Bugged U.S. Embassy Stands--for Now--as a Reminder of the Cold War : Espionage: A carefully crafted agreement turns into a diplomatic fiasco. Soviet chicanery costs Uncle Sam an extra $270 million and wasted years.

It has been 20 years since the United States and the Soviet Union agreed to build new embassies for each other in Moscow and Washington. In that time, it is said, the ancient Egyptians built the Great Pyramid of Cheops.

The Pharaohs didn’t have to deal with the Soviets. The U.S. Embassy is still not finished--and won’t be.

With eight stories up, $170 million spent and water and ice ravaging the most expensive bricks in the world, the Administration in Washington has decided to stop there, demolish the building and start over.

That will add five more years and an additional $270 million to the cost of a modern tale of two cities, a lumbering farce of pachyderms unique to the late unpleasantness called the Cold War. Walls come down, liberty soars, but in the new age we are left with monuments to the buffoonery of the old.

The United States finished the Soviet Embassy in Washington, but the Soviets couldn’t move into their chancery until the United States moved into its chancery in Moscow. That was by agreement, one of several that took 13 years to reach in tense, careful negotiations. Every major move had to be precise, simultaneous and symmetrical. It was like two Mafia families trying to arrange a truce for a wedding.

It took less than two years to build the 102-story Empire State Building in New York in 1931. In Moscow, the Soviets were into year seven and still not finished with the eight-story office building of the U.S. Embassy when the United States threw them out.

The problem was bugs. Mysterious, multitudinous, ubiquitous, anti-American, subversive, pre- glasnost , godless Russian communist bugs.

In columns and walls, in concrete and steel, in breathtaking numbers and novel ways that confounded American experts, we were told, the Soviets had sown the chancery with diabolic devices to overhear, record and transmit American secrets.

The United States refused to move in until the bugs were moved out, but getting them out appeared tougher than evicting a poor relative. So tough, in fact, two Administrations spent four years figuring out what to do. Both concluded that the only safe course was to build a new building.

Historically, there is no louder uproar among politicians and press than the thunder evoked by the suggestion that foreigners, especially the Soviets, had outwitted Uncle Sam. The devilish dither of the embassies had all the makings.

* Sites. After 10 years of negotiations, we gave them Mt. Alto along Wisconsin Avenue, one of the highest points in Washington. They gave us a plot along Konyushkovskaya Ulitsa down near the Moscow River.

* Uproar. The United States had given away a strategic height from which, electronically, the KGB could look down the throats of the White House and Pentagon.

“The view is terrific,” but the intelligence advantage is “considerably less,” said James R. Schlesinger, former director of the Central Intelligence Agency. What’s more, other witnesses testified, Mt. Alto was not the Soviets’ first choice for an embassy. And in Moscow, the United States had turned down an offer of Lenin Hills to be “downtown.” The high-low plot wouldn’t play.

* Sidewalks. A hearing of the House Foreign Affairs subcommittee on international operations. Back from Moscow, Rep. Dan Mica (D-Fla.) reported: “Where the new building is, (the Soviets) built us a 16-inch sidewalk so that there is no place to walk. . . . That is harassment.”

Rep. Olympia J. Snowe (R-Mass.) asked if the State Department pursued a “reciprocity” of harassment in building the Soviet Embassy in Washington. She seemed to think it should.

James E. Nolan, director of the Office of Foreign Missions, replied: “In the District of Columbia, one does not cut down sidewalk size in half simply because the State Department thinks it is a good time to do it or because we think that it is leverage to do it.”

* Off site. Here was the real trouble. In Washington, Americans poured concrete for the Soviet Embassy on-site where the Soviets could watch. In Moscow, Soviets poured concrete off-site where Americans couldn’t, or didn’t, watch.

“The Soviet Union works at the problem of security penetration 24 hours a day, 365 days a year,” testified Schlesinger, who investigated the embassy muddle for President Ronald Reagan. “If one signs an agreement that permits the Soviets to precast columns and beams off-site, the principal party to blame is oneself. . . . As Napoleon once observed, there are limits to rascality, there are no limits to stupidity.”

The result, said the expert witness, was “the best-bugged building ever built.”

It contained “a full array of intelligence devices for which we do not yet understand either the technology or underlying strategy. . . . We failed to allow for the boldness, thoroughness and extent of the penetration.”

During the building of their embassy in Washington, the suspicious Soviets watched every blow of the hammer. For every American working, said an American official observer of the Soviet observers, there was a Soviet watching.

They X-rayed “every inch” of steel before it went up, said an architect. They watched concrete poured on-site. If the work went too fast to watch carefully, they slowed the work. They insisted that window units assembled off-site be disassembled and reassembled before their eyes.

One result of their vigilance, the Soviets alleged, was the discovery of pencil-thin microphones in the walls and bugging wires in the weatherstripping of the windows put there by their American hosts.

