CIA BREACH PUTS AGENTS' UNDERCOVER CAREERS ON HOLD.

Byline: Tim Weiner The New York Times

The careers of the bright new graduates of the CIA's school for spies are blighted: The FBI fears the class lists and curriculum are sitting in a Russian safe.

The identities of American businessmen in Moscow who volunteer intelligence secrets to the CIA probably have been exposed. The agency's operations in Moscow, Tokyo, Manila and Malaysia have been compromised. And the reputation of the nation's clandestine service has taken another crushing blow.

That, for starters, is the damage believed to have been done by Harold Nicholson, the CIA officer arrested Saturday by the FBI and charged with selling secrets to Moscow, intelligence and law enforcement officials said Tuesday.

Though it will take months to complete a definitive damage assessment, ``we have a pretty good idea of what he had access to and what he could have had access to,'' a senior law enforcement official said. The officials assigned to figure out exactly which secrets Nicholson sold to Moscow must assume the worst. And the worst is very, very bad.

Officials suspect that Nicholson sold his Russian contacts the names of every student who prepared for undercover assignments overseas at the CIA's training school in 1994, 1995 and the first half of 1996. The school, Camp Peary, is a secret 9,275-acre base near Williamsburg, Va., known informally as ``The Farm.'' It provides a yearlong graduate seminar in espionage.

Nicholson taught a 16-week course in tricks of the trade like stealing mail, using disguises, evading pursuers and handling agents. He is suspected of telling the Russians everything about Camp Peary's core curriculum.

Nicholson read the biographies and the future assignments for every officer trained at Camp Peary during his two-year tenure there, the FBI says in an affidavit unsealed Monday. The CIA has to assume that since Nicholson knew every student, the Russians do, too, intelligence and law enforcement officials said.

That knowledge damages the immediate prospects of many of the agency's newest spies. Normally, they would be working undercover as State Department diplomats overseas. Now they cannot - particularly not in Russia - without fearing that Nicholson, their trusted instructor, has blown their covers.

``It will be difficult, if not impossible, for the CIA to place some of these newly trained officers into certain sensitive assignments for the rest of their careers,'' the affidavit says.

They will be in danger of exposure in any country where the Russian foreign intelligence service has a presence. For years to come, many will be forced to work at desk jobs, either at headquarters or in obscure and out-of-the-way foreign capitals, processing information instead of gathering it. This will not improve morale at the clandestine service, the report continues.

``There's a very real cost involved in this case, and that may be the highest cost of all,'' said Robert Gates, director of central intelligence from November 1991 to January 1993. ``It will be very difficult to have them targeted against Russia. It clearly puts some limitations on assignments. Time will have to pass before they are assigned overseas. There will be a much greater cost in creating cover for them. Their careers will be delayed'' - if not destroyed.

Some of the betrayed young officers may be retrained to assume nonofficial cover - that is, to pose as businessmen or in some other guise overseas. It costs millions of dollars for the agency to train and support such a deep-cover officer, and the assignment is far more dangerous, since it lacks the diplomatic immunity provided by posing as a State Department official.

The affidavit also said Nicholson, in addition to blowing the cover of one of his own star pupils who was headed for an undercover assignment in Moscow, sold the Russians the name of the agency's new Moscow station chief and information about the new chief's staff of clandestine officers.

Equally galling to the CIA is that Nicholson is charged with selling secret files on American citizens who live or work in Russia. These Americans, mostly businessmen, have volunteered information to the CIA on the structure of Russian banking, the state of the Russian economy and the workings of Russian military and industrial companies, among other subjects.

Those who have cooperated with the CIA may pay dearly for trusting that their roles would stay secret.

``They are clearly at risk,'' a former senior intelligence official said. ``They have to worry whether they are going to be subject to increased surveillance by the Russians.''

Gates agreed, adding that American businessmen in Moscow may now be reluctant to open up a relationship with the CIA. ``Others willing to help may now decline to do so for fear their business will be damaged,'' he said.

Beyond Moscow, Nicholson is suspected of revealing details of secret intelligence operations in Japan, Malaysia, the Philippines and Romania, all countries he served in as a spy from 1982 to 1994. A former intelligence official said: ``He very well may have disclosed specific collection operations that CIA might have had targeted against the Russians or against local governments that the Russians might be interested in.''

And diplomatic relations between Washington and Moscow also have been damaged. The United States lodged official protests over the case, one delivered face to face by Deputy Secretary of State Strobe Talbott, who summoned the Russian ambassador, Yuli Vorontsov, to the State Department on Monday. The United States is contemplating expelling a Russian spy working under diplomatic cover in Washington, government officials said, just as it did when similar spy cases arose during the Cold War.

The CIA has taken pains to point out that the charges against Nicholson were dwarfed by the case against Aldrich Ames, the career CIA officer who pleaded guilty to espionage in April 1994. Most important, no one died. Ames' treachery led to the execution of every important Soviet and Eastern European military and intelligence officer secretly working for the CIA - at least 10 of them - and the destruction of most of the espionage operations aimed at Moscow at the height of the Cold War.

But Gates, the former director of central intelligence, said the two cases had had a similar effect on the CIA - and a perversely healthy one.

``They've cleared away a lot of mythology within the agency,'' Gates said Tuesday. ``There was a view that people in the agency didn't turn and work for the other side. CIA people didn't steal. They didn't cheat.

``What we've found is that CIA is like any other big institution,'' he said. ``It's made up of human beings, some of whom are weak. They do embezzle. They do work for the other side. They do cheat and steal. The biggest effect of these cases has been to eliminate a good deal of the cultural mythology inside the agency and a certain measure of arrogance that went along with it - that the agency was different and better than anybody else.''