33. Memorandum From Barry Kelly of the National Security Council Staff to the President’s Assistant for National Security Affairs (Carlucci) and the President’s Deputy Assistant for National Security Affairs (Powell)1
SUBJECT
- Moscow Embassy in Context
The Soviets have scored a major intelligence success. The KGB has successfully compromised our Embassy in Moscow. Before the investigation is completed, foreign missions other than Leningrad and Vienna will be effected by KGB success in using the tried and true tools of espionage—sex, money and revenge. Our national security has been severely damaged by the Marine cases and several other recent espionage cases. There are a number of concurrent actions that need to be undertaken to (1) prevent further damage, (2) change some inadequate procedures and practices, (3) respond to the Soviets and (4) conduct an extensive damage assessment.
—Departments and agencies are working now on an urgent basis to prevent further damage.
—PFIAB has been tasked to conduct an extensive review of our current security procedures and practices on a worldwide basis.
—An interagency working group under the PRG is ready to begin a thorough assessment of the damage to our national security from a number of Soviet espionage cases.
—Our response to the Soviets needs further development. The following paragraph suggests the context for a response.
The Soviets expect that we will make them pay a price for such flagrant violation of our embassies. They have enjoyed the intelligence success. Now they must be made to pay the traditional price. Their operation has been exposed. It is time for the consequences. The consequences in the past have often been tied to substantive issues under negotiations between the U.S. and the USSR, thus preventing or inhibiting ongoing negotiations of vital interest to both sides. In the Danilov case, we very successfully kept our response to procedural issues. Important ones to be sure but still procedural issues. Our response in cutting back the Soviet presence in this country resulted in some real counterintelligence gains. The Soviets were surprised and their intelli[Page 124]gence activities damaged. In the same manner we could keep our response to procedural issues such as:
—Should we occupy the new Embassy in Moscow?
—Should we allow the Soviets to occupy their new site at Mount Alto?
—As the Soviets do in Moscow, should U.S. guards screen visitors to the Soviet Embassy?
—Should we further reduce the respective staffs at our embassies and consulates?
—Limit the size of diplomatic pouches to restrict Soviet technical collection activities in the U.S.?
—Encourage cultural exchanges but end technical exchanges?
—Seek the cooperation of our NATO allies to apply similar procedural restrictions on reciprocal diplomatic issues with the intent of improving their overall security vis-a-vis the USSR.
There are a number of areas where we can craft an appropriate response to the Soviets that will have the support of the American people and Congress and yet provide us with some real counterintelligence gains.
RECOMMENDATIONS
That you agree that our response to the Soviets be within procedural framework for counterintelligence gains.2
That you approve the use of this memo to develop press guidelines.3
- Source: Reagan Library, 1987 SYS 4 RWR INT 40151–40200. Secret. Sent for action. A stamped notation on the memorandum indicates Powell saw it.↩
- There is no indication of approval or disapproval of the recommendation.↩
- Powell wrote “OBE” beside the approve option. Attached but not printed is a list of U.S. Government responses.↩