The West German defection had direct repercussions for both MI5 and GCHQ. For some time MI5 had been mounting covert surveillance on an unremarkable rented house at 249 Waye Avenue in Cranford, near Heathrow Airport on the western edge of London. This was inhabited by Reinhard and Sonja Schulze, a quiet German couple in their mid-thirties who worked respectively as a kitchen designer and a translator. In fact they were agents of the East German foreign intelligence agency, the HVA. Unusually, they were ‘illegals’ – in other words they lived under deep cover, rather than pretending to be Eastern Bloc diplomats. At the same time as the BfV security flap in West Germany, the Metropolitan Police Special Branch raided the house and the Schulzes were arrested. Specialists then spent several weeks ripping up floorboards and dismantling every item in the house. They were not disappointed. In the garden shed they found wallets with one-time pads for encyphering and decyphering messages, together with a radio receiver. There was also an escape kit with money and false passports. The authorities had moved quickly because they feared that the Schulzes might flee, joining the flurry of anxious double agents moving between East and West.55 GCHQ had been reading many of the messages that the agents received in high-frequency Morse. This breakthrough was a great achievement for Cheltenham, a mini-version of Venona. In contrast to Venona, which was never used in court, GCHQ intercepts of the HVA communications were cited as prosecution evidence when the Schulzes came to trial in June 1987, ensuring that they each received ten years in prison.56
Surprisingly, Odom was not deterred by these serious security problems within the West German intelligence services, and continued to press ahead with his German plan. There were bureaucratic obstacles, since the BND was engaged in a fierce turf battle over tactical sigint with the West German Army which closely resembled the tussles between NSA and America’s own armed forces.57 Nevertheless, by the summer of 1986 NSA, the BND and indeed GCHQ were building the new Sigdasys system proposed by the Germans, which gave a better supply of sigint to NATO operational commanders and allowed partners to pool their military sigint on the Soviets. This was paid for on a three-way split between the British, the Americans and the Germans, with the French joining soon after.58 In September 1987 Peter Marychurch suggested the Swedish FRA join as a ‘sleeping partner’, since Sigdasys was saving costs for everyone by eliminating overlap.59 The Americans continued to be impressed by the BND’s aggressive and expanding global sigint programme, for example its cooperation with the code-breaking agency in Taiwan.60
Sadly, Odom’s desire to give more sigint to NATO’s front-line divisions was twenty years too late. By 1986 the new Russian Premier, Mikhail Gorbachev, was beginning to transform world affairs. In the Pentagon and the Ministry of Defence, Gorbachev was welcomed with cautious optimism. Observers were not only watching him but also the ‘exceptionally able’ Russian Ambassador in Washington, Anatoly Dobrynin, who was a natural diplomat.61 Meanwhile, the Middle East and Africa were becoming more important to NSA, which was anxiously watching the conflict in Angola between the Marxist regime and rebel forces of Joseph Savimbi, who received support from both South Africa and the CIA. NSA was pondering how to expand its coverage of sub-Saharan Africa, and at a meeting with his senior staff on 16 July 1986 Odom expressed high hopes of an ambitious new GCHQ covert collection operation that was being mounted from the British Embassy in Luanda, the Angolan capital. He also pondered using more sigint ships, and asking the BND to do some work in southern Africa. South Africa’s communications security was improving, with burst transmission and frequency-hopping, forcing GCHQ and NSA to concentrate on clear voice traffic.62
Terrorism was now an extremely high-profile concern, with Libya the main focus because it was directly aiding terrorist groups in the West, including the IRA. Indeed, a low-level war with Libya was gradually developing. During the early 1980s the eccentric Libyan leader, Colonel Muammar Gaddafi, had become increasingly paranoid about dissidents and exiles who opposed his regime. After hanging two students outside the gates of Tripoli University, he had ordered his secret service to attack what he called ‘stray dogs’ abroad, resulting in a series of bombings and shootings against opposition groups based in Britain. With the help of MI5, three Libyan assassins were caught and sentenced to life imprisonment. Some of these attacks had been organised from within the Libyan Embassy at 5 St James’s Square in London, now renamed the ‘Libyan People’s Bureau’. GCHQ was decoding Libyan communications freely, and during the early 1980s it had intercepted several of Gaddafi’s alarming messages demanding violent action.63
