CNN Moderator: We're pleased to welcome Oleg Kalugin and Melvin Goodman tonight. Both men join us from their homes in the Washington area. Let me start by asking: Is it possible to declare a winner of the covert Cold War?

Oleg Kalugin: Well, yes, and no. I would not give you a precise and definitive answer. I think the West has won the Cold War using all methods available, including clandestine and psychological warfare. However, the winning of the Cold War and the dissolution of the U.S.S.R. the end of the evil empire doesn't mean that the battle for human minds was won by the West. As you know Russia is turning back, there is a process of reversal. Though, it does not necessarily mean that Russia will land in communism again. The battle for the human mind is a long protracted process and I think the West has abandoned too early its efforts to change the Soviet mentality, to win over most of theRussian people to its side.

Melvin Goodman: I believe there was no winner in the Cold War and certainly no winner in the covert Cold War. I think that both sides exaggerated and distorted the capabilities and interests of the other sides. I think far too much money and effort went into waging the Cold War. We've now built nuclear arsenals that cannot be maintained; the Russians can't successfully monitor their nuclear forces in Russia and in some cases can't afford to destroy them.

Oleg Kalugin: I disagree with Melvin. This was not simply an espionage war. It was not just one side against the other. It was a deadly struggle of irreconcilable ideologies where the defeat of the other system was the sole goal. To talk about saving money is not right in this context. People are ready to die for the cause, and they do not care about how much it costs. They are willing to sacrifice their lives for the cause.

CNN Moderator: When you were at the KGB and CIA, how did you "rate" your rival intelligence agencies?

Melvin Goodman: We rated the KGB highly. It was very large and more powerful than the CIA. We respected its worldwide presence and we knew that the head of the KGB often was on the Politburo and involved in decision making. And one former head of the KGB, Mr. Andropov, eventually became head of the Politburo itself, so we had great respect for the KGB.

CNN Moderator: Mr. Kalugin, how did you rate the CIA?

Oleg Kalugin: Initially, the CIA did not look too great in the eyes of the KGB. It was a fairly young organization. It was no match for the old experienced imperial service which represented both the Soviet Union and Imperial Russia. At the same time, the people in the KGB admired American prowess and the technology and the ability to spend money we did not have. Let me tell you, at one time the KGB had one very strong advantage over the CIA. We recruited our agents worldwide on ideological grounds. People who spied for us did not do it for money. They had a goal , world communism. They wanted to help the Soviet Union. However, things started to change as the Soviet system began to degenerate. Ideology lost its appeal, and at this point the CIA made a major breakthrough in becoming a powerful adversary which managed ultimately to help, and I emphasize to help, defeat the Soviet system.

Chat Participant: Question for Mr. Goodman: What do you feel the role of the CIA is in the post-Cold War era? Do you feel we are still spending too much on intelligence?

Melvin Goodman: I think we are spending far too much on intelligence. We've been able with the end of the Cold War to reduce the defense budget significantly, but we have not made comparable reductions in the intelligence budget, and the CIA in some cases has been forced to look for enemies that don't always exist. 'That led to the unnecessary bombing in Sudan. The CIA has missed genuine problems, such as nuclear testing in India, which people outside the government predicted correctly. The CIA learned from a CNN broadcast about successful nuclear Indian testing. This was a classic intelligence failure. The evidence was there. You did not need agents on the ground in India. The technical intelligence was there, and it was sufficient.

CNN Moderator: To what extent is the KGB's successor agency a continuation of the KGB?

Oleg Kalugin: Well, it is a sorry shadow of the old KGB for a very simple reason. The original KGB was split into five autonomous services. There were seven reorganizations over the past seven years. They largely affected the domestic security service. However, the intelligence people, who were never reorganized and remained largely intact, have lost much of the zeal of the old days. The enemy was washed out or faded away. The U.S. these days is declared a partner, and almost a friend, so the ideological fervor plays no role. There was some kind of demoralization in the intelligence service. Quite a few professionals left the service either in disgust over the current political trend in Russia -- they just do not accept democratic reforms -- or because they found better-paying jobs in the civilian sector.