Another result: The windows now leak.

Both embassy complexes include a chancery or office building, consulate, residential apartments, school, gym, swimming pool, playground, theater and underground garages.

The new Soviet compound is in a residential area of Washington. The new U.S. Embassy in Moscow, like the old U.S. Embassy next door, is surrounded by high-rises where it is assumed that the KGB is in constant attendance.

Across the street is an old Russian church no longer used as such. Among American intelligence people, who say the place is loaded with electronic equipment for monitoring its neighbors, the old church is now known as “Our Lady of Telemetry.”

Their mutual distrust was such that the superpowers needed 10 years to agree on an exchange of sites to be used free of charge for 85 years. The United States got 11.9473 acres in Moscow. The Soviet Union got 12.5258 acres in Washington.

It took three more years to agree on “conditions of construction” in two stages, each using local labor and materials in stage one and each using a mutually agreed maximum number of their own specialists imported for the second, or finishing stage.

The original agreements stipulated simultaneous exchange of sites, simultaneous completion of construction, simultaneous occupancy of the chanceries. They also agreed to exchange architects’ drawings, and each would have veto power over the other. And, since the Soviet Union had no market economy on which to base costs, they agreed that cost calculation for the Moscow construction would be based on Washington prices.

Congress originally appropriated $192 million for the whole project. Now, says a State Department official, it will be asked to come up with $270 million more for the new chancery. It will cost that much because, to play it safe, all the labor will have to be brought in from the United States at American scale to build a building free of Soviet ears.

Time schedules meticulously negotiated by the superpowers bent in the fluctuating heat of their Cold War and the numbing pace of Soviet labor.

It took two years to finish most of the embassy in Washington; the Soviets moved into the residential and support quarters in 1979. It took seven years to complete the equivalent in Moscow, and the Americans moved into those in 1986.

All work had stopped. The United States had “locked out” all Soviet employees the year before for building an office building abounding in “intentional defects.”

The invisible presence in the woodwork should have surprised no one. In Moscow, spying on visitors was older than borscht. The czars kept informers busy, and their proletarian heirs bugged the American Embassy for years.

So regularly that guests at Spasso House, the ambassador’s residence, were given cards welcoming and warning them:

“Every room is monitored by the KGB and all of the staff are employees of the KGB. We believe the garden also may be monitored. Your luggage may be searched two or three times a day. Nothing is ever stolen and they hardly disturb things. . . . If you have anything sensitive to talk about, please call and make an appointment with the ambassador to discuss it in his office.”

The Soviets liked Ambassador W. Averill Harriman so much that they gave him a handsome replica of the Great Seal of the United States. It was years before the next ambassador found a tiny microphone nestled in the carved wooden eagle.

Americans have also found, they said, more than 40 mikes in the walls of the old chancery, bugs in electronic typewriters, signs of microwave assaults on the building, wires leading to a tunnel between the embassy and a nearby Soviet apartment building and traces of a “spy dust” called nitrophenylpentadienal by which the movements of people and objects could be tracked.

Unintentional defects were equally hard on the psyche of Americans trying to get a new embassy built in the land of Lenin. Which brings us to a tale of bricks told with a lingering shudder by Charles Bassett, chief architect.

The plans called for the 8-story chancery to be faced in brick. No problem, said the Soviets. Bassett quickly found problems. Available Soviet bricks were rough and unattractive. Lithuania looked promising but that didn’t pan out. Likewise the kilns of Western Europe.

Finally, the right bricks were produced in Augusta, Ga., and more than a million were carefully strapped and packaged on pallets and shipped by boat to Helsinki and by train to Moscow, tenderly chaperoned all the way by Americans. There, the Soviets had to be stopped from ruining the bricks by heaving them into dump trucks for delivery.

Then, Bassett watched with horror as Soviet bricklayers went to work using no strings or levels and setting bricks from inside a wall on irregular lines. “Among Soviet workers, meeting quotas was all-important; it didn’t matter if the wall fell down the next day.”

All work was stopped until master masons with proper tools could be flown in from the United States to teach and supervise. And it was stopped again with the discovery of the bugs, before the building was closed in properly and the well-traveled bricks could be protected from the weather.

In their original negotiations in what seems like another age of man, the two parties set up a cumbersome process to arbitrate disputes. The United States has since claimed $29.9 million in damages resulting from Soviet delays and defective work. It has also given notice of intention to claim an undetermined amount for “intentional defects.” The Soviets struck back with damage claims for $18 million resulting from U.S. delays. Settlement is not just around the corner.

Proving that he was no imprudent country bumpkin, Uncle Sam took out a $42-million policy with the Granite State Insurance Co. 20 years ago. This was to insure the government “against unforeseen and sudden physical loss or damage during construction.”