The Dresden Stasi foreign-intelligence chief, Herbert Kohler, served at the same time as head of its information and technology intelligence unit,[11] a sign of how important smuggling embargoed goods was for the city. Ever since Germany was carved up between East and West in the aftermath of World War II, much of the eastern bloc had relied on the black market and smuggling to survive. The Soviet Union’s coffers were empty after the ravages of the war, and in East Berlin, Zürich and Vienna organised-crime groups worked hand in hand with the Soviet security services to smuggle cigarettes, alcohol, diamonds and rare metals through the black market to replenish the cash stores of the security services of the eastern bloc. Initially the black-market trade had been seen as a temporary necessity, the Communist leaders justifying it to themselves as a blow against the foundations of capitalism. But when, in 1950, the West united against the Soviet-controlled bloc to place an embargo on all high-tech goods that could be used for military means, smuggling became a way of life. The free choices of capitalism and the drive for profit in the West were fuelling a boom in technological development there. By comparison, the planned socialist economy of the eastern bloc was frozen far behind. Its enterprises were bound only to meet annual production plans, its workers and scientists left to procure even the most basic goods through informal connections on the grey market. Isolated by the Iron Curtain, smuggling became the only way for the eastern bloc to keep up with the rapidly developing achievements of the capitalist West.[12]
The East German foreign trade ministry set up the Kommerzielle Koordinierung, appointing the garrulous Alexander Schalck-Golodkowski as its chief. Its mission was to earn illicit hard currency through smuggling, to bankroll the Stasi acquisition of embargoed technology. The KoKo, as it was known, answered first to Markus Wolf’s Stasi espionage department, but then became a force unto itself.[13] A string of front companies was set up across Germany, Austria, Switzerland and Liechtenstein, headed by trusted agents, some with multiple identities, who brought in vitally needed hard currency through smuggling deals and the sale of illicit arms to the Middle East and Africa.[14] All the while, the Soviet masters sought to keep a close eye on these activities. The KGB could access all the embargoed high-tech blueprints and goods collected by the Stasi.[15] Often, the Stasi complained that the intelligence-gathering was a one-way street.
At the time Putin arrived in Dresden, West Germany was becoming ever more important as a source of high-tech goods. The KGB was still recovering from a major blow in the early eighties, when Vladimir Vetrov, an officer in its ‘Directorate T’, which specialised in procuring Western scientific and technological secrets, offered his services to the West. Vetrov handed over the names of all the KGB’s 250 officers working on ‘Line X’, the smuggling of technology, in embassies across the world, as well as thousands of documents which provided a breakdown of the Soviets’ industrial espionage efforts. As a result, forty-seven agents were expelled from France, while the US began to develop an extensive programme to sabotage the Soviets’ illicit procurement networks.
The KGB was doubling down on its efforts in Germany, recruiting agents in companies including Siemens, Bayer, Messerschmidt and Thyssen.[16] Putin was clearly involved in this process, enlisting scientists and businessmen who could assist in the smuggling of Western technology into the eastern bloc. Robotron’s status as the biggest electronics manufacturer in East Germany made it a magnet for visiting businessmen from the West. ‘I know that Putin and his team worked with the West, that they had contacts in the West. But mostly they recruited their agents here,’ said Putin’s Stasi colleague Jehmlich. ‘They went after students before they left for the West. They tried to select them and figure out how they could be interesting for them.’[17]
But Jehmlich was far from aware of all the operations of his KGB ‘friends’, who frequently went behind the backs of their Stasi comrades when recruiting agents, including in the Stasi itself. Jehmlich, for instance, claimed he’d never heard that Putin used a cover name for sensitive operations. But many years later, Putin told students he’d adopted ‘several technical pseudonyms’ for foreign-intelligence operations at that time.[18] One associate from those days said Putin had called himself ‘Platov’, the cover name he’d first been given in the KGB training academy.[19] Another name he reportedly used was ‘Adamov’, which he’d taken in his post as head of the House of Soviet–German Friendship in the neighbouring city of Leipzig.[20]
One of the Stasi operatives Putin worked closely with was a short, round-faced German, Matthias Warnig, who was later to become an integral part of the Putin regime. Warnig was part of a KGB cell organised by Putin in Dresden ‘under the guise of a business consultancy’, one former Stasi officer recruited by Putin later said.[21] In those days, Warnig was a hotshot, said to have recruited at least twenty agents in the 1980s to steal Western military rocket and aircraft technology.[22] He’d risen fast through the ranks since his recruitment in 1974, becoming deputy head of the Stasi’s information and technology unit by 1989.[23]
Putin mostly liked to hang out in a small, lowlit bar in the historic centre of Dresden called Am Tor, a few tram stops into the valley from his KGB base, where he’d meet some of his agents, according to one person who worked with him then.[24] One of the main hunting grounds for operations was the Bellevue Hotel on the banks of the Elbe. As the only hotel in the city open to foreigners, it was an important hive for recruiting visiting Western scientists and businessmen. The hotel was owned by the Stasi’s department of tourism, and its palatial restaurants, cosy bars and elegant bedrooms were fitted out with hidden cameras and bugs. Visiting businessmen were honey-trapped with prostitutes, filmed in their rooms and then blackmailed into working for the East.[25] ‘Of course, it was clear to me we used female agents for these purposes. Every security service does this. Sometimes women can achieve far more than men,’ said Jehmlich with a laugh.[26]
We may never know if Putin took his hunt further afield into the West. We cannot trust the authorised accounts of his KGB contemporaries. He himself has insisted he’d never done so, while his colleagues liked to tell instead of the long, lazy ‘tourist’ trips they took to neighbouring East German towns. But one of Putin’s chief tasks was gathering information on NATO, the ‘main opponent’,[27] and Dresden was an important outpost for recruiting in Munich and in Baden-Württemberg five hundred kilometres away, both home to US military personnel and NATO troops.[28] Many years later a Western banker told me the story of his aunt, a Russian princess, Tatiana von Metternich, who’d married into the German aristocracy and lived in a castle, near Wiesbaden, West Germany, where the US Army had its main base. She’d told her nephew how impressed she’d been by a young KGB officer, Vladimir Putin, who had visited her in her home and taken confession religiously, despite his background in the KGB.[29]
While Putin operated under the radar, in the background, the ground was beginning to shift beneath his feet. Parts of the KGB leadership were becoming ever more cognisant of the Soviet Union’s flagging capacity in the struggle against the West, and had quietly begun preparing for a different phase. Soviet coffers were running on empty, and in the battle to procure Western technology, despite the extensive efforts of the KGB and the Stasi, the eastern bloc was always on the back foot, always playing catch-up and lagging ever further behind the technology of the West. In an era when US president Ronald Reagan had announced a new initiative to build the so-called ‘Star Wars’ system that would defend the United States from nuclear-missile attack, the Soviet bloc ploughed ever greater efforts into securing Western technology, only to become ever more aware of how behind they were.
Since the early eighties, a few progressive members of the KGB had been working on a transformation of sorts. Ensconced in the Institute for World Economy in Moscow, they began working on reforms that could introduce some elements of the market to the Soviet economy in order to create competition, yet retain overall control. When Mikhail Gorbachev took office as General Secretary of the Communist Party in 1985, these ideas were given impetus. Gorbachev launched the political and economic reforms of glasnost and perestroika, which aimed for a gradual loosening of control over the country’s political and economic system. Throughout the eastern bloc, the mood of protest was rising against the repression of Communist rulers, and