Spy gadgets worthy of a James Bond film have been planted by foreign agents on high-level US arms contractors, the Pentagon revealed yesterday.

American security experts said that coins containing tiny radio transmitters were slipped into the pockets of American government defence contractors while they travelled on sensitive missions in Canada, raising suspicions that a foreign power — possibly China or Russia — was behind the scheme.

“On at least three separate occasions between October 2005 and January 2006, cleared defence contractors’ employees travelling through Canada have discovered radio frequency transmitters embedded in Canadian coins placed on their persons,” the report, by the counter-intelligence office of the US Defence Security Service, said.

The Canadian Government, which works closely with the US on espionage matters, is not considered a suspect and has denied involvement. “The issue has just come to our attention,” a spokeswoman for the Canadian Security Intelligence Service said.

China and Russia have sophisticated industrial and military espionage operations in the US and Canada.

Last year a Chinese spy, Ko-Suen “Bill” Moo, pleaded guilty in a US court to charges that he tried to buy military parts and weapons, including an F16 fighter jet engine and cruise missiles, from an undercover FBI agent. Experts said that the coins might be used to track the movements of the US defence contractors whose job it is to buy and sell military technology.

Whom the contractors have met, and when and where, would be valuable information for a foreign spy service, analysts said. The Pentagon report was based on an analysis of 971 “suspicious contacts” reported by US defence contractors during 2005.

It states that foreign-hosted conventions, seminars and exhibits are popular venues for spies to steal military secrets.

One obvious problem with the tracker coins that the spies who planted them face is the risk that the targeted defence contractor might spend them on buying a cup of coffee or a newspaper.

The report did not state what type of Canadian coins were used. The country’s largest is its $2 “Toonie,” which is more than 1in (2.5cm) across and thick enough to hide a tiny transmitter.

The Pentagon report also listed other acts of espionage, including the case of a female foreign spy who seduced an American to steal his computer passwords.

The Pentagon report did not name any countries suspected of being behind the spying. But the reason many analysts suspect China is that it has become the leading espionage operator in the US.

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