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Europe’s Spy Capital Eyes Crackdown on Intelligence Industry

(Bloomberg) -- Spying is about to become more dangerous in the European capital known for rolling out the red carpet to the world’s intelligence services.

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Austria plans to close a legal loophole that’s turned Vienna into a haven for spies, Justice Minister Alma Zadic said Thursday in a broadcast interview on the public radio network ORF.

The nation has the most permissive spying laws in Europe when it comes to hosting foreign agents on its soil, with current rules allowing intelligence operatives to ply their trade as long as they don’t spy directly on Austria.

“We must ensure that all espionage activities in Austria are punishable, regardless of who they’re directed against,” Zadic said. “These gaps in criminal law must be closed.”

Stories of spy swaps, assassinations and Cold War intrigue are part of Vienna’s DNA. By some estimates, as many as 7,000 secret agents live among almost 17,000 accredited diplomats in the city of 1.9 million.

Austria’s cottage industry developed in the wake of the post-World War II racketeering portrayed by Orson Welles in Carol Reed’s The Third Man, then burgeoned during the Cold War as spies sought an edge in major Vienna-based institutions including the International Atomic Energy Agency and Organization of the Petroleum Exporting Countries.

Pressure has been growing to change the laws after Austrian prosecutors arrested a former counter-espionage official on suspicion that he spied for Russia. And in 2023, an investigative journalist who exposed Kremlin spies operating in Vienna fled the capital because he feared for his safety.

Meanwhile, officials continue investigating whether the arrested officer was part of an alleged bigger spy ring run by Austrian Wirecard-fugitive Jan Marsalek.

“The very limited legal options available to counter espionage lead to an extremely high incidence of foreign intelligence and secret services in the country,” Austria’s own spy operation, the Office for the Protection of the Constitution, said in its most recent annual report.

While agents from China, Iran, Russia and Turkey top the list of official concerns in Austria, friendlier countries also prominently feature in the espionage community, with as many as 80 US spies estimated to operate in the capital.

Legislation ending dispensations to foreign agents is being drafted and could pass quickly, according to Zadic. In addition to the ruling Austrian People’s Party and Greens, reform proposals have fetched support among some politicians in the opposition. Austria is scheduled to hold national elections later this year.

(Updates with timing in the final paragraph)

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