Ace of Spies (28 page)

Five months after his New York trip, Reilly was still working hard to push his Russian banking scheme. It is clear from a memorandum to Picton Bagge, dated 10 October, that he had now set his sights on enticing French bankers and had been sufficiently encouraged by their response:

My dear Bagge
In confirmation of my memorandum of the 8th instant, I now enclose the prospectus of the SOCIETE COMMERCIALE, INDUSTRIELLE ET FINANCIERE LA RUSSIE, which has been formed recently in Paris.

It is the Banking Combine of which M. YAROSHINSKY told us, and in which some of his banks are interested. You will see from this that the French bankers proved very much more receptive than our friends in the City. In connection with this French Banking Combine, I have received the following information from Paris. Last week a meeting took place at the French Ministry of Commerce and Industry, under the presidency of Gen. MANGIN, the Chief of the Economic Mission to Russia which was to leave on the 8th of this month. Besides the representatives of the Ministry and the French banks and industries, there were also present representatives of the Russian government and of Russian banks and industries.

Resolutions were passed urging the necessity of resuming trade relations on a large scale with Russia, and the dispatch of an Economic Mission to Russia was welcomed. Furthermore, the
formation of the above named company with a capital of 50 million francs, was approved and government support in the matter of credits and tonnage was promised. Of the 50 million francs, 20 million francs are being subscribed by French banks, and 15 million francs by French industrialists, and 15 million francs are reserved for Russian banks, and the Russian banks and Russian industrialists. It is stated that a credit of 400 million francs will be accorded to this company by the French banks. The Russian banks have stipulated that although they are participating in the formation of this company they reserve to themselves the liberty of action and participation in similar combinations formed in other countries.
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Three days after the memorandum’s composition, the city of Orel finally fell to Denikin’s forces. Now only 200 miles south of Moscow, the Whites and their sympathisers could be forgiven for seeing victory within their grasp. The territory Denikin controlled had gradually inflated over the past months to total some 600,000 square miles. However, within a week the Red Army had turned the tables and had retaken Orel. Having overstretched his supply lines to breaking point, Denikin was now forced into an unbroken retreat that would ultimately lead all the way back to the Black Sea where his campaign started. Along with the collapse of Denikin’s offensive went Reilly’s ambition of playing a pivotal role in the rebuilding of Russia’s economy. Had Denikin succeeded in ultimately taking Moscow and ousting the Bolsheviks, Reilly would no doubt have played a major role in the economic recon-struction of the country. The money he had made to date from munitions deals would have been a mere drop in the ocean compared to the rewards that would have been his for the taking in a Bolshevik free Russia.

Not one to be discouraged for long, Reilly set about composing a nineteen-page memorandum entitled
The Russian Problem,
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in which he set out his views on bringing about the downfall of the Bolsheviks. In conclusion he stated that:

The policies and proposals outlined in this memorandum can be summarised as follows:

1. Abolition of the Bolshevik government – by force, as no other effective means are available or conceivable.
2. The necessary force to be supplied by the military co-operation of the Russian National Armies with the armies of Finland, Poland and the Border States.
3. To obtain this co-operation an agreement must be effected between Denikin and the other states in the matter of their political and territorial differences at a special Inter-State Conference.
4. The conditions for effecting this agreement and for rendering it of sufficient duration for the attainment of the main object are:
4.1. Agreement between the Allied governments as to the definite terms to be proposed to the Inter-State Conference.
4.2. Readiness of the Allied governments to impose these terms upon the parties by moral and if necessary economic pressure, and on the other hand to give the parties all the necessary support immediately the terms have been accepted.
4.3. Certain changes in the personnel and policy of the Polish government and the Denikin government.
5. Elimination of Germany’s harmful influence by an attempt at an economic understanding with regard to Russia. For this it is necessary:
5.1. To prepare the ground in France for acquiescence to or participation in such understanding.
5.2. To induce a group of British financiers to take the initiative in forming a British-German pool for the control of Russian Bank Stock.
5.3. To carry out all those measures (some of which have been indicated here) which are necessary for retaining the control in this pool in British or British-French hands.

