(From L to R) Russian spy suspects, Anna Chapman, Vicky Pelaez, Richard Murphy, Cynthia Murphy and Juan Lazaro, are seen in this courtroom sketch during an appearance at the Manhattan Federal Court in New York June 28, 2010. The arrests -- days after a warm Washington summit between President Barack Obama and Russian President Dmitry Medvedev -- thrust a Cold War-style spy scandal into the midst of the U.S. leader's ''reset'' of long-strained ties with the Kremlin. Credit: Reuters/Jane Rosenburg
(Reuters) - Moscow angrily rejected U.S. accusations on Tuesday that Washington had cracked an undercover Russian spy ring, and said the Cold War-style cloak and dagger saga seemed timed to wreck a recent thaw in relations.
Prime Minister Vladimir Putin said U.S. police had gone "out of control" after 10 suspected spies were arrested in the United States in the biggest espionage case for years.
"I hope that all the positive gains that have been achieved in our relationship will not be damaged by the recent event," he told visiting ex-U.S. President Bill Clinton.
An 11th suspect was arrested in Cyprus on Tuesday and was released on bail, police on the Mediterranean island said.
The suspects, some of whom lived quiet lives in American suburbia for years, were accused of gathering information ranging from data on high-penetration nuclear warhead research programs to background on CIA job applicants.
The arrests came days after a warm Washington summit between President Barack Obama and Russian President Dmitry Medvedev, part of what the U.S. leader describes as a "reset" of long-strained ties with the Kremlin.
"The choice of timing was particularly graceful," Russian Foreign Minister Sergei Lavrov told journalists sarcastically during a trip to Jerusalem.
Other Russian officials also suggested the timing was no coincidence.
"We do not understand what prompted the U.S. Justice Department to make a public statement in the spirit of Cold War espionage," the Foreign Ministry said, calling the accusations baseless.
It said lawyers and diplomats should be given access to the suspects.
"We deeply regret that all of this has happened against the background of the relations reset declared by the U.S. administration itself," the ministry said in a statement.
With buried banknotes, coded communications and other cinematic details, the accusations echoed spy scandals of the 20th century and the more recent chill in relations with a Kremlin which, under the 2000-2008 presidency of ex-KGB spy Putin, often accused the West of trying to weaken Russia.
Britain and Ireland both said they were checking reports suspects had traveled on false passports from their countries.
Moscow has repeatedly accused Western powers of maintaining spying operations against Russia despite the end of the Cold War. Western powers also complain of Russian activity, especially in the commercial and scientific areas.
BLOW TO OBAMA
Russian analysts said the timing suggested it was an attempt to undermine the "reset" which Obama's administration has hailed as a major foreign policy achievement, citing Moscow's support for sanctions against Iran and cooperation on Afghanistan.
"It's a slap in the face to Barack Obama," said Anatoly Tsyganok, a political analyst at Moscow's Institute of Political and Military Analysis.
He predicted Russia would follow Cold War etiquette and uncover an equal number of alleged U.S. spies.
Military analyst Alexander Golts said the scandal would be unlikely to deal a major setback to ties. Obama's administration would aim to "soft-pedal the situation" to avoid damage to improved relations it sees as a foreign policy success, he said.
Tatyana Stanovaya, political analyst at Moscow's Center for Political Technologies, said the accusations could widen a rift in Russia's elite between advocates and opponents of better U.S. ties, with the scale of the response hinting at who is ascendant.
Stanovaya said it could dent the authority of Medvedev, who is struggling to emerge from Putin's shadow and has made engagement with Washington a hallmark of his presidency.
The U.S. Justice Department accused the 11 people of operating as "illegals"; the term applied in the intelligence world to agents infiltrated under false identities, rather than officers who use diplomatic or other legitimate cover.
They were accused of collecting information ranging from research programs on small-yield, high-penetration nuclear warheads to the global gold market, and seeking background on people who applied for jobs at the Central Intelligence Agency (CIA), according to criminal complaints filed in a U.S. court.
Authorities said 10 were arrested on Sunday in Boston, New York, New Jersey and Virginia on charges including conspiracy to act as unlawful Russian agents and money laundering.
They sought to "become sufficiently 'Americanized' such that they could gather information about the United States for Russia and can successfully recruit sources who are in, or are able to infiltrate, United States policy-making circles," court papers said.
The U.S. Justice Department said they received extensive training in coded communications, how to evade detection and how to pass messages to other agents.
After the 2001 arrest of FBI agent Robert Hanssen, accused of selling secrets to Moscow over 15 years and sentenced to life in prison, Washington expelled four Russian diplomats and ordered 46 to leave the country. Russia responded in kind.
In 2006, Russia accused British diplomats of running a James Bond-style spy ring and communicating with agents via an electronic device disguised as a rock. The next year, British officials said Russian spying was "at Cold War levels."
(Additional reporting by Dmitry Zhdannikov and Amie Ferris-Rotman; Writing by Conor Humphries and Steve Gutterman; Editing by Peter Graff)
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