Chat Participant: Did the KGB use terrorists to achieve its objectives? And did the CIA?

Oleg Kalugin: The KGB directed terrorists across the world supporting the national liberation movements, training and indoctrinating personnel from Asia, Africa, Middle East, Latin America. They were taught how to use weapons, explosives, spread disinformation. carry out assassinations, terrorist activities. This is all in the past. Today the Russian intelligence is not involved, as I understand, in these practices.

CNN Moderator: Mr. Goodman, what about the CIA? Did America's spy agency use terrorists?

Melvin Goodman: The CIA in certain situations trained people in terrorist tactics and one of the best examples, and we now have the evidence, was Guatemala. We now have the documents that showed that individuals engaged in terrorism, we have knowledge of as many as 200 deaths in Guatemala and we know that during the Vietnam War, the former director of the CIA, Bill Colby, ran the Phoenix program, which also sponsored terrorist activities, including assassinations of innocent civilians. That's why I strongly feel that the Cold War, and the covert Cold War, had no winners. There were just too many losers in any net assessment to allow for any aspect of winning as well.

CNN Moderator: Given the constant tensions between the U.S.S.R. and United States at the height of the Cold War, were your intelligence agencies ever used as "back channels" to defuse volatile situations?

Oleg Kalugin: In my time as an intelligence officer, we had several instances when the KGB intelligence service was used to diffuse growing political tensions and even serious international crises. One specific example is the Cuban Missile Crisis, when the KGB station chief in Washington relayed a message from Khrushchev to President Kennedy through an intermediary in the U.S. media. This allowed Khrushchev to establish a channel of communication which allowed him eventually to resolve peacefully the Cuban crisis. In another situation, in the late '60s, we established private contact with Henry Kissinger, who was assisting Richard Nixon in his efforts to become president of the U.S., before he was president. There was private communication between Nixon and Brezhnev. In this particular instance the KGB acted behind the back of Ambassador Dobrynin. These are just two examples.

Chat Participant: During the Cold War, did the KGB and CIA share any of the same enemies?

Melvin Goodman: I think in some cases the Soviet Union and the U.S. and certainly Russia and the U.S. share an interest in monitoring and preventing terrorist activities. There have been episodes where the CIA and the KGB exchanged documentation with regard to terrorism. Also in 1983, in the Soviet Union, there was a war scare. Many people in Moscow, particularly in the KGB, believed that the Reagan administration had declared a warlike policy and was prepared to use military force against the Soviet Union. The director of the CIA at that time, Bill Casey, traveled to London and met with KGB defector Gordievsky, who documented the war scare. Casey returned to Washington and brought these notes to President Reagan and convinced him to slow down some of the military exercises that were aimed at the Soviet Union. This was a very tense period in Soviet-American relations that was not known to the public. Also one final example, in 1967, before the Six-Day War, the KGB -- in an action that may have been unauthorized -- told their Egyptian allies that the Israelis had gone on alert. The CIA picked up this information, checked it with the Israelis and found that it was false and tried to get the KGB to convince the Arab clients that there was no military alert in Israel. But the damage was already done, and a war that could have been averted was fought in June 1967.

Chat Participant: Are agents on the ground more useful than satellites and spy planes?

Oleg Kalugin: It all depends. The human intelligence provides information that may be extremely important for the policy makers. It may contain information that would reveal the thinking of the adversary and probably the intentions in regard to their potential enemy. This is something which no technological gadgetry can do unless there is a bugging device inside the office of the top political leader or military unit. On the other side, in a military confrontation, high technology may play a more significant role than human resources because it would allow the other side to evaluate not simply the intentions of the leader, but the actual movements and preparations to unleash a war or undertake some other hostile act. When the Soviets, for instance, kept close watch on the National Security Agency operations, when they had the spy ring led by John Walker which allowed the Soviets to read the U.S. Navy coded traffic, they had an excellent chance to warn the Soviet political and military leadership about any potential threat coming from the U.S. military and particularly from the U.S. nuclear submarines.

