COLD WAR AUSTRALIA - PETROV COMMISSION

Federal Labor leader Dr Herbert Vere Evatt had reason to expect victory, but won only fifty-seven seats while the Coalition took sixty-four. This wound left Evatt unable to weigh the causes of this result. He might have regained his balance had his Press Secretary, Fergan O’Sullivan, not confessed to him on 3 June that he was the author of a three-page dossier brought by Petrov from a Soviet Embassy safe. “Why wasn’t I told?” he charged at ASIO and Menzies. His injured pride seized this scrap as proof that the defection had been concocted to deny him the crown.

Reeling from the double blows of deceit upon defeat, Evatt drove himself to distraction when it became public that two of his long-standing staffers, his private secretary Alan Dalziel, and the office dogsbody Albert Grundeman, were named as informants for a second Petrov exhibit, catalogued as Document J.

VENONA
The “conspiracies” around Petrov are no longer a state secret. The purpose of the Affair was to track down spies in the Australian government. Evidence of their activities between 1944 and 1948 had come from the decrypting of Soviet signals, a project known by its US tag, VENONA. The cover-up began at once. The Western agencies did not want the Soviets to know that their codes were being cracked. The FBI did not tell the CIA about VENONA until 1952; the CIA’s in-house historian suspects that President Truman was never informed.

Once the US became aware that a 1945 UK strategic plan had passed through the Australian government to the Soviets, Washington reduced Canberra’s access to classified information. By July 1948, a complete embargo applied. This blackout was disastrous for the Empire because the UK wanted US expertise for the nuclear rocketry at Woomera. The ban suited the US strategists by keeping their allies on a short lead.

The mess in Canberra had to be cleaned up. On 7 February 1948, MI5 head Sir Percy Sillitoe and a counter-intelligence officer, Roger Hollis, arrived to uncover how “top secret” material had been leaked. After a search of file records, the Defence Department concluded that an External Affairs officer, Ian Milner, was among the culprits. In July 1948, Prime Minister Chifley read Sillitoe’s report in London when the British government again urged him to set up a new intelligence organisation. In August, Hollis returned to Canberra with more MI5 men to establish ASIO. That agency devoted itself to pursuing the nest of traitors, in what became known as “the Case”.

Three suspects in External Affairs had known links to the Australian Communist Party, Jim Hill, Ian Milner and Ric Throssell. That narrowing of who leaked the secrets did not establish the chain of command back to their contact with Soviet intelligence, a person referred to as “K”, “Klod” or “Claude”. The most likely Controller was the Communist official, Wally Clayton.

The pressure was on ASIO to solve the crime on its patch. The Canadians had scored with the defection of Igor Gouzenko in 1945, followed by its in camera Royal Commission. ASIO hoped to find someone in the Soviet Embassy who would do the same here. That defection would establish ASIO’s credentials among allied intelligence agencies and give Colonel Spry “secrets” to trade. He “opposed to giving America anything for nothing”.

INDOCTRINATION
The significance of VENONA in Australia can be approached by considering who in Australia was told about it? How much were they told? And when? The term for being informed about security matters is “indoctrinated”.

During MI5 inquiries in Canberra in 1948, the Secretary of the Department of External, John Burton, refused to take an oath that he would not inform his minister (Evatt) of any information from Defence Intelligence. Outraged, Burton complained to Prime Minister Chifley without results. The head of Defence Intelligence at the time was Colonel Spry who, in 1984, hinted: “It is possible that the Prime Minister had already taken the oath himself”.

As opposition leader, Menzies had not been ‘indoctrinated’ before his overseas tour throughout the second half of 1948. Perhaps he glimpsed the truth in Washington where he got the five-star treatment at an October 14 luncheon in the Pentagon with Defence Secretary James V. Forrestal, the Chiefs of Staff, the Secretaries for each of the services, General Omar Bradley and John McCloy, known as “The Chairman of the Establishment”. In March 1949, when the Secretary of Australia’s Department of Defence, Sir Frederick Shedden, was heading to Washington to try to ease the embargo, opposition leader Menzies wrote a letter of introduction to Forrestal, a sign that he was in the loop, to some extent.

If so, that revelation would help to explain why Menzies changed his mind about banning the Communist Party, a course he had resisted despite pressure on his leadership. On his return in January 1949, he declared that “we can longer deal with Communism as an eccentricity … it is a form of high treason”. That final phrase suggests that he had been told of the spy ring, if not about the decrypts.

One strand in the argument for a conspiracy against Evatt has been that Menzies handpicked the Commissioners. He did, but not for their politics. The selection criteria included whether their Honours were suitable cases for indoctrination”. The evaluation was easier for the senior counsel assisting the Commission, major-general Victor Windeyer. His recent membership of the Military Board outweighed any concern that his practice in equity and commercial law had not honed the forensic skills required to break down hostile witnesses.

CONSPIRATORS RAMPANT
Having got hold of Petrov and whatever files he could bring with him from the Embassy, ASIO initiated multiple minor conspiracies – better called organisation and methods. Above all, it had to pretend in public that the Petrov documents were the origin of “the Case” on which it had been slaving for five years. ASIO had to build on what the Petrovs had supplied, not much of which was relevant.

