All Russian Co-operative Society
The All-Russian Co-operative Society (ARCOS) was the principal body responsible for the orchestration of Anglo-Russian trade in the early days of Soviet Russia, following the development of Lenin's New Economic Policy
New Economic Policy
The New Economic Policy was an economic policy proposed by Vladimir Lenin, who called it state capitalism. Allowing some private ventures, the NEP allowed small animal businesses or smoke shops, for instance, to reopen for private profit while the state continued to control banks, foreign trade,...

. In 1927 the organisation was raided by British authorities, who accused the company as serving as a front
Front organization
A front organization is any entity set up by and controlled by another organization, such as intelligence agencies, organized crime groups, banned organizations, religious or political groups, advocacy groups, or corporations...

 for subversive activities.


The All-Russian Co-operative Society, Ltd., began operations in London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...

 in October 1920. The name "Arcos" is actually an acronym deriving from the formal name of the company: All-Russian Co-Operative Society, although in the contemporary press the name was typically capitalised as would be a proper name (i.e. "Arcos").

Arcos was established as the official buying and selling agency of the Soviet government in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

. Arcos was a British company, operating under British law, although the stockholders were all Soviet citizens.

Arcos made £1,970,000 worth of purchases during calendar 1920, with payment for its purchases made in gold via Reval. The company bought an additional £3,650,000 worth of products during the first 8 months of 1921. Chief among its purchases were food, textiles, and coal, although a rather limited quantity of agricultural machinery was also obtained. The company was also the conduit for the sale of over £300,000 worth of Russian produce up to August 1921, primarily flax
Flax is a member of the genus Linum in the family Linaceae. It is native to the region extending from the eastern Mediterranean to India and was probably first domesticated in the Fertile Crescent...

, but also including timber, manganese
Manganese is a chemical element, designated by the symbol Mn. It has the atomic number 25. It is found as a free element in nature , and in many minerals...

, and furs.

The suspicions of Mi5
The Security Service, commonly known as MI5 , is the United Kingdom's internal counter-intelligence and security agency and is part of its core intelligence machinery alongside the Secret Intelligence Service focused on foreign threats, Government Communications Headquarters and the Defence...

 that Arcos was acting as a front organisation for espionage activity were first aroused in 1925 when John Ottaway had tailed a suspect back to the Moorgate offices. The suspect Ottaway was following, Walter Dale, then went to the offices of the Federated Press of America, which served as a journalistic cover for left wing espionage in the UK. Mi5 tapped the phonelines of the FPA which revealed a raft of calls not only to Arcos but also suspected Soviet intelligence operatives, whilst interception of its post revealed copies of classified French dispatches.

The Arcos Affair of 1927

On 31 March 1927 SIS
- Places :* Sis * Sis, Armenia, a town* Sis, Azerbaijan, a village* Sis, Iran, a city* Kozan, Adana, Sis in Armenian* Mountains of Sis, a range of the Pre-Pyrenees- Other :...

 passed evidence to Mi5, courtesy of an informant inside Arcos, that Arcos had illegally procured and copied a classified Signals Training manual from the Aldershot military base. The British secret service also had testimony that the basement of 49 Moorgate contained photostat apparatus, for the purpose of photographing stolen secret documents.

At 4:20 in the afternoon of 12 May 1927, a large force of uniformed and plain-clothes police officers entered the headquarters of Arcos and the Soviet Trade Delegation, located at 49 Moorgate in London. The police took possession of the telephone exchange, detained all employees, and made a thorough search of documents on the premises. Drilling machinery was brought in to open locked rooms and strongboxes. They immediately proceeded to the basement they had been tipped off about, recovered numerous classified documents, found it to be rigged with numerous anti-intruder devices and notices forbidding entry, for which the employees had no satisfactory explanation.

A secret cypher room was discovered, that had no door handle and could only be entered with a key, wherein workers were hurriedly engaged in burning papers. A struggle then ensued when Police tried to arrest remaining papers from staff. The chief of this room then attempted to pocket a list, which on inspection detailed cover addresses used for secret communication with the communist parties of the North and South American, African and Australasian continents.

