THE Kremlin reportedly bugged gifts they gave G20 leaders, including Australia's ex foreign minister Bob Carr, in a spying effort out of a movie.

The "gifts", a USB flash-drive and universal mobile phone battery charger, were bugged, according to Italian publication Corrierre della Sera.

Russia gave each member of the G20, including UK leader David Cameron and US President Barack Obama, the gifts.

EU Council president Herman van Rompuy raised the alert after arriving back in Brussels and getting security and intelligence experts to analyse the devices. That investigation found that they were bugging devices.

"The USB flash-drives and the power cables are suitable for use as secret tapping devices able to gather computer and mobile phones data," Corrierre della Sera quoted the report as saying. "Early analysis showed the USB drive and mobile phone charging cables gifted by the Russians to be Trojan horses - instruments capable of capturing data from computers and mobile phones."

Dmitry Peskov, the spokesperson of the Russian president, said the report was just an attempt to divert attention away from NSA whistleblower Edward Snowden and America's spying on its citizens.

"We don’t know what sources of information are involved, but it is definitely nothing other than an attempt to switch attention from the problems that really exist, which dominate the agenda between the European capitals and Washington, to problems that are ephemeral and non-existent", he said.

Diplomatic tension was particularly high between Mr Obama and Vladimir Putin after Russia granted Snowden temporary asylum.

Mr Putin is a former KGB agent and before becoming president was the head of the successor of Russia's Soviet era intelligence agency, the FSB.

The news came as the White House is considering ending its eavesdropping on friendly foreign leaders, a senior administration official said, as the US confronts a flood of revelations about its spying practices.

A final decision has not been made, the official said. The administration is trying to tamp down damage from the months-long spying scandal - including the most recent disclosure that the National Security Agency monitored the communications of German Chancellor Angela Merkel.

President Barack Obama said the US government is conducting "a complete review of how our intelligence operates outside the country.'' Interviewed on the new television network Fusion on Monday, Obama declined to say when he learned about the spying operations.

"What we've seen over the last several years is their capacities continue to develop and expand, and that's why I'm initiating now a review to make sure that what they're able to do doesn't necessarily mean what they should be doing,'' Mr Obama said.

Senator Dianne Feinstein, chairwoman of the Senate Intelligence Committee, called for a "total review of all intelligence programs'' following the Merkel allegations. In a statement Monday, the Democrat said the White House had informed her that "collection on our allies will not continue.''

The administration official said that statement was not accurate, but added that some unspecified changes already had been made and more were being considered, including terminating the collection of communications from friendly heads of state.

The official was not authorised to discuss the review by name and insisted on anonymity.

Politicians were set to press for more information about surveillance programs at a House Intelligence Committee hearing Tuesday.

Reports based on new leaks from former NSA systems analyst Edward Snowden indicate that the NSA listened to Ms Merkel and 34 other foreign leaders.

"With respect to NSA collection of intelligence on leaders of US allies - including France, Spain, Mexico and Germany - let me state unequivocally: I am totally opposed,'' Senator Feinstein said. She added that the US should not be "collecting phone calls or emails of friendly presidents and prime ministers'' unless in an emergency with approval of the president.

In response to the revelations, German officials said Monday that the US could lose access to an important law enforcement tool used to track terrorist money flows.

Other longtime allies have also expressed their displeasure about the US spying on their leaders. Spain's prosecutor's office said on Tuesday it has opened a preliminary inquiry to determine whether a crime was committed by NSA surveillance.

As possible leverage, German authorities cited last week's non-binding resolution by the European Parliament to suspend a post-September 11 agreement allowing the Americans access to bank transfer data to track the flow of terrorist money.

A top German official said on Monday she believed the Americans were using the information to gather economic intelligence apart from terrorism and said the agreement, known as the SWIFT agreement, should be suspended.





