Malicious Life Podcast: Operation Kudo

Transcript

On June 19th, 1981, at around 9:30 p.m., after a long day of meeting with world leaders in preparation for the 7th G7 Summit in Quebec, U.S. President Ronald Reagan was escorted back to his room at the historic Chateau Montebello hotel. At some point thereafter he sat down, and made brief notes about the day in his diary. Quote:

“The hotel is a marvelous piece of engineering, totally made up of logs. Had a one on one with Chancellor Schmidt. He was really down and in a pessimistic mood about the world.

Following — met with Pres. Mitterrand — explained our [economic] program and that high interest rates were not of our doing.”

What French President Francois Mitterand actually told Raegan that spring evening in Canada would go on to hugely influence the course of the Cold War. And it seems that Raegan knew it right away. The information was so top secret, so sensitive, that even writing it in his own, personal diary was too risky.

Hello and welcome to Cybereason’s Malicious Life, I’m your host, Ran Levi. In this episode: Operation Kudo, and what might have been the world’s first supply chain cyber attack.

Gus Weiss

Gus Weiss was an economist. But by 1974, he’d circuitously leveraged his PhD into a position on the National Security Council as a foreign affairs officer under Presidents Nixon and Reagan.

He was a small guy, described by Wired magazine as having, quote:

“[L]iquidy blue eyes and an aristocratic air. He stood 5’7″ and in later years developed a slight hunch. He spoke with a breezy Southern accent and wore J. Press suits. The autoimmune disease alopecia, which he developed as a teenager, left him hairless from head to toe. He wore a chestnut-colored wig and smelled vaguely of toupee adhesive. He drifted off into daydreams at inopportune moments. He laughed with a high-pitched giggle.”

In and around the halls of government, officials and journalists have variously described Weiss as an “oasis,” “mysterious,” with “the most exquisitely folded brain,” “a man with the sort of mind that could break the bank of Monte Carlo.” A former colleague recalled to Wired how, quote:

“We called each other ‘old bean.’ We had a contest to see who could bow the lowest as a show of respect. Inevitably I would lay down on the ground because he was so superior. I needed him because I was in my thirties and I didn’t know if I could pull off the things I advertised. He needed me because he was so cataclysmically underappreciated.”

Underappreciated in part thanks to his dogged efforts to combat one of the worst problems facing the U.S. in the Cold War.

During those years, the States enjoyed twice the gross national product of the entire Soviet Union. And it was only that close because the USSR possessed vast reserves of oil, a notoriously volatile commodity. How was it that the Cold War arms race was even competitive, with such mismatched opponents? How could the USSR have kept up? Weiss, like many others, was certain that the answer was espionage.

So he founded the American Tradecraft Society, or ATS, made up of around 30 able-bodied agents and analysts of various U.S. government branches. Together, the semi-renegade group would meet at restaurants in the Washington D.C. area, plotting how to foil the Soviets’ efforts to steal advanced technologies.

In 1982, for example, ATS caught wind of a KGB mission to illegally purchase machine parts necessary for making advanced computer chips. So ATS contacted the Customs department. Customs intercepted the pertinent shipping container, removed all the equipment from inside, and replaced it with the equivalent weight in sand, about 6,000 pounds.

Weiss’ efforts fighting Soviet economic espionage, in the ATS and within the government, remained largely under the radar for years. That finally changed in 1981 when, at some point between 6 and 6:45 p.m. that day in Quebec, Mitterand informed Raegan about “Farewell.”

Farewell

“Farewell” was a man named Vladimir Vetrov. According to legend, the French gave him an English codename — “Farewell” — just in case he were ever caught. That way, the Soviets would suspect him to be an American asset, not a French one. And yeah, maybe that’s one of those fun details people just make up after retelling a story a whole bunch of times, but it would make sense that all precautions were taken with such a significant individual.

Vetrov was an intimidating guy — a little bulky, with dark eyes, and dark hair that poofed up in the middle and ran down the sideburns. A look somewhere between Elvis and mafioso. Beginning in 1965, the young KGB officer was handed what turned into a five-year assignment at the Ministry of Foreign Trade in Paris, which he completed successfully.