However, on the morning of Tuesday, 17 April 1984 the British authorities were taken unawares by a new wave of violence. Seventy-five demonstrators were protesting outside the Libyan People’s Bureau over the recent execution of further students in Tripoli who had been critical of Gaddafi, and the police were trying to keep them separate from an angry group of pro-Gaddafi loyalists. At 10.18 a.m. a prolonged burst of automatic fire from two Sterling sub-machine guns came from the windows of the Libyan People’s Bureau, resulting in the death of twenty-five-year-old WPC Yvonne Fletcher. Eleven demonstrators were also injured. A former MI5 officer, Annie Machon, has claimed that GCHQ had advance warning of the incident. Cheltenham was still successfully reading communications between Gaddafi’s office in Tripoli and the People’s Bureau, and one message, intercepted on the day before the shooting, asked loyal Libyans ‘to open fire on the dissidents’. Machon would write:
As a prior warning of a possible attack, it was very useful intelligence or would have been, if it had been handed on in a timely fashion. But it wasn’t as the nine-to-five bureaucrats at GCHQ had gone home for the night. As a result the report did not go to the police or MI5 that day. In the meantime WPC Yvonne Fletcher was fatally shot from the window of the LPB [Libyan People’s Bureau].64
The recent authorised history of MI5 largely confirms this highly controversial claim. What GCHQ had actually intercepted the previous day was a telex sent by staff within the Libyan People’s Bureau to Tripoli, discussing possible means of dealing with the planned demonstrations by exiles and dissidents. One option that they suggested was: ‘To fire on them from within the Bureau.’ In fact this intelligence was not passed to MI5 or the Metropolitan Police Special Branch until the day after the shooting.65 The initial incident was followed by a ten-day siege of the embassy, after which Britain broke off diplomatic relations with Libya. In common with a number of other terrorist incidents in the 1980s and 1990s, GCHQ was criticised and there were internal arguments about how intelligence was circulated. All this underlined the new challenge of dealing with terrorism, which required responses in ‘real time’, something that a Cold War security apparatus was not remotely accustomed to. In the wake of the shooting at the Libyan People’s Bureau, there was a deliberate attempt to develop resources that could work on a twenty-four-hour basis and achieve the rapid response times required by counter-terrorism.66
In March 1986 there was a major naval confrontation between the Americans and President Gaddafi’s forces in the Gulf of Sidra, off the coast of Libya, where the extent of territorial waters was disputed. After US fighters attacked Libyan missile batteries and patrol boats, Gaddafi demanded that his secret services retaliate, and on 4 April Libya organised the terrorist bombing of La Belle discothèque in West Berlin, killing two American servicemen. NSA had intercepted the message from the head of the Libyan secret service ordering terrorist attacks throughout Europe, and newspapers had already revealed that Libyan communications were being read, so President Ronald Reagan decided there was nothing to be lost by using sigint publicly and in some detail to underline the fact that Gaddafi was the culprit. Three days later, Bill Odom was told by Reagan’s CIA chief, Bill Casey, that the President ‘wants to go public with SIGINT on Libyan activity in Berlin – [CIA Deputy Director] R[obert] Gates will work out “text” ’. However, both GCHQ and NSA were horrified that NSA’s reading of Libyan diplomatic traffic was going to be made public.67 Pre
dictably, the Libyans responded by immediately changing all their codes and cyphers, and they also purchased expensive new cypher machines from Crypto AG in Switzerland.68
Reagan’s public use of sigint to blame Gaddafi for the Berlin discothèque bombing was intended to justify a US air strike on Tripoli. Eighteen USAF F-111 bombers took off from RAF Upper Heyford, but were denied overflight rights by France, Italy and Spain, and so were compelled to take a circuitous route to their targets. One of these targets was President Gaddafi’s own compound. He escaped death by minutes because the Prime Minister of Malta warned the Libyans by telephone of the approaching military aircraft. However, Gaddafi’s fifteen-month-old adopted daughter was killed and two of his sons were injured.69 In 1987 the CIA, SIS and the French secret intelligence service assembled a vast mercenary army that pummelled Gaddafi’s forces during the ongoing border war between Libya and Chad. The conflict between Libya and the West flared again in December 1988 with the bombing of Pan Am Flight 103 over Lockerbie in Scotland, although responsibility for this attack remains a matter of dispute.70
Although Bill Odom had not warmed to Peter Marychurch, GCHQ’s Director was an energetic administrator and had notched up some impressive achievements in the late 1980s.71 He was trying to modernise GCHQ, moving away from old-style sigint operations which used rows of people sitting in nissen huts with headphones on. Radio Operators who did the front-line listening now had computer consoles which allowed them to feed the most interesting intelligence directly into a central computer, and were using better recording equipment called ‘Keepnet’ and a new system that allowed them to compare different signals, called ‘Livebait’. Like most GCHQ computers, the local computers – invariably Honeywells – were of American manufacture, so as to be in step with NSA. The terminals used by each operator could hold about a million words, meaning that the product could be word-searched and then distributed electronically, something GCHQ had hankered after for two decades.72
