The Dulles Brothers, Harry Dexter White, Alger Hiss, and the Fate of the Private Pre-War International Banking System

The Dulles Brothers, Harry Dexter White, Alger Hiss, and the Fate of the Private Pre-War International Banking System

Peter Dale Scott
The Asia-Pacific Journal:  Japan Focus
April 21, 2014

The election of Dwight D. Eisenhower in 1952 had permanent consequences for U.S. foreign policy. The U.S. major oil companies, which before the election were facing criminal charges for their cartel arrangements, instead were freed to continue their activities, until “In some of the faraway countries where it did business.… Exxon’s sway over local politics and security was greater than that of the United States embassy.”1 Parallel to this was a radical escalation in 1953 of CIA covert operations. Major plots to overthrow the governments of Iran and Guatemala, both of which had been turned down by Truman and his Secretary of State, Dean Acheson, now proceeded, redefining America’s relationship to the third world.2

The key to this important change was not Eisenhower but the Dulles brothers, formerly both partners in the firm Sullivan and Cromwell, which for years had represented the oil cartel:

As long as his brother, John Foster Dulles, was Secretary of State, [CIA Director] Allen Dulles had no need to chafe under political “control.”…. An adventurous director… whose brother held the second highest office in the administration… was able to act almost at will as he was shielded from any unpleasant consequences.3

The 1952 Republican campaign, for which John Foster Dulles was partly responsible, successfully attacked Truman’s supposed weakness in dealing with the alleged treason of two of his civil servants, Treasury assistant secretary Harry Dexter White, and State Department official Alger Hiss. In fact neither White nor Hiss was ever convicted of treason; nor were they ever proven to have committed it. But both men’s careers had been ruined by the sensational charges brought against them in 1948 by a freshman congressman, Richard Nixon, in the House Un-American Activities Committee (HUAC).

An Overview of This Essay

It has long been known that Nixon, in his interrogation of White and Hiss, was being fed information by FBI agents acting with the approval of J. Edgar Hoover. This essay will argue that Nixon also received assistance from the Dulles brothers, especially in a key meeting between the three men on August 11, 1948, five days before White’s untimely and disputed death.

At stake in the meeting was the Republican campaign of 1948, the first campaign, ultimately unsuccessful, in which “the GOP dubbed the Democrats ‘the party of treason.’”4 But deeper issues were also at stake. As we shall see, Harry Dexter White, backed by Treasury Secretary Henry Morgenthau, had his own candidates for treasonable behavior: above all Allen Dulles’s friend and former OSS agent, Thomas McKittrick, the American wartime president of the Bank of International Settlements in Basel, Switzerland.5

The BIS had handled Nazi looted gold when other banks had refused to do so, and at the war’s end McKittrick was “arranging deals with Nazi industrialists to guarantee their profits after the war was over.”6 In contrast, the Morgenthau-White Plan for postwar Germany called for the country to be deindustrialized and the power of the German cartels to be broken. The pre-war banking system linking American bankers to those who had backed Hitler was also to be demolished: the meeting of Allies at Bretton Woods in July 1944, organized largely by White, had passed a resolution calling for the dissolution of the BIS “at the earliest possible moment.”

A version of the Morgenthau-White Plan was approved by Truman in May 1945 as JCS (Joint Chiefs of Staff policy) 1067, which directed the U.S. forces of occupation in Germany to “…take no steps looking toward the economic rehabilitation of Germany.”7

But both McKittrick and Allen Dulles had a quite antithetical vision for Germany – that its economy should indeed be rehabilitated, and eventually made the underpinning for a more united Western Europe.

Thus “Dulles and others began to campaign against…JCS 1067,” and for its replacement by what later came to be known as the Marshall Plan.8

On one level this was a conflict between powerful individuals: White in Washington (Morgenthau soon retired), versus the banker McKittrick and the lawyer Allen Dulles, both of whom returned after World War II to Wall Street. But it was also an institutional conflict between Washington and Wall Street, because each center was initially united behind conflicting visions for the future of Germany, and also for the future of the pre-war international banking system uniting Germany and America – at the heart of which was the BIS. Another way to say this is that it was a contest between the conflicting visions of the state (Washington) and the deep state (Wall Street).

In this contest, as in many others at this time, Washington lost, and Wall Street won.9

The Dulles brothers and their allies, who argued that Germany must be rebuilt as rapidly as possible as a bulwark against the Soviet Union, triumphed over Morgenthau and White. The BIS returned the looted Nazi gold, and the calls for its dissolution faded away.10

There are various reasons for Wall Street’s victory. Prominent among these were the death of Roosevelt and his replacement by Truman with his conservative Secretary of State James Byrnes. Perhaps even more important was the brutish behavior of Stalin in eastern Europe, and the revelation (thanks to the 1946 defection of a Soviet code clerk in Ottawa), that Moscow had a robust network of spies in the west. These and other factors soon made Washington agree to the replacement of JCS 1067 by the Marshall Plan (which perhaps would have been better called the Dulles Plan).

But there were deeper aspects to the conflict. The Dulles brothers were determined to destroy, not just a plan for Germany which they disliked, but the Democratic New Deal by which the party under first Roosevelt and then Truman had restricted the traditional freedoms of Wall Street, and were now threatening to break up the oil cartel. Here the Republicans had their eyes on Harry Dexter White in particular.

The reason then given for this, and still believed by some intelligent people, was that White was a spy.11 But as we shall see, there are also those who believe that the evidence for this is very debatable. We shall consider the suggestion of Anthony Summers and others that Allen Dulles and the CIA, as early as July 1948, were the source of the furor over the alleged treason of first White, and then (after White’s death in August 1948) a far less prominent substitute figure, Alger Hiss.12

Summers suggests that Allen Dulles, even while still a Wall Street lawyer, may have had access to a secret weapon not available to a mere Treasury assistant secretary like White – the VENONA record of deciphered Soviet communications.

VENONA, Harry Dexter White, and Alger Hiss

Many on the left have referred to the post-war prosecutions of Alger Hiss and the Rosenbergs as “show trials,” alleging that their underlying purpose was not to determine guilt or innocence, but to influence public opinion by publicizing a guilt already determined, as a warning against dissent. But the spy scare of the 1940s was at least partly genuine, based largely on evidence from the newly translated VENONA record of Soviet transmissions. It is certain that VENONA intercepts helped identify and convict spies such as Judith Coplon, even though, for security reasons, these intercepts were not introduced at their trials.13

VENONA evidence also was used to raise suspicions about two other suspects, senior Treasury official Harry Dexter White and Alger Hiss. However the VENONA evidence against these two men is still fiercely debated. And the campaign against both men was not powered by security concerns alone. In part at least also it was a by-product of a deeper conflict over the future of America — between Wall Street (represented by the Dulles brothers) and the remnants of the New Deal (represented by White, a principal architect of the International Monetary Fund and the World Bank.)

 

The Bank of International Settlements HQ in Basel

The Dulles brothers, as lawyers at Sullivan and Cromwell, had played key roles in the inter-war western financing and refinancing of German debt. A primary bank in these transactions was the British merchant bank J. Henry Schröder and its American subsidiary the J. Henry Schroder Banking Corporation, where Allen Dulles served as director and his brother as attorney. A web of international banking connections was created between the wars; and much of this web “was connected to the BIS [Bank of International Settlements], via the Dulles brothers and their friends on Wall Street and in London and Germany.”14

Roosevelt New dealers like Treasury Secretary Henry Morgenthau and his assistant White intended to dismantle this complex network with German banks and corporations after World War II: in particular, they “loathed the BIS, seeing it, correctly, as a channel for the perpetuation of Nazi economic interests in the United States.”15 Their principal target was the wartime BIS president Thomas McKittrick (formerly of the Boston banking firm Lee, Higginson)– rightly so, in the opinion of Adam Lebor, who writes that “many of the things that McKittrick was doing, such as gold and foreign exchange deals with the Reichsbank after Pearl Harbor, were treasonable.” Lebor adds that McKittrick, a personal friend of Allen Dulles, came to New York and hired an attorney “to persuade the Treasury to unblock the BIS’s funds. His choice was never in doubt: John Foster Dulles.”16

 

Thomas McKittrick, American Head of the Swiss-based Bank for International Settlements

In July 1944, at Bretton Woods, Morgenthau and White led the American delegation at the conference which successfully established the International Monetary Fund, where White eventually became the executive director and U.S. representative. With the IMF at the center of the new international system, the two men also

wanted the BIS to be abolished. On July 10, 1944, they seemed about to get their wish. Wilhelm Keilhau, of the Norwegian delegation, introduced a motion to liquidate the BIS…. No delegation spoke publicly in defense of the BIS. But behind the scenes its defenders – sections of the State Department, Wall Street, the Bank of England… went into action…. Eventually a new Norwegian-Dutch resolution calling for the liquidation of the bank at “the earliest possible moment” was finally agreed.17

 

The 1944 Bretton Woods Conference

The Morgenthau-White opposition to the BIS was consistent with their support of the Morgenthau Plan, endorsed by Roosevelt and Churchill at Quebec, which called for the partial deindustrialization of Germany. Though this extreme proposal was soon modified, Truman in May 1945 approved JCS (Joint Chiefs of Staff policy) 1067, which directed the U.S. forces of occupation in Germany to “…take no steps looking toward the economic rehabilitation of Germany or designed to maintain or strengthen the German economy.”18

But both McKittrick and Allen Dulles had a quite antithetical vision for Germany – that its economy should indeed be restored, strengthened, and eventually made the underpinning for a more united Western Europe. We know from an OSS communication to Allen Dulles that, even before the end of the war, McKittrick as president of the BIS “had already concluded an agreement [with German industrialists!] to ‘preserve the industrial substance of the Reich.’”19

Thus “Dulles and others began to campaign against…JCS 1067,” and for its replacement by what later came to be known as the Marshall Plan.20 By mid-1947 the remnants of Morgenthau’s deindustrialization program

had been so watered down by General Lucius Clay, the American commander of occupation forces, that it was meaningless…. Washington’s JSC Directive 1779, passed in the summer of 1947, institutionalized this change in policy. German industry would be rebuilt; its steel mills and forges would once again be the powerhouse of Europe.21

Who Was Guilty of Treason? McKittrick or White?

