The Defence of the Realm (37 page)

¹
Illegals were deep-cover intelligence officers or agents operating under false name and nationality.

²
The first Soviet intelligence agency, the Cheka, founded six weeks after the Bolshevik Revolution, subsequently became the GPU (1922), OGPU (1923), NKVD (1934), NKGB (February 1941), NKVD again (July 1941), NKGB again (1943), MGB (1946), MVD (1953) and finally the KGB (1954). For further details, see Andrew and Mitrokhin, Mitrokhin Archive, p. xi.

3

British Fascism and the Nazi Threat

In the aftermath of the First World War, the newly established German Weimar Republic ranked much lower in MI5's priorities than Soviet Russia and the Communist International. With an army limited by the Versailles Treaty to 100,000 men, a demilitarized Rhineland, chronic political instability and raging inflation, Weimar posed no current threat to British security. Versailles also forbade Germany to engage in espionage. The main interwar German intelligence agency, the Abwehr (‘defence'), was founded in 1920 as a counter-espionage service. Since other countries continued to spy on Germany, the Abwehr reasonably regarded the prohibition on German espionage, which it later disregarded during the Nazi era, as hypocritical.
¹
In Britain there were regular denunciations in the Commons during the 1920s of the activities of foreign, mostly Soviet, intelligence services, but successive governments upheld the convention (not abandoned until 1992) that there should be no mention whatever of SIS. In 1927 Arthur Ponsonby, former junior Foreign Office minister during the first MacDonald government, attacked ‘the hypocrisy which pretends that we are so pure': ‘The Secret Service [SIS] is supposed to be something we do not talk about in this House . . . I do not see why I should not talk about it. It is about time we did say something about the Secret Service.'
²
Such parliamentary outbursts were very rare.

Though German espionage posed little threat after the First World War, MI5 had little doubt that, in any future war, it would play a major role. In the early 1920s the former head of the military Nachrichtendienst, Walter Nicolai, publicly defended the wartime achievements of German intelligence, arguing – like many other extremists in the Weimar Republic – that Germany had been ‘betrayed' but not defeated in 1918.
³
He continued to insist that Germany's recovery as a great power would require it to defy Versailles and set up a strong peacetime intelligence service, which would be vital in time of war.
⁴
MI5's thinking on German intelligence was also strongly influenced by captured German war documents and
interviews with POWs, which formed the basis for a remarkable report in 1922 by Kell's deputy, Holt-Wilson. The experience of ‘total' war from 1914 to 1918, argued Holt-Wilson, had shown that for the first time states were able to mobilize all their resources against their enemies. In peacetime also authoritarian states would henceforth be able to deploy a much wider range of covert resources to undermine their opponents.
⁵

There is still no detailed history of the illicit resumption of German espionage under the Weimar Republic.
⁶
Despite its chronic lack of resources in the 1920s, MI5 did, however, discover some of the subterfuges used by Weimar to circumvent the ban on foreign intelligence-gathering. Elements of the disbanded intelligence services of the Kaiser's Germany – the military Nachrichtendienst and the naval Nachrichten-Abteilung – were subsumed into official German commercial organizations, notably the Deutsche Überseedienst (German Overseas Service), where they continued to function as unofficial espionage agencies.
⁷
MI5's main leads to German espionage in the 1920s and early 1930s seem to have come from SIS. By 1922 SIS had a source in the Deutsche Überseedienst, codenamed A.14, who claimed to be responsible for paying its agents. A.14 stated that eighty-three full-time German ‘organizing agents' were operating in Britain in 1922, with 188 part-time agents. He provided details of nine of the most important agents in Britain, some of whom were identified by MI5.
⁸
However, in 1923 SIS assessed A.14 as unreliable, ‘self-glorifying' and suffering from ‘acute megalomania', and broke contact with him.
⁹
A few years later SIS achieved a far more successful penetration of the Deutsche Überseedienst by recruiting a translator and administrative assistant who, it told MI5, was one of its ‘most trusted employees'. In 1927 the agent provided SIS with a list of more than seventy individuals involved with German espionage in Britain.
¹⁰
MI5 informed SIS, probably with some pride, that over half the seventy names on the list were already known to it.
¹¹
Unfortunately, MI5 records on subsequent surveillance of the Überseedienst espionage network do not survive. In 1931 SIS recruited another ‘extremely well placed source' (about whose identity it gave few clues to the Security Service) who supplied copies of questionnaires detailing German naval and military intelligence requirements on scientific and technical developments in British defence industry: among them aircraft construction; river mines; listening apparatus; echo sound engineering; anti-aircraft armaments; torpedoes; and the Vickers cemented steel works.
¹²
MI5 failed, however, to identify the German naval intelligence network, the innocuously named Etappe Dienst (Zone Service), which operated in Britain and around the world during the 1920s and the 1930s, using members of
German steamship companies and other businesses to collect a wide range of intelligence (with, at least in Britain, probably only moderate success).
¹³
Like Germany's wartime agents, those detected between the wars were not high-flyers and did not begin to compare in quality with the best of those recruited by Soviet intelligence.

