Enemies Within

by Richard Davenport-Hines

  Overwork caused the death in 1946 of the master-negotiator and trans-Atlantic commuter Lord Keynes, and devitalized almost everyone in government administration. There was a grave shortage of competence for all the big tasks that needed to be done. Having failed to become chief of MI5, Penney was appointed Director of the London Communications Security Agency, which advised on cipher security and was the forerunner of GCHQ’s Communications Electronic Security Group. Churchill’s man in SIS, Desmond Morton, proved unwelcome there to Bevin, but was soon redeployed as the Treasury’s representative on the Inter-Allied Reparation Agency, and on the Tripartite Gold Commission in Brussels. Everywhere tired, hungry, uncomfortable officials were doing two simultaneous jobs. During 1950, as the VENONA-inspired investigations into the Foreign Office espionage intensified, Reilly was too busy to participate in inquiries for which he was specially fitted. With the continuing freeze of the Cold War, and especially after North Korea’s surprise attack on South Korea in June 1950, Reilly gave priority to preparing JIC advice for the Chiefs of Staff and government ministers on the danger of a new world war.10

  Contending priorities for MI5

  Hostility to the British Empire was the common ground of the United States and Soviet Russia before and after the defeat of Germany and Japan. ‘Traditional American dislike and suspicion of anything that savours of selfish British imperialism coincides with one of the major themes of Soviet anti-British propaganda,’ Jock Balfour and Archie Inverchapel (who had both served in the wartime Moscow embassy) reported from the Washington embassy in 1946. Yet until the 1970s MI5 was deeply, necessarily committed to activities that bore the stamp, or at least the residual marks, of the British Empire. This hindered good relations between London and Washington, and at MI5 entailed overwork and information overload.11

  ‘Intelligence requirements: prune these vigorously as no service can cover every subject’ – so Brian Stewart of SIS urged in his handbook for security agencies. The demands on MI5 were insupportable during the late 1940s: there was no surplus growth that could be trimmed, even if there had been time to wield the secateurs. Throughout the Cold War, MI5 bore heavy responsibilities for security and counter-espionage in Britain’s colonies as well as in the homeland. Intelligence was crucial to the process of decolonization in several territories. MI5 officers reformed local security procedure, trained colonial intelligence officials and posted security liaison officers (SLOs) in all the major colonies and dependencies that were given independence. Newly independent governments, without major exception, asked these SLOs to stay in place and continue to act as advisers. Intelligence was crucial to the decolonization programme of the 1950s and 1960s.12

  Attlee’s decision in 1946 that Britain should resume its rule in Hong Kong after the Japanese occupation, rather than relinquish control to the Chinese, had far-reaching consequences. The colony became the sentinel outpost of the western powers in a communist-dominated region. Sillitoe visited Hong Kong in 1948 and advised on its security. Wilfrid Vernon was a mouthpiece of the communist-front China Campaign Committee, and was vocal in support of Mao Tse-tung’s ‘efficient, humane and democratic’ forces in what he called ‘the Liberated Area’ of China: whereas Russia had ‘refrained most meticulously from interfering in China’, the US had (in Vernon’s view) intervened with ‘absolute shamelessness’. After Mao’s victory in 1949, the encircled colony of Hong Kong became Asia’s equivalent of Berlin.13

  Britain’s decision to cede independence to India, Burma and Ceylon was an unmatched devolution of imperial power. Three-quarters of the British Empire’s subjects were removed with the loss of the Raj, which took place at midnight on 14–15 August 1947. Nine months later, in May 1948, the British began to withdraw their forces from the Palestine mandate. Despite these withdrawals, 7.1 per cent of gross national product was spent on the euphemism of ‘defence spending’ in 1948; the figure grew to 9.8 per cent in 1952 (during the Korean war) and still exceeded 6 per cent in 1963.14

