Spying Through a Glass Darkly

American Espionage against the Soviet Union, 1945-1946

David Alvarez, Eduard Mark

• Publisher: University Press of Kansas
• Year: 2016
• Print ISBN: 9780700621927, 9780700621927
• eBook ISBN: 9780700621972
• Topic: History
• Subtopic: North American History
• Index: History

For the period between World War II and the full onset of the Cold War, histories of American intelligence seem to go dark. Yet in those years a little known clandestine organization, the Strategic Services Unit (SSU), emerged from the remnants of wartime American intelligence to lay the groundwork for what would become the CIA and, in ways revealed here for the first time, conduct its own secret war of espionage and political intrigue in postwar Europe. Telling the full story of this early and surprisingly effective espionage arm of the United States, Spying through a Glass Darkly brings a critical chapter in the history of Cold War intelligence out of the shadows.

Constrained by inadequate staff and limited resources, distracted by the conflicting demands of agencies of the U.S. government, and victimized by disinformation and double agents, the Strategic Services Unit struggled to maintain an effective American clandestine capability after the defeat of the Axis Powers. Never viscerally anti-communist, the Strategic Services Unit was slow to recognize the Soviet Union as a potential threat, but gradually it began to mount operations, often in collaboration with the intelligence services of Britain, France, Italy, Denmark, and Sweden, to throw light into the darker corners of the Soviet regime.

Bringing to bear a wealth of archival documents, operational records, interviews, and correspondence, David Alvarez and Eduard Mark chronicle SSU’s successes and failures in procuring intelligence on the capabilities and intentions of the Soviet Union, a chronicle that delves deeply into the details of secret operations against Soviet targets throughout Europe: not only in the backstreets of the divided cities of Berlin and Vienna, but also the cafes, hotels, offices, and salons of such cosmopolitan capitals as Paris, Rome, Budapest, Prague, and Warsaw.

A remarkable account of a clandestine war of espionage, kidnappings, blackmail, disinformation, and political subversion, Spying through a Glass Darkly also describes the quantity and quality of intelligence collected by SSU and disseminated to its “customers” in the U.S. government—information that would influence the attitudes and actions of decision makers and, as the Cold War evolved, the course of the nation in a new and dangerous world.

CHAPTER ONE

On the Precipice of Peace

At the end of the Second World War the United States deployed an intelligence apparatus that was—with the possible exception of the secret services of the Soviet Union—unrivaled among the belligerents in its size and reach. That reach extended from the mountains of Afghanistan to the beaches of Zanzibar as thousands of men and women, working in a myriad of agencies, scrutinized newspapers, magazines, and trade journals in dozens of languages; monitored foreign radio broadcasts; intercepted the communications of governments, businesses, and private citizens; interviewed travelers and refugees; interrogated prisoners of war; purloined documents from guarded buildings; and recruited a legion of informants ranging from cooks and cleaners to generals and cabinet ministers. Remarkably, this apparatus had been created during the war virtually from scratch. Despite more than a century and a half of national experience, participation in many wars and military interventions, and exposure to various domestic and international crises, the United States had been slow to establish standing professional espionage services to inform and guide political and military leaders. Presidents and generals, reflecting a broader national revulsion against the skullduggery and intrigue associated more with European absolutism than American republicanism, preferred to rely on ad hoc organizations, assembled and deployed when the need for information arose and then disbanded once the need had passed. This approach ensured that the country’s experience with intelligence organizations was decidedly mixed. In some cases, such as the Lewis and Clark reconnaissance mission to the Pacific coast in 1804–1806, the nation was adequately served by temporary arrangements, but more frequently, particularly in times of war, the deficiencies of improvisation and amateurism quickly became apparent to national leaders desperate for accurate and timely information.

A permanent peacetime intelligence office first appeared in 1882 when the navy created the Office of Naval Intelligence (ONI). The army followed suit by establishing the Military Intelligence Division (MID) in 1885. Poorly staffed and inadequately funded, these service organizations shunned anything smacking of espionage and limited their activities to collecting maps, photographs, and newspaper articles of military interest and collating the reports of the handful of army and navy officers who were attached to certain American embassies. After America’s entry into the First World War on 6 April 1917, ONI and MID increased significantly in size and expanded their activities to include modest ventures into secret operations, such as communications intelligence (comint), the interception and decryption of the secret communications of other governments. After the armistice in November 1918, however, staffing and operations returned to the modest levels of prewar practice.¹

In the two decades following the First World War the United States claimed the status of a great power but maintained the intelligence resources of a minor power. Although the mediocrity of American intelligence organizations in the period 1918–1941 is often exaggerated and many of the problems that constrained their efforts also afflicted the secret services of other countries, there is no question that in the interwar years American intelligence capabilities were limited.² There was no central organization responsible for collecting, evaluating, and disseminating to policy makers foreign political, economic, and military information. By tacit agreement, intelligence tasks were apportioned among various government departments. The State Department claimed a monopoly on foreign political and economic information, while coverage of military developments overseas fell to the Military Intelligence Division and the Office of Naval Intelligence. Counterespionage, the pursuit of foreign spies on American soil, was largely the bailiwick of the Federal Bureau of Investigation (FBI), although the military services, particularly the navy, occasionally made forays into this area. Cooperation among these agencies was rare, and there was little effort to coordinate operations. The dissemination of information was compartmentalized, with reports moving up vertically in an organization but rarely laterally to other organizations. The State Department, for example, did not distribute embassy cables or dispatches to army or navy intelligence offices, which, in any case, exhibited little interest in political or economic reporting from abroad. MID reports circulated within the War Department, but they rarely passed to either the State Department or the Navy Department until the late 1930s, when military intelligence officers began to share with their counterparts in State and Navy some of the foreign diplomatic messages intercepted and decrypted by army code breakers.

