By Robert Burns

New Zealand Herald

10:57 AM Wednesday Jun 30, 2010

WASHINGTON – The scandal over an alleged Russian spy ring erupted at an awkward time for a White House that has staked its foreign policy record on improved cooperation with Moscow, but it appeared unlikely to do lasting damage to US-Russian relations.

The administration sought to dampen tensions, while the Russian government offered the conciliatory hope on Tuesday that US authorities would “show proper understanding, taking into account the positive character of the current stage of development of Russian-American relations.”

The White House response was notably restrained following the dramatic announcement that 11 people assigned a decade or more to illegally infiltrate American society had been arrested. They are accused of using fake names and claims of US citizenship to burrow into US society and ferret out intelligence as Russian “illegals” – spies operating without diplomatic cover.

White House spokesman Robert Gibbs laboured to show that the arrests were a law enforcement matter – one not driven by the president, even though President Barack Obama was informed – and played down any political consequences.

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Obama was asked about the matter by reporters twice on Tuesday. He declined to comment both times.

Gibbs said Obama was aware of the investigation before he met with Russian President Dmitry Medvedev at the White House on Thursday, although Gibbs said he did not know whether Obama knew then that the arrests were imminent. The two leaders did not discuss the issue, Gibbs said.

Officials in both countries left the impression that spy rings remain a common way of doing business.

Prime Minister Vladimir Putin offered a message of restraint during a meeting at his country residence with former President Bill Clinton, who was in Moscow to speak at an investment conference.

“I understand that back home police are putting people in prison,” Putin said, drawing a laugh from Clinton. “That’s their job. I’m counting on the fact that the positive trend seen in the relationship will not be harmed by these events.”

The administration has made a high priority of improving relations with Russia.

At stake in the short term is a newly concluded nuclear arms control deal, dubbed New START, which requires a favourable vote in the US Senate and approval by the Russian legislature.

More broadly, Obama wants to build the foundation for a strategic partnership with Moscow – to increase security and economic and other cooperation with the former Cold War foe.