Operation Rubicon: How the CIA and BND Spied on the World

Operation Rubicon was a joint covert operation carried out by the United States Central Intelligence Agency (CIA) and the West German Federal Intelligence Service (BND) during the Cold War. The operation involved the acquisition and operation of a Swiss company called Crypto AG, which was a leading manufacturer of encryption machines used by governments, militaries, and intelligence agencies around the world.

Under Operation Rubicon, the CIA and BND secretly purchased Crypto AG and then modified the encryption machines to allow the intelligence agencies to eavesdrop on the communications of foreign governments and intelligence services that used the machines. The operation reportedly began in the 1950s and continued until the early 2000s.

The operation was considered one of the most successful and longest-running espionage operations of the Cold War, allowing the CIA and BND to intercept and decipher sensitive communications from numerous countries, including Iran, Argentina, and Libya. However, the operation was eventually exposed in 2020 through investigative reporting by several news organizations, leading to widespread criticism of the intelligence agencies involved and calls for greater transparency and accountability in intelligence operations.

A combination of a C-52 cipher machine with a B-52 keyboard attachment, such as pictured here, was denoted the BC-52 used during Operation Rubicon
A combination of a Crypto AG C-52 cipher machine with a B-52 keyboard attachment, such as pictured here, was denoted the BC-52.

The intelligence war behind the scenes of the Cold War is a topic of great interest to many. This website alone hosts many articles on the subject. However, intelligence operations do not exist in a vacuum. They exist to facilitate the interaction of states on the world stage. Intelligence operations, much like war, is politics by other means. Operation Rubicon is the best example of this categorisation. Unfortunately, it is not famous like more ‘flashy’ Cold War operations, such as the Berlin tunnels and Operation Northwoods. This article seeks to remedy this.

1.0: Setting the Stage

As noted in the introductory paragraph, the rapid decolonisation of Africa and Asia gave rise to many new political actors. Each of these entered a world where their support and natural resources were fair game to the dominant powers of the time. An essential aspect of this was the interception of diplomatic traffic. By reading classified internal communications, nations like the US could easily influence a given country. Policymakers or intelligence agencies could use this information to achieve their desired outcome. As such, interception of diplomatic traffic was highly desirable.

The Bombe Machine, built to decrypt transmissions using the Enigma cypher during WWII.
The Bombe Machine, built to decrypt Enigma transmissions during WWII. Original Image: https://www.cryptomuseum.com/crypto/bombe/

However, by the start of the Cold War, cypher machines were increasingly complex. Devices with similar complexity to Enigma, infamous for its difficulty in cracking, became available to embassies worldwide (source). These were both new machines and upgraded old machines (source). Western intelligence agencies had a challenging time trying to crack these machines. So, intelligence agencies began to reframe the issue. Why not get the manufacturers to stop selling complex cypher machines, or, better yet, why not introduce flaws in these machines, so traffic is more easily readable?

1.1: The Cypher Machine Market

Understandably, unaligned nations hesitated to purchase cypher machines from the East or the West (source). They assumed that any such devices were compromised, and thus diplomatic traffic was to be intercepted by the respective seller. This notion was absolutely true (source). Instead, neutral nations preferred to purchase machines from similarly neutral countries. Post-War, the principal suppliers of high-quality cypher machines were Swedish and Swiss (source).

The Crypto AG CX-52, a staple of the post-war cypher machine market.
The Crypto AG CX-52, a staple of the post-war cypher machine market. Photograph by Rama, Wikimedia Commons, Cc-by-sa-2.0-fr, CC BY-SA 2.0 FR https://creativecommons.org/licenses/by-sa/2.0/fr/deed.en, via Wikimedia Commons

One of the largest suppliers of cypher machines in the post-war era was Crypto AG (source). Crypto AG was a Swiss company owned by a Swede named Boris Hagelin (source). Hagelin had fled to the US upon the outbreak of WWII, fearing Swedish involvement in the war (source). While his fears remained unrealised, Hagelin spent the remainder of the war in the US, working extensively with American intelligence (source). Notably, this cultivated a close relationship with William Friedman, “the dean of American cryptology” (source). This relationship would prove to be essential to Operation Rubicon. In 1952, Hagelin established Crypto AG, a successor to A.B. Cryptoteknik, which dominated the inter-war market (source). As such, Crypto AG found many ready customers for their machines (source). Researchers estimate that around 120 countries and international organisations purchased Crypto AG machines throughout the 20th century (source). Notable countries include (source);

