The Defence of the Realm (108 page)

By far the most productive of the Line X agents reactivated after FOOT was the aeronautical engineer, codenamed ACE, who had first come to the Security Service's attention in October 1964 as a result of his contacts with a Soviet delegation visiting Farnborough Air Show. Various other contacts between ACE and Soviet officials (not an uncommon occurrence in the aircraft and airline businesses) were recorded over the next four years, but no evidence emerged that he was a Soviet agent and Service interest in him lapsed in 1968.
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Late in 1981 a French agent in the KGB codenamed FAREWELL revealed that the London residency was running a Line X agent, codenamed ACE, whose work was highly praised in Moscow, especially by the Soviet Aviation Ministry.
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But no connection was made with ACE, and FAREWELL's information was too general to provide a significant intelligence lead. ACE's career as a KGB agent came to an end with his death in 1982. ACE's identity was not discovered until after Mitrokhin's defection a decade later. According to Mitrokhin's notes on his multi-volume KGB file, ACE was Ivor Gregory, a senior aircraft engineer who had been recruited for money by Line X of the London residency in 1967.
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His ‘product file' alone consisted of about 300 volumes, each of about 300 pages. Most of these 90,000 pages comprised technical documentation on new aircraft (among them Concorde, the Super VC-10 and Lockheed L-1011), aero-engines (including Rolls-Royce,
Olympus-593, RB-211 and SPEY-505) and flight simulators. ACE's material on the flight simulators for the Lockheed L-1011 and Boeing 747 was believed to be the basis for a new generation of Soviet equivalents. ACE also recruited under false flag (probably that of a rival company) an aero-engines specialist codenamed SWEDE.
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The Security Service investigation of Gregory was hampered by the fact that he had been dead for ten years by the time it received Mitrokhin's notes on his KGB file. An initial assessment in 1992 concluded: ‘He must have saved the Soviets millions of roubles in research and development, not least in the field of flight simulators. His motivation it seems was financial.'
⁹⁵
There is no evidence in the files, however, that the Service attempted to identify and talk to ACE's former employers to establish exactly what he did have access to – probably because the case was an old one and the Service had many more pressing current priorities. Unsurprisingly, therefore, subsequent assessments of ACE's significance fluctuated. A 1996 assessment suggested that Gregory had passed information on commercial aviation only to Russians with whom he had ‘legitimate dealings' and was not involved in espionage. The most recent assessment in 2003 concluded, on the contrary, that the suggestion that Gregory ‘was an unwitting tool of the Russians is completely unjustified . . . He was quite clearly aware of what he was doing and was guilty of knowingly working for a foreign power.' There is no evidence that Gregory had access to classified information. But, as the 2003 assessment concluded, ‘this need not have prevented him causing significant economic damage.'
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The intelligence from KGB files provided by Vasili Mitrokhin in 1992 suggests that there were fewer new British Line X recruits during the 1970s than in the decade before Operation FOOT. The most important new recruit was, almost certainly, Michael John Smith (codenamed BORG), a Communist electronics engineer. The secretary of the Surrey Communist Party in the early 1970s, Richard Geldart, later described Smith as an ‘out-and-out Tankie' – a hardline supporter of the crushing of the Prague Spring by Soviet tanks in 1968: ‘Not to put too fine a point on it, he was the total nerd. There was socialising going on, but he was not part of it.'
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A Line X officer at the London residency, Viktor Alekseyevich Oshchenko, made initial contact with Smith in a pub near Smith's flat at Kingston-on-Thames in May 1975. On instructions from Oshchenko, Smith left the Communist Party, ceased trade union activity, became a regular reader of the
Daily Telegraph
, joined a local tennis club and – as his KGB file quaintly puts it – ‘endeavoured to display his loyalty to the authorities'.
⁹⁸