Toward the end of the 1930s, as the world moved closer to another global war, American policy makers still relied on small, underresourced organizations capable of pursuing only a narrow range of intelligence activities. In 1938, for example, the Military Intelligence Division, the organization responsible for collecting and distributing information on the organization, deployments, and capabilities of the world’s armies, employed only sixty-nine people. MID’s Intelligence Branch, the section directly concerned with the collection and evaluation of intelligence, numbered as few as eight officers. That year the army’s Signal Intelligence Service, the specialized and highly secretive unit charged with intercepting and decrypting foreign diplomatic and military communications, had a staff of barely two dozen. When Germany opened a European war by invading Poland on 1 September 1939, the Office of Naval Intelligence had only sixty-three people in its Washington headquarters. Of the seventeen naval attachés serving in American embassies, ONI’s eyes and ears abroad, only nine were in Europe.³

Intelligence units were modest in stature as well as size. Within their parent organizations, intelligence offices and their staffs were marginalized, receiving little attention and less respect. In no government department or military service was intelligence work a separate career path. Personnel usually rotated through brief tours in intelligence before returning to more mainstream assignments. The work still carried a whiff of dishonor and disrepute for its supposed recourse to thievery, blackmail, bribery, and other unsavory practices. Particularly in the armed services, ambitious and capable officers, believing intelligence assignments would tarnish their reputations and retard their careers, sought to avoid such posts. The resulting paucity of experienced personnel combined with a weak professional identity and narrow definitions of institutional mission to constrain efforts to obtain information. Most of these efforts centered on American embassies where diplomats and the army and navy attachés represented the collection end of the intelligence process. The emphasis was on acquiring information from open sources such as newspapers, journals, personal observation, and contacts with foreign colleagues. There was little effort at clandestine espionage, that is, the recruitment and control of secret informants who were cajoled or suborned to provide confidential information. The State Department strictly eschewed espionage as an unseemly and unprofessional activity that, if exposed, would discredit American diplomats, embarrass the United States government, and poison relations with foreign governments. The army and the navy were hardly more enthusiastic about spying, and during the 1930s neither had a clandestine espionage service, although the navy briefly experimented with recruiting spies in China. In the army, commanders consistently opposed the employment of secret agents as unethical or unnecessary. Recalling the state of MID collection efforts in the 1930s, General George C. Marshall, the army chief of staff during World War II, acknowledged that intelligence was “little more than what a military attaché could learn at a dinner, more or less, over the coffee cups.”⁴ For its part, ONI actively discouraged its representatives from recruiting informants, and in 1933 it circulated an order that required each naval attaché to employ “only such means as are consonant with his official position and the diplomatic relations that he bears to the government which receives him as naval attaché.” A separate directive specifically warned the attachés against employing “immoral women” as agents, primly observing that “a woman that will sell herself is usually willing to sell her employer.”⁵ Such directives did little to encourage an aggressive approach to intelligence collection. On 1 September 1939 the American naval attaché in Berlin, ONI’s sole representative inside Nazi Germany, had no clandestine informants and collected information solely from open sources: newspaper articles, official briefings at the German naval ministry, conversations with colleagues in the local attaché community, and officially organized and supervised trips beyond the capital. That year the director of naval intelligence admitted that “a real undercover foreign intelligence service, equipped and able to carry on espionage, counterespionage, etc. does not exist.”⁶