The plans of White and other New Dealers for post-war Germany and the BIS had thus been decisively defeated by 1948. Only in the Clinton era, more than half a century later, did some Americans’ mistrust of the BIS and McKittrick become known. At a minimum,

McKittrick was suspected by Allied authorities of helping Axis countries acquire funds the U.S. government had tried to freeze. He maintained that the BIS was neutral and that no looted gold was held by the BIS. The U.S. Office of Strategic Services, the forerunner of the Central Intelligence Agency, had found evidence that McKittrick had collaborated with the Nazis. A report given to President Bill Clinton alleged that the Axis powers had virtually taken over the BIS.22

John Loftus and Marcus Aarons go much further, accusing Allen Dulles and McKittrick together of having conspired to move Nazi looted gold in the post-war era to Argentina.23 A more cautious account is given by James Calvin Baker, implicating the BIS under McKittrick’s wartime tenure, but not Dulles:

After the war, McKittrick was appointed to a high-level position at Chase Manhattan [sic, i.e. Chase National] Bank…. And for nearly 50 years, the operations involving the the BIS and Swiss banks and looted assets by the Nazis were hidden in classified documents…. The U.S. Treasury Department [under White] tracked Nazi gold as it moved in and out of the BIS. Several of these transactions were found to have occurred between the BIS and major Swiss banks. From these Swiss banks, money was used by the Nazis to purchase war materiel or was wired to accounts in Spain, Argentina, and he Middle East.24

But Wall Street rallied to protect McKittrick, offering him positions at first the Chase National Bank, and then, at the invitation of Averell Harriman, to administer what became the Marshall Plan. Harriman also appointed an advisory committee consisting of Owen Young, a principal author of the pre-war German debt arrangements, “and of course Allen Dulles, who saw the Marshall Plan as the means of dealing the death blow to the spread of Communism in Western Europe.”25

One of the things that saved McKittrick and the BIS was the spy scare of the 1940s, which rightly or wrongly implicated White. Undoubtedly real spies were discovered, some of them thanks to deciphered VENONA intercepts, but others were the victims of hysteria.

Was White one of these victims? White died before he could be indicted, and the charges against him are still disputed in America.26 Undoubtedly White shared information with officials of the Soviet Union, which was then an ally; but the weight of evidence is that he was neither a Communist Party member nor securely under Soviet control. Chambers himself said of White, “His motives always baffled me.”27

 

Harry Dexter White, Architect of the Post-War International Monetary Fund

What is certain is that VENONA transcripts were used to persuade US officials that White was a Soviet spy – ending his career. It is clear too that hysteria also played a role. John Loftus and Mark Aarons claim that the Dulles brothers helped foment this hysteria, and Richard Nixon “became Allen Dulles’s mouthpiece in Congress.”28 Anthony Summers charges in addition that Nixon was fed secrets by the CIA as early as July 1948, before Allen Dulles joined the organization he had helped create.29

Nixon, Voorhis, and the BIS

Loftus and Aarons date this secret collaboration between Allen Dulles and Nixon back to 1945.

According to several of our sources among the ‘old spies,’ Richard Nixon’s political career began in 1945, when he was the navy officer temporarily assigned to review . . . captured Nazi documents. Allen Dulles allegedly told him to keep quiet about what he had seen and, in return, arranged to finance the young man’s first congressional campaign against [incumbent Congressman] Jerry Voorhis.30

Although Loftus and Aarons do not mention it, Voorhis was the principal ally and spokesman in Congress of Morgenthau and White’s charges against the Bank of International Settlements, having called for an investigation of the BIS in 1943.31 Dulles would therefore unquestionably have had another motive to see Voorhis defeated.

Voorhis himself wrote in an unpublished 1947 book manuscript that he had a lot of documentation “which would have shown how the [1946] Nixon campaign was a creature of big Eastern financial interests,” including “the major oil companies.” And a representative of Standard Oil, a company (represented by Sullivan and Cromwell) whose shady government dealings Voorhis had exposed, was present at the meeting which selected Nixon as a candidate.32

Nixon and the Dulles Brothers, August 11, 1948 – and Harry Dexter White

Most accounts of Nixon’s career point to an important meeting between Nixon and John Foster Dulles at the latter’s Republican Party headquarters in the Roosevelt Hotel on August 11, 1948, a meeting attended also by Allen Dulles and Douglas Dillon of Dillon Read, “one of the banking firms that [had] financed Hitler.”33 The conventional account is that Nixon approached the Dulleses with the proceedings from the House Un-American Affairs Committee (HUAC) on which he sat.34 Virtually all accounts say that their discussion concerned Alger Hiss.

 

John Foster Dulles, Vice-President Richard Nixon, and the Shah of Iran

It is probable however that when Nixon met with the Dulles brothers on August 11, 1948, the most urgent matter discussed was not Hiss, but the man then principally targeted by HUAC’s investigation – Harry Dexter White.

White had been the main focus of HUAC attention in 1948, both when Elizabeth Bentley had testified on July 31, and Whittaker Chambers on August 3. White and Lauchlin Currie, Bentley’s two principal targets (together with William Donovan’s law partner Duncan Lee), were due to testify in reply on August 13 (two days after the Dulles-Nixon meeting), along with Alger Hiss’s brother Donald. All three men would deny Bentley’s charges in their entirety, including Bentley’s charge (corroborated by Chambers) that White had “placed Communists in government posts to influence policy.”35

Chambers of course would be vindicated by Hiss’s ultimate conviction, twice, on perjury charges. But the main importance of Hiss at the Dulles-Nixon meeting on August 11, 1948, was as a challenge to the credibility of Chambers, a witness against the far more important target of White.36 One of the two men, either Hiss or Chambers, was apparently guilty of perjury. And Truman’s Justice Department was in the process of preparing a perjury indictment against Chambers, a key witness against White.37

 

Alger Hiss After His Conviction on Perjury Charges

Matters would change five days later. On August 16, three days after his stressful HUAC testimony, White died, after suffering two swift heart attacks. It was then that Hiss became by default HUAC’s principal target (and the key to Thomas Dewey’s presidential ambitions in the same year).

I mention all this because of the suggestion of many authors that, in post-war Washington, either White had to be discredited, or a number of those involved in the Wall Street-Berlin financial axis, including not just Thomas McKittrick but possibly also Prescott Bush (and perhaps even Bush’s lawyer Allen Dulles), risked being indicted. As Glen Yeadon and John Hawkins write,

White…was arguably one of the government’s most important postwar economists. However, due to his liberal economic policies, as well as his relentless pursuit of the financial dealings of large corporations with the Nazis, he had to be removed.38

Death did remove White on August 16, 1948, five days after the Dulles-Nixon meeting on August 11. But whereas most accounts say White died of a heart attack (e.g. Black, Richard M. Nixon, 118), the well-informed journalist Willard Edwards reported in 1949 that White’s cause of death, after being admitted to hospital with a heart attack, was in fact an overdose of digitalis.39

Summers charges that in August 1948, as the HUAC investigation of Alger Hiss

faltered in the face of Hiss’s denials, Nixon received confirmation that Hiss had indeed known Chambers. It came, according to CIA sources, from Allen Dulles. Dulles, who had had a run-in with Hiss years earlier, was at this time in close contact with his former chief, Donovan, and was likely to be privy to whatever the OSS had learned about Hiss.40

And Summers asks whether a secret weapon used by the Dulleses and Nixon against White and Hiss was a tendentious interpretation of material which existed about White and Hiss in the then secret VENONA transcripts of deciphered Soviet cable traffic:

A fascinating question, still unresolved, is whether Nixon’s secret sources – J. Edgar Hoover, Allen Dulles, or other OSS/CIA contacts – were aware by 1948 of the deciphered VENONA messages – and of the ALES cable in particular [of March 30, 1945]– that seem to point to Hiss’s guilt.41

He argues suggestively that “Allen Dulles may well have learned” of the VENONA evidence; and “if as reported he briefed Nixon on the case – then therein may perhaps lie the explanation for Nixon’s confidence in his pursuit of Hiss.”42 This theory would also explain why Nixon, backed by Hoover, relied on allegations that now look extremely dubious – the most dubious of all (and yet the most persuasive at the time) being the so-called Pumpkin Papers.

 

Richard Nixon in a Moment of Triumph

The grand jury convened to indict Chambers was persuaded in December 1948 by Nixon, in an extraordinary performance by a Congressman, to indict Hiss instead. Nixon did so by the controversial act of giving the grand jury copies of films from the “Pumpkin Papers.”

Nixon had been warned by a fellow Congressman that the film belonged to the House and should not be given to the grand jury.

But Nixon, as he later wrote in his book ”Six Crises,” saw the film as crucial evidence of Hiss’s guilt, was convinced the Justice Department was not taking the investigation seriously and feared that the grand jury might seek to indict Chambers for perjury instead of Hiss.43

It is clear that in the case of the Rosenbergs the VENONA evidence played a key role in their identification and prosecution.44 Because, for national security reasons, it could not be revealed at their trial that the Soviets’ code had been broken, substitute evidence, some of it unconvincing, was used to obtain conviction. The result was to subject the U.S. justice system to a bifurcation of knowledge, between the public evidence presented in open courts, and a deeper history known only to those cleared for the secrets of the deep state.

 

“ALES” in the VENONA Files — Was This Alger Hiss?

Something like this bifurcation appears to have occurred also in the still disputed cases against first Harry Dexter White and then Alger Hiss.

Nixon, Hiss, and the Pumpkin Papers

What is clear is that judicial process in the Hiss case was overridden and predetermined by Nixon’s election-year persecution of Hiss in the media. In an essentially favorable biography of Nixon, Conrad Black concedes that “Nixon attacked Hiss however he could, having conducted a press assault after he had sworn under oath to maintain confidentiality about HUAC’s executive session proceedings.”45 Speaking to his White House staff on July 1, 1971, and contemplating a similar strategy against the leakers of the Pentagon Papers, Nixon himself recalled:

We won the Hiss case in the papers. We did. I had to leak stuff all over the place. …. It was won in the papers. We have to develop now a program, a program for leaking out information. We’re destroying these people in the papers.46

 

And in 1948 the newspapers eventually took seriously, as mainstream historians like Stephen Ambrose have continued to take seriously, the “Pumpkin Papers” — five microfilm47 rolls planted in an outdoor pumpkin by Whittaker Chambers, where they were retrieved by investigators the next day. Two of these rolls contained classified State Department cables on economic relations with Germany, and on Sino-Japanese affairs.48 Three more were withheld for decades: according to Nixon, “the State Department still felt…that publication…would be injurious to the national security.” In response to a FOIA suit, Alger Hiss in 1975

was allowed to examine the three withheld rolls of microfilm. Two were from the U.S. Navy Department and contained instructions on how to use fire extinguishers, life rafts, and chest parachutes; the third roll was blank.49

It would seem that “national security” had been invoked to protect, not the film, but the reputation of those like Nixon who exploited it.50

The Pumpkin Papers, in other words, amounted to far less than what the press and the public believed. But the Pumpkin Papers were a media coup at the time, thanks to an elaborate stratagem, designed to keep the papers in the hands of HUAC and out of the hands of Truman’s hostile Justice Department. The stratagem, designed with the approval of Hoover, was the work of Nixon, HUAC Chief Investigator Robert Stripling, and an almost forgotten mastermind of the Pumpkin Papers scenario: Washington journalist Bert Andrews of the New York Herald Tribune.51

On December 1, 1948, UP carried a wire story, stating, “The Justice Department investigation [of Hiss and Chambers] is about to die for lack of evidence…. Unless something new turned up soon, officials said, there would be little use going to grand jury … to see if there were grounds for a perjury charge against either man.”52 That same night, Stephen Ambrose writes, Stripling and Nixon drove out to Chambers’ Westminster farm and heard from Chambers that he had “another bombshell.”

