novosti, Vladimir Rodionov, Presidential Press Service)

The answer was not long in coming.
“Some top Russian lawmakers have described the move as an attempt to undermine trust in relations between Russia and the United States,” reported
The state-owned news agency RIA Novosti cited a deputy chairman of the State Duma’s Security Committee, Nikolai Kolesnikov, as blaming the scandal on “people whose attitude to Russia was still based on Cold War-era stereotypes.”
Another senior lawmaker and former KGB official, Gennady Gudkov, saw Obama’s political opponents behind the affair.
“Now millions of Americans will think that Russia was only pretending to be a partner of the United States but is in fact still going after U.S. secrets like during the Cold War,” he told the Moscow Times.
“It looks like the work of someone who is very powerful and in the political opposition to Obama, or a hawkish military and intelligence group not happy with the reset of relations with Russia,” Gudkov said.
“Why were suspects exposed now if they were tracked down years ago?” RIA Novosti political correspondent Andrei Fedyashin asked in an analysis.
“Obviously, the FBI wanted to make a big splash with the arrests. One of its missions is counterintelligence, after all, and this operation was a major success,” he said. “But it is suspicious that an exposure of this magnitude happened to coincide with a warming in U.S.-Russian relations. It seems reasonable to assume that whoever ordered the arrests had ulterior motives.”
‘Pure propaganda’, a tabloid-style news site run by ex-employees of the former Communist Party mouthpiece, quoted analyst Yevgeny Minchenko as saying the scandal could be “part of the campaign to promote U.S. special services that would like to obtain more funding for their work.”
“A group of the U.S. establishment tries to sabotage the reset of relations between the U.S.A. and Russia,” added Minchenko, director of a think tank called the International Institute of Political Expertise.
Another analyst, Alexander Khramchikhin of the Institute of Political and Military Analysis, told the Republicans were using the Russian issue “to settle scores” with Obama.
Meanwhile the pro-Kremlin television network, Russia Today, featured former British MI5 officer and whistleblower Annie Machon, who called it “interesting politically” that the arrests came soon after a successful meeting between Obama and Medvedev.
“The intelligence agencies in the U.S. have been very much under attack over the last year or two … so to go to a good old-fashioned Cold War spy story and regain a bit of credibility, I think is probably something they would aspire to,” she said. “Everyone loves a good spy story and I think this is pure propaganda.”
(According to her personal Web site, Machon is involved with the “9/11 Truth Campaign.” She is also on record as blaming the Mossad for the 1994 suicide truck bombing of a Jewish community center in Buenos Aires. Argentina accuses Iran and Hezbollah of carrying out the deadly attack.)
‘Not the A-team’
Some pundits in Russia and elsewhere have poked fun at the notion that today’s spies would use such old-fashioned techniques as Morse code. “Does the USA really think that Russian special services are so outdated?” asked Minchenko.
Heritage Foundation senior fellow Peter Brookes warned Wednesday that behind the apparently bumbling operation, it was clear the Kremlin still regarded the U.S. “as an important target and competitor, no matter how often Team Obama mashes the U.S.-Russia ‘reset’ button.”
“Don’t believe that these James Bond wannabes with their sloppy spycraft are the Russian A-Team,” he wrote in a column posted on a Heritage Web site and published in the New York Post.
Brookes recalled past Russian espionage successes including CIA operative Aldrich Ames, arrested in 1994 for spying for the KGB and its SVR successor, and the FBI’s Robert Hanssen, arrested in 2001 after spying for the KGB and SVR for two decades.
“And our government says Russian intelligence is now more active, with more spies here, than during the Cold War,” he said. “So this ring is likely only a sampling of SVR operations in America. From traditional embassy spies to front companies to cybersleuthing, there may be hundreds of more effective Russian agents among us today.”
Another Heritage scholar, Ariel Cohen, said in an analysis that some of the tradecraft used by the spy cell looked “like a parody on an old Le Carre novel.” He also noted how easily the Russian agents were tracked by the FBI.
“This has led some old timers from the intelligence community to speculate that the network is a decoy to mask a much more sophisticated espionage operation in the U.S.”
“‘Reset’ or not, the current Russian leadership is still committed to the past and continues to view America with fear and suspicion,” Cohen said. “In Moscow, the U.S. is still an intelligence target, not a ‘partner’ the Obama administration believes it is.”
Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow