It was a typical December night in Moscow. The cold was biting, the snow thick and dry.

In the Federal Security Service's headquarters on Lubyanskaya Ploshchad, hundreds of intelligence officers met as they did every year to celebrate the founding of the Cheka, the Soviet secret police. Champagne glasses tinkled as the officers spoke in jubilant tones. Classical music played softly in the background.

The hall grew quiet as Vladimir Putin -- the former FSB director who had been appointed prime minister a few months earlier -- stood to speak.

"Dear comrades," Putin said. "I would like to announce to you that the group of FSB agents that you sent to work undercover in the government has accomplished the first part of its mission."

Everyone in the room knew what the second part entailed, said an FSB officer who attended the event and related what took place.

"We knew that the second part was to become president and to appoint former KGB colleagues to top government posts," the officer said.

In the speech, Putin assured the people in the room that he would not forget them once he reached the pinnacle of power, the officer said.

"There are no former agents," Putin declared, giving a new twist to a common joke among KGB officers.

The listening FSB officers raised a toast to Cheka founder Felix Dzerzhinsky and Yury Andropov, the longest-serving KGB chief.

That night, they had one more reason to celebrate, the FSB officer said: After years of humiliation, the intelligence services were on the brink of being restored to their former prestige.

It was Dec. 20, 1999, just 11 days before Boris Yeltsin abruptly resigned and named Putin as acting president. Three months later, Putin won a snap presidential election.

Now, as Putin prepares to leave the Kremlin eight years later, he has kept the promise made that night in FSB headquarters.

An astounding 78 percent of the country's leadership has links to the KGB or FSB, according to estimates by Olga Kryshtanovskaya, a leading sociologist who tracks Kremlin politics and the security services. Twenty-six percent of the officials acknowledge their involvement, while the rest give themselves away "by the holes in their resumes," Kryshtanovskaya said.

In addition to filling government and company posts with intelligence officers, Putin has restored to the FSB much of the power and glory enjoyed by the KGB.

At the same time, a kind of spy mania has swept the country, with the FSB seeming to see enemies in every corner and accusing dozens of scientists of espionage.

Rise of FSB

Yeltsin abhorred the omnipresent KGB, and he decided after the Soviet breakup in 1991 that it would be dangerous to leave national security in the hands of a single organization.

Inspired by the U.S. model, Yeltsin broke the KGB up into a half dozen agencies that he believed would prove more efficient and provide him with more sources of information about what was going on in the country. (See table, page 4.)

As Yeltsin wanted, none of the agencies boasted a monopoly on information. In fact, the FSB, the main domestic intelligence agency, and the others often had to fight for the president's ear.

On economic security issues alone, the FSB found itself competing with three other agencies -- the Federal Tax Police, the Interior Ministry and the Federal Agency of Governmental Communication and Information, or FAPSI. In fact, Yeltsin set up the tax police in 1993 to balance the growing clout of the FSB's economic security department.

Also, Yeltsin initially only empowered the FSB to carry out preliminary investigations, although he later allowed it to establish a full-fledged investigative branch.

"At first glance the system seems huge and inefficient, but it allowed the president to avoid being unduly influenced when making decisions," said Andrei Soldatov, director of Agentura.ru, a nongovernmental agency that monitors the intelligence services.

Rivalries among the various branches of the intelligence services often led to internal fighting and the embarrassing release of compromising material.

All this changed in March 2003 when Putin signed a decree disbanding FAPSI and the Tax Police, the FSB's main rivals. Most of FAPSI's duties were handed over to the FSB, while 40,000 tax police officers were sent to the newly created Federal Drug Control Service, headed by former FSB deputy director Viktor Cherkesov.

(Exactly a year later Putin appointed the former head of the tax police, Mikhail Fradkov, as prime minister. Fradkov is now the head of the Foreign Intelligence Service.)

Putin's 2003 decree also put the State Border Service under the control of the FSB. The agency of 400,000 armed border guards had operated under the KGB during Soviet times.

Another Yeltsin-era agency, the Presidential Security Service, was folded into the Federal Guard Service. Yeltsin had essentially used the Presidential Security Service as his personal intelligence agency, and it had compiled reports that balanced those provided by the other intelligence agencies.

The FSB's powers expanded further in 2006, when a Putin-backed anti-terrorism law gave the agency the lead role in fighting terrorism -- a clear effort to centralize command over counterterrorism activities. Previously, the FSB and the Interior Ministry had divided duties in fighting terrorism.

Also in 2006, the Kremlin created the National Anti-Terrorist Committee, which is under the FSB's control.

After the kidnapping and killing of four Russian diplomats in Iraq in June 2006, a Putin-backed law was approved that allows the FSB to eliminate enemies abroad. Until then, the intelligence officers could only gather information abroad, said Andrei Soldatov, the intelligence expert.

Under Putin, the FSB has become more powerful in some ways than the KGB, Soldatov said. The KGB was an instrument in the hands of the Communist Party and did not take part in the decision-making process, but the FSB has managed to obtain the powers of both the KGB and the Party, he said.

The FSB refused to comment for this report. Many current and former intelligence officers and other people contacted for this article were reluctant to discuss the rebirth of the FSB under Putin. Most of those who agreed to talk asked for anonymity, citing fear of reprisal from the FSB.

All the President's Men

The FSB seems to have a presence in all walks of Russian life these days. In the Kremlin alone, more than half of the senior staff has links to the intelligence services, according to estimates by Kryshtanovskaya. The officials include presidential aide Viktor Ivanov, a KGB colonel general, and perhaps Igor Sechin, a Kremlin deputy chief of staff who once worked as a Portuguese translator in Mozambique.

These Kremlin officials are split into two main competing clans.

The FSB is believed to control many federal agencies. Intelligence officers are usually named deputy ministers and charged with checking how the ministries are carrying out their activities, Kryshtanovskaya said.

Former Defense Minister Sergei Ivanov, a KGB and FSB veteran, brought a number of FSB colleagues to the ministry during his six years there, including Deputy Defense Minister Nikolai Pankov; Andrei Chobotov, head of the ministry's personnel department; and Sergei Rybakov, head of the ministry's information department. Ivanov is now a first deputy prime minister.

The interior minister, Rashid Nurgaliyev, served in the KGB as a criminal investigator and later in the FSB.

Former officers also fill the ranks of regional governments and state companies. (See table, Page 4.)

More than 10 percent of lawmakers in the State Duma and 20 percent in the Federation Council have ties to the FSB, Kryshtanovskaya said.

Every once in a while a surprise pops up. Putin has chosen First Deputy Prime Minister Dmitry Medvedev, who does not have a background in intelligence, as his successor, paving the way for him to become the next president. But the former agents who have seen their stars rise under Putin are unlikely to fade under Medvedev, a former intelligence officer said.

"Under Medvedev, we are likely to see less of the paranoia typical of the KGB and FSB, but the current Kremlin clans will continue to rule the country," he said.

In Private Business

Current and former FSB officers work in large private companies as well. Another former FSB official said the Kremlin wanted the officers to make sure the companies do not act against Russia's interests.

"Big companies in Russia consult with the Kremlin before striking any big deal. The officers working for those companies are there to make sure that things are done properly or the way the Kremlin wants," the official said.

The companies, who pay generous salaries to the officers, feel they get their money's worth. The officers make sure they do not have problems with the Kremlin.

"All big companies have to put people from the security services on the board of directors," said a banker with a large private bank. "Many are appointed as directors or deputy directors. They are called 'active reserve agents,' and we know that when Lubyanka calls, they have to answer them."

FSB headquarters is commonly referred to as Lubyanka.

There are no estimates for how many officers with links to intelligence work in private companies.

"It works like a pyramid: Big state and private companies hire KGB and FSB big shots, medium-size companies hire medium agents, and small companies employ ordinary officers," the former FSB official said.

Medium and small companies hire former KGB and FSB agents to protect their businesses from corrupt tax or fire inspectors and to cut through bureaucracy, he said.

"Before, the protection job was done by the mafia, but now its role has been taken over by the agents," he said.

Spin and Spy Mania

The FSB, meanwhile, has brought back a Soviet-era tradition of honoring actors, writers and journalists who portray agents in a good light. The tradition, which was discontinued in 1989, resumed in 2006.

Last December, the creator of the television show "Operation Agent.ru," Sergei Medvedev, won the first prize of 100,000 rubles ($4,000). Historian Roy Medvedev took second place and 50,000 rubles for his book "Andropov," while Vladimir Shmelev, director of the film "Under the Apocalypse," won 25,000 rubles.

Despite the positive spin, the FSB seems to be facing the same occupational hazard as the KGB -- seeing spies and enemies everywhere. Over the past five years, the FSB has accused more than a dozen scientists of selling classified information to foreign countries.

One physicist said he now seeks the FSB's advice before publishing articles or attending conferences to avoid being accused of spying.

"All of a sudden it was like going back to the past, to the Soviet Union," he said. "When I'm not sure what I should do, I just ask them. I have to."

He refused to elaborate on how the FSB monitors scientists. "I'd prefer to keep that to myself," he said.

He added, however: "With the chekists in power, it seems that our country has enemies everywhere. Poland sells us bad meat, Georgia and Moldova sell bad wine, and Ukraine steals our gas. This is what television is feeding us."

However, the FSB officer who told of Putin's speech in FSB headquarters said Russia had faced a very real threat and that the Kremlin had needed to act "to save the country."

"President Putin has done so much for us, " he said. "He took us out of the decay of the Yeltsin period, when the country was in complete chaos, the security services were disbanded, and Russia was in danger."

He said Putin had realized that economic reforms were needed but that the reforms could not be implemented without a stronger FSB.

"He is the best president we have ever had," the officer said.

Previous reports in the Putin's legacy series can be found online at www.themoscowtimes.com.

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Agents in Power

The number of current and former intelligence officers employed by the state has increased significantly under President Vladimir Putin. Here are some senior figures linked to the security services.

The Kremlin

Vladimir Putin, president, KGB lieutenant colonel. He was recruited by the KGB in 1975 and served in the First Department of the Leningrad Directorate (foreign intelligence) until 1983. He served as a spy in Dresden, East Germany, from 1985 to 1990.

Igor Sechin, Kremlin deputy chief of staff, Rosneft chairman. In what experts say was an undercover KGB job, he worked as a Portuguese translator in Mozambique. He is believed to have played a key role in the legal assault on Yukos, once Russia's biggest oil company. Viktor Ivanov, presidential aide; chairman of Aeroflot and Almaz-Antei, KGB colonel general. He has served as FSB deputy director and head of the FSB's economic security department. Vladimir Osipov, head of the Kremlin's personnel department. He formerly worked for the Federal Agency of Governmental Communication and Information, or FAPSI. Igor Porshnev, head of the Kremlin's information department. In what experts say was an undercover KGB job, he worked as a journalist for Gosteleradio (State Television and Radio) in India.

Alexei Gromov, head of the Kremlin's press service, Channel One television board member. He is a career diplomat believed to have links to the security services.

The Government

Sergei Ivanov, first deputy prime minister; head of United Aircraft Corporation, the state aviation holding; controls the country's military-industrial complex. He worked for Soviet foreign intelligence in Africa and Europe and served as FSB deputy director from August 1998 to March 2001. Defense minister from 2001 to 2007. Nikolai Pankov, deputy defense minister. He graduated from the KGB Higher School in 1980 and served at the agency for many years. He headed the State Border Service in 1997 and 1998. In 2001, he was appointed head of the Security Council's secretariat. Sergei Ivanov brought him to the Defense Ministry.

Andrei Chobotov, head of the Defense Ministry's personnel department. He is a former KGB and FSB agent and a close ally of Sergei Ivanov.

Rashid Nurgaliyev, interior minister. He was hired as a KGB investigator in 1981. In 1995, he worked at the central office of the Federal Counterespionage Service, or FSK. He later served as an FSB chief inspector and head of the FSB's internal security department. Arkady Yedelev, deputy interior minister, police colonel general. He served in the KGB and FSB. Yevgeny Shkolov, head of the Interior Ministry's economic security department. He served in the KGB and FSB.

Yury Draguntsov, head of the Interior Ministry's internal security department, KGB major general. He served in the KGB and FSB.

Viktor Cherkesov, Federal Drug Control Service chief. He served in the KGB and FSB. Konstantin Romodanovsky, Federal Migration Service chief. He attended the KGB school in Minsk. Sergei Veryovkin-Rokhalsky, chief of the Federal Agency for Financial and Tax Crimes, KGB colonel general. He worked for the KGB in the Leningrad region and for the FSB in various Russian regions.

Yury Zubakov, Security Council deputy secretary. He served as a KGB officer and was ambassador to Moldova.