  The British commitment in Greece was an important part of the resistance to communism. Sir Daniel Lascelles summarized the position, as seen from the Athens embassy, in November 1945. ‘During the occupation period we officially backed an unpopular and ostentatiously non-Greek monarch,’ King George II of the Hellenes, ‘who made no secret of the fact that he disliked the Greeks and preferred to live in England.’ This preference was intensified by his devotion to his gentle and intelligent mistress, Joyce Brittain-Jones, who later married Eddy Boxshall, the former SIS officer in Bucharest. ‘What was still more unfortunate’, continued Lascelles, ‘was the fact that, simultaneously, certain British organizations which were grossly ill-informed about Greece and which ought to have been under the control of the Foreign Office but notoriously were not, backed and armed the King’s bitterest enemies of the extreme Left, whose resistance included the attempted liquidation, more sovietico, of all their internal political opponents.’ The Greek National Liberation Front, ‘loudly encouraged by that contemptible section of public opinion which believes any group labelled “Left” to be incapable of sin, committed a long series of really ghastly atrocities in the name of democracy’, Lascelles reported. These London-based groups included the League for Democracy in Greece, which had the support of eighty-six Labour MPs, including Driberg, Platts-Mills, Vernon and the winner of the Stalin peace prize, Pritt.15

  In January 1947 Attlee proposed the assuagement of competitive tensions with Stalinist Russia by offering Moscow the economizing policy of withdrawing costly British forces stationed in the Balkans and Middle East. His plan was quashed by the Foreign Office. ‘It would be Munich over again, only on a world scale, with Greece, Turkey and Persia as the first victims in place of Czechoslovakia,’ Bevin warned. ‘Russia would certainly fill the gap we leave empty, whatever her promises.’ Middle Eastern regimes might seem unsavoury, but they all valued their national independence. ‘If we speak to Stalin as you propose, he is as likely to respect their independence as Hitler was to respect Czechoslovakia’s, and we should get as much of Stalin’s goodwill as we got of Hitler’s after Munich.’ The world would see retreat from the Middle East ‘after our abandonment of India and Burma … as the abdication of our position as a world power’.16

  The following month, in February 1947, the Attlee government informed Washington that it could no longer afford to give financial aid to Greece or to maintain troops there. Britain had intervened there by force of arms, so as to prevent ‘the establishment by terrorism of a Communist minority regime which would have turned Greece, like the other Balkan states, into another Soviet Satellite State’. But the cost was no longer supportable. This renunciation gave a violent jolt to Washington. Within days President Truman had declared his resolve that the US would uphold the integrity of free states against armed minorities or outside intervention. The Truman Doctrine, which was adopted with rare unanimity in Washington, proved as momentous as the nineteenth-century Monroe Doctrine: it ended American isolationism for seventy years, and led to the formation of the North Atlantic Treaty Organization (NATO) in 1949. ‘The missionary strain in the character of Americans’, reported Inverchapel, ‘leads many of them to feel that they have now received a call to extend to other countries the blessings with which the Almighty has endowed their own.’17

  A dominant fear in Whitehall was that Britain’s withdrawals from its colonies would leave a power vacuum that the Soviet Union would hasten to fill: that, in Calder Walton’s phrase, ‘the red on British imperial maps would be replaced by the red of communism’. In response to these concerns, the Security Service formed its Overseas Department in 1948. During 1946–50 Sillitoe made twelve major tours of British overseas territories: Canada, Palestine, Egypt, Kenya, Rhodesia, South Africa, Singapore, Hong Kong, Malaya, Australia and New Zealand were inspected and assessed by him. Sir Roger Hollis, MI5’s Director General during 1956–65, was also an inveterate traveller, who made a priority of security in the colonies as much as in the British Isles.18
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br />   The primary threat to British internal security in 1946–7 came not from the Soviet Union but from a radicalized Middle Eastern minority. In July 1946 the Zionist group Irgun, led by Menachem Begin, a future prime minister of Israel and co-winner of the Nobel peace prize, arranged for six men disguised as Arabs to carry milk-churns containing 500 pounds of explosives into La Régence, the basement restaurant of the King David Hotel in Jerusalem. The secretariat of the British mandatory authority for Palestine as well as the MI5 and SIS stations were housed immediately above La Régence. The explosives were a combination of gelignite and TNT designed by the Irgun’s bomb expert, Isser Nathanson @ Gideon, later a physicist at the Hebrew University of Jerusalem. The detonated churns killed ninety-one people. A photograph from the scene shows a typewriter atop some rubble with severed fingers still resting on the keys. A day after the blast a corporal heard a faint voice from deep in the rubble. He knelt and shouted, ‘Is that a wog down there?’ A dying man who had kept his humour called back, ‘Yes, a wog named Thompson, Assistant Secretary.’19