By increasing the demand in Washington for information while exposing the limited ability of existing practices to satisfy that demand, the outbreak of the European war stimulated a modest expansion in American intelligence capabilities and efforts. Even before Japan’s surprise attack on American military installations at Pearl Harbor, Hawaii, on 7 December 1941 catapulted the United States into what had become a global war, both the army and navy had begun—albeit slowly—to reconsider their hostility toward clandestine intelligence operations. In August 1941, for example, MID dispatched a retired officer to the Far East to survey the potential for establishing espionage networks in the region. This officer’s encouraging report reached Washington four weeks before Pearl Harbor, too late for MID to act upon it before Japan attacked.⁷ The navy also recognized the need to expand its intelligence program to include clandestine collection. In the summer of 1940, ONI established a Special Intelligence Section to recruit and run secret agents abroad. It was, however, a modest effort. The headquarters staff for the new section consisted of a retired naval officer recalled to active duty and a clerk. After more than a year of effort the unit had managed to recruit only a handful of sources in Latin America, the Far East, and the Middle East.⁸ In the months before Pearl Harbor both the army and the navy discovered the price of their neglect of informant networks, which, to the dismay of MID and ONI, could not simply be wished into existence when required. While the services grappled with the problems of constructing such networks from scratch, they took steps to improve foreign intelligence collection in the short term by expanding significantly their attaché systems; sending training, liaison, and observer missions to the armed services of many belligerent and neutral countries; and augmenting their communications intelligence units.⁹ With operations expanding, there were tentative attempts to coordinate better the disparate activities of the State, War, and Navy Departments and the FBI. In the summer of 1939, State, MID, ONI, and FBI, prompted by President Franklin D. Roosevelt, had formed the Interdepartmental Intelligence Committee (IIC) to consider the government’s intelligence and counterintelligence efforts, particularly in the Western Hemisphere. After a year of desultory discussions the committee concluded that the United States required a special organization devoted exclusively to clandestine foreign intelligence operations. There was, however, less agreement on who should control this organization. While fully expecting to influence the direction and priorities of the proposed clandestine service, neither the army nor the navy wanted to engage in actual espionage for fear that such operations might compromise the diplomatic status of their attachés abroad. The FBI refused to accept sole responsibility for espionage operations without sole authority to direct those operations, authority that the other members of the committee were loath to concede. For its part, the State Department, aghast at the mere thought of espionage, wanted nothing at all to do with spies and spying. President Roosevelt resolved the impasse by ordering, on 24 June 1940, a division of responsibilities. The FBI received responsibility for foreign intelligence work in Latin America, for which task it established a Special Intelligence Service (SIS), while MID and ONI covered the rest of the world. The State Department successfully protected its virtue, receiving no additional responsibilities beyond its traditional—and entirely above board—political reporting.¹⁰

Roosevelt’s directive did little to remedy the lethargy, decentralization, and parochialism that seriously constrained the American intelligence effort. As much attitudinal as administrative in origin, these deficiencies could not be alleviated by new boxes and lines on organization charts. Jealous of their prerogatives and protective of their institutional interests, IIC members were reluctant to pursue any initiatives that might undermine their respective authorities, budgets, and statuses. Within a month of the president’s directive, for example, MID was challenging the FBI’s monopoly on Latin American intelligence operations, arguing that the new Special Intelligence Service should merely supplement, not replace, the collection activities of military attachés.¹¹ In such a bureaucratic environment, effective mechanisms for coordinating collection programs and sharing and collating intelligence reports across departmental lines remained elusive. Even more serious was the continued failure to accelerate—beyond the FBI’s nascent and narrowly focused SIS—the expansion of clandestine collection capabilities.

The continuing disarray in the American intelligence community troubled those in the government, such as President Roosevelt, Secretary of War Henry Stimson, and Secretary of the Navy Frank Knox, who believed that war was creeping closer to the United States and that the country had to hasten its efforts to address the threat. Frustration and concern, particularly in the White House, stimulated additional organizational initiatives, the most important of which was a presidential directive on 11 July 1941 establishing a new office, the Coordinator of Information (COI). Responsible directly to the president, charged with collecting, analyzing, correlating, and disseminating to the White House and interested departments information concerning national security, and empowered to secure relevant material from other agencies or departments of the government, COI appeared over the opposition of its putative partners in the State, War, Navy, and Justice Departments. Vigilantly patrolling the boundaries of their organizational turf, these departments considered the new agency a threat to their institutional prerogatives and independence and feared subordination to a “super” intelligence agency. The president’s selection of William J. Donovan to run COI did little to assuage their concerns. A much-decorated hero of the First World War, successful Wall Street attorney, prominent Republican, and assistant attorney general in President Calvin Coolidge’s Justice Department, “Wild Bill” Donovan had previously been entrusted by Roosevelt with confidential political missions to Europe. Two trips to Britain in 1940 to survey that country’s prospects against the Axis powers included extensive briefings by British authorities on the organization and activities of His Majesty’s intelligence organizations. The British, their backs against the wall and desperate for any assistance from the United States, hoped to cultivate closer intelligence cooperation with Washington, but suspected that the Americans could contribute little to the relationship until they reformed and energized their fragmented and uncoordinated intelligence programs. These meetings—as the British probably intended—convinced Donovan that the United States required a larger and more centralized intelligence service to navigate through the political and military storms that were engulfing the world. He made it his mission to create and lead that service, and his advocacy, in the spring and summer of 1941, was a significant factor in Roosevelt’s decision to establish COI.¹²

Scorned and distrusted by its sister agencies, COI struggled to find a place in the national security structure. Although the lack of an effective clandestine espionage capability remained the most serious deficiency in American intelligence, t...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Dedication
• Contents
• Preface
• 1. On the Precipice of Peace
• 2. A Mystery in an Enigma
• 3. Signs and Portents: Germany
• 4. Spies on the Danube: Austria
• 5. A Distant Arena: Eastern Europe
• 6. The Nearer Shore: France and Italy
• 7. Conclusion
• Notes
• Bibliography
• Index
• Back Cover