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“We must be careful to avoid seeking intelligence simply for its own sake”

Newly released documents reveal the intelligence community in the early 1970s through the eyes of a former senior bureaucrat, writes Alan Fewster

Alan Fewster 1 August 2014 3577 words

There was a “natural tendency in covert intelligence operations to create a cloak of secrecy over what might in fact be quite legitimate inquiries,” observed Sir Keith Waller (above). National Archives of Australia L63248

In August 1974, prime minister Gough Whitlam announced a sweeping inquiry into Australia’s intelligence services. While the existence of the Australian Security Intelligence Organisation had become widely known after Russian diplomats Vladimir and Evdokia Petrov defected to Australia in 1954, the other arms of state security were all but unknown outside the tight-knit intelligence community.

Whitlam chose a NSW Supreme Court judge, Robert Marsden Hope, as royal commissioner, and Hope chose one of Australia’s most respected diplomats, Sir Keith Waller, as one of a number of consultants to assist him. At Hope’s request, Waller provided a detailed assessment of the intelligence services, a redacted copy of which I have obtained under the Archives Act. His views, published here for the first time, provide a rare perspective on the shadowy world of intelligence – the perspective of a senior “consumer” of the agencies’ findings who had been working with spies on and off since the 1930s. They also foreshadow changes in intelligence gathering that would occur over the next four decades.

One of the first recruits to Australian diplomacy, Waller had served in China during the second world war, and later in Brazil, the Philippines, London and Bangkok. When Australia reopened its Moscow embassy in 1959 after the Petrov affair, he went there as ambassador. At the height of the Vietnam war, before he ran the Department of Foreign Affairs, he spent six years in Washington as Australia’s first professional ambassadorial appointee.

In addition to ASIO, Waller’s submission to the Hope commission examined the work of three other intelligence agencies. Although its existence was still not publicly acknowledged, the Australian Secret Intelligence Service, or ASIS, had been around since 1952. The Joint Intelligence Organisation, or JIO, had been set up under the defence department as a kind of intelligence coordinating body in 1969; it worked closely with the National Intelligence Committee, which was supposed to set intelligence collection priorities. The Defence Signals Division, which predated ASIO by two years, had operated under military cover using different names since 1947. Waller was most familiar with the work of ASIO and ASIS, although he was, of course, well-positioned to comment on the Defence Signals Division and JIO.

As a permanent head of External Affairs, later Foreign Affairs, Waller had often considered the question of whether Australia really needed its own secret foreign intelligence service. He concluded that the best answer he could give was “not now, but probably in the future.”

Major foreign policy decisions were not, he wrote, greatly influenced by “scraps of intelligence,” whether acquired overtly or covertly. While they helped build a broad picture on which a decision was made, these fragments were ultimately peripheral. “What we need,” he wrote to Hope in evocative prose, “are the main features of the King portrayed, not large quantities of blue sea and white clouds on which he is floating.”

For Waller, there was a grave danger that the “intrinsic fascination” of raw intelligence would detract from wider considerations. Thus, if an ASIS operator were to learn from an unimpeachable source that Soviet president Leonid Brezhnev was suffering from terminal cancer, the news “would send a shock through the whole intelligence community.” But although it would undoubtedly create waves and attract secret acclaim in the major world capitals, Waller questioned whether “it would move Australia’s foreign or defence policy by a hair’s breadth. “In short,” he concluded, “we must be careful to avoid seeking intelligence simply for its own sake.”

On the other hand, anyone familiar with northern hemisphere agriculture travelling by train through the Ukraine in late March (as Waller himself had done as ambassador) could hazard a guess about the prospects for the Soviet winter wheat harvest. This information, which was of great interest to Australian wheat growers, could be obtained “without espionage on the ground or by satellite.”

On this basis, Waller argued that while ASIS was “probably not needed at present” – mid 1975 – “conditions may change, and a secret intelligence organisation cannot be built in a day or a year.” Skills, such as the recruitment and control of agents, had to be learned “very largely by experience… A day may come when we find ourselves in a more hostile environment than at present. As an insurance, we probably need to keep alive a small but highly trained secret intelligence service on which we could build, should there ever be a less benign climate than the present one.”