  • Saudi Arabia
  • Yugoslavia
  • Iran
  • Italy
  • Indonesia
  • Iraq
  • Libya
  • Jordan
  • South Korea
  • Philippines
  • Bahrain 
  • Kuwait 
  • Oman 
  • Qatar 
  • The United Arab Emirates
  • Malaysia
  • Tunisia
  • Morocco
  • Vatican City
  • Argentina

2.0: Operation Rubicon

Because of its complexity, Operation Rubicon did not come into form overnight. Indeed, it took incremental steps to achieve its final form by 1970. American intelligence agencies had identified diplomatic interception as a priority target, worryingly made more difficult by the prevalence of complex cypher machines. Crypto AG was selected as a target to influence for three reasons:

  1.  The prevalence of their machines throughout embassies across the world.
  2. The outwardly neutral orientation of Switzerland, where Crypto AG was based, and the neutrality of Sweden, where Hagelin was from.
  3.  The relationship between Hagelin and Friedman, who became head of cryptology at the National Security Agency (NSA) by the time of Crypto AG’s foundation (source).

This last point would be the starting point of Operation Rubicon.

2.1: The “Gentleman’s Agreement”

The first stage of Operation Rubicon was a so-called “Gentleman’s Agreement” between Hagelin and Friedman (source). In the 50s, Friedman approached his friend in an effort to influence the international cypher machine market (source). The reason for this was the development of “theoretically unbreakable” cypher machines developed by Crypto AG (source). Hagelin was in the process of developing a new machine using One-Time Tape (OTT). OTT machines record data from a random number generator to generate a keystream (source). Following this, plaintext characters are combined with a random character from this keystream (source). This message is unbreakable unless listeners can access the keystream (source).

Friedman (left) and Hagelin (right) are seen pictured with their wives, Annie Hagelin (left) and Elizebeth Friedman (right). Their relationship would be the foundation for Operation Rubicon. Original Image: https://cryptologicfoundation.org/support-us/this-day.html/event/2019/07/02/1562043600/1892-boris-hagelin-inventor-of-convertor-m-209-cryptodevice-born/74538

Hagelin accepted Friedman’s proposal in 1954 (source)(source).

While never formalised, several key terms are known through historical investigation. The first of these was the selling of “inferior machines” to non-Western states (source). This also included restricting the supply of Crypto AG machines worldwide (source). The second was that when Hagelin saw fit to retire, the US would have the first opportunity to purchase his company (source). This latter point was, in fact, what Friedman initially wished for (source). However, the NSA did not fully trust Hagelin and watered down the initial proposal to create the gentleman’s agreement (source). Additionally, Crypto AG was to provide customer details to the NSA, as well as sales figures and planned developments (source). Lastly, the NSA would write the brochures and manuals for the CX-52, the new unbreakable cypher machines developed by Crypto AG (source).

This framework would last until 1960 (source).

2.2: Crypto AG Licensing Agreement

By 1957, Hagelin was preparing to retire (source). The American intelligence community initially refused to purchase Crypto AG from him later that year, though reconsidered in 1960 (source). By then, the NSA had decided to remove itself from the project, and the Central Intelligence Agency (CIA) took control (source). Hagelin and the CIA struck a licensing agreement, codenamed SPARTAN (source). In essence, this codified, in writing, the earlier gentleman’s agreement (source). Hagelin was to remain in charge of Crypto AG while abiding by a list of approved sellers for best security machines (source). Crypto AG was, at this point, producing three variations of their cypher machines (source). These were;

  • Best security machines; intended for NATO members and NATO allies. These would come with unaltered instructions for secure communication (source).
  • Medium security machines; reserved for neutral but friendly countries. These would be less secure than the previous category, enabling American decryption, but secure enough to prevent hostile interception (source).
  • Low-security machines; sold to neutral and hostile countries. These would come without OTT capabilities and with manipulated usage instructions to ensure ease of decryption for Western signals intelligence (SIGINT) (source).

Additionally, Hagelin finally received financial compensation (source). The Americans would provide $600,000 for lost sales and an annual sum of $75,000 for abiding by the agreement (source). 

The SPARTAN programme also coincided with the electronic revolution, which threatened to obsolete traditional cypher machines (source). Rather than being negative, this was an unexpected bonus (source). The Americans could design electrical devices in a way favourable to their decryption efforts (source). 

This portion of Operation Rubicon would persist until 1970 (source).