  The terror campaign was then taken to the capitals of Europe. In August 1946 Sillitoe briefed Attlee that he and all his Cabinet were targets of Zionist terrorist cells operating in London. In October two suitcases left by the Irgun wrecked the British embassy in Rome, where Francesco Constantini @ DUNCAN had stolen pre-war secrets for Moscow. British military headquarters in Vienna were bombed. In March 1947 the British Colonial Club, used by servicemen and students from the West Indies, off St Martin’s Lane in London, was bombed. In April Betty Knouth @ Gilberte Lazarus walked into the Colonial Office, which shared the same block in Whitehall as the Foreign Office, and asked a guard for a moment’s respite from the cold outside. She then went to a basement lavatory, where she left twenty-four sticks of dynamite wrapped in newspapers. The timer on the bomb broke, but if the device had exploded it would have caused carnage on the scale of the King David massacre. Knouth, who had received the dynamite from a Frenchman who smuggled it into England inside his prosthetic leg, subsequently opened a nightclub in Beersheba.

  In June 1947 twenty-one lethal packages containing letter-bombs were posted from Italy to politicians in London. Sir Stafford Cripps was saved by a secretary who put the fizzing packet in a bucket of water. The shadow Foreign Secretary, Anthony Eden, carried a letter-bomb in his briefcase all day, thinking that it was a boring circular that he could wait to read in the evening. A death threat was issued against Hugh Trevor-Roper for his qualified magnanimity about Germans in The Last Days of Hitler. Yaacov Eliav, who ran the Colonial Office plot, planned to contaminate London’s water supplies with cholera cultures procured from Zionist sympathizers in the Pasteur Institute in Paris. Attlee’s decision to withdraw from the Palestine mandate and to pass responsibility to the United Nations averted the execution of this attack.

  Sillitoe, Liddell and their senior staff were too busy with crisis interventions to refresh old training procedures or revitalize organizational management. Observation rather than new initiatives was the order of the day. MI5 watchers followed Soviet officials through London streets, surreptitious photographs were taken, old files were reread, and reams of transcripts of bugged telephone calls were translated by elderly émigrés. Surveillance of suspects in secret installations and blacklisting were forbidden by the Attlee government until 1948, when the communists seized power in Czechoslovakia, fomented unrest in Italy and France and blockaded Berlin. Then the numbers of watchers were increased, but they were inexperienced, and their reports of plodding about London had limited value.

  The United States had extended a massive loan, with onerous conditions attached, to save Attlee’s Britain from economic ruin. This enabled the Labour government to introduce the welfare state, to persist in its global pretensions and to embark on its misguided nationalization of coal-mines, railways, civil aviation, road haulage, canals, electricity and gas supplies, the Bank of England, Cable and Wireless and steel manufacturing. Washington’s money did more than pay for deleterious socialism. ‘The American loan opened the way to a silent infiltration of American influence into almost every walk of British public life,’ E. H. Carr noted in 1948. It became obligatory for anyone appointed to an important official post, whether civilian or military, to be acceptable to their US counterparts. ‘To be known as anti-American is a bar to promotion to a responsible position in any walk of life.’20

  By an agreement of 1947, SIS and MI5 sent liaison officers to work in the Washington embassy. A London liaison office for the FBI and CIA was opened at 71 Grosvenor Street above a shop selling beds and mattresses. Every morning SIS delivered summary reports and analyses to Grosvenor Street, and received a deciphered message from Washington containing equivalent material. The ‘scrambler’ telephone at Grosvenor Street was linked to MI5’s headquarters, Leconfield House in nearby Curzon Street, and to SIS’s Broadway Buildings.