Mikhail Barsukov, head of the Security Council's military inspection department. A former FSB director.

Sergei Poltavchenko, presidential envoy to the Central Federal District, a KGB lieutenant general.

Grigory Rapota, presidential envoy to the Southern Federal District. He served in the KGB and as deputy head of the Foreign Intelligence Service from 1994 to 1998. He also served as Security Council deputy secretary and secretary-general of the Eurasian Economic Community, a union of Russia, Belarus and Kazakhstan.

Anatoly Safonov, presidential counterterrorism envoy. He has served as deputy foreign minister and head of the KGB's branch in Krasnoyarsk.

Murat Zyazikov, Ingush president, KGB general.

Vladimir Kulakov, Voronezh governor. He headed the KGB's and later the FSB's branch in Voronezh.

Valery Potapenko, Nenets governor. He served in the KGB and FSB. Putin appointed him to the post after the previous governor was accused of fraud.

Sergei Lebedev, CIS executive secretary. He formerly headed the Foreign Intelligence Service. Nikolai Bordyuzha, secretary-general of the Collective Security Treaty Organization. He has worked in the KGB and FAPSI, headed the State Border Service, and served as ambassador to Denmark.

State Companies

Valery Golubev, Gazprom deputy chairman. He served in the KGB.

Alexander Medvedev, Gazprom deputy chairman, head of Gazexport, RosUkrEnergo board member. In what experts say was an undercover KGB job, he worked for Soviet bank Donaubank in Vienna at the same time as Andrei Akimov, now Gazprombank's chief.

Konstantin Chuichenko, head of Gazprom's legal department and executive director of RosUkrEnergo. He served in the KGB.

Sergei Ushakov, deputy head of Gazprom's management committee. He served in the KGB.

Yury Shamalov, head of Gazflot, the Gazprom subsidiary that is exploring the Arctic shelf and plans to handle future Gazprom shipments of liquefied natural gas. He served in the KGB and FSB from 1987 to 2007.

Andrei Akimov, Gazprombank chief. In what experts say was an undercover KGB job, he worked for Vneshtorgbank in Switzerland and for Donaubank, another Soviet bank, in Vienna. He worked at Donaubank at the same time as Alexander Medvedev, now Gazprom's deputy chairman.

Yevgeny Plyusnin, head of Gazprombank's personnel department. He served in the KGB and FSB.

Sergei Ivanov, Gazprombank vice president and son of First Deputy Prime Minister Sergei Ivanov. Alexander Ivanov, Vneshekonombank manager, FSB officer, son of First Deputy Prime Minister Sergei Ivanov.

Andrei Patrushev, Rosneft aide, FSB officer, son of FSB director Nikolai Patrushev

Sergei Chemezov, head of Russian Technologies. In what experts say was an undercover KGB job, he worked for an obscure company in Dresden, East Germany, in the 1980s. He told Itogi magazine in 2005 that Putin was his neighbor in Dresden.

Vladimir Yakunin, head of Russian Railways. In what experts say were undercover KGB jobs, he worked in the Soviet Committee for Foreign Trade Relations and later in the Soviet mission to the United Nations.

Source: MT Research

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Breakup of the KGB

Feeling it was dangerous to place national security in the hands of a single organization, President Boris Yeltsin split the KGB into around a half dozen agencies in the early 1990s. Here's what they were.

The Federal Security Service, or FSB. This is the main domestic counterespionage agency. Its initial task was to operate only on Russian territory, including in its embassies abroad.

The Foreign Intelligence Service, or SVR. It has a mandate to operate only abroad.

The Federal Agency of Governmental Communication and Information, or FAPSI. Its most important function was to provide safe and secure communication channels for top government officials. Like the U.S. National Security Agency, it also tapped telephone conversations and monitored Internet activities.

Putin disbanded the agency in 2003 and passed most of its tasks to the FSB.

The Federal Border Service. This agency took more than 400,000 armed border guards away from the KGB. Putin put the agency under the auspices of the FSB in 2003.

Federal Guard Service. This agency was intially called the Main Guard Directorate and provided security for government officials.

The Presidential Security Service. This powerful agency was set up to provide security for the president, his retinue and family, but eventually became an in-house security service whose officers also prepared reports for Yeltsin that balanced the information from the other intelligence agencies.

Putin put the agency under the Federal Guard Service in 2003.

- MT