TORONTO - The Cold War ended long ago, but the arrest of a suspected Russian spy in Montreal suggests the stealth battles between spies and spy-catchers that characterized the Soviet era continue.

Although counterterrorism has been at the centre of Canada's national security efforts since 9/11, the government has been dropping hints about a spike in spying, sometimes called the world's second-oldest profession.

Intelligence chief Jim Judd said in a speech in Ottawa last month that "foreign espionage is, if anything, growing and, in fact, becoming more sophisticated than ever through the application of new technologies."

The counter-intelligence branch of the Canadian Security Intelligence Service investigated 36 organizations (mostly foreign intelligence services) and 152 individuals last year.

By comparison, the counter-terrorism branch investigated 31 organizations and 274 individuals.

"We are concerned about the levels of espionage," Stockwell Day, the Public Safety Minister, said earlier this year in response to reports about spying at a military research facility in Valcartier, Que.

Mr. Day could not be reached for comment yesterday.

When the Iron Curtain fell, Canada slashed its intelligence budget, hoping to cash in on the anticipated peace dividend. But spying carried on, fuelled partly by new technologies and a growing demand for economic secrets.

"Although espionage is often thought of as a relic of the Cold War, in reality it has continued, and in many ways intensified over the past 15 years," says a top secret CSIS report obtained by the National Post.

In Canada, the government remains the primary target of foreign spies who "constantly" attempt to infiltrate key federal departments to gain access to political and military secrets, according to CSIS.

Increasingly, however, foreign intelligence services have been going after economic and trade secrets as well, not to mention technology, some of it for nuclear and weapons programs.

Another type of espionage common in Canada is "foreign interference," in which foreign operatives target ethnic or expatriate communities to influence homeland conflicts or tamper with the political process. "Foreign interference in domestic affairs, especially in multicultural societies with large immigrant communities, is more prevalent than ever," Mr. Judd, the CSIS director, said in his speech.

The Iranian Ministry of Intelligence and Security is one example. MOIS agents in Canada, financed by the Iranian embassy in Ottawa, have been working to influence the Iranian-Canadian community in ways that favour Tehran.

Although CSIS does not name its targets, Peter MacKay, the Foreign Affairs Minister, has publicly singled out China for its efforts to steal industrial and high-tech secrets.

"Foreign governments have viewed Canada as a particularly appealing target because of its advanced technological achievements, its wealth of natural resources, diversity of ethnic groups and open political system," says the CSIS report, released under the Access to Information Act.

While China may have the most aggressive spy program here, the Russians have a long history of espionage in Canada, which they view as a useful flag of convenience as well as a back door into NATO and the United States, and a rising economic and military power in its own right.

Russian snooping in Canada goes back to the start of the Cold War, when Igor Gouzenko, a Soviet embassy employee in Ottawa, defected and exposed a vast spying apparatus. The KGB, it turns out, had financed the Canadian Communist party, tried to inflame the FLQ crisis and used its embassy in Ottawa to plan sabotage operations to be executed in the event of a Soviet-NATO war.

The Russians did not relent after the Soviet collapse. In 1996, Canadian authorities arrested and deported two Russian spies on assignment for Moscow: Dmitryi Vladimirovich Olshevskiy and Yelena Borisovna Olshevskaya.

They had stolen the identities of Ian Lambert and La urie Brodie, Canadians who died as infants in the 1960s.

CSIS counter-intelligence officers fight foreign spies by watching and listening in on them and by sometimes throwing a wrench into their activities by passing them bad information or technology designed to fail.

Spies working out of foreign embassies in Ottawa are occasionally declared personae non gratae and expelled, but that does not work for "illegals" like the Lamberts who do not hold diplomatic status.

In such cases, Canada has opted for deportation, using the same sections of immigration law that are cited to deport foreign terrorists. While terrorism-related deportations are often complicated by concerns that suspects could be tortured once sent home, that rarely applies to spies being returned to their own governments.

The counter-intelligence branch also tries to prevent known spies from entering Canada. Last year, it screened more than 80,000 visa applications and detected "a number of known or suspected intelligence officers seeking entrance to Canada," the Security Intelligence Review Committee wrote last month in its annual report to Parliament.

The Montreal arrest suggests the current focus on counterterrorism should not blind intelligence agencies to other security threats. When CSIS was created in 1984, its main job was counter-intelligence, but today most of the agency's resources are devoted to fighting terror.

"Espionage is a time-tested tradecraft that serves political, military, strategic and economic ends, and for these reasons it is not about to disappear," the CSIS report says.

sbell@nationalpost.com