Michael John Smith first came to the attention of the Security Service in
November 1971 at the age of twenty-three, when surveillance of the CPGB revealed a membership application from a ‘Michael Smith' in Birmingham. Both the Service and the local police, however, failed to identify him. In January 1973 the Service received a report that an engineer called Michael John Smith with an address in Chessington had attended a district congress of the CPGB in Surrey. Because the surname was so common and the address was different, no connection was made with the Birmingham Smith. By a remarkable coincidence, the Surrey Communist Party contained another Michael John Smith and the 1973 report, like some subsequent reports, was wrongly placed on his file. In July 1976 the Michael John Smith recruited by Oshchenko began work as a test engineer in the Quality Assurance department of EMI Defence Electronics, a job which required a normal vetting (NV) security clearance giving him access to material classified up to secret. Since C Branch, because of the filing error, had no knowledge of Smith's Communist background, he was given the clearance. In the spring of 1977 the Service's earlier filing error was corrected when it was discovered that the Smith working for EMI had been active in the Surrey District Communist Party from 1973 to 1976. The C2 adviser to EMI, a List X firm (that is, working on classified government contracts), did not, however, raise the case with them until February 1978 – a delay understandably criticized in a later Security Commission report. After a series of discussions between the Service, EMI and MoD, Smith's security clearance was revoked and he was moved to unclassified work.
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One reason for C2's lack of urgency was almost certainly, as a later Director K acknowledged, ‘the perception in K Branch that by the 1970s the KGB did not recruit members of the CPGB as agents . . . I remember absorbing it myself in my early years in the Branch.'
¹⁰⁰
Earlier in the Cold War, following well-publicized cases on both sides of the Atlantic in which Communists had either conducted or assisted Soviet espionage, the Centre had become much more wary about recruiting Party members. Lyalin had reported to the Security Service after his defection: ‘The KGB are not supposed to cultivate or recruit known Communists. If after recruiting an agent they discovered that he was a Communist, they would try to modify his behaviour as far as the outside world was concerned and renounce his Communist views.'
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But though Directorate K did not realize it for over a decade, Lyalin had been far too categorical. As in the case of Smith, the Centre was quite capable of making exceptions.
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For a year before Smith lost his security clearance in 1978, he had been working on the top-secret Project XN-715, developing and testing radar fuses for Britain's free-fall nuclear bomb.
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The KGB passed the documents
on Project XN-715 provided by Smith to N. V. Serebrov and other nuclear weapons specialists at a secret Soviet military research institute codenamed Enterprise G-4598, who succeeded in building a replica of the British radar fuse. Smith's intelligence, however, seemed too good to be true. Serebrov and his colleagues were puzzled as to how Smith had been able to obtain the radio frequency on which the detonator was to operate. This information, they believed, was so sensitive that it should not have appeared even in the top-secret documents on the design and operation of the detonator to which Smith had access. Armed with a knowledge of the radio frequency, Soviet forces would be able to create radio interference which would prevent the detonator from operating. The Centre, like the Soviet nuclear weapons specialists, also seems to have been suspicious of the ease and speed with which an engineer with a previous reputation as a staunchly pro-Soviet Communist had been able to gain access to one of Britain's most highly classified nuclear secrets so soon after going through the motions of leaving the Party and switching from the
Morning Star
to the
Daily Telegraph
. Its suspicions that Smith's intelligence on the radar fuse might have been a sophisticated deception seem to have strengthened when he told his controller in 1978 that he had lost his security clearance and, for the time being, could no longer provide classified information.
¹⁰⁴