You keep that second bombshell,” Nixon said. Don’t give it to anybody except the committee. Why he did not issue a subpoena then and there on Chambers for the remaining documents [the Pumpkin Papers] is another of the many mysteries in the case. In any event, he did not — he and Stripling drove back empty-handed…. Back in Washington, Nixon phoned Bert Andrews [who told him] “get hold of Bob Stripling. Tell him to serve a blanket subpoena on Chambers to produce anything and everything he still has in his possession.53

A pro-Nixon biography summarizes the consequences:

The next evening, in a cloak-and-dagger scene that fired the national imagination, an agent of the Committee served a subpoena on the ex-Communist; Chambers led him in darkness to a pumpkin in his garden, and from the pumpkin he drew five rolls of microfilm containing photostatic copies of confidential and secret documents stolen from the State Department. A New York Grand Jury, on the verge of indicting Whittaker Chambers for perjury, reversed itself when Nixon rushed to New York and testified that it must have been Hiss who lied in saying he had not turned official documents over to Chambers.54

This account fails to mention that, as a conservative website now concedes, the pumpkin was one Chambers “had hollowed out the night before” – i.e. the night of Nixon’s visit.55

 

The Hollowed-Out Pumpkin at Whittaker Chambers’ Farm

What also fired the national imagination were the dramatic photos of Nixon, who had left on a sea voyage, returning “in theatrical fashion, transferring from his liner to a coast guard seaplane, then flying to Florida to be met by a posse of reporters.”56 This is the answer to Ambrose’s mystery of why the subpoena was not served by Nixon on December 1, nor the microfilm rolls simply taken.

The Chamber-Hiss controversy…was once again front-page news. … Reporters and photographers swarmed to Westminster. Even staid dailies ran pictures with arrows indicating the pumpkin patch. And there was the microfilm. Its contents remained secret and under twenty-four hour guard…. However [Stripling] did let Bert Andrews read some of the documents.57

In all of this Nixon was coached by Andrews “on how to handle the Hiss-Chambers confrontation.”58 David Halberstam adds that

By this time Andrews was not just a reporter covering a story, he was friend adviser, press officer, and reporter for Nixon…. He had steadied Nixon and advised him, and kept him advised of other developments in the case through his sources in the White House…. Andrews proved to be an invaluable connection and friend. He not only helped brief the younger, rawer Nixon on strategy, he helped legitimize him with other reporters.59

Press reaction to the Pumpkin Papers at the time was rather mixed, with many liberal journalists still inclined to favor the well-spoken Hiss over the young upstart Nixon. But that support waned after Hiss’s conviction in 1950, possibly influenced by Russia’s successful test of an atom bomb. Public criticism of the “Pumpkin Papers” drama – or farce – became closely restricted to Hiss’s waning supporters, especially after the convictions of the Rosenbergs during the Korean War, when the choice presented to everyone was now whether to side with the government, or the Communist enemy.

By 1968 the columnist Drew Pearson was a maverick in his unpopular reproof of the US press for having “glossed over the fact that the pumpkin papers had been planted there as a phony but sensational plot so [Nixon] could discover them and make headlines.”60 But I believe Pearson’s salty reproof to have been justified.

Press coverage of the “Pumpkin Papers” in 1948 was intense, because the public was aroused by legitimate concerns much wider than the fate of Alger Hiss. One larger issue – how much the U.S. should commit to supporting Chiang Kai-shek – aroused a narrower segment of U.S. public opinion than another: how Roosevelt and Churchill could at Yalta in 1945 have ratified the delivery of Catholic eastern Europe into the hands of Stalin.

Hiss had accompanied Roosevelt and his Secretary of State Edward Stettinius to Yalta. Few today would ascribe to the “falsely claimed” charge by Senator McCarthy “that Hiss had been integrally involved in drafting the Yalta agreements.”61 But at the time the possibility of treason by White and Hiss was an unresolved question, exploited vigorously by Republican campaign manager Herbert Brownell in his unsuccessful 1948 campaign to elect Governor Thomas Dewey, and his successful campaign in 1952 to elect Eisenhower. It thus helped make John Foster Dulles Secretary of State, and Allen Dulles Director of Central Intelligence.

The two brothers promptly illustrated their break with Truman’s foreign policy by approving what Truman had rejected, the use of CIA resources to rescue the Anglo-Iranian Oil Company (now BP) from nationalization by Iran. The gates had been opened to four decades in which the resources of the American deep state would be used to defend U.S. corporate interests abroad by crushing local governments that had been democratically elected — from Guatemala in 1954 to Panama in 1989.62

The claims against White and Hiss continued for years to feed the phobic hysteria we remember as McCarthyism. And unfortunately they continue to the present.63

On the institutional level the results of the Washington-Wall Street conflict, initially at least, were less depressing. Germany was reconstructed as the strongest economy of western Europe; however Nazism did not seriously revive. The era of private banking influence, as symbolized by the BIS, was also restored, but within a new framework which also incorporated the public institutions of the International Monetary Fund and the World Bank.

For a quarter century, until it ended under Nixon in 1971, the Bretton Woods system largely worked, and the BIS functioned as part of its infrastructure. America prospered; and there were signs of a healthy reduction in income disparity, not just in America, but also in the Third World. Discussing the researches of the economist Thomas Piketty into the reduced income inequality of that era, Richard Brinkman has written, “The immediate period after WWII, from 1950 to 1973, has come to be called the Golden Age…. a close approximation to the best that in practice can be obtained from a capitalist economy.”64

Thanks to the Vietnam War and other factors, America went off the gold standard in 1971. Since then the dollar has been sustained by a system of high petroleum prices, highly profitable to the oil cartel, for which increasingly impoverished third world countries are forced to pay in dollars.

That is another story, too complex to be told here. But a major factor in the eventual collapse of the Bretton Woods system was the success of the Dulles brothers in freeing Wall Street and the oil majors from the restraints of law.

Peter Dale Scott, a former Canadian diplomat and English Professor at the University of California, Berkeley, is the author of Drugs Oil and War, The Road to 9/11, and The War Conspiracy: JFK, 9/11, and the Deep Politics of War. His most recent prose book is American War Machine: Deep Politics, the CIA Global Drug Connection and the Road to Afghanistan. His website, which contains a wealth of his writings, is here.

Recommended citation: Peter Dale Scott, “The Dulles Brothers, Harry Dexter White, Alger Hiss, and the Fate of the Private Pre-War International Banking System” The Asia-Pacific Journal, Vol. 12, Issue 16, No. 3, April 21, 2014.

Notes

1 Steve Coll, Private Empire: ExxonMobil and American Power (New York: Penguin Press, 2012), 19-20. The name Exxon was used from 1973.

2 Bryce Wood, The Dismantling of the Good Neighbor Policy (Austin: University of Texas Press, 1985), 159: “In writing to Truman on 3 May 1961 about the Bay of Pigs fiasco, Acheson said: Why we ever engaged in this asinine Cuban adventure, I cannot imagine. Before I left [the department] it was mentioned to me and I told my informants how you and I had turned down similar suggestions for Iran and Guatemala and why I thought this Cuban idea had been put aside, as it should have been” [citing Dean Acheson, Among friends: personal letters of Dean Acheson, ed, David S. McLellan and David C. Acheson (New York: Dodd, Mead, 1980), 159].

3 Tom Wicker, New York Times, April 29, 2966.

4 Paul S. Boyer et al., The Enduring Vision: a history of the American people, Volume II (Lexington, MA: D.C. Heath and Co., 1995), 812.

5 Some in Washington wished to indict other Wall Street figures for wartime collaboration with Nazi Germany. Among those investigated were Herbert Walker and his son-in-law Prescott Bush (father of George H.W. Bush), for their role in representing the American interests of Fritz Thyssen, the German mogul who financed Hitler. According to John Loftus, Allen Dulles may also have been involved: “If the investigators realized that the US intelligence chief in postwar Germany, Allen Dulles, was also the Rotterdam bank’s lawyer, they might have asked some very interesting questions. They did not know that Thyssen was Dulles’ client as well. Nor did they ever realize that it was Allen Dulles’s other client, Baron Kurt Von Schroeder who was the Nazi trustee for the Thyssen companies which now claimed to be owned by the Dutch. The Rotterdam Bank was at the heart of Dulles’ cloaking scheme, and he guarded its secrets jealously” (John Loftus, “How the Bush Family Made Its Fortune from the Nazis,” Tetrahedron.org, September 27, 2000; cf. John Loftus and Mark Aarons, The Secret War Against the Jews New York: St. Martin’s Press, 1994], 358-60).

6 Adam LeBor, “Meet the American Banker Who Helped Hitler Loot Jewish Gold—While Spying for the OSS,” Tablet: A New Read on Jewish Life, August 30, 2013,

7 Frank W. Thackeray, ed., Events that Changed Germany (Westport, CT: Greenwood Press, 2004), 170. For text of JCS 1067, see here.

8 James Srodes, Allen Dulles: master of spies (Washington: Regnery, 2009), 373.) For a relatively dispassionate account of Allen Dulles’s wartime opposition to Roosevelt’s intentions to de-industrialize Germany, see e.g. Stuart Eizenstat, co-

ordinator, “U.S. and Allied Efforts To Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War,” 37:

“Dulles looked forward to a postwar settlement that envisioned the United States working closely with European business and banking circles to reshape Western and Central Europe according to American interests.” See also Stuart Eizenstat, Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II (Jackson, TN: PublicAffairs, 2009).

9 Two other relevant examples: Truman in 1945 terminated General Donovan’s plans to convert OSS into a peacetime CIA; but two years later he was persuaded to accept a plan, drafted largely by Allen Dulles, for just such a CIA. In 1948 Defense Secretary James Forrestal preferred that funds for the anti-Communist parties in the 1948 Italian election should be raised privately, and the hat was passed at the elite Brook Club in New York. But Allen Dulles, still just a lawyer, persuaded the CIA to take over the funding program.

10 Adam LeBor, “Meet the American Banker Who Helped Hitler Loot Jewish Gold—While Spying for the OSS,” Tablet: A New Read on Jewish Life, August 30, 2013.

11 Eric Rauchway, “How the Soviets saved capitalism,” TLS: The Times Literary Supplement, April 5, 2013.

12 Anthony Summers with Robbyn Swan, The Arrogance of Power: The Secret World of Richard Nixon (New York: Viking, 2000), 63.

