Business as usual for Smiley's people

If the business of spying was the same as that of making wine, then Russia and Britain were yesterday dusting off old, and not particularly pleasant, bottles from their darkest cellars. The era? That of 1963, of Kim Philby, Oleg Penkovsky and Greville Wynne, the classic espionage vintage.

Seven years have elapsed since Russia and Britain have fallen out quite so spectacularly over spying. This time it is over an allegation by Moscow that they have caught redhanded a Russian agent for working M16, who lead them to his controllers within the British embassy.

On the last occasion, in 1989, each side threw out 11 people. This time - given the evident fury of the Foreign Office, which described the Russian behaviour as "wholly unjustified" - a similar tit-for-tat performance seems to be looming, one that may not stop with British retaliation for Russian expulsions.

What divides the two incidents, of course, is the collapse of the Soviet Union, and a certain warming of relations. Only last month John Major was in Moscow for talks with President Boris Yeltsin during a summit on nuclear safety. Britain, which supports Mr Yeltsin and his current re- election efforts (although it only admits to supporting "reforms"), announced another pounds 33m in aid.

Yet, for all the cool friendliness, there is plenty of evidence that the intelligence community has ploughed on with its work. In March, a parliamentary committee warned of an increase in Russian spying. The former Defence Minister, Tom King, said the Russians "were back in business' and on the increase, having retrenched after the collapse of the Soviet Union.

There seems little doubt that for the British, the same is true. These days there are 300 British businesses operating in Russia, and some $500m (pounds 300m) worth of investment. Yet secrets remain: many activities - from nuclear disarmament, to chemical weapons, Nato policy, and the sale by Russia of nuclear technology to China and Iran - remain of keen interest to the Smiley types.

But the latest affair should also be seen in the context of Russian domestic politics. Next month, Boris Yeltsin faces an election which he could easily lose to the resurgent Communists. The country is in a nationalist and anti-Western mood, not least because of the proposed expansion of Nato, but also because it feels cheated of the prosperity that everyone promised capitalism and free market reforms would yield.

Discovering a nest of spies within the British embassy in Moscow can only help the Yeltsin administration's efforts to align itself with popular opinion. It was not a coincidence that the Federal Security Services (FSB), the successor to the KGB, was last night crowing about the "high level of professionalism of its agents".

Whether Russians are paying any attention is another matter. They seem bored by such squabbles - just as they were in March when the Russians threw out British businessman Nigel Shakespear for "activities incompatible with his status", or last year, when Britain sent home a Russian television journalist.

But this is the second time in only two years that Russia has claimed to have unmasked a spy for Britain in its midst. Vadim Sintsov, 59, a Russian arms industry official, was arrested in January 1994, though the case did not emerge until March. He said his British paymasters had been particularly interested in arms supplies to the Middle East. Shortly after this, the Russians expelled John Scarlett, a British diplomat said by Russian officials to have been the head of the MI6 station in Moscow.

The most famous case of a Russian recruited by Britain was Oleg Penkovsky, a colonel in Russia's military intelligence, the GRU. He was arrested and sentenced to death in May 1963. Greville Wynne, the British businessman who was Penkovsky's go-between, was sentenced to eight years in prison; he was freed in a spy-swap a year later for Gordon Lonsdale, who had been jailed for his role in the Portland spying ring. Eight British diplomats and five Americans were declared persona non grata as a result of the case.

Since then, of course, everything has changed, a point made neatly by the British Embassy in Moscow yesterday. It refused to comment on the latest affair, but released a press release last night pointing out that today the British defence attache would be officiating at a ceremony at which 80 Russian military officers will graduate from a retraining programme in Moscow - paid for by the British Ministry of Defence.