Marychurch’s biggest headache was the perennial issue of budgets, which slowed the recruitment of higher-grade technical staff.73 Money problems had also impacted on Zircon, perhaps Britain’s most sensitive defence project during the mid-1980s. Bill Odom was not disappointed when Andrew Saunders, Britain’s liaison officer within NSA at Fort Meade, confided to him as early as February 1986 that in his personal opinion, as a result of defence cuts, ‘Zircon probably will go.’74 By April 1986 Marychurch had persuaded America’s National Reconnaissance Office to give him further assistance with Zircon. However, it now had an unnerving ‘on–off’ status, and understandably the British Treasury was scheming to kill off this highly secret project.75
Zircon did not remain secret for much longer. In early 1987, to the horror of Whitehall civil servants, the project was exposed by Duncan Campbell, the journalist who almost a decade before had been at the centre of the ‘ABC trial’. For the past ten years his investigative journalism, mostly for the New Statesman magazine, had tracked the British secret state, and he was regarded as a significant problem by the authorities. In November 1985 he had been commissioned by BBC Scotland to make a series of programmes called Secret Society, and had decided to use this to reveal Zircon. However, it was only in the summer of 1986 that he uncovered the biggest secret. Speaking to Robert Sheldon, the Chair of the House of Commons Public Accounts Committee, he discovered that Parliament knew absolutely nothing about the project. The fact that this very large spending item had been hidden from Parliament – a reprise of the previous defence spending scandal over Chevaline – now became the core issue. Meanwhile, GCHQ had got wind of the planned documentary, and on 5 December 1986 there was a hurried meeting between Peter Mary church and the BBC. In early January 1987 Alasdair Milne, the Director General of the BBC, announced that he had banned the programme on grounds of national security.76
On 21 January the High Court granted an injunction against Duncan Campbell. This restrained him from either showing the documentary or revealing any details of its contents. The next day the New Statesman published an article asserting that the real issue was nothing less than the sovereignty of Parliament itself, and that a deception had been perpetrated on the Public Accounts Committee. Campbell tried to have the film shown to MPs in the House of Commons, but was prevented by the intransigent Speaker of the House, Bernard Weatherill.77 Then, over the weekend of 24-25 January the Special Branch raided the offices of the BBC and the New Statesman, together with the homes of Duncan Campbell and several other journalists who had worked with him. There was high drama as television cameras filmed a search team breaking down the front door to Campbell’s London flat.78 The New Statesman’s solicitor was soon contacting everyone mentioned in the programme, including the GCHQ trade unions at Cheltenham, warning them that they might also be raided by the local constabulary.79
Nigel Lawson, then Chancellor of the Exchequer, claims that he had actually killed off Zircon in the autumn of 1986, some months before the Campbell story broke. ‘Well before all this blew up,’ he recounts, ‘I had succeeded in getting the ZIRCON project cancelled on grounds of cost.’ For this reason, he declares rather triumphantly, the satellite ‘did not in any sense leave the ground’.80 In fact, this is by no means the whole story. Whitehall opposition to Zircon was certainly mounting during late 1986, and key defence advisers had lost faith in it.81 However, Bill Odom’s personal daily log, only recently released, makes it very clear that in the spring of 1987 Britain’s political leaders were still completely committed to some form of space-based sigint, and that a variant of the project – still called ‘Zircon’ – was going forward. Indeed, what is remarkable is the strength of Margaret Thatcher’s continued personal commitment. In May 1987 Peter Marychurch visited NSA and personally told Bill Odom: ‘Thatcher says “we will strain every sinew” to get Zircon.’82
What did Marychurch mean by this? By late 1986 the costs of Zircon were threatening to spiral out of control. Therefore, by the summer of 1987 he was exploring the possibility of purchasing a single American-built satellite ‘off the shelf’. However, a single satellite would not give Britain global coverage: the comprehensive collection of sigint would require no fewer than three satellites. By 1988 a more sensible solution had emerged. Britain opted to pay £500 million as a direct subscriber to the American satellite system. Then Foreign Secretary Geoffrey Howe recalls: ‘Beggars can’t be choosers. If you can’t afford a wholly independent operation then you have to put in a share.’ Each of the three latest American sigint satellites cost £500 million, and Britain effectively bought a one third time-share, giving it a guaranteed supply of ‘overhead’ sigint. This not only delivered global coverage, but also a much bigger advantage: quite simply the system worked well, unlike Britain’s ill-fated space adventures.83 Satellite experts suggest that ‘Zircon’, such as it now was, arrived in space on 4 September 1990. A Titan 34D rocket from Cape Canaveral put it in position under the cover of a Skynet 4C launch, and the satellite was positioned over Asia.