13 “On February 8, 1951, about a month before the scheduled start of the trial, the Joint Congressional Committee on Atomic Energy met in secret session in Washington to discuss the Rosenberg prosecution… The main purpose of the meeting was to determine what classified information could be made public at the trial” (Curt Gentry, J. Edgar Hoover: the man and the secrets [New York: Norton, 1991], 421)

14 Adam Lebor, Tower of Basel: the shadowy history of the secret bank that runs the world (New York: Public Affairs, 2013), 17. Cf. p. 37: “The Standard Oil-IG Farben agreement set the pattern for a series of powerful cartels. John Foster Dulles carried out much of the pioneering legal work for these.”

15 Lebor, Tower of Basel, 95. White was the principal author of the so-called Morgenthau Plan to deindustrialize Germany. At the same time, White “tried without success [against Morgenthau] to soften the plan by allowing Germany to rebuild the industries in the Ruhr under international supervision” (James M. Boughton, “The Case against Harry Dexter White: Still Not Proven” [IMF Working Paper WP/00/149, 2000], 12.) This fact challenges one of the common claims against White: that he wished to weaken Germany in order to please the USSR.

16 Lebor, Tower of Basel, 96.

17 Lebor, Tower of Basel, 121-22, 124. Cf. Benn Steil, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the making of a new world order (Princeton: Princeton University Press, 2013); James Calvin Baker, Bank for International Settlements: Evolution and Evaluation (Westport, CT: Greenwood Press, 2002), 7: “During World War II, some attempts were made to abolish the BIS, so the Federal Reserve delayed joining the Board. After the war, the International Monetary Fund (IMF) and the World Bank were established at the Bretton Woods, New Hampshire, conference to form agencies to facilitate the finance and development operations of the United Nations. U.S. officials believed the BIS operations might be co-opted by these new agencies. However, the United States position on this matter was mellowed by the belief that the BIS might be able to perform beneficial operations with the IMF especially and, perhaps, with the World Bank.”

18 Frank W. Thackeray, ed., Events that Changed Germany (Westport, CT: Greenwood Press, 2004), 170. For text of JCS 1067, see here.

19 Lebor, Tower of Basel, 120.

20 James Srodes, Allen Dulles: master of spies (Washington: Regnery, 2009), 373.) For a relatively dispassionate account of Allen Dulles’s wartime opposition to Roosevelt’s intentions to de-industrialize Germany, see e.g. Stuart Eizenstat, co-

ordinator, “U.S. and Allied Efforts To Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War,” 37:

“Dulles looked forward to a postwar settlement that envisioned the United States working closely with European business and banking circles to reshape Western and Central Europe according to American interests.” See also Stuart Eizenstat, Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II (Jackson, TN: PublicAffairs, 2009).

21 Lebor, Tower of Basel, 138.

22 James Calvin Baker, The Bank for International Settlements: Evolution and Evaluation (Westport, CT: 2002), 203. Cf. John Singleton, Central Banking in the Twentieth Century (Cambridge: Cambridge University Press, 2011), 149: “In 1948 the BIS agreed to return 3,740 kg of looted gold to the original owners. After this concession, the US assets of the BIS, which had been frozen during the war, were unblocked.”

23 Loftus and Aarons, The Secret War Against the Jews, 109-13. Citing testimony from a former naval intelligence officer, Daniel Harkins, they claim that some of the funds were cycled through the post-war “World Commerce Corporation, with Allen Dulles, naturally, as their lawyer” (110). Cf. Mark Aarons and John Loftus, Unholy Trinity: The Vatican, The Nazis, and The Swiss Banks (New York: St. Martin’s/ Griffin, 1998), 278-79. I discuss their claims in American War Machine, 54-56.

24 Baker, Bank for International Settlements, 203.

25 Lebor, Tower of Basel, 140.

26 For the case against White, see e.g. John Earl Haynes and Harvey Klehr, Venona: Decoding Soviet Espionage in America (New Haven: Yale University Press, 1999), 125-26, 139. For rebuttal, see e.g. James M. Boughton, “The Case against Harry Dexter White: Still Not Proven,” IMF Working Paper WP/00/149, 2000, 1:”Evaluation of that [VENONA and other new] evidence in the context of White’s career and worldview casts doubt on the case against him and provides the basis for a more benign explanation.”

27 Whittaker Chambers, Witness (New York: Random House, 1952], 431; discussion in David Chambers (Whittaker Chambers’ grandson), “The Baffling Harry White,” History News Network, May 21, 2012.

28 John Loftus and Mark Aarons, The Secret War Against the Jews, 222; citing “Confidential interviews, former agents, U.S. CIC; former officers, U.S. MIS; former officers and agents, SSU, CIG, and OPC” (557n17).

29 Anthony Summers with Robbyn Swan, The Arrogance of Power: The Secret World of Richard Nixon (New York: Viking, 2000), 63.

30 Loftus and Aarons, The Secret War Against the Jews, 221.

31 On March 26, 1943, Congressman Jerry Voorhis introduced a resolution in the House of Representatives calling for an investigation of the Bank for International Settlements, including “the reasons why an American retains the position as president of this Bank” (John Spritzler The people as enemy: the leaders’ hidden agenda in World War Two [Montreal: Black Rose Books, 2003], 97; cf. Lebor, Tower of Basel, 97).

32 Summers, The Arrogance of Power, 46-47. With limited evidence, Russell Baker also suspects that Prescott Bush, another prominent member of the BIS German-American financial complex, may have flown to California and participated in the Nixon campaign (Family of secrets: the Bush dynasty, the powerful forces that put it in the White House, and what their influence means for America New York: Bloomsbury Press, 2009], 162-164).

33 Loftus and Aarons, The Secret War Against the Jews, 156. Dillon Read had handled 29 percent of the Wall Street financing of German reparations (Antony C. Sutton, Wall Street and the rise of Hitler [Seal Beach, CA: '76 Press, 1976], 29).

34 Conrad Black, Richard M. Nixon: A Life in Full (New York: PublicAffairs, 2007), 113.

35 Lewis Hartshorn, Alger Hiss, Whittaker Chambers and the Case That Ignited McCarthyism, 42. Today almost no one believes this. The accepted charges against White are that he shared information, and possibly passed documents, that reached the Soviet Union.

36 The sensational charges against Hiss, such as that he was the architect of betrayal at Yalta, would come later.

37 G. Edward White, Alger Hiss’s Looking-glass Wars: The Covert Life of a Soviet Spy

(Oxford: Oxford University Press, 2004), 62.

38 Glen Yeadon and John Hawkins, The Nazi Hydra in America (Joshua Tree, CA: Progressive Press, 2008), 195; cf. 193-94, 273-74, 368-70, etc.

39 Willard Edwards, “Hiss spy paper linked to late treasury aid,” Chicago Daily Tribune, November 29, 1949, 1-2. The doctor who signed White’s death certificate (and who was not present when White died) later denied that digitalis was a factor. More recently the right-wing author John Koster has charged (with no evidence other than a contemporary movie which White might have seen) that White overdosed on digitalis in order to commit suicide (John P. Koster, Operation Snow: how a Soviet mole in FDR’s White House triggered Pearl Harbor Washington: Regnery Publishing, 2012], 204-05).

40 Summers, The Arrogance of Power, 63; citing Peter Grose, Gentleman spy: the life of Allen Dulles (Boston: Houghton Mifflin, 1994), 297n (run-in).

41 Summers, The Arrogance of Power, 78. An anti-Hiss author has implied the opposite, suggesting from an annotation in the file that the identification of ALES as Hiss was made much later, in 1969 (White, Alger Hiss’s looking-glass wars, 225). But a partially declassified FBI memo from 1950, viewable on line here, makes it clear that by then the FBI was already investigating the possibility that Hiss was ALES, who had reportedly flown to Moscow after the Yalta conference (“The Alger Hiss Story: Venona and the Russian Files”).

42 Summers, Arrogance of Power, 78.

43 Benjamin Weiser, “Nixon Lobbied Grand Jury to Indict Hiss in Espionage Case, Transcripts Reveal,” New York Times, October 12, 1999: “Judge Peter K. Leisure of Federal District Court in Manhattan, who ordered the release after reviewing detailed summaries of the transcripts, had ruled that an exception to traditional grand jury secrecy should be made for the archive.

“‘The court finds the public has a significant interest in disclosure of Nixon’s testimony,’ Judge Leisure wrote. ‘Grand jury testimony by a Congressional official allegedly attempting to influence a grand jury’s charging decisions is of inherent and substantial historical importance.’”

44 Herbert Romerstein and Eric Breindel, The Venona Secrets: Exposing Soviet Espionage and America’s Traitors (Washington: Regnery, 2000), 233-34.

45 Conrad Black, Richard M. Nixon: A Life in Full (New York: PublicAffairs, 2007), 122.

46 “President Nixon Remembers the Alger Hiss Case: Selected References from the Nixon Tapes,” Stanley I. Kutler (ed.), Abuse of Power: The New Nixon Tapes (New York: Free Press, 1997), 7.

47 In addition, the materials produced by Chambers “included a long letter in Harry White’s own handwriting” (Haynes and Klehr, Venona: decoding Soviet espionage in America, 139).

48 Black, Richard M. Nixon, 131. My on-line investigations have failed to find a more detailed description of these cables. Black’s account should however be enough to establish that, if the microfilms did in fact come from Hiss, then Hiss was not, as many believe, the “ALES” of VENONA cable traffic, whose work was described as “obtaining military information only” (see facsimile reproduced in Summers, Arrogance of Power, 493).

49 Gentry, J. Edgar Hoover, 362n; quoting from Richard Nixon, The Memoirs of Richard Nixon (New York: Grosset and Dunlap, 1978), 69. The five rolls are now deposited in the National Archives (Record Group 60.3.5), Black was in error when he claimed that the withheld rolls contained “Navy Department secret files” (Black, Richard M. Nixon, 130); the Navy files were publicly available.

50 This impression is corroborated by the odd fact that the records of the long-defunct HUAC committee “were sealed, in 1976 [under Ford], for an additional fifty years” (Summers, Arrogance of Power, 77).

51 At the time Andrews “vowed that he could make Nixon president” (Tim Weiner, Enemies: a history of the FBI [New York: Random House, 2012], 476n).

52 We now know that on December 3 the Justice Department notified the FBI that an indictment of Chambers [for perjury] was contemplated (Athan Theoharis, Chasing spies: how the FBI failed in counterintelligence but promoted the politics of McCarthyism in the Cold War years [Chicago : Ivan R. Dee, 2002], 115; citing Allen Weinstein, Perjury: the Hiss-Chambers case New York : Random House, 1997], 271). Not surprising, since by this time Chambers was a self-admitted perjurer!