To try to resolve its doubts the Centre devised a series of tests to check Smith's reliability. The most detailed, personally approved by the KGB Chairman, Yuri Andropov, and termed in KGB jargon ‘a psychophysiological test using a non-contact polygraph', was conducted by KGB officers in Vienna in August 1979. Smith was asked more than 120 questions (all ‘yes' or ‘no') and his replies secretly recorded. Subsequent analysis of the recording reassured the Centre that he was not, as it had thought possible, engaged in a grand deception orchestrated by British intelligence. Though Smith had been led to suppose that the ‘psycho-physiological test' was a routine formality, it had never before been used by the KGB outside the Soviet Union. The Centre was so pleased with its success that it decided to use the same method to check some other agents.
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The excitement of working for the KGB seems to have appealed to Smith. A hint of the exotic began to enliven a hitherto drab lifestyle. In 1979 he got married, took up flamenco dancing, began cooking Spanish and Mexican cuisine, and gave dinner parties at which he served his own home-made wine.
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Smith also began a campaign to recover his security clearance at EMI, even drafting a personal appeal to Mrs Thatcher, to whom he complained, ‘There is a cloud over me which I cannot dispel.' He had made little progress in dispelling the cloud by the time he was made redundant in
1985. No doubt because of his lack of access to classified material, the KGB had broken contact with him at least a year previously, though it was later to recontact him.
¹⁰⁷
In November 1993 Smith was sentenced to twenty-five years' imprisonment (reduced to twenty on appeal) for collecting and communicating material in the period 1990–92 while working for GEC ‘for a purpose prejudicial to the safety or interests of the state'.
¹⁰⁸

Despite Line X success in running Michael John Smith and ACE, Operation FOOT had turned the United Kingdom into a hard target for Soviet intelligence. It remained so for the rest of the Cold War. Material smuggled out of KGB archives by Vasili Mitrokhin later revealed that, because of the difficult operating conditions in London, at least six (probably more) British Line X agents either met their case officers outside the UK or were controlled by residencies elsewhere in Europe.
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Operating conditions were also made more difficult by the C Branch advisers to List X firms. The uncharacteristic error made in the Michael Smith case was an exception which proved the rule – evidence of how important protective security was as a defence against Soviet S&T operations. There was a striking contrast with the United States, where failure to limit the size of KGB and GRU residencies combined with widespread weaknesses in US defence contractors' protective security to produce a haemorrhage of S&T to the Soviet Union. By 1975 FCD Directorate T had seventy-seven agents and forty-two confidential contacts working against American S&T targets both at home and abroad, some of them inside leading defence contractors such as IBM, McDonnell Douglas and TRW. Christopher Boyce, a TRW employee who passed the operating manual of the latest Rhyolite spy satellite to the KGB via his drug-addict friend Andrew Daulton Lee, later testified to a Senate committee that security was so lax in TRW that he and his colleagues ‘regularly partied and boozed it up during working hours within the “black vault”' housing the Rhyolite project. Bacardi, he reported, was kept behind the cipher machine and a cipher-destruction device used as a blender to mix banana daiquiris and Mai Tais.
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Boyce also claimed that one employee successfully gained entrance to top-secret TRW offices with a security pass containing the photograph of a monkey superimposed on his own.
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Though such extreme lapses in protective security are unlikely to have been common, Soviet intelligence collected more S&T from the United States than from the rest of the world put together. The Pentagon estimated in the early 1980s that probably 70 per cent of all current Warsaw Pact weapons systems were based in varying degrees on Western – mostly US – technology.
Both
sides in the Cold War – the Warsaw Pact as well as NATO – depended on American know-how.
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2

The Heath Government and Subversion

Edward Heath did not take to Sir Martin Furnival Jones, who continued as director general during his first two years as prime minister. Like Macmillan during the Hollis era, Heath compared the DG unfavourably with the far more clubbable Sir Dick White, whom he had first met while lord privy seal at the Foreign Office during the Blake case in 1961:

Almost a decade later, I was again much impressed by [White, then Intelligence Co-ordinator]. The head of MI5 was not so convincing. Having described his work, he told me that he had a particular point to make. His people had heard that a church organist was being sent from Poland to London to give a recital, to which I would be invited, in the hope that he could have an interview in order to obtain the latest political information from me. As I had never heard of the organist, nobody else was able to identify him and there was no evidence whatsoever of any such organ recital in London, this kind of nonsense hardly seemed to represent a fruitful way of occupying either my time or that of MI5.
¹

Heath's recollection may well have been garbled. There appears to be no record in Security Service files of any warning to the Prime Minister about a Polish organist's visit to London.