From the outside, then, it seems like he was doing everything right to scope out a promising career in KGB intelligence. But something must have happened in Paris, or in the years thereafter.

In a letter later written for French President Mitterand, Vetrov explained why he turned on his country. Quote:

“You are asking why I took this step. I could explain as follows. Sure, I like France very much, a country that marked my soul deeply, but apart from this, I detest and am appalled by the regime in place in our country. This totalitarian order crushes individuals and promotes discord between people. There is nothing go  od in our life; in short it’s rotten through and through.”

The problem with believing this letter on face value is, well, it’s the kind of letter anyone in his position would’ve written.

It’s unlikely that Vetrov turned against the Soviet Union due to ideological reasons, as many have argued in years since, or for financial ones. According to his biography — later adapted into a movie starring Willem Defoe and Diane Kruger, among others — Vetrov never asked for any compensation from the French, and only reluctantly ended up accepting a sum four times his annual salary.

He was a complex individual, by all accounts. The French intelligence officer handling his case from Paris once described him as a, quote, “uncontrollable man, who oscillated between euphoria and over-excitement.”

You can expect that a person like that might not have taken it well when, despite years collecting intel from research and engineering labs, juicing secrets out of Western executives and scientists alike, he received no extraordinary promotion on return to Moscow. Instead he found himself, after a brief stint in Montreal, stuck with a stuffy Moscow office job.

That office job happened to be working for the leader of the infamous “Line X,” a group within the KGB’s First Directorate tasked with stealing advanced Western science and technologies. Vetrov — the possibly resentful, reportedly unpredictable individual — was now in charge of evaluating secrets stolen by a network of hundreds of KGB spies.

Line X

Between March 1981 to February 1982, Vetrov met at various times with handlers from French intelligence — in grocery stores, parks, or just his car — exchanging bags full of sensitive documents. A decade’s worth of information stolen from, and about, Line X. As author Tim Weiner explains in “Legacy of Ashes: The History of the CIA,” quote:

“It worked with every major intelligence service in Eastern Europe. It stole American know-how—especially software, a field where the United States then held a ten-year lead on the Soviets. The KGB’s efforts at technology theft extended from the dullest international trade fairs to the dramatic docking of the Apollo and the Soyuz spacecraft in 1975. The dossier contained clues that the Soviets had cloned American software for airborne radar systems. It suggested the ambitions of Soviet military designers to pursue a new generation of military aircraft and the ever-elusive goal of a defense against ballistic missiles.”

According to Wired, in four years, the Soviets had stolen or illegally purchased 30,000 pieces of Western-manufactured hardware including various machine tools, semiconductors, and a state-of-the-art 3D coordinate measuring machine. They also stole 400,000 technical documents pertaining to everything from space programs to manufacturing techniques, national defense projects and military machinery. For every new advancement that the U.S. had dedicated millions of dollars and thousands of hours of manpower to achieve, the Soviets simply took from right under their noses, saving billions of dollars and all that time and effort in the process.

It did require some cost — Line X employed nearly 20,000 people like Vetrov, all working in some capacity to plot, process, and interpret years worth of secrets from the West. Of those, hundreds of the most elite agents worked undercover in embassies across the globe, using whatever they had at their disposal to pilfer whatever secrets they could.

But besides all the stealing and the lying, what was so frustrating was just how much the US had enabled their own espionage.

In the history of the Cold War, the 1970s were the decade of detente — an easing of tensions between the two arch rivals. Nixon and General Secretary Brezhnev developed a much warmer relationship than their predecessors had had, and each side promised to make certain concessions to become, slowly, friendlier.

For example, by carrying out joint initiatives, like Apollo-Soyuz — a mission to space with representatives from both nations, meant to symbolize the growing partnership between former enemies. Except according to Farewell’s dossier, one of the USSR astronauts who showed up to Apollo-Soyuz was a secret KGB agent, gathering intel on the U.S. space program.

Detente also meant opening up economically, to some degree. For instance, Soviet representatives were invited to tour U.S. companies, in a limited capacity, to learn a thing or two about making, say, watches. But reports indicate that they took advantage of these arrangements, and planted spies among their ranks. Famously, in tours of US aircraft and semiconductor plants, Soviet representatives wore sticky strips on the soles of their shoes in order to collect samples of materials on the factory floors.

