Behind The Veil, New U.S. Embassy Rises In Moscow -- Bugged Earlier Version Was Kgb's Highest Achievement

MOSCOW - Furls of white sheeting billow gently in the breeze. They are draped around a building rising in the center of the U.S. Embassy compound in central Moscow, making it look like some witty piece of art by Christo.

Behind the sheets, and behind fences and walls and security guards, construction workers with top-security clearances are busy finishing a building that amounts to the biggest joke in the annals of spydom.

Begun in 1979, using Soviet labor and materials, the U.S. chancery building in Moscow was abandoned in mid-construction six years later when it was found to be honeycombed with Soviet eavesdropping devices.

The building, so compromised that U.S. officials said it amounted to a giant microphone, was primed to broadcast every last grunt and whisper uttered by U.S. diplomats into the Kremlin's eager ears.

Even now, it brings impish smiles to the faces of former KGB operatives, who came so close to turning the entire U.S. Embassy into the Soviet Union's No. 1 intelligence agent.

Americans got the joke, but weren't necessarily amused.

After much debate and hand-wringing, Congress agreed to knock down the top two floors and rebuild the rest of the building, adding four new floors on top.

The work began last year, using American and other foreign workers - each cleared by U.S. security agencies - and imported American materials.

Or at least, work seems to have begun.

The noises certainly suggest activity, but no one can authoritatively confirm that the workers behind the sheets are working. No one who has been inside the construction zone is allowed to talk about it.

"It's very strictly controlled. I've never been in," said Richard Hoagland, the embassy's press attache and the sole person authorized to speak about the project.

Strolling past U.S. children playing softball inside the compound, Hoagland muses: "I could ask to have a special tour for myself, but I'm not sure it would be granted."

When it is finished, in 1998, the new chancery will be 10 stories tall, coolly sheathed in Minnesota stone. The new four floors will serve as offices for the U.S. ambassador and other top diplomats.

The bottom six floors - the "dirty" floors - will be used for clerical offices and other functions far removed from the touchy world of diplomacy and intelligence.

The project is called "Operation Top Hat." It is being built by a consortium of American contractors - Zachary, Parsons & Sundt - brought together for this one project. The consortium's telephone number is unlisted.

The building will cost U.S. taxpayers $240 million - actually, $376 million if you count the money that was spent before the original construction was halted.

The bugging of the U.S. Embassy was perhaps the high-water mark of KGB ingenuity.

"In 1969, when the new embassy building had only just been designed, the idea of stuffing it with the corresponding equipment was made in Moscow," former KGB chairman Vadim Bakatin recalled recently in an interview with the newspaper Moskovskaya Pravda.

"With the Americans' consent, the support structures were manufactured at our plants, and our workers went to work at the construction site, so the technical problem was not that complicated. . . . In 1985, after the Americans had discovered the `gifts,' the scandal broke."

The bugs were said to be so sophisticated they couldn't be picked up by X-rays. They reportedly were powered by batteries that were recharged by building vibrations and the flow of steam pipes.

The KGB had a listening post in a nearby church all ready to receive the transmissions. Agents nicknamed the church "Our Lady of Telemetry" and "Our Lady of Perpetual Observation."

The Americans were furious. The Soviet response was predictable. "The Politburo made the decision: Carefully dismantle all you can and deny everything," Bakatin recalled. "Everything was denied."

Eventually, the Russians came around. Under Bakatin's leadership, and in the warm glow of glasnost, the Soviets decided to bare all and hand over the blueprints to the eavesdropping system.

In December 1991, Bakatin presented the plans to U.S. Ambassador Robert Strauss.

"This is the most amazing thing that's happened to me in my life," Strauss said later in a speech at the National Press Club in Washington.

To this day, former KGB agents consider Bakatin's decision an act of high treason.

Nevertheless, the Americans weren't satisfied with the blueprints. What if it was another trick? In Congress, many argued the only solution was to tear the building down and start over. The cost of that option was put at $310 million.

Finally, the Clinton administration proposed the "Operation Top Hat" plan, and Congress eventually went along.

Surrounded by barbed wire and watched over by attentive-looking guards, the construction zone is strictly off limits to all but the 300 or so construction workers.

Although the workers are free to come and go, within their inner sanctum they have their own cafeteria, barber shop, game room, medical clinic - all quite separate from the same facilities for the rest of the embassy community.

It's a bit like a construction camp in the Alaskan tundra, or a research station in Antarctica. The workers must have interesting stories to tell, and perhaps someday they will.