But was ASIS the “right kind of service”? Waller thought not; it was patterned too closely on Britain’s MI6, which provided its original training. MI6 was intended originally to operate in a European or predominantly white environment. Waller referred to major-general Sir Walter Cawthorn, an Australian-born former military British Indian Army intelligence officer, who headed ASIS from 1960 to 1968. The general, he felt, was “too familiar with the British intelligence system in India, which in its prime was not too far removed from the picture provided in Kim,” the picaresque novel written at the turn of the century by Rudyard Kipling. Neither was America’s CIA a model of “what Australia needs.”

Waller was firmly opposed to ASIS having responsibility for special operations – sabotage and the like – writing that “special operations are best left to bodies such as the SAS.” Although ASIS provided training in special operations, Waller couldn’t believe it was either efficient or ever likely to be used in practice. This kind of work was sometimes important in Europe, “where an agent could easily merge into the background,” but he didn’t consider the conditions were right in Asia, which was the focus of ASIS operations.

Referring to revelations in the United States at the time, where hearings conducted by Senator Frank Church had learned of abuses, illegalities and incompetence at the CIA, Waller said “special political action” – bribery, deception, rumour campaigns, or what the CIA called “dirty tricks” – had “long term political effects,” by which he appeared to mean undesirable side effects. He believed Australia did not have the capacity to conduct such operations, which were by their very nature dangerous and should, therefore, be avoided.

Waller saw no great advantage in making the existence of ASIS public. “The less said about any secret intelligence agency the better,” he wrote. ASIS’s competitors were well aware of the service and knew a number of its principals, “or at least believe they do.” But until its operation was officially confirmed, there must always be an element of doubt. “Let us keep these doubts alive,” he counselled.

In terms of ministerial responsibility for the services, Waller thought either the foreign minister or the defence minister would be appropriate, with the foreign minister having a “slight edge.” It was undesirable that defence staff should be thought to be carrying out covert operations, and preferable that diplomats should “carry the odium of secret affairs.”

What is clear from Waller’s observations is that he tended to the view that the few “diamonds” of intelligence that ASIS gained were scarcely worth the cost and labour involved in collecting them. Much of the information was not timely, or was bland and over-classified. Moreover, not only was ASIS intelligence too much influenced by British and American information, it also “lacked direction.”

Waller thought that these problems could be avoided if the information collected by ASIS were fed into the “normal embassy channels” instead of being filtered through its headquarters in Melbourne, a process he assumed was undertaken to protect sources.

“I doubt whether this is really valid,” Waller wrote. “ASIS station chiefs are supposed to keep the Head of Mission apprised of their information. Very often they fail to do so. Often the Head of Mission simply does not bother to keep track of ASIS reporting because he rates it poorly and prefers his own sources.” In other cases, he went on, ASIS “has ‘recruited’ a local agent by paying him small sums and he receives in return information which although useful could have been obtained by overt means.” There was a “natural tendency in covert intelligence operations to create a cloak of secrecy over what might in fact be quite legitimate inquiries.”

Waller felt that the first step in evaluating ASIS intelligence should be undertaken in the embassy in which the ASIS officer was stationed. His own enquiries had led him to believe that many of ASIS’s “so-called” agents were “worthless” and would be “only too happy to disgorge such information as they have… over the bar.” When a report was attributed to an ASIS “agent, in [redacted] with excellent [redacted] contacts,” how could a reader in Canberra do otherwise but attach credence to it? “In fact, the agent may be a drunken and disgruntled official in some ministry who only keeps his job because his wife is a cousin of the minister.”

To set targets, determine priorities and “generally keep a watch on intelligence matters,” Waller felt that a small committee was needed comprising the permanent heads of Defence, Foreign Affairs, Prime Minister’s and possibly Treasury. He was adamant, however, that this should not be a cabinet committee; he had never known a minister who had both the time and the inclination to give the necessary thought to intelligence matters. A cabinet committee on intelligence would “founder under a mass of detail.”

Waller thought that ASIS should move from Melbourne to Canberra, where it would have ready access to Defence, JIO and Foreign Affairs. Ten years earlier, Canberra would have been too small for such a move to escape attention, but that was no longer the case. The move would be costly, but the long-term result would be advantageous to the armed services and “the users of its product.”

Waller believed that an overhaul of existing intelligence sharing was overdue. The main weakness in the UKUSA, or “Five Eyes,” arrangement, to which Australia was admitted in 1956, was that it was originally drafted to cover the sharing of signals intelligence between Britain and the United States. Any new arrangement putting international liaison on a “proper basis” would need to be of less-than-treaty status, he believed, because a treaty would require ratification by the US Senate. (He didn’t mention that similar ratification would be required by the Australian parliament.)

It was certainly the case that Australia gained “immensely” by having access to large quantities of high-grade US intelligence, which it could not secure from its own resources, but the American government also gained from the arrangement. Australia’s own small output was a “useful supplement” to the larger US effort.

Would Australia receive the same information it now received if it did not reciprocate fully? Waller suspected not. There was a conscious US effort to make Australia a member of the international intelligence community. “We are useful to them because of our standing in the Asian regions and our ability to provide a different slant. If we stopped doing this… there would be a falling off in the United States interest in us as a source of intelligence.”

But Waller also feared that large quantities of US intelligence could mean that “we will either see many problems through American eyes, or at worst, have the American point of view clearly before us.” He had often been asked whether there was a conscious American attempt to “brain-wash” countries like Australia. He didn’t think there was, “but whether conscious or unconscious, the advantage to the United States is obvious.”

The enormous flow of US information undoubtedly had a distorting effect on Australian intelligence assessments. Waller revealed that as secretary of Foreign Affairs he had contemplated establishing a separate set of files that contained only information of US origin. This would enable officers to have clearly in mind what information came from Australia and what from US sources. “But to deny ourselves access to US sources for fear of being tainted would, I believe, be foolish.”

At Hope’s request, Waller had examined embassy and intelligence reporting of the riots in Jakarta in January 1974, and of unrest in what was then Portuguese Timor in February and March 1975. The Jakarta reports were used to determine if there should be any change in Australian policy toward Indonesia (there was not) and if projected visits by foreign minister Don Willesee and prime minister Gough Whitlam should proceed.

Unsurprisingly, Waller found that the diplomats’ reporting was by far the most significant. It was regular, informative, well-sourced and “constructed so that [it] shed maximum light on the picture.” The Defence Signals Division’s reports, by contrast, “were of little assistance, perhaps because we were dealing with an internal power struggle in Indonesia… and in the nature of things little of this surfaced in the traffic read by DSD.” Much of the ASIS reporting was over-classified and given to trivia, or simply retailed gossip that was “endemic” in any capital like Jakarta.

“I found this habit of not identifying sources when in reality there is nothing secret about them, to be very unsatisfactory – although it is a well-established tradition in the intelligence community,” Waller wrote. “If it is to conceal the source of a [redacted] document, it is of course justified. If it merely hides the identity of a [redacted] it is not.”

The occasional high-quality report of a kind not easily available from other sources showed that ASIS could do valuable work with proper direction, Waller wrote. He gave examples, but such is the government’s sensitivity about intelligence reporting on Indonesia that this information is still redacted almost forty years later.

Hope had wanted Waller’s thoughts on how the intelligence agencies might be “controlled” – the lack of which the diplomat confessed had “frequently worried” him over the years. “I never felt that there was sufficient direction given to these organisations,” he wrote. ASIS, for example, “complained quite fairly that they were never told what their targets were.”

This had been particularly true in Indonesia, where the leaders of ASIS and Foreign Affairs, along with the Australian ambassador, were at fault for not assigning more specific tasks to the ASIS station in Jakarta. “The capacity is there. The contacts are there. The information is available,” wrote Waller. “But these things are not being put to their proper use through lack of direction. Too much effort is expended in creating an unnecessary veil of secrecy.”

It had been suggested to Waller that JIO was insufficiently concerned with “economic and resources matters” and was “too oriented towards Defence interests.” It was also said to be “wrong to give Defence service personnel and diplomatic officers places in JIO as of right.” Did this mean that JIO should be a separate career service? Waller didn’t believe so. “By all means let there be a strong career element but some cross-posting from the armed services and Foreign Affairs is in my view of increase [sic] value to both.”

But nor should JIO be part of Foreign Affairs. Intelligence agencies had the luxury of specialisation whereas foreign ministries tended to be full of generalists, even in institutions as well-resourced as the US State Department. “The man on the Cambodian desk in State may have come on promotion from the embassy in Paraguay. In the CIA, he would probably have spent ten or fifteen years studying Cambodia.”

In time, wrote Waller, JIO would develop its own expertise, although it should regard the Department of Foreign Affairs as an important client and should always have input from the diplomats.

If, in Waller’s view, ASIS was little more than a purveyor of cocktail party gossip, JIO was a collection of academic manqués. It could produce “scholarly background briefs” and its daily and weekly bulletins were useful in keeping busy ministers and officials informed, but “this can be done in other places, notably Foreign Affairs… They do not justify JIO’s existence.”

The Defence Signals Division, on the other hand, “was clearly of considerable importance in enabling the government to consider the question: ‘what are Indonesian intentions in regard to Portuguese Timor?’” It was this capacity which justified its existence.

Elsewhere in Australia’s sphere of interest, there was a “serious gap” in knowledge about Japanese intelligence activities. As far as Waller was aware, ASIO’s treatment of Japan as a friendly power put it “outside the range of their scanty resources.” ASIO had looked to Tokyo as a source of information rather than a possible source of espionage. Much of the Japanese intelligence gathering was probably in the economic and commercial field. “It is none the less important for that,” wrote Waller.

Similarly, the Australian government needed to know more about the activities of the Malaysian and Indonesian embassies among the “student population of Australia.” Waller thought that ASIO would argue that these activities were “essentially anti-communist and therefore have their blessing.” He found such a view “simplistic.”

Under the arrangements then in force, the last word on an individual public servant’s security clearance rested with his or her departmental secretary. Waller agreed with Hope that a security assessment appeals system was needed. In his view, whether it be a tribunal of one, a bench of judges or a “mixed tribunal,” it was essential that the presiding officer be trained in the process of judicial examination and the weighing of evidence. Otherwise, wrote Waller, too much responsibility was thrust on to the permanent head.

“The [security clearance] decision may have drastic effects on the livelihood of the person being assessed. If the permanent head takes a wrong decision it may have dire effects on the safety of the state.” Hope had apparently suggested that an “Inspector General” would review “doubtful cases.” Waller saw nothing wrong with this but wondered whether such an official would have sufficient cases to fully occupy his time.

One of the more difficult problems in security assessments was that of “character defects,” which included using alcohol to excess, extramarital relations and male (but not female) homosexuality. Traditionally, homosexual men were regarded as security risks because of the perceived risk of blackmail.

“The problem could be solved by a government decision that the admission of male homosexual relations was no longer a character defect,” wrote Waller. Having said that, however, he believed that there were certain “homosexual cases” where the man in question was a security risk not so much by the “nature of his acts” but by the company he kept.

Just as legislative oversight of the CIA had not worked in the United States, Waller did not believe that parliamentary control of ASIO would work in Australia. “Leaks would occur,” he warned. The responsible committee “would either be given too much or too little information. In either case it would be inefficient.”

In terms of overseeing ASIO, Waller favoured a “mixed committee” of ministers and officials, to whom the director-general could report annually, and which could revise his directive as required. In this way, Waller believed, the director-general would retain his autonomy “within the broad terms of his directive” which would in turn “always be related to current events.”

Waller’s was not exactly a cry in the wilderness for reform, and much of what he called for came eventually to pass. There is now, for example, an inspector-general of intelligence and security, and changes to the security clearance system mean that gay diplomats no longer fear blackmail. The Office of National Assessments was formed in 1977 to handle assessment of foreign intelligence; JIO’s focus has shifted to intelligence relating solely to defence matters, and in 1990 it morphed into the Defence Intelligence Organisation, an all-source military intelligence assessment agency. The Defence Signals Division (recently renamed the Australian Signals Directorate), which Waller saw as “of considerable importance,” proved its worth in East Timor and presumably also in the Middle East.

Despite Waller’s view that any MPs’ committee established to monitor the intelligence community would leak, it has not. As for secret intelligence, the diplomat’s traditional distrust of spooks notwithstanding, almost forty years down the track Waller’s view that ASIS may be needed in future seems nothing if not prescient. •

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