  Attlee wrote in March 1947 to Inverchapel of the feeling that the Special Relationship was one-sided, and that Britain was being used by Washington as ‘a mere breakwater between the United States and Russia’. Three months later, in June, the FO’s Sir Oliver Harvey speculated that if required ‘to choose between Communist Russia and Capitalist America the Western Europeans might hesitate, for Western Europe has now quite outlived capitalism and free enterprise in the United States sense, which is but 19th century Liberalism. The Western democracies, including Great Britain, now stand for progressive Socialism and controlled economy.’ Mass opinion in Britain was ‘mildly Left’, Harvey judged. ‘Some may have doubts about Socialist planning, but all have greater doubt, if not complete disbelief, in the United States system, with its total lack of plan, its primitive labour laws and tariffs and above all its congressional government.’ Harvey warned that if Americans pressed unregulated capitalism too hard on Europe and Britain, they would lose influence on the corporatist-minded continent.21

  Anglo-American attitudes

  Mass opinion in the United States was not veering towards Europe’s regulated capitalism. Instead it was being whipped up against Red enemies in the nation’s midst. Extensive investigations of Elizabeth Bentley’s denunciations began in 1945–6, but made limited headway in obtaining evidence of espionage that could be used in court to obtain convictions. Bentley and Whittaker Chambers might name their former associates, but their assertions were a long way from clinching incrimination. When evaluating allegations of espionage cover-ups by the London government, and accompanying complaints that traitors were not brought to trial, one must compare the record of MI5 with that of the FBI. Bringing spies to book was tricky on both sides of the Atlantic.

  When interviewed by the FBI, Gregory Silvermaster @ PAL @ ROBERT, Helen Silvermaster @ DORA, William Ullmann @ POLO @ PILOT, Mary Price @ DIR, Ishbel and Duncan Lee, and Peter Rhodes (all of whom had been named by Bentley) stalled rather than cracked. An FBI lawyer who analysed the evidence collected as of January 1947 concluded: ‘What we know to be true in this case is a far cry from what we are in a position to prove beyond a reasonable doubt.’ A Grand Jury, which heard forty-seven witnesses between June 1947 and April 1948, failed to indict Lee for treason or perjury. To protect the FBI from accusations of incompetence, Hoover determined to give Bentley’s material to HUAC. He did this against the advice of Milton (‘Mickey’) Ladd, head of the Bureau’s Domestic Intelligence Division: ‘I doubt whether it could be handled without them playing a great deal of politics, and resulting in its being grief for everybody involved.’22

  On 30 July 1948 Bentley, who had sunk to a secretarial job with the Pacific Molasses Company of New York, testified to legislators who were more interested in embarrassing President Truman than in eliciting her full story. In terms that might have been used by Cairncross or Nunn May, she declared that her sources were ‘a bunch of misguided idealists’ who felt that the Russians were America’s allies, believed ‘that Russia was bearing the brunt of the war’ and resented the fact that Washington was not sharing with Moscow
all the information and material support with which it provided London. ‘They felt it was their duty, actually, to get this stuff to Russia, because she was hard-pressed and weakening.’ Bentley called Browder and his CPUSA associates ‘cheap little men pulled on strings from Moscow’.23

  In December 1948, as the VENONA decrypts accumulated and Chambers and Bentley testified to HUAC, the FBI interviewed Laurence (‘Larry’) Duggan, an official of the State Department in 1930–44, at his suburban home. Duggan was an optimist, an altruist and a constructive idealist who believed in taking action on his own responsibility and knew that he was more intelligent than most people. In a cocksure mood, with the encouragement of his wife Helen Boyd, he had started supplying official secrets to Soviet Russia in 1936. The couple were just two of the ‘bonanza of anti-fascist romantics’ who started working at this time for the NKVD. He nearly broke off contact in dismay at the Moscow purges of 1937, but continued to supply material until he received a semi-official State Department warning after Chambers, in September 1939, named him as a Soviet source. Despite believing that FBI investigators were like ‘boys lost in a forest’, Duggan insisted that the risks were too high for his spy work to continue. The NKVD forcefully renewed contact during 1942, and pressed him to divulge further official secrets at a time when State Department security officials were also giving him renewed trouble. He solved this double bind by leaving the State Department in July 1944 to become diplomatic adviser to the United Nations Relief and Rehabilitation Administration. On 11 December 1948, under FBI questioning, he denied espionage, looked uneasy and cut short the interview. Four days later, by coincidence, he was telephoned by a Soviet operative codenamed SAUSHKIN seeking to convince him to resume work for Moscow. Duggan must have felt beset on both sides. During the early evening of 20 December, he fell to his death from the window of his sixteenth-floor Manhattan office. It is likely that he jumped, conceivable that he fell in a weird accident while trying to put on a snow-boot, but some prefer to think that he was pushed.24