As a self-appointed expert on Russia and one of the few people in intelligence circles who had actually been there during this critical period, Reilly took every opportunity he could to
hawk his views to anyone of influence who might be receptive. An indication of his success in this direction can be seen from a note sent by Sir Archibald Sinclair to Winston Churchill on 15 December 1919.
¹⁶
Reilly had apparently met Sinclair some days previously in order to give him a copy of
The Russian Problem.
While discussing it, he had allowed Sinclair sight of a letter recently received from the
Daily Mail
proprietor Lord Northcliffe, to whom he had also sent a copy. This resulted, as Reilly had hoped, in Sinclair sending the memorandum to Churchill with a covering note in which he remarked, ‘I have seen a very cordial note to Reilly from Northcliffe saying that he had “read every word” of the memorandum “to the end”’.
¹⁷
This again exemplifies another of Reilly’s tactics, namely establishing influence by association. Despite the mutual suspicion that existed between Northcliffe and Churchill, Reilly knew that Churchill would be keen to see anything that Northcliffe had expressed an interest in.

While Reilly’s mind was clearly fixed on grandiose schemes, SIS was far more concerned with bread-and-butter issues, namely intrigues between pro-German Russians and German militarist elements in Berlin. As a result of information volunteered to the Foreign Office by the daughter of Chaikovsky, a member of the White Russian delegation in Paris, SIS in London sent a cable on 30 January to the SIS station in Paris:

With reference to your telegram CXP.583 of today, enclosed please find particulars of the German-Russian reactionary conspiracy report. This information was obtained from the daughter of Chaikovsky, to whom we have given your private address and told her to write you and fix up an appointment, and she will keep you in touch with any fresh movements she gets wind of… It would be as well to get in touch with Reilly and show him the enclosed report, and ask him to give you all the assistance he can.
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The report stated that:

Information has been received regarding a conspiracy which is being hatched by German and Russian reactionaries. The headquarters is in Berlin, and there are important branches in Paris and the Crimea. The first step in the conspiracy is to be a coup d’etat in the south of Russian Volunteer Army, which is to eliminate the leading pro-Entente elements including DENIKIN unless the latter is willing to fall into line with the plans of the pro-Germans. After this coup d’etat, the Volunteer Army under instructions from Germany, will conclude an armistice with the Bolsheviks.

The report asserts that:

… the centre of these intrigues is in Berlin under the direction of Gen. Ludendorff. Gen. Ludendorff has an agent in Paris whose name is unknown to me, who has received strict instructions from Gen. Ludendorff to have nothing to do with the official representative of the German government in Paris, as his organisation in Berlin is hostile to the German government and intends ultimately to overthrow it.
¹⁹

Investigations ensued and cables passed back and forth between London and Paris. In a detailed report from Paris on 23 March, Reilly perceptively told C that:

Without wishing in any way to minimise the dangerous possibilities of the so-called ‘German-Russian Plot’ I am inclined to believe that under the present circumstances one is liable to attach to it more importance than it can in reality have. I have no faith from experience in the capabilities of the Russian Monarchists and I cannot imagine that the Germans can consider them as valuable associates.
²⁰

The report is also noteworthy in drawing attention to a prophetic view expressed by Nicolai Koreivo that:

Russia has nothing to expect from the Allies who have been all along pursuing a selfish policy towards her, and who have fooled and betrayed
KOLTCHAK, DENIKIN and YUDENITCH for their own ends. An alliance between the German military party and the Bolsheviks would be the most satisfactory policy so far as Russian national interests are concerned. The League of Nations is a dream which is fortunately dissipating owing to America’s abstention, and it is therefore all the more necessary to adopt a ‘Realpolitik’ in which Russia and Germany will play a major part, and which promises the quickest political and economical recovery of these countries.
²¹

This is more or less what came to pass two years later in April 1922 when Germany and Russia signed the Rapallo Treaty, recognising each other’s regimes and giving up all financial claims against each other. It was an inevitable recognition by the two nations of their mutual self interest.

Another inevitable recognition of mutual self interest was the decision by Sidney and Nadine Reilly to seek a divorce. Although they were not legally married, Nadine did not know this, and they had therefore to go through the motions of divorce in order that he could keep up the pretence. As such, they journeyed to Paris on 4 March 1920 in order to start the legal process. Reilly and Nadine called into the SIS office in Adam Street to be issued with a passport and travel tickets, although no prior arrangement seems to have been made. This was made apparent the following day when C received a note from Section H: ‘Reilly and wife No. 2 called at Adam Street yesterday for passport and passage to Paris. As you were away, I told Crowley verbally to get on with it, but I know nothing about the journey nor whether it is to be at our expense or not’.
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Not for the first time Reilly was combining his private business with that of SIS. Having made contact with the lawyers who were to attend to the divorce, he wrote two letters to Sir Robert Nathan at the Foreign Office from the Hotel Lotti in Rue de Castiglione, where he and Nadine were staying. From these letters dated 13 and 14 March it is clear that he had met Baranoff and Burtsev
²³
in connection with the unrest in Germany.
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On
returning to London, Reilly wasted little time in typing up two more memorandums on Russian policy, sending copies to Archibald Sinclair, to ask for his view on them, before submitting them to the Foreign Office and the Department of Overseas Trade. Sinclair, as Reilly had hoped, immediately sent them on to Churchill, along with a brief letter dated 24 June:

Secretary of State
I hope you will find time to read these two short memoranda by my remarkable MI1c friend Reilly. They contain a concrete proposal for bringing about the downfall of the Soviet government by economic means and for putting us in a position at the earliest possible moment to obtain food and raw materials from Soviet Russia. He is very anxious to obtain ‘my’ opinion on them before pressing his views on the FO and DOT.

Reilly is reputed to possess an expert knowledge of finance, which would seem to be borne out by his personal prosperity and the authority which he enjoys among Russian financiers such as M. Jarascynski. For knowledge of Russia, grip of Russian problems, insight into the tendencies of political and economic forces and powers of prophecy which have been constantly tested throughout the last year, he is without a rival among my Russian and Anglo-Russian visitors. Picton Bagge would concur in this opinion, and so I have reason to believe would ‘C’ from the Intelligence point of view.
²⁵

Reilly’s proposals hinged on three points of attack from within Russia: persuading the Red Army leaders to make a deal with Denikin to overthrow the Bolsheviks; positively enrolling the help and support of the Orthodox Church; and persuading the Ukrainians to link up with Denikin against the Bolsheviks. Although Reilly’s memorandum was favourably received by Rex Leeper in the Political Intelligence Department, Sir Ronald Graham of the Russian Department was distinctly cool about it. The Foreign Secretary, Lord Curzon, was more inclined to back Graham’s view than Leeper’s and the proposals were therefore scotched.

That same month Nadine and Reilly parted for the last time when she returned to New York.
²⁶
Within a year, Reilly was to strike up a new relationship, this time with a girl nearly thirty years his junior. Caryll Houselander
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had recently left St John’s Wood Art School, and was introduced to Reilly by another former student, Della Clifford, who had met him through friends in the Russian émigré community. Della showed Reilly Caryll’s sketches as she was ‘too shy, and despised her drawings too much to take them to him herself’.
²⁸
Caryll was fascinated by religion, art, mysticism and Russia, and found herself immediately attracted to a man who seemed to embody all these. Being a devout Catholic, she found herself struggling to reconcile her feelings and her religious beliefs. In her 1955 autobiography she recalled this inner turmoil:

I was driving myself to a dangerous state of psychological, as well as spiritual starvation, and becoming more and more driven by my own emotions. I had emptied myself of almost everything that was essential to me, and now felt the necessity of filling that emptiness. I did not define this, but obviously it added a fierce intensity to every natural temptation and complicated all my emotional relationships with other people.
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