In some ways Zircon symbolised the increasingly awkward sigint partnerships of the 1980s, a curious mixture of collaboration and animosity. Together with the Geoffrey Prime affair, the Falklands War and the trade union issue, it underlined the deep transatlantic tensions that now existed in the world of code-breaking. Nevertheless, the new ‘time-share’ relationship went down well in Washington. Brian Tovey’s seemingly upstart bid for GCHQ independence in space had been bought off, and NSA breathed a sigh of relief that another power, albeit a close ally, had not acquired its own space sigint capability. Meanwhile, despite Bill Odom’s bluster about Britain’s failure to play in the big league of sigint powers, NSA’s own budgets were stretched to breaking point in the late 1980s. With the Cold War drawing to a close, many were predicting savage cuts in intelligence budgets, so GCHQ’s monetary contributions to the secret satellite programme were doubly welcome. Accordingly, the somewhat battered GCHQ-NSA relationship marched on, out of the Cold War and into a new era of ‘hot peace’.
84
AFTER 1989
GCHQ GOES GLOBAL
23
From Cold War to Hot Peace – The Gulf War and Bosnia
We had the place ‘swept’ regularly, but it made no difference. That building…was built around bugs.
Captain Milos Stankovic on the UN
Headquarters in Sarajevo1
Intelligence organisations everywhere failed to predict the end of the Cold War. GCHQ and NSA certainly did not foresee it, nor did Britain’s Joint Intelligence Committee.2 The changes that swept across the Warsaw Pact countries in 1989 also took Communist leaders by surprise, despite the intense surveillance conducted within their own societies. The exact moment at which the Eastern Bloc collapsed was hard to pinpoint, because ultimately it amounted to a failure of self-belief. Once the Communist leadership was unwilling to shoot its own people, the game was up. The closest anyone from Britain had come to a prediction of the end of the Cold War was in the writings of the journalist Timothy Garton Ash, reporting on the free trade union ‘Solidarity’ in Poland in the early 1980s. Having witnessed the mass defiance of the Soviets by trade unionists in the Polish shipyards, he had forecast that Moscow’s empire might well crumble in short order – and he was quite right.3
Bizarrely, the end of the Cold War was not accompanied by an onrush of new threats, but by the surprise appearance of an old threat. On 2 August 1990, Iraq launched a surprise attack against its neighbour Kuwait. This was arguably an event that GCHQ had been awaiting for three decades. Iraq had long professed claims to areas of Kuwaiti territory; meanwhile Britain had sought to deter an Iraqi attack because of its friendship with the Kuwaiti royal family. Back in January 1965, shortly after Joe Hooper took over from Clive Loehnis as Director of GCHQ, one of his first tasks was to discuss the future of a small GCHQ team in Kuwait whose brief was to constantly sweep the airwaves for signs of an Iraqi attack. ‘While the team was a reasonable insurance factor in providing timely warning of an external attack,’ he explained to the JIC, ‘it could do little or nothing to give Sigint warning of internal unrest or a coup.’ Hooper was pressed for resources, and wondered whether the team’s task could be carried out by the bigger sigint stations on Cyprus. However, GCHQ did not want to suffer the ‘loss of tactical Sigint information on the Basra brigade’, the key unit of the Iraqi Army. This could only be collected at short range, so it decided the team should stay in place.4 Sigint against Iraq did not operate in isolation. There was also regular photographic intelligence from a Canberra photo reconnaissance aircraft flying along the edge of the Iraqi frontier to detect an Iraqi military build-up. In an emergency, typically a warning from SIS or GCHQ, British diplomats in the Persian Gulf could order high-level photographic flights over the Basra area of southern Iraq, penetrating up to fifty-five miles inside the border, to confirm or disprove indications of a coming attack.5
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