The alleged spies are in US custody, after being charged in court on Monday with conspiracy to act as an agent of a foreign government. Police in Cyprus yesterday arrested the ring's alleged paymaster and 11th spy, Christopher Metsos, attempting to catch a flight to Hungary.
A court in Larnaca later released Metsos on bail of €20,000 (£16,000), prompting fears he would flee to the island's Turkish side, or either Turkey or Syria. Greek police said they were shocked by the decision. "It's not what we expected," said a spokesman; they were seeking more documents from the US and would go back to court.
Metsos, 54, had been in Cyprus on holiday, his lawyer Michael Papathanasiou told the Guardian. "He is quiet, very normal. He says he has nothing to do whatsoever with the accusations against him by US authorities. He is in good spirits, and will remain on the island until the court-ordered extradition hearing on July 29. We have given our word we will be there."
Russia's foreign minister, Sergei Lavrov, yesterday questioned the timing of the arrests, three days after Barack Obama hosted Russia's president, Dmitry Medvedev, on a successful US visit, with talks in Washington, a joint presidential cheeseburger, and a tour of Silicon Valley. "The moment when all this was done was chosen quite smartly," Lavrov said.
In a statement, the foreign ministry suggested the "groundless" arrests were a shadowy attempt to undermine the "reset" in US-Russian relations "announced by the US administration". It said the suspects were Russian citizens who had never acted against US interests.
Obama declined to comment on the case when asked during a briefing on the economy. Later, a White House spokesman said Obama had known of the investigation when he met Medvedev, but had been unaware any arrests were imminent. The spokesman stressed that the arrests were a law enforcement issue, and not driven by the president.
A US justice department official said they had been triggered because one of the suspects was due to leave the US. "Operational considerations were the only factors that dictated the timing," said the justice spokesman.
The affair spread to Britain after it emerged that one of the 11 alleged spies had used a fake British passport. According to US court documents, Tracey Lee Ann Foley travelled on a fraudulent British passport prepared by the SVR, Russia's foreign intelligence agency.
She was given it in Vienna en route to Moscow, the FBI indictment said. Another alleged spy, Richard Murphy, reportedly picked up a fake Irish passport at a "brush past" meeting with a Russian in Rome. He then used it to travel to Moscow.
A Foreign Office spokeswoman in London said: "We are aware that the indictments state that one of the accused has travelled on a UK passport. We will be investigating this fully with the US. We are establishing the facts so it would be wrong to comment further at this stage. We remain confident that the British passport is one of the most secure documents of its kind – fully meeting rigorous international standards."
It also emerged last night that one of the accused, Anna Chapman, had lived and worked in Britain. According to reports she lived in the UK for around four years from 2003, and today a private plane hire firm, NetJets Europe, said she had been employed at its London office for a short period. US and Russian reports said Chapman was married to a British citizen.
NetJets said last night: "We can confirm that Ms Chapman was employed by NetJets Europe from May to July 2004, as an executive assistant in the sales department."
The spy case puts Medvedev in one of the most uncomfortable dilemmas of his two-year presidency. He has to weigh up the Kremlin's response, and whether to expel or even arrest Americans living in Russia. Relations between Washington and Moscow have improved significantly since the semi-cold war days of the Bush era, with both Obama and Medvedev investing heavily in their friendship; and there have been results: a new, if modest, Start treaty on nuclear arms reduction; a deal on civilian nuclear cooperation; the US has backed Russia's long-delayed WTO application, and Russia has taken a tougher line on Iran. The Russian foreign ministry said yesterday: "We are counting on the American side to display the appropriate understanding in this matter, including taking into account the positive character of the current stage of Russian-American relations."
A 55-page US dossier reveals in humiliating detail the frequently amateurish bungling of Moscow's alleged agents, who lived in leafy suburban homes in Boston, New York and Washington DC. The FBI said they were urged to adopt Americanised names to blend in, and gather information from thinktanks and government officials.
The FBI appears to have known of the spy ring since at least 2000, and tracked its every move, covertly observing numerous encounters in Manhattan coffee bars, in which the "agents" would send data to their Russian handlers via wireless from their laptops. Often, however the technology broke down, causing desperate pleas for Moscow to sort out the problem.
The US court documents also lays bare the stiltedly textbook spycraft used by the Russians to identify their own side. In one comic encounter spy Anna Chapman is told her contact will ask: "Excuse me, but haven't we met in California last summer?"
Her reply is: "No, I think it was the Hamptons." Another alleged spy, Mikhail Semenko, posted personal photos on the Russian social networking website Odnoklassniki. One shows him posing in front of the White House; another in his swimming trunks on Miami beach; a third with a blonde against the Manhattan skyline.
"They [the Russians] are going to have to make a calculation," Sam Greene, deputy head of Moscow's Carnegie Centre said yesterday. It would be unthinkable for Moscow not to respond, he said, but it was unclear what form this might take. None of the alleged spies was a diplomat or consular official – making a classic tit-for-tat expulsion unlikely. Russia might claim to have uncovered a spy ring of its own, possibly Russians working for US companies. Or it could target Americans.
Either way, the FBI arrests appear to be further evidence of the explosion in Russian intelligence activity abroad over the past 10 years. Since 2000, when Vladimir Putin became president, western governments have reported a dramatic increase in spying activity by Moscow in Europe, the US, Africa, and Latin America. Putin, a former KGB agent in east Germany, tripled the budget for the FSB, the KGB's domestic successor, which he headed until 1999. Former intelligence officers now make up a huge proportion of Russia's ruling elite.
Hardliners on both sides are likely welcome the spy scandal as an opportunity to sabotage improving US-Russian ties. Despite the recent thawing in relations, both the US and Russia had continued to spy on each other, Mark Urnov, dean at the political science department at Russia's higher school of economics said. "This [spy scandal] is an issue dating from previous years. The security services can't stop their activities immediately. Until recently there was a semi-Cold War between US and Russia. So why not spy?"
According to Urnov, Moscow was unlikely to drop its current positive attitude to Washington. "Of course there are some groups inside the [Russian] political elite who would prefer to continue with more or less cold relations. But the dominant tendency now is to be friendly.
"I don't see any forces on both sides who could be interested in intensifying this scandal, or in stirring up aggravation now between these countries."
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