Operation Kudo

The Farewell dossier detailed all of this and more. It was so dense, in fact, and so significant, that the Americans took months to process and plan what to do with it. In the Fall of 1981, some time after learning about Farewell from Mitterand, Raegan tasked the Director of the CIA, William Casey, with figuring out how to deal with the Farewell dossier. Casey, in turn, turned to Raegan’s advisors on the National Security Council.

One of those advisors — former Air Force Secretary Thomas Reed — recalled what happened next in his book “At the Abyss: An Insider’s History of the Cold War.” Quote:

“During the fall of 1981, one of my NSC associates, Dr. Gus Weiss, was cleared to read the material. He devised a remarkable plan: “Why not help the Soviets with their shopping? Now that we know what they want, we can help them get it.” There would be just one catch: the CIA would add “extra ingredients” to the software and hardware on the KGB’s shopping list.”

Raegan gave his approval. Just as in Quebec that Spring, out of caution, he made no record of the meeting, nor the contents of the discussion or the plan, which was given the designation “Operation Kudo.”

Here’s how it worked:

Based on the contents of the Farewell dossier, the National Security Council and a new CIA directive called the “Technology Transfer Intelligence Center” were aware of a crucial project for the economic future of the Soviet state: a natural gas pipeline stretching from remote Siberia through Russia, Kazakhstan, and into Eastern Europe, thousands of kilometers across in all. According to one U.S. official writing for the New York Times, this pipeline would’ve supplied the Soviet state with 8 billion dollars a year — an absolutely essential lifeline to support its failing economy, as well as its lagging advanced technology research.

To automate such a pipeline, the Soviet engineers sought advanced software for controlling its various pressure gauges, compressors, valves, and so on.

At first, according to Weiner, they attempted to buy the necessary software from manufacturers in the United States. Quote: “Washington rejected the request but subtly pointed to a certain Canadian company that might have what Moscow wanted. The Soviets sent a Line X officer to steal the software. The CIA and the Canadians conspired to let them have it.”

Reed explained what happened next. Quote:

“Once in the Soviet Union, computers and software, working together, ran in the pipeline beautifully — for a while. But that tranquility was deceptive. Buried in the stolen Canadian goods — the software operating this whole new pipeline system — was a Trojan horse. In order to disrupt the Soviet gas supply, its hard currency earnings from the West, and the internal Russian economy, the pipeline software that was to run the pumps, turbines, and valves was programmed to go haywire, after a decent interval, to reset pump speeds and valve settings to produce pressures far beyond those acceptable to the pipeline joints and welds.”

Different accounts have differed in their evaluation of the nature, timeline, and damage caused by this supply chain cyber attack, and related events associated with it.

According to Weiner, an explosion and other failures caused the Soviets millions of dollars in damages. According to Reed, quote, “the result was the most monumental non-nuclear explosion and fire ever seen from space.” End quote. Despite the three-kiloton blast, the story goes, no casualties were reported.

Two Russian agents later disputed the explosion story, as did an employee of t   he Canadian company that supposedly wrote the software. According to that employee, the supply chain bug was only introduced to USSR pipeline systems in 1986, long after the blast Reed referred to, and many have cited since.

Whatever the exact details, it’s generally agreed that the American plot was successful, and even broader than just one computer virus. Besides the pipeline malware, another top security advisor under Raegan explained that, quote, “we started in motion feeding the Soviets bad technology, bad computer technology, bad oil drilling technology. We fed them a whole lot, let them steal stuff that they were happy to get.” End quote. There were more trojan viruses, Weiner claimed, for weapons systems and other state-of-the-art stolen equipment. There were blueprints for bad space tech, and bad designs for chemical machinery.

And even if the Americans did a fraction of what’s been reported, the effect would’ve been the same. The primary goal of Operation Kudo wasn’t actually to destroy any particular Soviet project or machine. As Reed explained, quote:

“In time the Soviets came to understand that they had been stealing bogus technology, but now what were they to do? By implication, every cell of the Soviet technical leviathan might be infected. They had no way of knowing which equipment was sound, which was bogus. All was suspect, which was the intended endgame for the entire operation.”