Until 1933, MI5 paid ‘practically no attention' to Nazism – nor did Whitehall expect that it should.
¹⁴
The rise to power of the forty-three-yearold fanatic Adolf Hitler as chancellor of a coalition government on 30 January 1933 (in retrospect one of the turning points of modern history) rang few alarm bells either in the Security Service or in most of Whitehall. Next day
The Times
commented: ‘That Herr Hitler, who leads the strongest party in the Reichstag and obtained almost one third of the more than 35 million votes in the last election, should be given the chance of showing that he is something more than an orator and an agitator was always desirable . . .'
¹⁵
The Hitler regime first showed itself in its true colours after the burning of the Reichstag on 27 February by a former Dutch Communist, Marinus van der Lubbe. Though van der Lubbe almost certainly acted alone, the entire Nazi leadership and many others convinced themselves that the fire had been intended as the signal for a Communist insurrection. Hermann Göring, then Prussian Interior Minister and police chief, issued a press statement claiming that documents seized during a police raid on German Communist Party (KPD) headquarters a few days earlier contained plans (which were never published) for attacks on public buildings and the assassination of leading politicians. An emergency decree ‘For the Protection of People and State' suspended indefinitely the personal liberties enshrined in the Weimar constitution, among them freedom of speech, of association and of the press. A brutal round-up followed of Communists, Social Democrats, trade unionists and left-wing intellectuals, who were dragged into the cellars of local SA and SS units, brutally beaten and sometimes tortured. An election victory on 5 March gave Hitler and his nationalist allies the majority he needed (once Communist deputies had been excluded) to establish his dictatorship. Hitler's biographer Ian Kershaw concludes that, within Germany, ‘The violence and repression were widely popular.'
¹⁶

Even in Britain, except on the left, protests at Nazi brutality were relatively muted.
The Times
leader-writer commented on 22 March: ‘However much foreign friends of the country may deplore the cruelties inflicted by German upon German . . . all that is primarily a matter for Germany herself . . . In all of this there is nothing yet to indicate that the new Chancellor intends to be immoderate in his foreign policy.'
¹⁷
Hitler in fact
intended to be more immoderate in his foreign policy than any other European of the twentieth century, though he no longer referred publicly to the huge ambitions for ‘living space' in Eastern Europe he had set out in
Mein Kampf.
In March 1933, however, the Security Service was no more alarmed than
The Times.
Its main immediate response to Hitler's rise to power was to accept, with no visible soul-searching, an invitation from Berlin to discuss the haul of material on Comintern operations captured during the raid on KPD headquarters.
¹⁸
On 22 March the SS opened its first, infamous concentration camp at a disused powder-mill in a suburb of Dachau, about 12 miles from Munich. A week later Guy Liddell, a fluent German-speaker, arrived in Berlin ‘to establish contact with the German Political Police' and seek access to the Comintern documents. SIS volunteered to pay half the expenses of Liddell's visit as well as providing assistance from the head of its Berlin station, Frank Foley.
¹⁹

