CEAUSESCU FAMILY SOLD SOVIET MILITARY SECRETS TO U.S.

The Ceausescu connection was part of a broader U.S. weapons-buying operation that reached into the highest levels of the East Bloc military establishment. The Central Intelligence Agency and the U.S. military were able to obtain important components of the tactical, non-nuclear weaponry -- including air defense systems -- that the Soviet Union has in place to protect itself and other Warsaw Pact countries.

From Romania alone the acquisitions included the latest version of the Shilka, one of the most effective antiaircraft systems in the Soviet inventory; mobile rocket launchers that had been modified and improved by the Romanian military; and radar systems used in identifying targets and directing the firing of various Soviet antiaircraft weapons.

Armed with this knowledge, U.S. military planners could then develop effective countermeasures or perhaps not build a costly weapon. "The potential value of these things is almost incalculable," a U.S. intelligence officer said. "The only way you can truly unlock the secrets of your adversaries' weapons is to physically have them." For example, access to the Soviet radar systems aided in U.S. development of the revolutionary "stealth" technology, designed to allow aircraft to elude radar detection.

U.S. government officials say that Nicolae Ceausescu was not personally involved in the dozen or so transactions, but that the operation could have succeeded only with his tacit approval. "It was an assumption from the beginning," said one U.S. intelligence officer. "It was never something that we had to debate. . . . None of this could happen, our presumption was, without him."

Of all the East Bloc deals, the Romanian transactions may have been the most stunning because of the Ceausescu involvement. Nicolae Ceausescu was one of the most hard-line Communist leaders in the Warsaw Pact. The Stalinist dictator had sought to insulate his country from the rest of Eastern Europe and the West as well as from Moscow, and had placed his family members in key government posts to assure his hold on power.

The Romanian operation came to a halt with Ceausescu's overthrow and execution last December. The two brothers also are out of the picture: Marin Ceausescu, 74, was found hanged Dec. 28 in the basement of the Romanian trade mission in Vienna, which he headed. Lt. Gen. Ilie Ceausescu, 63, deputy defense minister and secretary of the Supreme Political Council of the Romanian armed forces, was arrested during the revolution and remains in custody in the Romanian capital of Bucharest.

The pro-democracy upheaval in Eastern Europe has disrupted the broader operation, but not ended it. Over the past decade, the U.S. government has paid more than $250 million to obtain the latest versions of Soviet-made weapons systems through contacts in Poland, Czechoslovakia, Hungary, East Germany, and Bulgaria, according to those interviewed.

The contacts included influential military or Communist Party officials, whose willingness to sell was seen by some in the U.S. intelligence community as a reflection of growing discontent among some Warsaw Pact officials. "It was corrupt to the core," a former U.S. official said. "There was no ideological discrimination. If you wanted to use this as an indication of the fragility of the system, this was a classic."

Although Romania was more independent of Moscow than other East Bloc nations, intelligence officials never assumed the Ceausescus were betraying their Soviet allies out of any secret affection for U.S. policies or ideology. "It was just greed -- pure and simple personal greed," said a retired high-ranking U.S. intelligence official. "It was an indication of the corruption of the Ceausescus, and from the U.S. standpoint, we didn't really care who we dealt with if they could produce. Generally, you don't run into sainted characters in this business."

U.S. officials had no contact with the Romanians in the weapons transactions. Instead, they advanced funds to as many as half a dozen intermediaries, who then arranged the deals on their own through the Ceausescu brothers.

None of the intermediaries were U.S. citizens. Because the U.S. officials had no control over the money once they paid the intermediaries, they felt that the arrangement did not violate the Foreign Corrupt Practices Act, which prohibits Americans from paying illegal sales commissions to foreign officials.

Marin Ceausescu's Vienna trade post gave him a plausible cover for his contacts with the West. "He was the commercial path that you'd connect back into the bureaucracy. He's the guy that made it happen," an intelligence source said.

Ilie Ceausescu, as deputy defense minister and chief of the main political directorate of the Romanian military, had the clout inside Romania to obtain much of the sensitive technology the U.S. government wanted to acquire.

A special aide to Nicolae Ceausescu, identified by two sources as Stalian Octovian Andronic, flew to Switzerland on a regular basis and coordinated the diversion of a portion of the payments to the family's secret bank accounts, the sources said. The rest of the money went to a Romanian military agency, Romtehnica, in Bucharest.