In effect, the USSR was now blind both to what was happening in the U.S. — because its intelligence was faked — and within its own country — because any of its machines could’ve been bugged.

It was a devilish intelligence operation, cyber operation, and it was also more than that. Years later, none other than Fidel Castro reflected on the legacy of Operation Kudo, writing how, quote:

“The campaign of countermeasures based on Farewell Dossier was an economic war. Even though there were no casualties in terms of lives lost because of the gas pipeline explosion, significant damage was made to the Soviet economy.”

As Castro explained, Weiss’ plan wasn’t just incisive and effective. It also dovetailed with Raegan’s broader mission to burn out the Soviet Union in a war for technological supremacy.

It was best epitomized in his Strategic Defense Initiative, mockingly referred to as “Star Wars.” At the time, Raegan’s detractors argued that the missile defense system he was pouring so much money into was science fiction. But as Castro and British Prime Minister Margaret Thatcher, in one of her autobiographies, explained, even technological failure could bring economic success. From Thatcher, quote:

“President Reagan did not pretend that they yet knew where the research could finally lead. But he emphasized that –in addition to his earlier arguments in favor of SDI– keeping up with the United States would impose an economic strain on the Soviet Union. He argued that there had to be a practical limit as to how far the Soviet Union could push their people down the road of austerity.”

 In other words, as long as the Soviets had to keep up with American investments and technological advancement, they would be fighting a losing war. Then, thanks to Operation Kudo, Castro wrote, quote:

“He knew that the Soviets could not compete in that league, because they couldn’t suspect that their electronics industry was infected with viruses and Trojan horses placed there by the United States intelligence community.”

The Cold War wasn’t won with guns, or even nuclear weapons. It was won with money, and intelligence. While America bled the Soviet economy, the Farewell dossier and Operation Kudo ensured that it couldn’t even get up to mount a response.

And then in a final, killing blow, after the Kudo mission was complete, CIA Director Casey sent representatives through Western Europe to disclose the identities of over 200 Line X agents stealing technology and intel for the KGB. The majority were promptly expelled from their host countries, if not arrested.

And so, the KGB’s international operation for technology theft was utterly dismantled, in one fell swoop. The Soviet Union would not survive the decade.

Epilogue

At the heart of the story of Operation Kudo, and the affair surrounding the Farewell dossier, were two underappreciated men. There was Vetrov, the unreliable KGB agent-turned-mole after a perceived failure of proper recognition for his work. And Weiss, the overlooked mastermind renegade against Soviet economic espionage. Both managed to have an outsized impact on the direction of the Cold War, and both were just as intriguing and perplexing in their deaths as they were in their lives.

According to the book written about Vladimir Vetrov, in February, 1982, French intelligence imposed a cooling-off period for their work with him, worried that too much contact might raise suspicions. He began heavily drinking and, one day, found himself parked at a highway median with his mistress in the car. In the heat of an argument, he stabbed her. A man came knocking on the car window, and Vetrov reacted by stabbing the man, as well. That man, it turned out, was a policeman. The policeman died, the mistress survived, and Vetrov was sentenced to 12 years in jail.

In jail, Vetrov wrote letters bragging about being involved in “something big.” Soon, the KGB put two and two together. Vetrov confessed, was charged and convicted of treason, and executed on January 23rd, 1985.

Weiss survived another, largely unappreciated two decades. But on November 25th, 2003 — a cold evening in Washington D.C. — his body was found mangled, lying on the concrete sidewalk 11 stories below the balcony of his condo at the Watergate in Washington D.C.

A medical examiner ruled it a suicide. Some of his colleagues have mentioned, since, that he demonstrated symptoms of loneliness and depression in the years prior. But Weiss left no note to confirm anyone’s guesses, and obituaries in his local town paper and The Washington Post explained no determined cause of death.

Though there’s almost certainly no credence to it, it may be worth noting that, shortly after The Post obituary, the wife of one of Weiss’ colleagues phoned another one of his colleagues.

“After what he and my husband did to the Soviets,” the woman said, “there’s no way they would let that pass. If you think Gus committed suicide, then you believe in fairy tales.”