Liddell's host, during his ten days in Berlin, was Hitler's Harvardeducated foreign-press liaison officer, Ernst ‘Putzi' Hanfstaengel, whom Liddell found ‘on the whole an extremely likeable person' but ‘quite unbalanced' about both Jews and Communists: ‘He is under the erroneous impression that Communism is a movement controlled by the Jews.' Liddell was deeply sceptical about Nazi claims that, thanks to tough action by the new regime, ‘a serious Communist outbreak had just been averted':

In fact all our evidence goes to show that, although the German Communist Party may have contemplated a peaceful street demonstration which might have provoked violent counter-demonstrations by the Nazis, Moscow had issued definite instructions that no overt act was to be committed which could in any way lead to the wholesale repression of the Party.

Liddell was equally unconvinced by ‘a map which purported to show that International Jewry was being controlled from London', and took an instant dislike to the thirty-three-year-old head of the political police (soon to become the Gestapo), Rudolf Diels:
²⁰

His face is scarred from the sword duels of his student days. His jet black hair, slit eyes and sallow complexion give him a rather Chinese appearance. Although he had an unpleasant personality he was extremely polite and later when he came round on a tour of inspection gave orders to all present that I was to be given every possible facility.

The few documents from KPD headquarters seen by Liddell, however, were deeply disappointing: ‘Most of the raids were carried out by the Sturm Abteilung [SA], who just threw the documents into lorries and then
dumped them in disorder in some large rooms.' Ironically therefore Liddell concentrated instead on records of a Soviet front organization, the League Against Imperialism (LAI), which had been captured during a police raid over a year before Hitler came to power and, unlike those seized from KPD headquarters, had been carefully filed away. Liddell found further evidence in these files both of Soviet funding for the LAI and of Comintern instructions to Indian Communists.
²¹

Liddell left Berlin with no illusions about the brutality of the Nazi regime. ‘A number of Jews, Communists and even Social Democrats', he reported, ‘have undoubtedly been submitted to every kind of outrage and this was still going on at the time of my departure.' But Liddell wrongly believed that the current brutality was likely to prove a passing phase, and that the Comintern remained a more serious problem than the Nazi regime:

In their present mood, the German police are extremely ready to help us in any way they can. It is, however, essential, that constant personal contact should be maintained . . . so that when the present rather hysterical atmosphere of sentiment and brutality dies down, the personal relations established will outweigh any forms of bureaucracy which would normally place restrictions on a free interchange of information.

The most disturbing part of Liddell's report on his visit to Berlin is a prejudiced appendix on ‘The Anti-Jewish Movement' which, while dismissing Nazi anti-Semitic conspiracy theories, claimed that there was a serious basis for claims that official corruption during the Weimar Republic was due chiefly to the Jews:

There have undoubtedly been some very serious cases of corruption in Government institutions where the Jews had a firm foothold. For the last ten years it has been extremely noticeable that access to the chief of any department was only possible through the intermediary of a Jew. It was the Jew who did most of the talking and in whose hands the working out of any scheme was ultimately left.
²²

Liddell's denunciation of German-Jewish corruption did not derive from a more general anti-Semitism. It was at his proposal that Victor Rothschild was later invited to join the wartime Security Service.
²³
His memorandum was none the less the lowest point in a distinguished career.

The first Security Service officer to grasp the seriousness of the Nazi threat was John ‘Jack' Curry, who joined B Branch in 1934 after a quarter of a century in the Indian police.
²⁴
Curry was also the first B Branch officer to pay serious attention to the British Union of Fascists (BUF), founded in 1932 by the political maverick, fencing champion and former Labour
minister Sir Oswald Mosley, who modelled the BUF black-shirt uniform on his fencing tunic. Curry joined Mosley's January Club, led by two former Indian army officers, which organized dinner parties for those thought likely to be receptive to Fascist ideas and was believed to be targeting other retired officers from the armed services. After a series of tedious dinners, Curry concluded that the Club had little appeal to former servicemen and was not worth further investigation.
²⁵