53 Stephen E. Ambrose, Nixon: The Education of a Politician 1913-1962, 128 (emphasis in original); Robert O. Blanchard, ed., Congress and the news media (New York, Hastings House, 1974), 305.

54 Gary Allen, Nixon: The Man Behind the Mask (Boston, Western Islands, 1971].

55 “Alger Hiss,” emphasis added. The brevity of the storage in the pumpkin (not known at the time) is also conceded by John Earl Haynes and Harvey Klehr: “The film had actually been in the pumpkin only since that morning…. Chambers explained later that he had briefly hidden the film in the pumpkin because he had feared that agents from Hiss’s defense team would steal it” (John Earl Haynes and Harvey Klehr, Early Cold War spies: the espionage trials that shaped American politics [Cambridge: Cambridge University Press, 2006], 108).

56 Summers, The Arrogance of Power, 69. The day before leaving, Nixon reportedly told the House doorkeeper, William Miller, “’I’m going to get on a steamship, and you will be reading about it/ I am going out to sea, and they are going to send for me. You will understand when I get back.’… Coast Guard logs also reportedly suggest that arrangements for Nixon’s return had been made even before his ship left harbor in New York, which would confirm suspicion that the trip was a charade to ensure maximum publicity.” (loc. cit., 70; citing William Miller, Fishbait: The Memoirs of the Congressional Doorkeeper Englewood Cliffs, NJ: Prentice Hall, 1977], 41-).

57 Sam Tanenhaus, Whittaker Chambers: A Biography (New York: Random House, 1997), 305.

58 Donald A. Ritchie, Reporting from Washington: The History of the Washington Press Corps (New York: Oxford University Press, 2005), 75. Ritchie, like many other authors, writes that Nixon (and Stripling) went out to the pumpkin field accompanied by Bert Andrews (Donald A. Ritchie, Reporting from Washington: The History of the Washington Press Corps New York: Oxford University Press, 2005], 75). Ritchie and the rest are probably relying on the badly edited posthumous memoir of Andrews, ed. Peter Andrews, A tragedy of history; a journalist’s confidential role in the Hiss-Chambers case (Washington: Robert. B. Luce, 1962]. Cf. U.S. State Department, History of the Bureau of Diplomatic Security of the United States, 56:On December 2, 1948, Andrews joined Nixon on a trip to Chambers’ farm near Westminster, Maryland.” But on December 2, Nixon was already beginning his preplanned sea voyage.

59 David Halberstam, The Powers That Be (New York: Knopf, 1979), 260.

60 Drew Pearson, Toledo Blade, August 4, 1968. Pearson added, “Thanks in part to Bert Andrews of the New York Herald Tribune, Mr. Nixon’s mentor, the headlines helped catapult Mr. Nixon into the Senate.”

61 Sheldon Anderson, Condemned to repeat it: “lessons of history” and the making of U.S. Cold War containment policy (Lanham, MD: Lexington Books, 2008), 95.

One who still blames the Yalta handover on Hiss (and on Harry Hopkins, another alleged Soviet agent) is Christina Shelton, in Alger Hiss: Why He Chose Treason (New York: Simon & Schuster, Threshold Editions, 2012), 121-22.

62 The J. Henry Schröder & Co. Bank and J. Henry Schroder Banking Corporation (Schrobanco, the firm of which Allen Dulles had been an officer) had a financial stake in all three of Allen Dulles’ major CIA covert operations. Schröder had financed the creation of Anglo-Persian (later Anglo-Iranian) oil: thus Frank Cyril Tiarks was a partner both in J. Henry Schröder & Co., and also in the Anglo-Iranian Oil Company (1917-1948). (He was also a member of the Ribbentrop-inspired Anglo-German Fellowship and of the British Union of Fascists.) Schrobanco had a stake in the International Railways of Central America, a firm developed in conjunction with what became United Fruit in order to ship out United Fruit’s bananas in Guatemala. Both Schröders and Schrobanco were heavily invested in Cuban sugar; and M.E. Rionda, president of Cuba Cane Corporation, was a member of Schrobanco’s board.

63 The surrender at Yalta of Eastern Europe to Soviet domination is still blamed on Hiss (and on Harry Hopkins, another alleged Soviet agent) by retired DIA intelligence analyst Christina Shelton, in Alger Hiss: Why He Chose Treason (New York: Simon & Schuster, Threshold Editions, 2012), 121-22. Cf. Ann Coulter, Treason: liberal treachery from the cold war to the war on terrorism (New York: Crown Forum, 2003).

64 Richard Brinkman, Corporate Pharaohs: A Vicious Circle of Globalization (Xlibris Corp, 2013.), 234.

http://japanfocus.org/-Peter_Dale-Scott/4109

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Yue Yuen shoe strike expands from Guangdong to Jiangxi

Yue Yuen shoe strike expands from Guangdong to Jiangxi

China Times
April 21, 2014

A week after 30,000 workers from the Yue Yuen shoe factory in Dongguan in southern China’s Guangdong province took to the streets over invalid contracts, 2,000 workers from another of the company’s factories, located in Ji’an in eastern China’s Jiangxi province, have also joined the strike, reports the Hong Kong-based Oriental Daily.

Operated by the Taiwan-based Pou Chen Group, the Yue Yuen factory in Dongguan’s Gaobu township is one of the biggest shoe factories in China and produces footwear for more than 30 top brands such as Nike, Adidas and Reebok. The factory currently employs more than 60,000 workers.

The protest began on Apr. 14 when workers found out that the factory had failed to pay its employees their full social security and housing fund contributions.

A senior factory worker surnamed Li told the web portal Nanfang that he was unable to use his permanent work contract as evidence of local residence in order to enroll his child in a local school because he was told his contract was not legally binding. Migrant workers like Li must present documents which prove to the local authority that they and their family members have stayed in the province for at least five years before their children are allowed to study in the area.

In addition to the invalid contracts, the factory also cheated its workers in regards to their insurance packages, with some having to pay 40,000 yuan (US$6,400) while others only had to pay 10,000 yuan (US$1,600) for the same scheme. Following these issues coming to light, workers decided to strike to demand that the factory sign new contracts with them and improve their working conditions.

So far, the factory has arranged a round of negotiations with the strikers, however a consensus has yet to be reached.

Following the action of their counterparts in Dongguan, 2,000 workers from Ji’an decided to down tools in protest over unfair treatment on Apr. 20. The protest has remained peaceful but many of the workers have expressed anti-Taiwanese sentiment, the Oriental Daily said, adding that protesters have demanded that their Taiwanese supervisors leave the country.

http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1103&MainCatID=11&id=20140421000013

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China ship seizure hikes redress fears

China ship seizure hikes redress fears

The Japan Times
April 21, 2014

China’s seizure over the weekend of a containership owned by shipping giant Mitsui O.S.K Lines for its failure to respond to a wartime compensation order related to a contractual dispute has raised concerns in Japan that further assets may be confiscated if more rulings favor Chinese plaintiffs.

The container vessel was seized Saturday at a port in Zhejiang province, Shanghai municipal authorities said Sunday.

The seizure appears to mark the first time that an asset belonging a Japanese company has been seized over litigation related to wartime compensation.

The Maritime Court said that if Mitsui does not honor its legal obligations, it will dispose of the ship in accordance with the law.

Local media and municipal authorities identified the seized vessel as the Baosteel Emotion.

On Monday, Tokyo conveyed its concerns to Beijing through diplomatic channels.

Chief Cabinet Secretary Yoshihide Suga said the court action was “extremely regrettable,” adding that the sudden seizure may damage bilateral economic ties.

“The Chinese side’s actions, including the seizure, may rock the foundation of the 1972 joint statement’s spirit that normalized Japan-China diplomatic relations. And it may have an intimidating effect on Japanese firms doing business in China,” Suga told reporters at a news conference.

“I’m deeply concerned and strongly hope China will take appropriate measures,” he added.

In the 1972 joint statement normalizing postwar Sino-Japanese ties, China declared that it “renounces its demand for war reparations from Japan.”

Suga said that Tokyo has asked Beijing to provide related information on the case.

“We will think about concrete measures (against the seizure) while working closely with Mitsui,” he said.

China countered that the seizure has nothing to do with issues related to war reparations between the two countries. Foreign Ministry spokesman Qin Gang played down the gravity of the case, saying it was just “a common commercial contract dispute.”

“The Chinese government sticks to upholding all the principles” of the 1972 joint communique, he told a news conference. “This position remains unchanged.”

He also emphasized that “China will continue to protect the lawful rights and interests of foreign-invested companies in China in accordance with the law.”

In a statement Monday, Tokyo-based Mitsui said it was seeking ways to compromise with the plaintiff and deliberating on its response.

In 2007, the court ordered Mitsui to pay 190 million yuan ($26 million) to a Chinese family to compensate for contractual obligations left unfulfilled by Mitsui’s predecessor, Daido Shipping Co.

Mitsui appealed the ruling, but the Supreme People’s Court rejected Mitsui’s petition for retrial in December 2012,affirming the decision.

In 1936, a year before the Second Sino-Japanese War began, Daido rented two ships on a one-year contract from Zhongwei Shipping Co. But the ships were commandeered by the Imperial Japanese Navy and later sank at sea.

The suit was brought against Mitsui by grandsons of the founder of Zhongwei Shipping Co.

Mitsui has argued it is not liable for paying compensation, given that the ships Daido rented were requisitioned by the Japanese military.

A string of compensation lawsuits related to wartime forced labor in Japan have recently been filed in China against Japanese corporations, reflecting the apparent intention of the country’s leadership, headed by President Xi Jinping, to toughen relations with Japan.

Rulings made in favor of such plaintiffs could lead to further confiscations of assets in China.

As of December 2011, a total of 22,790 Japanese companies were operating in China.

http://www.japantimes.co.jp/news/2014/04/21/national/china-ship-seizure-hikes-redress-fears/#.U1X3sSh8vzI”

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U.S. force in Afghanistan may be cut to less than 10,000 troops

U.S. force in Afghanistan may be cut to less than 10,000 troops

By Missy Ryan and Arshad Mohammed
Reuters
April 21, 2014

(Reuters) – The number of U.S. troops in Afghanistan may drop well below 10,000 – the minimum demanded by the U.S. military to train Afghan forces – as the longest war in American history winds down, Obama administration officials briefed on the matter say.

Since Afghanistan’s general election on April 5, White House, State Department and Pentagon officials have resumed discussions on how many American troops should remain after the current U.S.-led coalition ends its mission this year.

The decision to consider a small force, possibly less than 5,000 U.S. troops, reflects a belief among White House officials that Afghan security forces have evolved into a robust enough force to contain a still-potent Taliban-led insurgency. The small U.S. force that would remain could focus on counter-terrorism or training operations.

That belief, the officials say, is based partly on Afghanistan’s surprisingly smooth election, which has won international praise for its high turnout, estimated at 60 percent of 12 million eligible votes, and the failure of Taliban militants to stage high-profile attacks that day.

The Obama administration has been looking at options for a possible residual U.S. force for months.

“The discussion is very much alive,” said one U.S. official who asked not to be identified. “They’re looking for additional options under 10,000″ troops.

There are now about 33,000 U.S. troops in Afghanistan, down from 100,000 in 2011, when troop numbers peaked a decade into a conflict originally intended to deny al Qaeda sanctuary in Afghanistan after the September 11, 2001, attacks.

QUESTIONS ABOUT AFGHAN FORCES

With British and other foreign troops scheduled to depart in lock step with U.S. soldiers, the size of any residual U.S. force could add fuel to a debate in Washington over whether Taliban-led violence will intensify amid the vacuum left by Western forces, as some U.S. military officials expect.

Military leaders, including American General Joe Dunford, who heads U.S. and NATO forces in Afghanistan, has identified 10,000 soldiers as the minimum needed to help train and advise Afghan forces fighting the insurgency, arguing a smaller force would struggle to protect itself.

During a March visit to Washington, Dunford told lawmakers that without foreign soldiers supporting them, Afghan forces would begin to deteriorate “fairly quickly” in 2015. The Afghan air force, still several years away from being self-sufficient, will require even more assistance, he said.

A smaller U.S. force could have other unintended consequences, possibly discouraging already skeptical lawmakers from fully funding U.S. commitments to help fund Afghan forces.

At their current size, Afghan forces will cost at least $5 billion in 2015, a sum far beyond the reach of the Afghan government. The United States has been widely expected to be the largest outside funder for those forces.

The Taliban and other militants have been weakened by more than 12 years of Afghan and NATO assaults, but they still can obtain supplies and plan attacks from Afghanistan’s remote mountain regions and tribal areas of neighboring Pakistan.

Some analysts are wary of reducing the U.S. presence to less than 10,000 troops.

“If the White House opts to keep a lower number of troops, it will put more pressure on the Afghan forces and run the risk of squandering their recent progress against the Taliban,” said Lisa Curtis, a former CIA analyst and State Department official now with the conservative Heritage Foundation, a think tank in Washington.

A U.S. force significantly below 10,000 might focus almost exclusively on counter-terrorism, tracking militants affiliated with a greatly weakened but resilient al Qaeda insurgency based on the Afghanistan-Pakistan border, officials said.

Debate over the size of a residual U.S. force follows the failure of the U.S. and Afghan governments to finalize a Bilateral Security Agreement (BSA) to authorize a U.S. troop presence in Afghanistan beyond 2014, the deadline for U.S. and NATO troops to conclude their fight against the Taliban.

“The longer we go without a BSA, the more challenging it will be to plan and execute any U.S. mission,” said Laura Lucas Magnuson, a White House spokeswoman. “Furthermore, the longer we go without a BSA, the more likely it will be that any post-2014 U.S. mission will be smaller in scale and ambition.”

Results of the recent presidential election may not be known for weeks, or months if runoffs take place. But leading candidates have said they will sign the agreement, which has been on hold because of reservations from current Afghan President Hamid Karzai.

In late February, Obama announced that the United States might seek to sign the deal with Karzai’s successor and possibly keep troops there after 2014 to train and advise Afghan forces and pursue al Qaeda militants.

Some U.S. officials believe Afghan forces will require substantial, hands-on support from foreign troops, in addition to help from the United States.

(Additional reporting by Patricia Zengerle; Editing by Jason Szep and David Lindsey)

http://www.reuters.com/article/2014/04/21/us-usa-afghanistan-idUSBREA3K1DS20140421

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Investigating Surveillance: German Parliament Divided over Snowden Subpoena

Investigating Surveillance:  German Parliament Divided over Snowden Subpoena

Berlin has insisted it wants to scrutinize NSA spying in Germany. But actually inviting Edward Snowden to testify before a paraliamentary investigation is proving delicate. Some in Chancellor Merkel’s party are now casting doubt on Snowden’s suitability as a witness.

By SPIEGEL Staff
Der Spiegel
April 14, 2014

It was, of course, purely coincidental that Glenn Greenwald found himself in Berlin last week, just as the debate in Germany was swelling over whether Edward Snowden should be invited to testify before the NSA investigative committee in the Bundestag, the federal parliament.

Greenwald had flown in from Brazil, where he lives, to speak at the presentation of the Liberty Award, a prize honoring foreign correspondents from Germany. And he didn’t pass up the opportunity to pay tribute to Snowden, the man whose source material he has relied on in helping to shed light on the global surveillance system maintained by the United States and Britain. “Every country,” said Greenwald, 47, has a moral obligation to help Snowden. That, he added, is particularly true for Germany. Top politicians in Berlin were targeted by the NSA and its British counterpart GCHQ, and Germany would have been none the wiser but for Snowden. Meanwhile, Snowden’s visa for political asylum in Russia, where he now lives, is set to expire this summer.

 

Just a few hours prior to Greenwald’s speech, and not even two kilometers away, politicians belonging to Chancellor Angela Merkel’s governing coalition made clear that help would not soon be forthcoming. The Greens and the Left Party, both in the opposition, had moved to invite Snowden to testify before the parliament’s NSA committee, but conservative and Social Democratic members of the committee are in no hurry and it remains unclear when they might reach a decision. Opposition politicians are furious.

The squabbling within the committee — which led to the resignation of Chairman Clemens Binninger of Merkel’s Christian Democratic Union (CDU) — is more than just the standard Berlin bickering. Ten months after the NSA spying affair began, the parliamentary investigation has presented Merkel’s government with the perfect opportunity to finally demonstrate its resolve in getting to the bottom of US and UK spying activities in Germany. Berlin has frequently insisted it is committed to probing the depths of the scandal, with Interior Minister Thomas de Maizière (of the CDU) even claiming that “boundless” American surveillance would be addressed. But if the handling of Snowden provides any indication, the government’s resolve is to be doubted.

Lasting Damage

It is perhaps not surprising that Berlin would seem to have gotten cold feet. Snowden’s presence in Germany would be delicate in the extreme from a foreign policy perspective. And trans-Atlanticists in the Merkel government have for months been uncomfortable with the fact that many of Snowden’s closest supporters have chosen the German capital as their base of operations. Should Snowden, 30, be allowed to join them, many in Berlin fear that US-German cooperation could suffer lasting damage, particularly on intelligence issues.

Were Snowden to testify before the Bundestag investigative committee, says Heather Conley, a former US diplomat who is now with the Center for Strategic and International Studies in Washington, it would be a “major irritant in the US-German bilateral relationship.” His testimony, she continues, “will continue to deepen anti-American sentiment in Germany and elsewhere in Europe” — just at a time when the Ukraine crisis is demonstrating just how important trans-Atlantic ties are.

Partly for that reason, Merkel decided early on not to grant Snowden asylum in Germany. Her fear of a clash with the US is just as great as her concern over a potentially divisive domestic political debate. Government sources say it could lead to a grave fissure in her governing coalition, which pairs her conservatives with the center-left SPD. The final say over visa issues lays with the Interior Ministry, under the control of de Maizière, one of Merkel’s closest allies.

There is, however, an exception: Were a parliamentary investigative committee to subpoena a witness from abroad, the Interior Minister’s discretion “could be reduced to nil,” according to an expert opinion provided by the Bundestag’s research service. On the contrary, he would then be required to do everything within his power to prepare such a visit, unless, the expert opinion notes, the welfare of the state is at risk. That, though, is a “question that can only be answered on an individual basis” — and parliament has a significant say in the answer.

Both the Greens and the Left Party have been adamant that Snowden should be allowed to come to Germany and the expert opinion produced by the Bundestag’s research service has made it clear that the investigative committee provides the best tool to reach that goal. Once Snowden is here, both opposition parties would like to see him stay.

That, though, is an impossibility from the perspective of Merkel’s conservatives. “Were Snowden to come to Germany,” says conservative domestic policy spokesman Stephan Mayer, “then the government, in my opinion, would be required to accede to the legally unobjectionable extradition request from the US.” A final decision in this hypothetical could ultimately lie with the judiciary.

‘A Dead-End’

Senior Green party figure Hans-Christian Ströbele says that it is paramount for the investigative committee to learn as much about American surveillance practices as possible. But, he notes, “there is a second important aspect for me: We have to make it possible for a man, whom we have so much to thank for, to live a normal life in a country based on the rule of law.” And there isn’t much time to achieve that goal, he adds. Snowden’s asylum visa in Russia expires in August and nobody knows how long Russian President Vladimir Putin might continue to allow his presence.

The Left Party and the Greens sought to petition for a Snowden subpoena in the very first session of the investigative committee, but conservatives rejected the move. Indeed, the committee chairman, Clemens Binninger, unexpectedly resigned in response last Wednesday, saying that he stepped down to protest opposition efforts to turn the committee into a Snowden circus. In his statement, Binninger said that Snowden was not of particular interest as a witness. “Focusing only on him would lead the committee into a dead-end,” he said.

The Greens immediately became suspicious and claimed, with no evidence whatsoever, that Binninger had been pressured into resignation by the Chancellery. Merkel, according to the Greens, didn’t want to have a potential Snowden subpoena hanging over her during her trip to Washington at the beginning of next month. Binninger was quick to deny the accusations. “During the entire preparations for the committee, there were no discussions with the Chancellery — formal or otherwise — regarding how to approach the witness Snowden,” he said, adding that his decision was his alone. Ströbele is not convinced and is now considering subpoenaing witnesses from the Chancellery.

But the Chancellery too was caught off guard by Binninger’s sudden resignation. Chancellery sources note that Binninger was apparently unprepared for the political nature of most parliamentary investigative committees. To be sure, Merkel’s staff has also denied accusations that it sought to influence the investigation, but sources also admit that Merkel is eager to avoid travelling to the US under the shadow of an impending Snowden visit to Berlin.

During the investigative committee’s second session last Thursday — now under the leadership of Patrick Sensburg — coalition politicians listed a number of concerns related to the potential Snowden subpoena. Myriad questions pertaining to such a visit would have to be resolved, including organizational issues and Russia’s potential stance.

The When and the How

When the Left Party and the Greens refused to back down, coalition lawmakers resorted to a procedural trick. Although the opposition can make as many motions to collect evidence as they like, the majority decides on when and how such motions are addressed.

The majority decided to delay the vote on whether to subpoena Snowden until its next meeting. By then, the government is to determine if and how such a visit could be arranged. Whether coincidence or not, the government has been asked to provide that information by May 2, precisely the date on which Chancellor Merkel embarks on her next trip to the United States to meete with President Barack Obama.

Committee Chairman Sensburg believes this is sensible, saying that it must be determined in advance whether Snowden has “anything relevant” to say. “Only then can we consider the question of when, where and how” it can take place, he said. The politician also said that the questioning didn’t necessarily have to take place in Germany. The SPD’s senior official on the committee holds a similar view. “I admonish all members of the committee not to use the Snowden issue to create media attention,” he said. “That would be cheap and inappropriate.”

Green Party politician Konstantin von Notz, on the other hand, is annoyed. “The Christian Democrats and the SPD are defending the government’s interests,” he said. “If that continues, then the next four years are going to be terrible.” He says his faction is considering challenging the procedural tricks now being used by the majority at Germany’s Federal Court of Justice. Notz said he finds it absurd that there has been a debate for weeks now on whether or not Snowden would make an important witness. “He is one of the most important ones,” he said.

One man suspected early on that people would seek to discredit the whistleblower: Snowden himself. Even as he began his flight, he said that the American government would seek to impose long-term damage to his credibility as a witness.

Snowden wasn’t a senior employee at the NSA, but he was an unusually perceptive and critical one. He says he made the decision to turn against his employer when, while working as a systems administrator, he stumbled across a document from the NSA’s general inspector dating from 2009. In it, an NSA lawyer at the agency’s headquarters in Fort Meade, Maryland, outlined the tectonic changes that had been made to America’s security structures following the Sept. 11, 2001, terrorist attacks. It described in detail how the NSA had been given wider leeway for its operations with significant support from former Vice President Dick Cheney.

Significant Value

That’s the point at which Snowden came up with the idea of obtaining as many documents as he could. He had been planning his departure from the NSA for over a year. US officials claim that he then used a webcrawler to automatically detect and download data. Among other areas, they claim he used the software program to obtain reports from the powerful technical surveillance unit, which had a sort of online black board behind the firewall where reports were posted with information about various secret operations.

Information about that alone could be significantly valuable to the parliamentary committee. It would allow members of German parliament, who know little about the NSA’s structures, to learn how the US intelligence service is organized, which data is stored, where it is stored and for how long, and the importance of certain types of documents. Even just the way he handled the material shows how deeply he dove into the NSA’s inner workings. He sorted the data into categories that document the NSA’s various secret programs — the surveillance of other countries or Internet infrastructure, for example. He stored the some 50,000 documents from Britain’s Government Communications Headquarters (GCHQ) separately. The papers include diverse clues that are also important for the investigation in Germany. They would spotlight, for example, the close cooperation between the NSA and the largest American telecommunications companies, like AT&T — a cooperation which, documents show, sought to direct part of international data traffic through the United States to make it possible for the NSA to access it.

Of particular relevance to Germany is a program called “Tempora” which is operated jointly by the NSA and GCHQ. The program, operated out of Bude in Cornwall, is used by the intelligence services to tap parts of international data traffic in the large fiber optic cables that run across Europe. “Tempora is the first ‘I save everything approach’ (‘full take’) in the intelligence world,” Snowden says. He claims “it sucks in all data, no matter what it is, and which rights are violated by it.” Last week, Bloomberg reported that the NSA has been exploiting the Heartbleed bug in order to tap encrypted data. The US government has denied the allegation.

One of the parliamentary committee’s key objectives is to determine the extent to which the NSA is surveilling the German people. Tempora would seem to be an important piece of this puzzle. Snowden spent a lot of time looking into Tempora and would likely be able to say a lot about the program.

‘Think Twice’

Snowden’s German lawyer, Wolfgang Kaleck, is convinced of this. Last Friday, he assured members of the committee in writing that Snowden occupied a “unique work status” in the US intelligence service structure. “He possesses expertise that for this reason alone is of crucial importance because he may be the only specialist of such rank who would also be willing to or is in a position to share his knowledge with the NSA investigative committee.”

 

The decision on whether the former NSA employee testifies is a decision that Snowden himself must make. Diplomatic sources in Berlin suggest that Snowden would have to “think twice” about traveling to Germany. Even if he had hopes for applying for amnesty here, the risks for the 30-year-old in traveling from Moscow to Berlin would be considerable.

Memories in Berlin are still fresh of how vigorous efforts were in July 2013 to force a plane carrying Bolivian President Evo Morales to land in Vienna. At the time, the Americans suspected that Edward Snowden was on board the aircraft.

BY NIKOLAUS BLOME, HUBERT GUDE, RENE PFISTER, JÖRG SCHINDLER AND HOLGER STARK

Translated from the German by Charles Hawley and Daryl Lindsey

http://www.spiegel.de/international/germany/german-parliament-divided-over-snowden-subpoena-in-nsa-investigation-a-964293.html

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NSA Put Merkel on List of 122 Targeted Leaders

NSA Put Merkel on List of 122 Targeted Leaders

By Ryan Gallagher
The Intercept
March 29, 2014

Secret documents newly disclosed by the German news magazine Der Spiegel on Saturday shed more light on how aggressively the National Security Agency and its British counterpart have targeted Germany for surveillance.

A series of classified files from the archive provided to reporters by NSA whistleblower Edward Snowden, also seen by The Intercept, reveal that the NSA appears to have included Merkel in a surveillance database alongside more than 100 others foreign leaders. The documents also confirm for the first time that, in March 2013, the NSA obtained a top-secret court order against Germany as part of U.S. government efforts to monitor communications related to the country. Meanwhile, the British spy agency Government Communications Headquarters targeted three German companies in a clandestine operation that involved infiltrating the companies’ computer servers and eavesdropping on the communications of their staff.

Der Spiegel, which has already sketched out over several stories the vast extent of American and British targeting of German people and institutions, broke the news last October that Merkel’s cellphone calls were being tapped by the NSA – sparking a diplomatic backlash that strained US-Germany relations. Now a new document, dated 2009, indicates that Merkel was targeted in a broader NSA surveillance effort. She appears to have been placed in the NSA’s so-called “Target Knowledge Base“ (TKB), which Der Spiegel described as the central agency database of individual targets. An internal NSA description states that employees can use it to analyze “complete profiles“ of targeted people.

A classified file demonstrating an NSA search system named Nymrod shows Merkel listed alongside other heads of state. Only 11 names are shown on the document, including Syria’s Bashar al-Assad, Belarus’s Alexander Lukashenko, and Colombia’s Alvaro Uribe – the list is in alphabetical order by first name – but it indicates that the full list contains 122 names. The NSA uses the Nymrod system to “find information relating to targets that would otherwise be tough to track down,” according to internal NSA documents. Nymrod sifts through secret reports based on intercepted communications as well as full transcripts of faxes, phone calls, and communications collected from computer systems. More than 300 “cites” for Merkel are listed as available in intelligence reports and transcripts for NSA operatives to read.

merkel-nymrod

But the NSA’s surveillance of Germany has extended far beyond its leader. Der Spiegel reporters Marcel Rosenbach and Holger Stark – together with The Intercept’s Laura Poitras – described a separate document from the NSA’s Special Source Operations unit, which shows that the Obama administration obtained a top-secret court order specifically permitting it to monitor communications related to Germany. Special Source Operations is the NSA department that manages what the agency describes as its “corporate partnerships” with major US companies, including AT&T, Verizon, Microsoft, and Google. The order on Germany was issued by the Foreign Intelligence Surveillance Court on March 7, 2013. The court issues annual certifications to the NSA that authorize the agency to intercept communications related to named countries or groups; it has provided similar authorization, Der Spiegel reported, for measures targeting China, Mexico, Japan, Venezuela, Yemen, Brazil, Sudan, Guatemala, Bosnia and Russia.

The NSA on Friday declined to comment to The Intercept about its role in conducting surveillance of Germany and deferred questions to the National Security Council and the Justice Department. The DOJ had not responded at the time of publication. National Security Council spokeswoman Caitlin Hayden told The Intercept that the Obama administration was “not monitoring and will not monitor the communications of Chancellor Merkel.” However, Hayden did not deny that the surveillance had occurred in the past – and declined to rule out spying on other senior German officials going forward. “We have made clear that the United States gathers foreign intelligence of the type gathered by all nations,” she said.

The secret files reveal some specific German targets – none of whom appear to have been suspected of any wrongdoing. One undated document shows how British GCHQ operatives hacked into the computer servers of the German satellite communications providers Stellar and Cetel, and also targeted IABG, a security contractor and communications equipment provider with close ties to the German government. The document outlines how GCHQ identified these companies’ employees and customers, making lists of emails that identified network engineers and chief executives. It also suggests that IABG’s networks may have been “looked at” by the NSA’s Network Analysis Center.

GCHQ’s aim was to obtain information that could help the spies infiltrate “teleport” satellites sold by these companies that send and receive data over the Internet. The document notes that GCHQ hoped to identify “access chokepoints” as part of a wider effort alongside partner spy agencies to “look at developing possible access opportunities” for surveillance.

In other words, infiltrating these companies was viewed as a means to an end for the British agents. Their ultimate targets were likely the customers. Cetel’s customers, for instance, include governments that use its communications systems to connect to the Internet in Africa and the Middle East. Stellar provides its communications systems to a diverse range of customers that could potentially be of interest to the spies – including multinational corporations, international organizations, refugee camps, and oil drilling platforms.

The chief executives of Cetel and Stellar both told Der Spiegel they were surprised that their companies had been targeted by GCHQ. Christian Steffen, the Stellar CEO, was himself named on GCHQ’s list of targets. “I am shocked,” he told the magazine. IABG did not respond to a request for comment.

GCHQ issued a standard response when contacted about its targeting of the German companies, insisting that its work “is carried out in accordance with a strict legal and policy framework which ensures that our activities are authorised, necessary and proportionate.”

But German authorities may take a different view on the legalities of the clandestine intrusions. Earlier this month – prior to the latest revelations – German Federal Public Prosecutor Harald Range told the newspaper Die Tageszeitung he was already conducting a probe into possible “espionage offenses” related to the targeting of the country. “I am currently reviewing whether reasonable suspicion exists,” Range said, “for an actionable criminal offense.”

https://firstlook.org/theintercept/article/2014/03/29/der-spiegel-nsa-ghcq-hacked-german-companies-put-merkel-list-122-targeted-leaders/

 

 

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‘A’ for Angela: GCHQ and NSA Targeted Private German Companies and Merkel

‘A’ for Angela:  GCHQ and NSA Targeted Private German Companies and Merkel

Documents show that Britain’s GCHQ intelligence service infiltrated German Internet firms and America’s NSA obtained a court order to spy on Germany and collected information about the chancellor in a special database. Is it time for the country to open a formal espionage investigation?

By Laura Poitras, Marcel Rosenbach and Holger Stark
Der Spiegel
March 29, 2014

The headquarters of Stellar, a company based in the town of Hürth near Cologne, are visible from a distance. Seventy-five white antennas dominate the landscape. The biggest are 16 meters (52 feet) tall and kept in place by steel anchors. It is an impressive sight and serves as a popular backdrop for scenes in TV shows, including the German action series “Cobra 11.”

Stellar operates a satellite ground station in Hürth, a so-called “teleport.” Its services are used by companies and institutions; Stellar’s customers include Internet providers, telecommunications companies and even a few governments. “The world is our market,” is the high-tech company’s slogan.

 

Using their ground stations and leased capacities from satellites, firms like Stellar — or competitors like Cetel in the nearby village of Ruppichteroth or IABG, which is headquartered in Ottobrunn near Munich — can provide Internet and telephone services in even the most remote areas. They provide communications links to places like oil drilling platforms, diamond mines, refugee camps and foreign outposts of multinational corporations and international organizations.

Super high-speed Internet connections are required at the ground stations in Germany in order to ensure the highest levels of service possible. Most are connected to major European Internet backbones that offer particularly high bandwidth.

Probing German Internet Traffic

The service they offer isn’t just attractive to customers who want to improve their connectivity. It is also of interest to Britain’s GCHQ intelligence service, which has targeted the German companies. Top secret documents from the archive of NSA whistleblower Edward Snowden viewed by SPIEGEL show that the British spies surveilled employees of several German companies, and have also infiltrated their networks.

One top-secret GCHQ paper claims the agency sought “development of in-depth knowledge of key satellite IP service providers in Germany.”

The document, which is undated, states that the goal of the effort was developing wider knowledge of Internet traffic flowing through Germany. The 26-page document explicitly names three of the German companies targeted for surveillance: Stellar, Cetel and IABG.

The operation, carried out at listening stations operated jointly by GCHQ with the NSA in Bude, in Britain’s Cornwall region, is largely directed at Internet exchange points used by the ground station to feed the communications of their large customers into the broadband Internet. In addition to spying on the Internet traffic passing through these nodes, the GCHQ workers state they are also seeking to identify important customers of the German teleport providers, their technology suppliers as well as future technical trends in their business sector.

The document also states that company employees are targets — particularly engineers — saying that they should be detected and “tasked,” intelligence jargon for monitoring. In the case of Stellar, the top secret GCHQ paper includes the names and email addresses of 16 employees, including CEO Christian Steffen. In addition, it also provides a list of the most-important customers and partners. Contacted by SPIEGEL, Stellar CEO Steffen said he had not been aware of any attempts by intelligence services to infiltrate or hack his company. “I am shocked,” he said.

‘Servers of Interest’

Intelligence workers in Bude also appear to have succeeded in infiltrating competitor Cetel. The document states that workers came across four “servers of interest” and were able to create a comprehensive list of customers. According to Cetel CEO Guido Neumann, the company primarily serves customers in Africa and the Middle East and its clients include non-governmental organizations as well as a northern European country that uses Cetel to connect its diplomatic outposts to the Internet. Neumann also says he was surprised when he learned his firm had been a target.

The firm IABG in Ottobrunn appears to have been of particular interest to the intelligence service — at least going by a short notation that only appears next to the Bavarian company’s name. It notes, “this may have already been looked at by NSA NAC,” a reference to the NSA’s network analysis center.

IABG’s history goes back to the 1970s. The company was established as a test laboratory for aerospace and space technologies. The German Defense Ministry was an important client as well. Although the company has been privately held since 1993, it has continued to play a role in a number of major projects connected at least in part to the government. For example, it operated the testing facility for Germany’s Transrapid super high-speed maglev train and also conducted testing on the Airbus A380 super jumbo jet and the Ariane rocket, the satellite launcher at the heart of the European space program.

IABG also does considerable business with the Bundeswehr, Germany’s armed forces. The company states that its “defense and security” unit is “committed to the armed forces and their procurement projects.” These include solutions for “security issues, for prevention and reactions against dangers like terrorism and attacks against critical infrastructure.”

Like Stellar and Cetel, the company also operates a satellite ground station — one that apparently got hacked, according to the GCHQ document. It includes a list of IABG routers and includes their network addresses. In addition, it contains the email addresses of 16 employees at the company named as possible targets. IABG did not respond to a request for comment from SPIEGEL. In a statement, GCHQ said it does not comment on intelligence-related issues but “all of GCHQ’s work is carried out in accordance with a strict legal and policy framework which ensures that our activities are authorised, necessary and proportionate.”

Classic Acts of Espionage

Monitoring companies and their employees along with the theft of customer lists are classic acts of economic espionage. Indeed, such revelations ought be a case for the German federal public prosecutors’ office, which in the past has initiated investigations into comparable cases involving Russia or China.

So far, however, German Federal Public Prosecutor Harald Range has been struggling with the NSA issue. Some experienced investigators have had a problem applying the same criteria used to assess intelligence services like Russia’s to those of the United States and Britain. Federal prosecutors in Karlsruhe have provided a preliminary assessment, but so far no decision has been made about whether the agency will move forward with legal proceedings.

Under review at the moment are allegations that the NSA monitored the chancellor’s mobile phone and also conducted mass surveillance on the communications of millions of Germans. Range recently told the Berlin-based daily Die Tageszeitung the affair was “an extremely complicated issue.”

“I am currently reviewing whether reasonable suspicion even exists for an actionable criminal offense,” he told the newspaper. “Only if I can affirm that can I then address the question of whether a judiciary inquiry would run contrary to the general public interest — a review required for any espionage-related crime” in Germany. A decision is expected soon.

The launch of legal proceedings against GCHQ agents or NSA employees would quickly become a major political issue that would further burden already tense trans-Atlantic relations. An additional problem is the fact that Range is in possession of very few original documents, particularly those pertaining to the NSA’s monitoring of Chancellor Merkel.

A secret NSA document dealing with high-ranking targets has provided further indications that Merkel was a target. The document is a presentation from the NSA’s Center for Content Extraction, whose multiple tasks include the automated analysis of all types of text data. The lists appear to contain 122 country leaders. Twelve names are listed as an example, including Merkel’s.

The list begins with “A,” as in Abdullah Badawi, the former Malaysian prime minister, and continues with the presidents of Peru, Somalia, Guatemala and Colombia right up to Belarusian President Alexander Lukashenko. The final name on the list, No. 122, is Yulia Tymoshenko, who was Ukrainian prime minister at the time. The NSA listed the international leaders alphabetically by their first name, with Tymoshenko listed under “Y”. Merkel is listed under “A” as the ninth leader, right behind Malawian President Amadou Toumani Touré, but before Syrian dictator Bashar Assad.

Target person No. 9: A top secret NSA list includes the names of government leaders who have been tasked as targets. The "Nymrod" database of citations derived from intelligence agencies, transcripts of intercepted fax, voice and computer-to-computer communication, includes 300 references to German Chancellor Angela Merkel. Zoom

Target person No. 9: A top secret NSA list includes the names of government leaders who have been tasked as targets. The “Nymrod” database of citations derived from intelligence agencies, transcripts of intercepted fax, voice and computer-to-computer communication, includes 300 references to German Chancellor Angela Merkel.

The document indicates that Angela Merkel has been placed in the so-called “Target Knowledge Database” (TKB), the central database of individual targets. An internal NSA description states that employees can use it to analyze “complete profiles” of target persons. The responsible NSA unit praises the automated machine-driven administration of collected information about high-value targets.

 

The searchable sources cited in the document include, among others, the signals intelligence database “Marina,” which contains metadata ingested from sources around the world. The unit also gives special attention to promoting a system for automated name recognition called “Nymrod”. The document states that some 300 automatically generated “cites,” or citations, are provided for Angela Merkel alone. The citations in “Nymrod” are derived from intelligence agencies, transcripts of intercepted fax, voice and computer-to-computer communication. According to internal NSA documents, it is used to “find information relating to targets that would otherwise be tough to track down.” Each of the names contained in Nymrod is considered a “SIGINT target.”

The manual maintenance of the database with high-ranking targets is a slow and painstaking process, the document notes, and fewer than 200,000 targets are managed through the system. Automated capture, by contrast, simplifies the saving of the data and makes it possible to manage more than 3 million entries, including names and the citations connected to them.

The table included in the document indicates the capture and maintenance of records pertaining to Merkel already appears to have been automated. In any case, the document indicates that a manual update was not available in May 2009. The document could be another piece of the puzzle for investigators in Karlsruhe because it shows that Chancellor Merkel was an official target for spying.

In addition to surveillance of the chancellor, the Federal Prosecutor’s Office is also exploring the question of whether the NSA conducted mass espionage against the German people. The internal NSA material also includes a weekly report dating from March 2013 from the Special Sources Operations (SSO) division, the unit responsible for securing NSA access to major Internet backbone structures, like fiber optic cables.

A License to Spy

In the document, the team that handles contact with US telecommunications providers like AT&T or Verizon reports on the legal foundations with which it monitors the data of certain countries. According to the SSO report, FISA, the special court responsible for intelligence agency requests, provided the NSA with authorization to monitor “Germany” on March 7, 2013. The case number provided in the ruling is 13-319.

Graphic: The SSO report citing FISA authorization to monitor Germany Zoom

Graphic: The SSO report citing FISA authorization to monitor Germany

The documents do not provide sufficient information to precisely determine the types of data included in the order, and the NSA has said it will not comment on the matter. However, lawyers at the American Civil Liberties Union believe it provides the NSA with permission to access the communications of all German citizens, regardless whether those affected are suspected of having committed an offense or not. Under the FISA Amendments Act, the NSA is permitted to conduct blanket surveillance in foreign countries without any requirement to submit individual cases for review by the court, whose deliberations and rulings are top secret.

 

According to the partial list in the document, the court has provided similar authorization for countries including, China, Mexico, Japan, Venezuela, Yemen, Brazil, Sudan, Guatemala, Bosnia and Russia. In practice, the NSA uses this permission in diverse ways — sometimes it uses it to monitor telecommunications companies, and at others it surveils individuals.

 

“So far, we have no knowledge that Internet nodes in Germany have been spied on by the NSA,” Hans-Georg Maassen, president of the Federal Office for the Protection of the Constitution, Germany’s domestic intelligence agency, which is also responsible for counterintelligence measures, said last summer.

It’s also possible the Americans don’t even have to do that, at least not directly. It’s quite feasible they have better access through major US providers like AT&T or Verizon whose infrastructure is used to process a major share of global Internet traffic. The NSA could use that infrastructure to access data from Germany. This would be totally legal from the American perspective — at least according to the FISA court.


 

This article is based on the SPIEGEL book, “The NSA Complex: Edward Snowden and the Path to Total Surveillance“. The book was published this week in German by DVA, a subsidiary of Random House. You can read the English-language archive of SPIEGEL’s reporting on the NSA scandal here.

Editor’s note: You can read an additional report on spying by the NSA and GCHQ on Germany and Chancellor Merkel on The Intercept.

Translated from the German by Daryl Lindsey

http://www.spiegel.de/international/germany/gchq-and-nsa-targeted-private-german-companies-a-961444.html

 

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