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The VENONA project was a long-running and highly secret collaboration between the United States intelligence agencies and the United Kingdom's MI5 that involved the cryptanalysis of Soviet messages.
US Army codebreakers had intercepted large volumes of encrypted high-level Soviet diplomatic and intelligence traffic during and immediately after World War II. The British had stopped intercepting Soviet traffic, at Winston Churchill's orders, shortly after Germany invaded the Soviet Union in 1941 and had no traffic to contibute to the project after that time. This traffic, some of which was thought to be encrypted with a one-time pad system, was stored and analyzed in relative secrecy by hundreds of cryptanalysts over a 40-year period starting in the early 1940s.
The British codename for VENONA was Bride. Some brilliant cryptanalysis by American and British codebreakers (the first steps were by a very young Meredith Gardner of what would become NSA) revealed that some of the one-time pad key material had incorrectly been reused by the Soviets, which allowed decryption (sometimes only partial) of a small part of the traffic. Very slowly, using assorted techniques ranging from traffic analysis to defector information, more of the messages were decrypted. Out of some hundreds of thousands of intercepted cyphertexts, it is claimed that under 3000 have been partially or wholly decrypted. Claims have made that information from physical theft of encryption pads (a partially burned one is reported to have been recovered by the Finns) to bugging embassy rooms in which text was entered into encrypting devices (and analyzing the keystrokes by listening to them being punched in), contributed to achieving as much plaintext as was recovered. These latter claims are less than fully supported in the open literature.
This decryption and cryptanalysis project became known to the Soviets not long after the first breaks. It is not clear whether the Soviets knew how much of the message traffic, or which messages, had been successfully decrypted. At least one Soviet agent, Kim Philby, was told about the project as part of his job as liaison between British and US intelligence. The project continued for decades, long after Philby left British intelligence.
The decrypted messages from Soviet aid missions, GRU spies, KGB spies, and some diplomatic traffic, known collectively as the VENONA papers, gave important insights into Soviet behavior in the period during which duplicate one-time pads were used. They also revealed the existence (and in some case the identities) of some American, Canadian, Australian, and British Soviet spies in research and in government, including Klaus Fuchs, Julius and Ethel Rosenberg, and at least one of the Cambridge Five spy ring (Donald Maclean).
The Soviets eventually stopped reusing key pad material, possibly after learning from their agent(s) of the US / British work, after which their one-time pad traffic reverted to completely unreadable. There has been speculation that the reason for the key material duplication was the increase in work (including key pad generation) in the period after the German attack in June of 1941. Other suggestions have it that it was Guderian's tanks just outside Moscow in early December that year which forced Moscow Centre to make such a fundamental error.
The VENONA documents, and the extent of their significance, were not made public until 1995. They show that the US and others were targeted in major espionage campaigns by the Soviet Union as early as 1942.
The decrypts include 349 individuals who were maintaining a covert relationship with the Soviet Union. It can be safely assumed that more than 349 agents were active, as that number is from a small sample of the total intercepted message traffic. Among those identified are Alger Hiss, believed to have been the agent "ALES"; Harry Dexter White, the second-highest official in the Treasury Department; Lauchlin Currie, a personal aide to Franklin Roosevelt; and Maurice Halperin, a section head in the Office of Strategic Services. Almost every military and diplomatic agency of any importance was compromised to some extent, including, of course, the Manhattan Project. Even today, the identities of fewer than half of the 349 agents are known with any certainty. Agents who were never identified include "Mole", a senior Washington official who passed information on American diplomatic policy, and "Quantum", a scientist on the Manhattan Project.
Some known spies, including Theodore Hall, were neither prosecuted nor publicly implicated, because the VENONA evidence against them could not be made public. VENONA evidence has also clarified the case of Ethel and Julius Rosenberg, making it clear that Julius was guilty of espionage while Ethel was guilty of cooperating, while also showing that their contributions to Soviet nuclear espionage were less important than was publicly alleged at the time. In fact, Ethel had been only an accomplice, and Julius' information was probably not as valuable as that provided by sources like "Quantum" and "Pers" (both still unidentified.)
This is an extremely different picture from the one that which had developed over most of 50 years in the absence of solid evidence. While critics debate the identity of individual agents, the overall picture of infiltration is more difficult to refute. The release of the VENONA information has forced reevaluation of the Red Scare in the US.
In Australia, the founding of the Australian Security Intelligence Organisation by Labor Prime Minister Ben Chifley was considered highly controversial within Chifley's own party. Until then, the left-leaning Australian Labor Party had been hostile to domestic intelligence agencies on civil liberties grounds, and a Labor government actually founding one was a surprising about face. VENONA material has now made it clear that Chifley was motivated by evidence that not only were there a large number of very damaging Soviet agents operating in Australia, but that these probably included members of his party. Chifley was succeeded by the conservative, zealously anti-communist Sir Robert Menzies. Menzies began what was long considered an over-zealous anti-communist "witch hunt", but it is now known that VENONA decrypts and associated surveillance had identified one of the Soviet agents as being either the popular "Doc" Evatt (one of Chifley's Cabinet Ministers, instrumental in the early organisation of the United Nations, and former President of the UN General Assembly), or Evatt's secretary Alan Dalziel. As well, other middle ranking government officials were either identified or implicated. Further, investigation had revealed that Wally Clayton (codenamed KLOD), a Soviet agent within the Communist Party of Australia, was forming an illegal "underground network" within the CPA, presumably as a prelude to political violence. When Menzies announced a Royal Commission into Soviet espionage in Australia, it was supported by the anti-communist Roman Catholic factions of the ALP but strongly opposed by "Doc" Evatt and allies. The ALP eventually split over this issue.
Critics of VENONA point out that the intelligence agencies did not have actual names for nearly all the Soviet agents mentioned, so their identity had to be inferred, often using other information sources. The critics argue that with the lack of actual names (eg, ALES is only assumed to be Alger Hiss), all VENONA really shows is that there were numerous Soviet agents in the United States. In response, it has been noted that iron-clad proof is rare in espionage cases, and in fact in many ordinary criminal cases.