Melvin Goodman: I disagree with Oleg. There is no question in my mind that the intelligence from satellites and spy planes is essential to policy making, to defense spending, to monitoring arms control agreements, and to national security decision making. In my 25 years at the CIA we never, never had one source in the Soviet Union with any access to the Politburo in terms of technical intelligence. There was a period when we intercepted the car phones of Politburo members, which was a fascinating source of intelligence but rarely essential. But we never had that human source who told us about the intentions of the Soviet leadership. Human intelligence is vastly overrated. One of the reasons why we failed in India in nuclear testing with regard to humans is that most human intelligence sources in a society are losers, not winners. Ames was a loser, John Walker was a loser, Harold Nicholson was a loser and the people with access to leaders and intentions and decision making are rarely losers in a society. They are the people who have won the game of power and influence and prestige.

Oleg Kalugin: I wish to quote Admiral Studeman, the former chief of U.S. naval intelligence, who said at the trial of John Walker, and this is on public record, and I quote, "If a military conflict erupted between the U.S.S.R.and the U.S. at the time when John Walker was operating as a Soviet spy, his information would have had war-winning implications for the Soviet side." I think this is an answer to how important human sources are.

Melvin Goodman: I would only make one addition to Oleg's quotation. If a nuclear war had taken place between the U.S.S.R. and the U.S., none of us would be here tonight.

CNN Moderator: How much did Cold War policy in your countries depend on political or ideological agendas, rather than intelligence?

Melvin Goodman: I think the Cold War had a life of its own, and the superpower rivalry had a life of its own. I think intelligence played a very small role in that competition. I think policy makers used intelligence to rationalize or justify decisions they had already taken. I think when they disagreed with the intelligence, they ignored it. I'll give you an example. In the October 1973 war, Henry Kissinger did something very outrageous that could have had very bad effects in the Soviet-U.S. competition. He called a nuclear alert against the Soviet Union, even though the CIA clearly had intelligence that said the Soviet Union was not going to intervene using Soviet military forces in Egypt. But Kissinger went ahead for his own political and personal reasons, and this could have had devastating consequences. Fortunately, Brezhnev ignored the alert. If he had not ignored this alert and taken the advice of his defense minister, the two sides could have gone to war. So my point is that policy makers usually had their own interests for pursuing their own policies that rarely had anything to do with the intelligence. In the Cuban Missile Crisis, the KGB had very little impact on the actions and behaviors of Nikita Khrushchev. They were cut out of the decision making. So I would be careful not to exaggerate the role of intelligence analysis.

Oleg Kalugin: Covert actions were the very heart and soul of the KGB activities. I think this holds true for the CIA as well. No wonder in this country, which entered the Cold War unprepared in terms of subversion, this country, the U.S., had to learn fast how to subvert, sabotage and destroy the enemy. That was essentially the policies of the CIA patterned on the KGB model. I also think that the Soviets never gave up these practices of subversion until the collapse of the Soviet Union. And I think these episodes related to the psychological warfare and acts of subversion on the worldwide scale were not properly portrayed in the COLD WAR series. Let me cite you one example from the Soviet research on the dissidents in the former U.S.S.R.Sixty-five percent of the Soviet dissidents arrested and tried by the KGB revealed that they had become dissidents because of Western radio propaganda. They were avid listeners of Radio Liberty, Radio Free Europe and BBC and other programs. Thirty-two percent arrested and tried for political deviations said they had been influenced by books and other printed material smuggled into the U.S.S.R. by tourists on a program conducted by the CIA to erode internally the Soviet system.

Melvin Goodman: Let me add just one point. Covert action is a perfect example of what I was talking about. In my 25 years at the CIA, all of the covert action that was conducted by the CIA was directed by the White House or the National Security Council. These were policies that were declared at the level of the executive branch, and quite often, in the case of Chile for example, there was disagreement. But President Nixon and [National] Security Adviser Henry Kissinger wanted to overthrow the leftist government of Chile, so the key is understanding the role of the policy maker and not so much the actions of the CIA, who carried out policy decisions. If you look at the overthrow of the government of Iran in 1953, Guatemala in 1954, the Bay of Pigs in 1961, Chile in 1973, these were White House policies of President Eisenhower or Kennedy of Nixon and not the policies of the CIA.