The need for secrecy about the decrypts could explain why the list of informants with codenames found in Petrov’s Document G replicated that brought out by MI5 in 1948. The Petrov list had been in an envelope marked “N” that his predecessor had left for him but which he claimed never to have opened during his three years as resident spymaster. If ASIO was tempted to forge evidence, then this section of Document G would have been a prime instance. The reason behind such a plant would have been to get the names into the open without giving away the existence of the VENONA decrypts. So secret did VENONA remain that during in-camera sessions, some evidence was not even recorded.

To make matters worse, Document J could not be published because it was, in Windeyer’s phrase, a “farrago of fact, falsity and filth” about the personal failings of Canberra identities. It also alleged that the erstwhile Liberal Minister Percy Spender would have played Petain for the Japanese in the South-west Pacific.

ASIO might have done itself a good turn if it had concealed the existence of Document J. Yet it could not do so because a mention of Dalziel as an informant was the hook that ASIO had for catching him. ASIO believed him pivotal in the relations between External Affairs, the Communist Party and Soviet officials. Codenamed “Denis” in VENONA, Dalziel was seen by ASIO as being as significant as Clayton (“Klod”). If Lockwood had not dropped Dalziel’s name into Document J, ASIO might have been obliged to do so.

The pursuit of Dalziel adds weight to whether the Petrov affair was aimed at Evatt. Three times in 1953, Spry had warned Evatt about O’Sullivan’s drinking with Soviet officials. Petrov’s delivery of O’Sullivan’s dossier on fellow journalists raised the stakes. Spry now knew that the Soviets had a means to blackmail O’Sullivan. The prospect of his and Dalziel’s managing the entourage of a prime minister notorious for carelessness with documents should have sounded a tocsin.

Hence, MI5 and ASIO would have feared that the return of a Labor government, especially under Evatt, whom key US officials either disliked or distrusted, might renew the restrictions on the transfer of data from the US.

These matters of global security pose a puzzle. Why did Spry not move to prevent Evatt’s victory by circulating the compromising facts about O’Sullivan and Dalziel?

We can no longer assume that Britishers never do that sort of thing. The Spycatcher case of ex-MI5 man Peter Wright exposed how a faction in UK security in the early 1970s connived against British Prime Minister Harold Wilson, whom they believed to be a Manchurian candidate. In November 1972, a group formed within ASIO to deal with the threat from left-wingers in the event of Whitlam’s winning the coming elections. Had Evatt got across the line on 29 May, how would our guardians have neutralised Dalziel?

THE THINNING RED LINE
The Communist leadership, meanwhile, were interpreting the Royal Commission as the latest offensive in the class war. They saw Petrov as a continuation of the 1950 Communist Party Dissolution Act which the High Court had declared invalid. The consequent referendum to carry the ban had failed, with Evatt leading the ‘No’ campaign. On that occasion, the Party had survived by sheltering inside the labour movement. The option of again hiding behind Evatt became available in June 1954 when he entered the fray over O’Sullivan.

Clayton had as many reasons for not informing any other members of the Communist Party’s Central Committee about his espionage as ASIO did for keeping quiet about how it had used VENONA to identify him. Hence, the Party was confused about the government’s determination to outlaw it. In particular, the leadership thought that ASIO was after Clayton because he had set up an underground network so that the Party could operate after it became illegal, as it had from 1940 and 1942. ASIO, in turn, thought that Clayton had created these covert operations for espionage.

After Evatt appeared before the Commission on 16 August, the Communist leaders instructed their legal team to go along with whatever nonsense he alleged. This farce reached its apogee when communist journalist Rupert Lockwood denied that he had written Document J, weeks after he had published a pamphlet boasting of his handiwork.

Evatt had decided that Document J was a fraud to get him. Lockwood now swore for days on end that his version had been quite different. To add detail to this thoroughly unconvincing narrative, the Party arranged for a stenographer from Party headquarters to claim that she had typed the original. Comrades were instructed to hunt down evidence that the typing of a double-dash for a hyphen in Document J was not as idiosyncratic as the ASIO expert claimed.

A Communist lawyer, Rex Mortimer, recalled cross-examining a woman about the use of the double-dash. The Commissioners declared themselves “sick and tired” of this line of questioning. Mortimer was taken aback when Justice Philip remarked “Timeo Danaos et dana ferentes!” Mortimer did not catch “Beware of Greeks bearing gifts!”, but instead hoped he was being invited to proceed. Turning to the Classical scholar Evatt, he asked, “What did he say?”. Without looking up from his scribbling, Evatt muttered: “Pay no attention to what he said. Just you say, ‘Be that as it may, your honour’, and go on with your cross-examination”.

This anecdote spotlights why the Commissioners had to rid themselves of this troublesome advocate. Evatt was the unstoppable object. His paranoia had done nothing to reduce his powers of concentration. Moreover, he intimidated the Commissioners and the ASIO witnesses. His biggest catch was to make Petrov’s ASIO handler, Ron Richards, admit that he had paid Petrov £5000 for the documents. In The Petrov Affair (1987), Robert Manne observed that Richards, who had worked under Evatt during the war, seemed about to crack.

