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North Korean spies are operating an elaborate espionage network in Canada and have tried to steal Canadian nuclear technology abroad, intelligence sources say.

Ottawa recently recognized Communist North Korea, the sources added, over the strong reservations of Canada's intelligence agency, the Canadian Security Intelligence Service.

CSIS is concerned, an intelligence source said, that the thaw in relations between Canada and North Korea will mean that the Communist regime in Pyongyang may try to engineer joint ventures with Canadian firms in order to pilfer technological and scientific secrets that may have military applications.

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CSIS is also worried that the presence of North Korean diplomats in Canada will result in even greater and more sophisticated espionage activity. North Korean diplomats are likely to arrive in Canada by the end of this year.

In July, Ottawa announced that it intended to normalize diplomatic relations with North Korea's totalitarian regime after a decades-old freeze.

"CSIS really didn't want that to happen," an intelligence source said. "Now, we're in for a bigger headache with the North Koreans."

Marie-Christine Lilkoff, a Foreign Affairs and International Trade department spokeswoman, said CSIS was consulted before Canada recognized North Korea and did not object to the diplomatic step. However, she acknowledged that the intelligence agency may have "expressed some concern" about the historic move at high-level government meetings.

"This [diplomatic recognition]is a huge mistake," another intelligence source said.

CSIS, sources said, spent several years doggedly collecting intelligence of North Korean espionage activity in Canada in an attempt to discourage Ottawa from recognizing a nation Washington has described as a "rogue state" and a security threat.

Western governments, including Canada, have been deeply troubled by North Korea's human-rights record and its efforts to develop nuclear weapons and long-range missiles.

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"CSIS was building a file to prevent diplomatic recognition," a source said. "Obviously, it failed."

For example, sources said, the intelligence agency has been closely watching a convenience store manager in Verdun, Que., a Montreal suburb, for several years. Despite his humble work, CSIS believes the man plays a key role in directing North Korea's espionage activity in Canada, intelligence sources said.

The corner-store manager, sources said, entered Canada in the early 1990s under a popular immigrant-investor program that allowed thousands of people to obtain Canadian visas quickly if they could invest some money in Canada.

The man also apparently owns a large computer business in Mapo, South Korea, a suburb of Seoul, that employs over 200 people and makes millions of dollars a year in profits, sources said. Some of that money, sources added, is believed to finance North Korea's intelligence operations in Canada.

Two CSIS intelligence officers, Kevin McLeod and Phillip Gardner, sources said, have been investigating both South and North Korean espionage operations in Canada. Contacted at CSIS offices in Toronto, neither agent would discuss his involvement in tracking North Korean intelligence operations.

"I have no comment," Mr. McLeod said in a brief interview, before abruptly hanging up.

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Sources said that the two agents are also aware that a French-Canadian nuclear engineer who was working on Canadian Candu reactors in South Korea in 1996 was befriended by North Korean agents.

"He was unaware that he was talking to the wrong people," an intelligence source said.

The married engineer, sources said, was "wined and dined" by the North Korean agents, who provided him with women and luxury vacations. The North Korean agents were attempting, sources said, to elicit sensitive information about the nuclear reactors from the engineer. Whether they succeeded was not clear.

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