The Defence of the Realm (116 page)

Despite the bombing campaigns in Britain and Northern Ireland, a secret back-channel had been established to the Provisional leadership which was to play a major role in later ceasefire and peace talks involving the Security Service as well as SIS. The main intermediary (the ‘Contact') through whom clandestine talks with the Provisionals were intermittently conducted was a Derry businessman, Brendan Duddy, who knew Ruairí Ó Brádaigh, the president of Sinn Fein.
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Duddy said later that his ‘mission' of ‘replacing violence with dialogue' was driven by his ‘Christian faith': ‘I was completely opposed to the bombs, the blood and the bullets on all sides.'
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Contacts with the Provisionals were among Whitehall's most tightly held secrets. When Harold Wilson returned to power in March 1974, he instructed that only he and the Secretary of State for Northern Ireland, Merlyn Rees, should be kept informed of them.
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In January 1975 Duddy helped to arrange direct talks between NIO officials and PIRA representatives. Intelligence briefings by the DCI and others to Rees identified two other initiatives which helped to make the talks possible:

First, as a direct result of a meeting at Feakle in the Republic with some Northern Protestant clergymen, the Provisionals declared a temporary ceasefire over Christmas 1974. They indicated to the clergymen that this was to give us a chance to open negotiations for an indefinite ‘truce'. Secondly, David O'Connell [Dáithi Ó Conaill], then the Provisional IRA Chief of Staff, made a similar proposal in a letter to the Prime Minister delivered through the intermediary of Dr John O'Connell, a Labour Deputy in the Dail.
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On 9 February the Provisionals announced an indefinite ceasefire. Rees concluded, chiefly on the basis of his intelligence briefings, that PIRA's motives, though not known with certainty, were probably, in declining order of importance:

a)   A belief that the British Government and people were so fed up with Ireland that all they were looking for was an honourable way out;

b)   An awareness that a number of incidents, notably the Birmingham bombs, had eroded some support from the Provisionals in the South. This meant there was a need to take stock and show a responsible face to the Catholic community;

c)   An element of war weariness;

d)   A desire to re-group and re-equip.
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Even if, as proved to be the case, the ceasefire did not prove to be indefinite, in addition to saving lives it served, in Rees's view, ‘two vital short-term objectives'. First, it provided a period of peace in which elections could be held on 1 May 1975 for a Constitutional Convention at which it was
hoped that all parties, including those linked to paramilitaries, would debate the future of Northern Ireland. Though Sinn Fein boycotted the elections and the Convention achieved little, it was able to meet during a period of comparative peace. Rees's second objective during the truce, also successfully accomplished, was to end internment without trial in Northern Ireland – which would probably have been politically impossible in the middle of a major PIRA bombing campaign.
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By the time the PIRA truce began, the early confusion over the role of the Director and Co-ordinator of Intelligence had been largely resolved. Though the DCI never directed intelligence in Northern Ireland, his liaison and advisory functions made him nonetheless an influential figure. He became SOSNI's chief intelligence adviser with regular access to him, ran an office which produced daily intelligence summaries, and acted as the channel for passing intelligence on Northern Ireland to the JIC, travelling every fortnight to London to brief the Assessment Staff. The DG, Sir Michael Hanley, also showed increased interest in intelligence on PIRA. The desk officer responsible for monitoring the threat of renewed Republican terrorism during the 1975 ceasefire saw Hanley at 9 a.m. every Thursday – partly to ensure that the DG was fully briefed in case he was summoned to the Home Office or, occasionally, to Number Ten before the weekly Thursday cabinet meetings.
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On instructions from the Prime Minister, however, the DG did not brief the Home Secretary, Roy Jenkins, on the talks with the Provisionals which continued during the truce. Harold Wilson insisted, as before, ignoring the 1952 Maxwell Fyfe Directive (which made MI5 directly responsible to the Home Secretary), that only he and the Secretary of State for Northern Ireland should be briefed on them.
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On occasion the Prime Minister took a personal, somewhat conspiratorial interest in intelligence on PIRA. When the DCI reported that, unusually, he had obtained a copy of an important PIRA document, he found himself summoned, not to Number Ten (which Wilson had mistakenly come to believe was bugged),
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but to Chequers where, to his surprise, the door was opened by the Prime Minister himself. Wilson asked him if he thought the document was genuine. The DCI said it was. Later in Whitehall he found himself criticized for having bypassed the JIC to deal directly with the Prime Minister.
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4