CNN Moderator: But wasn't the CIA instrumental in offering policy makers options and recommendations for actions?

Melvin Goodman: Not on covert actions. I think there is a conventional wisdom out there that the CIA has suggested these covert activities. If you look at the Bay of Pigs or Guatemala or all of the major covert actions -- not espionage, covert actions -- these were directed by the White House. The CIA very reluctantly got involved; this was not a role they sought. It was imposed on them by the Truman administration, and CIA officials were very reluctant to go down a road that many considered immoral and counterproductive, which is why in a post-Cold War world, we must review these policies.

Oleg Kalugin: The Soviet KGB also operated on the control and direction of the Soviet Communist Party and its Central Committee. On the other hand, it would be wrong to deny that the suggestions and recommendations of the intelligence and security apparatus were ignored by high officials, either at the Kremlin or the White House. Quite often, they shaped the mindsets of party officials and leaders, and in the U.S. some presidents were very attentive toward what the CIA was offering in terms of advice and action.

Chat Participant: Is espionage from China as real a threat as it was from the Soviets?

Melvin Goodman: I think the issue of Chinese espionage in the U.S. is highly exaggerated in terms of its impact for U.S. interests. But if I were a Russian, I would be greatly concerned about the Chinese ability to learn American nuclear secrets. The likelihood of a Russian-Chinese conflict along their long border is far more likely than a Chinese-American conflict in Asia. All countries conduct espionage. They conduct it against their friends and enemies. Israel conducts espionage against U.S. We conduct against France. I think this has nothing to do with the policy process and the diplomacy of these countries. To exaggerate the significance of Chinese espionage that took place during the Reagan administration is just a blatant attempt to embarrass the Clinton administration. The Republicans failed to follow through after impeachment of the president and now are looking for other ways to embarrass the president. What they are really doing is embarrassing the U.S., and this is unfortunate.

CNN Moderator: General Kalugin, you spent an entire career attempting to subvert the West, and the U.S. government in particular. You now live and work in Washington. How has your perspective of the West changed?

Oleg Kalugin: It has not changed much. Because I lived in this country for too long, I was exposed to Western ways and values for too long, and my life in this country is a logical continuation of my previous life experience, not the intelligence experience, though it helps as well in business.

Chat Participant: Is there a need for more intelligence agencies to monitor technologies such as the Internet?

Melvin Goodman: Yes, if the CIA had been monitoring the Internet successfully, they would have learned about the Indian nuclear test last spring. I think there are excellent sources of information on the Internet with regard to ethnic groups, religious fundamentalists and terrorists activities. Right now, there is more intelligence than anyone can absorb. It's like trying to drink water out of a fire hydrant.

Chat Participant: How do you both feel about being players in a game that affected the lives of millions, if not billions, of people?

Melvin Goodman: I was proud of the work I did at the CIA because it involved the pursuit of information on the Soviet Union which was vital to policy making with regard to the most important bilateral relationship that the U.S. had during the Cold War. So I felt that I was putting to use my interests, my graduate school education, and felt as though I was performing as a public servant until the 1980s. So I look upon that time very fondly -- until the 1980s, when the director of CIA, Bill Casey, and his deputy, Robert Gates, politicized the functions and distorted that information, and therefore the CIA had its greatest intelligence failure, missing completely the weakness and collapse of the Soviet Union. And I thought this was a great tragedy for those officials in the CIA who were dedicated to the exchange of ideas and information.

Oleg Kalugin: The Cold War espionage was exciting and frustrating. Exciting when you felt you worked for the cause, you felt that you were not wasting your life. When the cause was dead, to devote your life to something unworthy becomes a major frustration in one's life. And then you think about the philosophy of spying. After all, it's akin to thievery, and this is fundamentally repugnant to any individual. Once you think in these terms, you lose interest in your work and often think that you wasted some of the best years of your life.

CNN Moderator: Mr. Kalugin and Mr. Goodman, thank you for participating in our COLD WAR chat tonight.