ACCESSION NUMBER:382045 FILE ID:EFS219 DATE:03/07/95 TITLE:(FS) RESENTMENT OVER U.S.-FRENCH SPY FLAP COULD LAST YEARS (03/07/95) TEXT:*95030718.FFE *EFS219 03/07/95 (FS) RESENTMENT OVER U.S.-FRENCH SPY FLAP COULD LAST YEARS (Washington Post 03/07/95 William Drozdiak article) (880) (Following FS material not for publication) PARIS, March 6 -- Less than two weeks after a French request to remove five American spy suspects was made public, Paris and Washington appear to have muffled the embarrassing controversy. But it has eroded trust between the two allies, inflicted serious political damage on Prime Minister Edouard Balladur and caused lasting harm to relations between French and U.S. intelligence, according to officials in both governments. While President Clinton said last week he believes the matter was resolved and would not discuss it any further, resentment over the affair appears to run deep. A senior French official said contacts with the Americans at a Group of Seven meeting in Brussels on information technology, attended by Vice President Gore, were "nothing less than glacial." The consequences for Balladur appear even more dramatic. The spy flap briefly distracted attention from an explosive wiretap scandal, but it also undermined Balladur's authority and aggravated a breach in his government between ministers supporting his bid for the presidency and those backing his Gaullist rival, Paris Mayor Jacques Chirac. Polls show Balladur has lost his once commanding lead and observers now predict Chirac will win a second-round vote on May 7. But the most devastating impact is being felt by the two countries' intelligence agencies, officials say. "This will not blow over in a matter of months; it will take several years, at least, before we can talk about serious cooperation again in intelligence matters," a U.S. official said. French intelligence sources echoed those sentiments, deploring the unprecedented leak to the newspaper Le Monde which reported Feb. 22 that 1rance had asked the United States to repatriate five agents, including four diplomats, for alleged acts of political and economic espionage. In the past, France has benefited from intelligence gleaned by U.S. satellite reconnaissance and international eavesdropping. American aid was vital in capturing the international terrorist known as "Carlos the Jackal" last August in Sudan and deporting him to France. There has also been important sharing of information between the Washington and Paris on such sensitive areas as Algeria, Iraq and Iran, officials said. "Right now the mood is too poisoned to believe that we will ever be able to cooperate on anything like we did before, unless there is a major crisis that poses a serious threat to both governments," a French official said. With the passing of the Cold War, the United States has become embroiled in a growing number of economic espionage conflicts with France and other allies, as countries jostle for advantage in a global marketplace that is becoming feverishly competitive. U.S. officials have charged that Balladur's powerful ally, Interior Minister Charles Pasqua, chose to make public the espionage charges -- apparently for domestic political purposes -- despite a long tradition of discreet handling for all such conflicts between friendly nations. French newspapers and government officials have fingered a top aide to Pasqua as the most likely person to have leaked the story to Le Monde. Several years ago the same aide was caught rummaging through a neighbor's garbage while serving as a commercial attache in Houston at a time when French agents were suspected of spying on Texas Instruments and other U.S. companies. As a political ploy, the espionage controversy has failed to bolster Balladur's standing in the presidential race and has revived charges by his opponents that Pasqua is a reckless and ruthless politician who should not be entrusted with France's internal security. French newspapers have quoted passages from a top-secret report by French counterintelligence describing the recruitment of Henri Plagnol, a civil servant who served briefly as an adviser to Balladur. He was forced to resign after he admitted taking about $400 from a woman identified as a CIA agent as payment for writing a five-page paper on "France's relations with NATO." According to the counterintelligence report, Plagnol met the woman at a UNESCO cocktail party, where she was introduced as the public relations official of a Dallas foundation. He was dumbfounded to learn she was a CIA agent because the information she sought seemed so banal. After being tagged as a security risk, the report said, Plagnol agreed to serve as a double agent on behalf of French counterintelligence to feed information to his American pursuers and ultimately serve as the principal bait to entrap them. The published accounts have depicted U.S. intelligence agents in France as naive and ill-informed as they sought to extract information on France's negotiating positions in the final months before a global trade agreement was reached in December 1993. Plagnol reportedly was paid $1,000 cash at each of several furtive meetings in Paris hotels, where he was asked to fill out questionnaires and undergo interrogation by CIA analysts. The questions ranged from whether Balladur would run for the presidency to why the French government is so protective of farmers, who represent only 5 percent of the population. But as Plagnol pointed out, all of the information he provided in return for such handsome payments was available to any attentive reader of French 1ewspapers. (Preceding FS material not for publication) NNNN .