Nicolae Ceausescu, at his chaotic trial last December, emphatically denied the existence of any such secret bank accounts, and since his execution there has been a continuing mystery surrounding where much of the family wealth is hidden. This is the first indication that U.S. government funds ended up in some Swiss accounts held by the Ceausescus.

The East Bloc Pipeline

U.S. intelligence officials say the Romanian connection in particular, and the larger East Bloc operation in general, was an extraordinary intelligence coup during the 1980s, a time of heightened East-West tension and modernization of the military systems in place in Central Europe.

As the Soviet Union's closest military allies, the Warsaw Pact countries received regular shipments of military technology under strict controls imposed by Moscow.

For example, U.S. Army intelligence officials had seen earlier models of the Shilka, an antiaircraft system captured by the Israelis during the 1973 war with Egypt and Syria. But they had not examined the most recent version, with its dramatically improved target-acquisition radar and four computerized guns, until they acquired it from Romania in the mid-1980s. The U.S. military had no comparable weapon, military sources said.

The Shilka, a "formidable weapon" against combat aircraft and armed helicopters, occupies "a crucial place in the Soviet-NATO military balance," according to the 1988 edition of the military reference volume, "Weapons and Tactics of the Soviet Army."

From other East Bloc nations, the U.S. government secured such key items as Soviet air defense systems and a variety of surveillance and target acquisition radars; armored vehicles, tanks and tank technology, including laser range finders and fire control systems; fighter aircraft engines, nuclear, biological and chemical warfare equipment, and technical and instruction manuals. In 1987, after several unsuccessful attempts, the CIA managed to obtain the Soviets' newest battle tank, the T-72.

Often, East Bloc officials cooperated in the transactions, acting as a kind of informal consortium, splitting orders and arranging for various forms of plausible deniability to cover each other's involvement. Such cooperation was critical in the case of Romania which, due to its strained relationship with the Soviet Union, did not possess all Soviet weaponry.

One country might provide part of an order, with the remainder coming from a second and even third country. "It helped to obfuscate the trail of paper. It would go through the various {countries'} ministries and get lost in the bureaucratic maw," one official said.

The Romanian shipments, carried on foreign-flag freighters, typically left from the port of Constanza on the Black Sea. Officials of third countries, including Soviet Middle East allies, sometimes agreed, for a fee, to provide end-user certificates showing their country as ultimate destination for the arms headed for the West.

The Ceausescu Connection

Neither Ilie nor Marin Ceausescu has ever admitted or even discussed involvement in selling Soviet technology and secrets to the West, nor have there ever been hints of such cooperation.

Scholars say both men had impeccable Communist Party credentials. Ilie, with his high military and party posts and close ties to the head of the Securitate, the Romanian secret police, was "of all the president's brothers, the most prominent and the most visible," according to Vladimir Tismaneanu, a Romanian expert at the Foreign Policy Research Institute in Philadelphia.

When the revolutions in Eastern Europe began last fall, Ilie Ceausescu took a public stance in defending Romania and attacking others for straying from socialist ideology. "Some comrades in the Socialist countries are not up to these crisis-stricken times," Ilie told the British newspaper, the Independent, in an interview published just before his brother was overthrown.

"They cannot cope with challenges," he said. "We know all too well that there are only two forms: socialism and capitalism. There are two systems, and there is no middle way. . . . We do not sell our souls and ideology for a fistful of dollars," he said.

Marin Ceausescu is credited with bringing Nicolae, the future president, into the Romanian Communist Party in the 1930s. Marin was sent to Vienna in 1973 to direct Romania's commercial mission. In that capacity, he wooed foreign investors, leading delegations to Bucharest, sometimes to meet President Ceausescu.

Friends and associates interviewed in Vienna said Marin had a penchant for luxury, often wearing a large diamond ring and confiding to one friend that he wanted to make a lot of money. At the same time, he stayed in the background, rarely allowing himself to be photographed or interviewed. In nearly 17 years in Austria, he never learned the language.

Marin conducted the secret negotiations for the weapons shipments away from the Romanian commercial mission at Theresianumgasse 25, usually meeting at hotel coffee shops or one of Vienna's many cafes, like the busy Cafe Schwarzenberg.

"You have to compliment him on his ability to successfully mask his substantial role in the arms market over a long period of time," one U.S. official said. "He avoided all the notoriety that is generally associated with this. . . . He cut a wide swath in Vienna, and yet he was successful in not drawing publicity as someone intimately involved in the international arms business."