The ‘Wilson Plot'

Harold Wilson returned to power in February 1974 after a narrow election victory which left Labour only four seats ahead of the Conservatives, with no overall majority. During his preceding four years in opposition, some of the business friends Wilson had made while involved in East–West trade during the 1950s attracted the unfavourable attention of the Security Service. The friend who gave the Service most cause for concern was the Lithuanian-born Joseph (later Lord) Kagan, whose company Kagan Textiles made the Gannex macs which became one of Wilson's trademarks. While chancellor of the exchequer in the later 1960s, Roy Jenkins had once been ‘practically run over' by a sports car as he was walking along Downing Street to his official residence at Number Eleven. A stocky figure emerged from the car and hurried to the door of Number Ten which was promptly opened for him. Finding the figure faintly familiar but unable to identify him, Jenkins asked the policeman outside Number Ten ‘Who was that?' ‘Oh, don't you know, sir?' was the reply. ‘That's Mr Kagan. He's
very
well known here.'
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In August 1970 a Lithuanian officer in the KGB residency, Richardas Vaygauskas, was reported to have congratulated Kagan on his knighthood (awarded on Wilson's recommendation), claiming to be ‘so proud' that Britain had at last a Lithuanian knight.
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Kagan returned the compliment by inviting Vaygauskas to his investiture at Buckingham Palace, possibly the first ever attended by a KGB officer.
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The KGB defector Oleg Lyalin
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confirmed that Kagan was being actively cultivated by Vaygauskas, who in September 1971 was among the Soviet intelligence officers expelled from Britain in Operation FOOT. When interviewed by a K5 (counter-espionage operations) officer two months later, Kagan said that Vaygauskas had visited his flat almost every week since being posted to London in 1964, and that he had introduced Vaygauskas to all his friends (including a number of MPs), not realizing that he was a KGB officer.
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At a subsequent meeting with Tony Brooks (K5B/1), Kagan admitted that Vaygauskas had
asked him to use his influence with leaders of the Jewish community in Britain to call off demonstrations and the media campaign against trials of Russian Jews in Leningrad. Kagan had agreed to do so, having been convinced by Vaygauskas that ‘If the outcry in the Western world were stopped the sentences would be light and further action against Jews would probably be stopped.' Brooks noted after the meeting:

I thanked Kagan for telling me this as it was a first class example of the KGB exploiting him as an agent of influence, because surely he was not so naive as to believe that calling off the legitimate protest in the West would have any effect on the fate of Jews in the USSR . . . Kagan was by now subdued and very worried and he quietly asked me whether what he had done was indictable. I said not in this country . . .
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Kagan also admitted that, if Vaygauskas had been collecting ‘dirt' on people in public life, he would have provided him with a great deal: ‘You know what it is in our sort of world, we gossip a lot and tend to make and destroy people's reputations.' Among the gossip was Harold Wilson's alleged affair with a female member of staff (whom he did not name). Vaygauskas would sometimes interrupt his evening chats with Kagan in order to go and see his ‘ambassador' (in reality, almost certainly the KGB resident) before returning with ‘a shopping list of questions'.
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In October 1972, Wilson himself requested a meeting with the Service to discuss information given him by Kagan. He was visited in his Commons office not by the DG or DDG (as he would have been had he still been prime minister), but by K5. Though Kagan's information was of little significance, K5 used the meeting to brief Wilson on Kagan's contacts with Vaygauskas:

It seemed clear to us that Kagan was being used unconsciously by Vaygauskas to supply items of news or scandal and as a medium for obtaining access to the famous. Kagan now accepts this.

Here Wilson interrupted to say that Kagan has two main faults – he cannot stop gossiping or chasing women . . . Wilson said that Kagan was a very sharp Jewish businessman and that he wished that he would stick to business.

