The Canadian government has done everything it can to play down the espionage damage done to this country and our allies by naval Sub-Lt. Jeffrey Delisle.

But the case continues to rumble through the Western intelligence world as one of the biggest spying debacles possibly in decades.

It also says a lot about the bizarre nature of global espionage today when the victims play down their defeats in order to avoid harming relations with those who would filch secrets.

Ottawa barely whispered its discontent to Moscow after Delisle was arrested near the end of 2011.

That was after Russian Military Intelligence (the GRU) used Delisle over four years to buy, at bargain prices, some of the most closely guarded defence and intelligence secrets of Canada and its closest allies.

Following Delisle's arrest, six Russian embassy officials were so calmly requested to go home that the smiling Russian ambassador could pooh-pooh the whole business as insignificant.

"I have a deal with your people to keep quiet," Ambassador Georgiy Mamedov told a reporter when news of the departures came out.

Well, true enough. Public Safety Minister Vic Toews wouldn't even comment when asked about the scandal, and the government has maintained mostly a gloomy silence about the matter ever since.

Yet the military and former intelligence officials that I know shiver in horror when they speak of this case, and even the normally restrained CSIS calls the Delisle damage "severe and irreparable."

Collateral damage

Quite apart from the specific secrets that were lost, the collateral damage here is that Canada is getting tagged as the "soft underbelly" of NATO security.

The fact that other Western allies have also suffered serious security breaches in recent years only partially lessens the blow.

Canada is not alone. Accused spies, Andreas Anschlag and his wife Heidrun, both aliases, appear in court in southern Germany last month. They are charged with providing Russia’s foreign intelligence service with information on German, EU and NATO’s security policies. (Bernd Weissbrod / Associated Press)

In the U.S., there is real anger right now that Delisle could so easily sell Russia the secrets of critical American military command and control, and communications techniques, along with much other top secret material, including the names of Canadian and allied intelligence personnel.

A Wall Street Journal study recently concluded that Delisle was, single-handedly, as damaging to U.S. intelligence interests as the giant WikiLeaks exposures a few years back.

That would make this affair one of the biggest security scandals in over a decade.

The British and Australians were also shocked to learn their signals and communications protocols were exposed to Moscow.

Worst off all, Delisle kept no records of everything that he gave the GRU, so we and our allies have to assume that all that he handled was betrayed — a nightmare for military planners.

Pandemic of espionage

For the doughty GRU, founded by Lenin in 1918, this is no small coup.

Sure, Delisle was a voluntary turncoat who first went to the Russians to sell his wares. But such "walk-ins" are how most big human intelligence sources begin, and they need highly skilled handling.

So one can understand if there's discreet celebrating at GRU headquarters in Moscow, despite the fact that Russia was supposed to be far more trustworthy these days. We've even sat with them for over a decade on the Russia-NATO council.

Now, leading experts on Russian spying, such as Mark Galeotti of New York University, warn that Canada's weakness will only encourage Russian leader Vladimir Putin's aggressive instincts.

As Galeotti put it, "because we don't want to antagonize Russia, because we realize that Putin tends to get very spiky if challenged, because we need Russia for supply routes to Afghanistan, for a whole variety of reasons — we have let the Russians get away with it. So of course they're going to continue" to spy on the West.

Some go further. Edward Lucas, the respected European editor of The Economist, recently wrote that Putin's obsession with all-out spying is creating "a new Cold War."

Indeed, as I found out while making a documentary on espionage, The Secret Storm, which airs tonight on CBC's The National, there is today far more spying by more countries than at the height of the Cold War.

In fact, there is almost a pandemic of espionage that seems to know no limits.

Bigger threat than terrorism

Many countries spy on us to some extent, and that likely includes, to a cautious degree, even friends like the U.S., Israel and France. None of these would risk major scandal by prying too aggressively.

But Russia, and even more so China, now target Canadian and American secrets — diplomatic, economic, industrial, scientific — with an astonishing fervour.

Quite apart from lost profits, corporate espionage hurts advanced societies, especially when it succeeds in stealing away innovation — and the jobs that would go with it.

Hanjuan Jin, a former software engineer with Motorola, was sentenced to four years in August 2012 for stealing trade secrets. She was stopped during a random security search at Chicago's O'Hare airport in 2007, before she could board a flight to China, with what prosecutors said was hundreds of confidential Motorola documents, many stored on a laptop and other devices (M. Spencer Green / Associated Press)

There are far more professional and amateur spooks ripping off secrets these days, and of course cyber-espionage has given hacker-agents tools to groups in China and Russia that are hard to defend against.

Just Thursday, for example, the New York Times reported that Chinese hackers have been trying to get into the newspaper's computer systems for the last four months.

For the first time since 9/11, the U.S. now sees espionage as a bigger threat than terrorism.

"We are losing upwards of $250 billion a year in U.S. wealth through this kind of illicit cyber-targeting of business and industry," Michelle Van Cleave, director of all U.S. intelligence during the last Bush administration, told me in Washington.

The fear that cyber-espionage can cause corporations to lose whole markets within weeks or months is prompting U.S. and Canadian businesses to spend $20 billion a year to try to fend off spies, with only mixed success.

Even a fourfold increase in FBI arrests of spies in the U.S. over four years has barely dented this new phenomenon.

At this point, there are no agreed-upon figures for how much Canadian businesses have lost to international espionage. But CSIS is urging executives to urgently protect their trade and product secrets.

"I think it's death by 1,000 nibbles and it's happening, happening everywhere," Ray Boisvert, former director of CSIS threat assessments, told us.

It's a warning now heard from security officials across the developed world.

There is no indication that corporate espionage is going to lessen any time soon. Indeed, it will almost certainly expand and become even murkier.

Spying is so hugely profitable when successful that organized crime in China and especially Russia have entered the fray as proxy spies for intelligence agencies.

Once, Ottawa would have raged and threatened strong diplomatic retaliation when a Soviet spy ring was uncovered in this country.

Now, Moscow knows Jeffrey Delisle alone will bear the brunt of Canada's righteous anger — a pretty good deal considering the years of insights into Western security it bought for a pittance.