A considerable number of documents were removed from the building in the course of the investigation. This raid and subsequent diplomatic fisticuffs subsequently became known as the Arcos Affair.

The next day, the Soviet Embassy handed in an official note of protest, stressing the illegality of the raid on Arcos headquarters. It was noted by the Soviet government that the Chairman of the Trade Delegation, Mr. Khinchuk, was protected by diplomatic immunity
Diplomatic immunity
Diplomatic immunity is a form of legal immunity and a policy held between governments that ensures that diplomats are given safe passage and are considered not susceptible to lawsuit or prosecution under the host country's laws...

 in accord with the Anglo-Soviet Trade Agreement
Anglo-Soviet Trade Agreement
The Anglo-Soviet Trade Agreement was an agreement signed on 16 March 1921 to facilitate trade between the United Kingdom and the Russian Socialist Federal Soviet Republic...

 of March 16, 1921.

The Conservative
Toryism is a traditionalist and conservative political philosophy which grew out of the Cavalier faction in the Wars of the Three Kingdoms. It is a prominent ideology in the politics of the United Kingdom, but also features in parts of The Commonwealth, particularly in Canada...

Stanley Baldwin
Stanley Baldwin, 1st Earl Baldwin of Bewdley, KG, PC was a British Conservative politician, who dominated the government in his country between the two world wars...

 government accused the USSR of using the organisation for the conduct of "military espionage and subversive activities throughout the British Empire and North and South America." Diplomatic relations and trade agreements between the USSR and Britain were abruptly dissolved shortly after the incident and a war scare swept the Soviet Union.

Despite the highly-publicized raid of Arcos and the manpower and time put into the operation, little of practical import resulted from the raid. Historian Louis Fischer noted of the Arcos raid:

"It disclosed nothing that had not been known before, and failed to produce the highly important War Office documents the rumored theft of which served as excuse for the raid. The official White Paper
White paper
A white paper is an authoritative report or guide that helps solve a problem. White papers are used to educate readers and help people make decisions, and are often requested and used in politics, policy, business, and technical fields. In commercial use, the term has also come to refer to...

 containing the documents found in the raid was thin evidence indeed, and led to no arrests or charges for illegal or subversive activities by Russian or British subjects."

During its six years of existence, Arcos did approximately £100,000,000 in trade between Britain and Soviet Russia.

Aftermath of the Arcos raid

The government of Great Britain severed diplomatic relations with the USSR during the second half of May 1927.

In an attempt to provide justification for the raid on Arcos, Prime Minister Stanley Baldwin
Stanley Baldwin
Stanley Baldwin, 1st Earl Baldwin of Bewdley, KG, PC was a British Conservative politician, who dominated the government in his country between the two world wars...

 read aloud in the House of Commons from a handful of deciphered telegrams that proved Soviet guilt of espionage. As a result of this the Soviets, now aware that the British secret services had been intercepting their communications, changed their encryption cyphers for all diplomatic communication. They adopted the virtually unbreakable one-time-pad system, therefore eliminating the ability of the British GC&CS to decipher any high grade Soviet messages from 1927 until the end of the Second World War.

See also

  • Campbell Case
    Campbell Case
    The Campbell Case of 1924 involved charges against a British Communist newspaper editor for alleged "incitement to mutiny" caused by his publication of a provocative open letter to members of the military...

  • Zinoviev letter
    Zinoviev Letter
    The "Zinoviev Letter" refers to a controversial document published by the British press in 1924, allegedly sent from the Communist International in Moscow to the Communist Party of Great Britain...

  • 1926 General Strike
    1926 United Kingdom general strike
    The 1926 general strike in the United Kingdom was a general strike that lasted nine days, from 4 May 1926 to 13 May 1926. It was called by the general council of the Trades Union Congress in an unsuccessful attempt to force the British government to act to prevent wage reduction and worsening...

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.