In the mid-1970s, Marin represented Romania in the sales of military products to other countries, primarily Soviet allies. The deals centered almost exclusively on surplus arms and ammunition that had no intelligence value to the West.

The U.S. government regularly bought old Soviet rifles, armored vehicles and other military equipment on the open arms market, and used them to outfit American soldiers in combat training exercises at the National Training Center at Fort Irwin, Calif.

In July 1979, working through a middleman, the U.S. government made such a purchase from Romania, buying a load of arms, ammunition and four armored personnel carriers. Marin Ceaucescu handled the arrangements. The cargo was carried on a Yugoslav freighter, the Klek. When the Klek arrived at a Navy facility in Earle, N.J., word leaked out and there were a few brief news accounts of a mysterious ship with a curious cargo.

The Pentagon, in a brief statement at the time, confirmed that the Klek carried "equipment from various Warsaw Pact countries," adding that the cargo was "not sophisticated" and was "relatively low level." The statement did not mention Romania, saying the shipment came from a "private business organization."

Though the shipment was of little intelligence value, sources said, it marked the beginning of the long, mutually beneficial relationship. Around that time, U.S. intelligence officials say they wondered whether they could tap their East Bloc connections for more important and tightly controlled Soviet weapon systems.

"Somebody said, if they can get all these things for us, could they get something that was worth a damn -- for intelligence exploitation?" an official recalled.

At the time, the tactical weapon that U.S. officials wanted to see most was the Soviet T-72 tank, a 45-ton machine that had been deployed only a few years before. "We didn't know a thing about the T-72," a former U.S intelligence official said. "In the European war scenario it was going to be tank against tank" and the Defense Department wanted to find out everything about the T-72; "to tear it apart," in the words of this official.

"I don't think there was anything else more important," another official said.

For a weapon the magnitude of a T-72, Marin brought his brother, Ilie, a rising military and party official, into the negotiations. Ilie worked for about a year in 1980 and 1981 on a delivery.

The Romanians set two important conditions. They demanded that the foreign intermediaries deposit about 20 percent of the proposed $15 million deal into Swiss bank accounts controlled by the Ceausescus. They also asked for -- and received -- an extraordinary promise from high-level U.S. officials: that the United States would guarantee safe passage for the two Ceausescu brothers and several others if the deal somehow became public and they had to be made into scapegoats to save Nicolae Ceausescu's regime.

The T-72 deal failed at the last minute, but the year of work was a significant one nonetheless. The United States, through its intermediaries, now had a direct working relationship with Ilie.

Ceausescus Hid Wealth

The relationship that began in 1979 thrived for 10 years. The deals followed the same pattern: U.S. officials, using letters of credit, transferred funds to the middlemen. On delivery, the middlemen paid the Romanians, with about 20 percent going to the Swiss accounts controlled by the Ceausescus and the remainder to the Romtehnica agency.

Additionally, thousands of dollars in cash were distributed by the foreign intermediaries to several Romanian officials assisting in the transactions.

The Swiss accounts were established in the names of commercial front companies, usually created for a single deal, with incorporation papers from Panama or Liechtenstein. Ceausescu special aide Andronic sometimes opened the accounts himself.

The Swiss accounts appear to be part of the larger web of secret bank accounts in which the Ceausescus hid their wealth -- accounts that Nicolae and Elena Ceausescu, at their Dec. 25 trial, said did not exist.

At one point, according to a transcript of the trial, the prosecutor asked: "Let us now talk about the accounts in Switzerland, Mr. Ceausescu. What about the accounts?"

Elena Ceausescu replied: "Accounts in Switzerland? Furnish proof!"

Nicolae Ceausescu said, "We had no account in Switzerland. Nobody has opened an account. This shows again how false the charges are. What defamation, what provocations!"

As Nicolae Ceausescu faced death, Marin and Ilie found themselves in precarious positions. Marin was in Vienna. He had recently sent his wife and daughter back to Bucharest and now could not locate them. Desperate, he called an old friend. They met at a cafe. Marin said he had been dialing Romania all day and could not get through.

The friend, whose account was related by an associate, said Marin seemed to be at the cracking point. They agreed to meet again in a few days. But later that day, Dec. 25, came news that Nicolae and Elena Ceausescu had been executed.

Three days later Marin, who lived in a flat above the Romanian trade mission, was found dead in the basement of the mission. Doctors ruled it a suicide.

In Bucharest, Ilie was taken into custody in a general roundup of Ceausescu family members and former officials of the regime.

Staff researcher Lucy Shackelford contributed to this report.