With Evatt on the rampage, the Commissioners lost control of the proceedings. Five months had passed and ASIO’s investigation of “the Case” had not begun. Days had been spent on the length of paper staples, or the authenticity of scribbles in the margins of Document J. The prospect grew that Evatt would so derail the proceedings that Menzies himself would have to face cross-examination by the opponent he had vanquished only three months before.

His administration counter-attacked. Spry hired Sir Garfield Barwick to advance ASIO’s interests. Barwick had become involved in “the Case” when he led the government’s team before the High Court in 1951 to ban the CPA. He had perhaps been indoctrinated to some extent then so that he could appreciate why the government was arguing that the Commonwealth’s War Powers under the Constitution should apply during the build-up to hostilities.

The Commissioners fired the second salvo on 7 September by seizing on Evatt’s abuse of them in the media as grounds to withdraw his permission to represent his staff, or himself.

The task of proving that Document J was a fake then passed to his hapless nephew, Phillip, who kept referring to his gagged uncle as “my leader”. In truth, his leader had become the Communist barrister Edward Fowler (Ted) Hill, with whom Dr Evatt discussed courtroom tactics during lunches in Green Park, near the Darlinghurst Court.

Hill now saw a chance for the CPA to do more than shelter inside the Labour movement. Dissent from the Catholic Right in Federal caucus over Evatt’s Petrov-mania provided the Communists with the chance to strike a blow against the Industrial Groupers who had been dislodging one Communist union official after another. As a manipulator of other people’s weaknesses, Hill fueled Evatt’s vanity and paranoia by pointing to the black hand of Catholic Actionists behind his election defeat.

Hill later told a post-graduate student of the Royal Commission that he had talked Evatt into exposing the barely known B. A. Santamaria. Evatt’s bombshell on 5 October 1954 led to the Labor splits of 1955-57. Hill also claimed that Evatt had promised to make him a High Court judge. Bizarre as that prospect was, such an offer would have been vintage Bert.

A RED ARMY?
The defensive maneouvres taken by the local Reds in the political domain were perhaps following, albeit unwittingly, steps taken in the 1940s by Red Army agents in Australia.

ASIO’s acolytes and critics both accept that the fount of the leaks was External Affairs, leaving the Department of Defence in the clear. Yet, the British ‘Top Secret’ items that passed to the Soviet embassy in Canberra were Defence documents. The 1945-46 Royal Commission in Canada, moreover, had found penetration at senior levels in its armed services.

In 1948, the MI5 investigators accepted that the Defence officials with access to the British plan were of “unquestioned reliability”. It remains to be tested in public whether their reliability was also unquestionable. Spry would have been the last person to ask. He had become Director of Military Intelligence in 1946 after joining the Army when he was 17. His fellow officers were British gentlemen, indeed, chaps.

A bigger puzzle is why academic spy-catchers have not paid more attention to the doings of Soviet Military Intelligence (GRU) in Australia during the 1940s. Its representative here from 1942 to 1947 was Viktor Zaitsev. As Second Secretary at the Soviet embassy in Tokyo until October 1941, Zaitsev had been party to the most successful espionage operation of all time, centered on Richard Sorge. Among several achievements, his ring had informed Moscow of Japan’s decision to swing south, and not to join its Axis partner in a pincer movement against the USSR.

Parallels between Zaitsev’s past and the seepage of Allied battle documents to Tokyo in 1944-45 merit better attention than the welter of speculations floated by Des Ball and David Horner in Breaking the Codes. Their tome traces Zaitsev’s socialising around Canberra, but ignores his access to the US Embassy on consular business.   

The likelihood that Soviet Military Intelligence (GRU) had run its own agents obliged ASIO to persist with “the Case” decades after the Klod group had ceased to be active. Moscow had instructed its Canberra staff to establish a network that could function here behind the lines in the event of war or the severing of diplomatic relations. External Affairs officer Ric Throssell concluded that ASIO had decided that its inability to prove any wrong-doing by him in the 1940s did not establish his reliability but rather pointed to his being a sleeper.

ASIO could never abandon the hunt for moles in Attorney-General’s, CSIRO, External Affairs, or one of the five defence departments. Nor was ASIO itself above suspicion. Peter Wright’s allegations against Roger Hollis as the Soviet’s man in MI5 inflamed fears in Canberra because Hollis had set up ASIO. Had he left sleepers behind? In 1978, Richard Hall alleged in The Secret State that Soviet penetration of ASIO had led to the 1975 departure of its Director-General, Peter Barbour.

Fifty years on from the defection, it seems improbable that the conjunction of “Petrov” with “conspiracy” will cease. Lets hope that, by 2054, no one will be talking about a plot by Menzies merely to defeat Evatt at the polls. Attention is already moving towards the multiple conspiracies that flowed from the need by Western intelligence to conceal VENONA while using those decrypts for covert and public investigations into Soviet espionage around the world.

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