WASHINGTON, Nov 21: Hezbollah has partially unravelled the CIA's spy network in Lebanon, severely damaging the intelligence agency's ability to gather vital information on the terrorist organisation at a tense time in the region, former and current US officials said.

Hezbollah's longtime leader, Sheik Hassan Nasrallah, boasted in June on television he had unmasked at least two CIA spies who had infiltrated the ranks of the organisation, which the US considers a terrorist group closely allied with Iran.

Though the US Embassy in Lebanon officially denied the accusation, American officials concede that Nasrallah was not lying and the damage spread like a virus as Hezbollah methodically picked off the CIA's informants.

To be sure, some deaths are to be expected in these shadowy spy wars. It's an extremely risky business and people get killed. But the damage to the agency's network in Lebanon has been greater than usual, several former and current US officials said, speaking on condition of anonymity.

The Lebanon crisis is the latest mishap involving CIA counterintelligence, defined as the undermining or manipulating of the enemy's ability to gather information. Former CIA officials have said the once-essential skill has been eroded as the agency shifted from out manoeuvring rival spy agencies to fighting terrorists. In the rush for immediate results, former officers say, tradecraft has suffered.

The most recent high-profile example was the suicide bomber who posed as an informant and killed seven CIA employees and wounded six others in Khost, Afghanistan, in December 2009.

Last year, then-CIA director Leon Panetta said the agency had to maintain “a greater awareness of counterintelligence.” But eight months later, Nasrallah let the world know he had bested the CIA, demonstrating that the agency still struggles with this critical aspect of spying and sending a message to those who would betray Hezbollah.

It remains unclear whether anyone has been or will be held responsible in the wake of this counterintelligence disaster or whether the incident will affect the CIA's ability to recruit assets in Lebanon.

CIA officials were warned their spies in Lebanon were vulnerable. Those told include the chief of the unit that supervises Hezbollah operations from CIA headquarters in Langley, Va., and the head of counterintelligence.

Former and current intelligence officials are waiting to see how CIA Director David Petreaus, who took the helm in September, will handle this fiasco. While in the military, the retired four-star developed a reputation for exacting standards and holding people accountable.

“Gen Petraeus will definitely take care of the failings of his organization. He will deal with it head on and not try to bury it under the carpet,” said retired Army Col Peter Mansoor, the general's former executive officer in Iraq.

In response to questions about what happened in Lebanon, a US official said Hezbollah is a complicated enemy, responsible for killing more Americans than any other terrorist group before September 2001. The agency did not underestimate the organisation, the official said.

The CIA's toughest adversaries, like Hezbollah and Iran, have for years been improving their ability to hunt spies, relying on patience and guile to exploit counterintelligence holes.

In 2007, for instance, when Ali-Reza Asgari, a brigadier general in the Islamic Revolutionary Guards Corps of Iran, disappeared in Turkey, it was assumed that he was either killed or defected. In response, the Iranian government began a painstaking review of foreign travel by its citizens, particularly to places like Turkey where Iranians don't need a visa and could meet with foreign intelligence services.

It didn't take long, a western intelligence official said, before the US, Britain and Israel began losing contact with some of their Iranian spies. In this instance, the Iranians used travel and expense records to figure out who was selling the foreign intelligence services information about its nuclear programme.

The State Department last year described Hezbollah as “the most technically capable terrorist group in the world,” and the Defence Department estimates it receives between $100 million and $200 million per year in funding from Iran.

Hezbollah has built a professional counterintelligence apparatus that Nasrallah ù whom the US government designated an international terrorist a decade ago — proudly describes as the “spy combat unit.” US intelligence officials believe the unit, which is considered formidable and ruthless, went operational around 2004.

Using the latest commercial software, Nasrallah's spy-hunters unit began methodically searching for traitors in Hezbollah's midst. To find them, US officials said, Hezbollah examined cellphone data looking for anomalies. The analysis identified cellphones that, for instance, were used rarely or always from specific locations and only for a short period of time. Then it came down to old-fashioned, shoe-leather detective work: Who in that area had information that might be worth selling to the enemy?

The effort took years but eventually Hezbollah, and later the Lebanese government, began making arrests. By one estimate, 100 Israeli assets were apprehended as the news made headlines across the region in 2009. Some of those suspected Israeli spies worked for telecommunications companies and served in the military.

Back at CIA headquarters, the arrests alarmed senior officials. The agency prepared a study on its own vulnerabilities, U.S. officials said, and the results proved to be prescient.

The analysis concluded that the CIA was susceptible to the same analysis that had compromised the Israelis, the officials said.

CIA managers were instructed to be extra careful about handling sources in Lebanon. A US official said recommendations were issued to counter the potential problem.—AP