. . . Wilson asked if it would help us in any way if he was to have a word with Kagan and warn him about talking to the Russians. I said that I thought it might be a good thing to do because nobody's secrets were safe when they were in the hands of a man as garrulous as Kagan.
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One of K5's main impressions from the meeting was ‘Wilson's high regard for this Service which he has mentioned on a number of occasions'. This impression, however, may have been somewhat misleading. Presumably
disconcerted by the discovery that a friend who had been one of the most regular visitors to Number Ten throughout his previous six years as prime minister had been passing on gossip about the Labour government to the KGB, Wilson was anxious to show that he himself had a proper regard for national security. He told K5 that, while at Number Ten, he had asked Security Service technicians to investigate the television set because of his concern that it could be used for ‘technical attack' by a hostile intelligence service. ‘This', noted K5, ‘enabled me to mention the case of . . . a Lithuanian employed in the Electrical Dept. in the House of Commons who had been introduced to Vaygauskas by Kagan. Wilson seemed startled by this information but I assured him that it was under investigation.' Wilson, K5 concluded, ‘is obviously under no illusions about Kagan's business honesty'.
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Immediately after K5's meeting with Wilson, Hanley discussed the Kagan case with the PUS at the Home Office, Sir Philip Allen. Both were baffled as to why, despite being well aware of Kagan's dishonesty and indiscretion, Wilson continued to see him regularly.
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Director KX (John Allen) concluded that Kagan was: ‘clearly a target of the highest importance for the K.G.B. because of his close association with Mr Wilson and other Labour Party leaders. I do not believe Kagan has been, or is now likely to become, a conscious Soviet agent but I am sure he has been a valuable source of intelligence.'
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Why Wilson was attracted to such dubious characters still remains something of a mystery. His official biographer, Philip Ziegler, concludes that ‘He enjoyed the company of flamboyant self-made men; and where he would have been ill at ease in the company of a traditional backwoods Tory peer, a swashbuckling adventurer, especially if Jewish, appealed to him.'
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Wilson continued to enjoy their company even when, as with Kagan, he was ‘under no illusions about [their] business honesty'. When Wilson's press officer, Joe Haines, surveyed the Prime Minister's personal guests at the Guildhall ceremony on 12 December 1975 to confer on him the Freedom of the City of London, he ‘looked around to see if Inspector Knacker of the Yard was keeping the ceremony under observation'.
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Even after Kagan was sentenced to ten months in jail for fraud in 1980, Wilson's friendship with him continued. On at least one occasion after Kagan emerged from jail, the two men jointly entertained a member of the Soviet Trade Delegation at the House of Lords.
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As late as 1986 two major British embassies complained to the FCO Security Department of Wilson's personal involvement with another company which had ‘a dodgy reputation', was notorious for ‘sharp practice' and had a chairman whose ‘disgraceful' behaviour had caused diplomatic problems.
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Apart from Kagan, the business friend of Wilson of most concern to the Security Service during his final term as prime minister was Rudy Sternberg who, like Kagan, had made a fortune out of trade with the Soviet Bloc and had received a knighthood in 1970 on Wilson's recommendation. In the Service's view, Sternberg had made his money ‘by methods which seem frequently to have been on the fringe of respectability'.
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In 1961, he led a committee otherwise composed of MPs and peers to the Leipzig Trade Fair, to the great satisfaction of the East German Communist regime, which was not recognized in the West. As Sternberg's entry in the
Dictionary of National Biography
records: ‘It was a role he clearly relished and he drove around Leipzig in a Rolls-Royce flying the Union Jack. Whether or not he intended it, the delegation's presence provided a valuable propaganda coup for a regime craving international recognition and acutely embarrassed the British government.'
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In May 1974 Robert Armstrong, then Wilson's principal private secretary, asked the DG, Sir Michael Hanley, whether there was ‘anything we ought to know' about Sternberg, who was currently ‘seeking to bend the Prime Minister's ear' – apparently ‘to seek accreditation as an unpaid, unofficial, confidential and irregular liaison between the Prime Minister and the top leadership of the Soviet Government/Communist Party and other Eastern European Governments/Parties'.
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Hanley replied that, though there was no evidence that Sternberg had been recruited as an agent: