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The CIA coup that changed history

Cryptographer Boris Hagelin. Calle Hesslefors/Getty Images

In the decades after the war an entrepreneurial Swedish cryptographer called Boris Hagelin cornered the market in secret communications. With his cipher machines – typewriters that encrypted messages – spies working for governments the world over could communicate with their masters in complete secrecy. Or so they thought. Because in 1970 the CIA and the West German BND intelligence agency secretly bought Hagelin’s business, Crypto AG, for nearly $6m – and with it the ability to read the encrypted communiqués of all its clients. It was the “intelligence coup of the century”, say Peter Muller and David Ridd in Archive on 4: A Spy in Every Embassy. The consequences were world-altering.

Take the “unexpected” Camp David agreement signed in 1978 by Egypt, Israel and the US. It succeeded in part because Egypt was a Crypto AG customer; the Americans knew every detail of their negotiating position. Similarly, the British were clueless about the impending invasion of the Falkland Islands in early 1982 until the Americans rescued the UK from “a diplomatic disaster” with intercepted messages from Argentina’s Crypto AG machines. When angry Argentine generals confronted the company’s salesman after the war, he insisted that they upgrade to the Crypto 500 – and they did. By 1987 the company was making millions, employing 400 people and keeping a yacht to entertain clients from Saudi Arabia, Yugoslavia, Iran, Libya and other dodgy regimes. In 1980 the CIA and BND owed 42% of their “decrypts” to Crypto AG.

In the early 1990s the reunified Germany, keen that its secret deal should not come to light, sold its share to the Americans for $17m. The CIA kept its interest in the company until digital technologies overtook cipher machines; Crypto AG was broken up in 2018. Two years later journalists at The Washington Post, Switzerland’s SRF TV and Germany’s ZDF TV got hold of a secret account of the deal’s heyday, written by German and American agents in 1999. After decades of deception, they spilled the beans on “the most profitable intelligence venture of the Cold War”.

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