2.3: The Minerva Purchase

The seal of the CIA. United States Federal government, Public domain, via Wikimedia Commons

In 1967, the French and Germans attempted to purchase Crypto AG (source). The West German Federal Intelligence Service (BND) approached the Americans with an offer to join this initiative (source). The plan was to use Siemens, a German cypher machine company, as a front for intelligence agency ownership of Crypto AG (source). To outside observers, Crypto AG would seem to have been purchased by an independent competitor. In reality, the BND had assumed control of the company (source). CIA, once again taking the reins from the NSA, agreed, on the condition that the French be shut out (source). They arranged a 50/50 split between them and the BND, and purchased Crypto AG for $7 million in 1970 (source)(source). Internal CIA documentation refers to Crypto AG from this point on as Minerva (source). 

The seal of the BND. BND, Public domain, via Wikimedia Commons

The Minerva purchase enabled the CIA and BND to further introduce indetectable defects into Crypto AG machines without customer knowledge (source). If customers began to suspect interception, Crypto AG would sell them ‘upgraded’ machines with the same flaws (source). American and German intercept teams could read diplomatic traffic faster than their intended recipients (source). It is possible that nations using Crypto AG systems suspected Western interception but tolerated it because neighbours, without access to the master keystreams, could not crack the encryption provided by Crypto AG machines (source).

The combined logos of the CIA, BND, and Crypto AG. Original Image: https://www.cryptomuseum.com/intel/cia/rubicon.htm

2.3: The Evolution of Operation Rubicon

Operation Rubicon was not the initial name of the program described above. Indeed, it is first known as Operation Thesaurus (source). The name changed to Rubicon in 1987 (source). The program never expanded beyond the BND and CIA (source). It should be noted that despite not taking the lead, the NSA was involved in all steps of the process (source). 

By 1992, the BND’s and CIA’s relationship began fraying. This was, in part, due to the Hydra affair (source). A Crypto AG sales representative, Hans Bühler (codenamed Hydra), disappeared while on a business trip to Iran (source). Initially, CIA and BND officials feared that Iran had caught wind of Operation Rubicon. However, Iranian action soon allayed their fears (source). Iran accused Bühler of spying for the Swiss and set a $1 million ransom (source). Bühler was unaware of Operation Rubicon, but the CIA considered him essential to its success, presumably by selling (and therefore spreading) compromised cypher machines (source). The CIA and BND agreed to split the bill (source). However, the White House refused to pay any ransom to Iran, leaving the BND to pay for Bühlers release alone (source).

Another component of the worsening relationship was the reunification of Germany and the upcoming establishment of the European Union (EU) (source). Germany was orienting to be more in line with its European neighbours. It was uncomfortable with America spying on its partners in this European project (source).

2.4: Rubicon Under ‘New’ Management

Germany approached the US intending to change their role in Operation Rubicon in early 1993 (source). By December, both parties agreed to a deal, and the CIA bought out the BNDs shares of Minerva for $17.1 million (source). This arrangement stipulated that the US continue to send interceptions to the Germans, but this rapidly fell apart (source). Essentially, the Germans voted themselves out of Operation Rubicon (source). Therefore, from 1993 onwards, the US had sole control of the programme (source).

The logo of Crypto AG. Crypto AG, Public domain, via Wikimedia Commons

In 2018, Crypto International AG, a newly founded company, took over service contracts from Crypto AG (source). It is reportedly unrelated to Crypto AG, and likely did not know about Operation Rubicon at the time (source). 

3.0: Knowledge of Operation Rubicon

The general public remained largely unaware of Operation Rubicon until 2020 (source). However, it is clear that several actors certainly understood the programme. Leaked CIA documents suggest as many as five or six countries had access to the information from Rubicon (source).

3.1: The Anglosphere

General Communications Headquarters (GCHQ), the British SIGINT intelligence agency, was briefed on Operation Rubicon as part of their long-term special relationship with the US (source). This was done without West German knowledge (source). A clumsy attempt to enter this programme in 1973 resulted in a scandal between the BND and the CIA (source). Still, it was quickly paved over (source). The CIA and NSA informed GCHQ of matters of importance, such as passing on decrypted Argentine diplomatic traffic with the British during the 1982 Falkland Islands War, but that was the extent of British participation in it (source)(source).

THE FALKLANDS CONFLICT, APRIL – JUNE 1982 (FKD 2028) Commandos from 40 Commando Anti-Tank Troop march towards Port Stanley in amongst a column of from 45 Commando (the unit to which they were attached). Royal Marine Peter Robinson, carrying the Union Flag attached to the radio’s aerial, brings up the rear. The flag was owned by Marine John ‘Snowy’ Snowden who was unable to attach the flag to his backpack so he passed it to Robins… Copyright: © IWM. Original Source: http://www.iwm.org.uk/collections/item/object/205194942

To what extent the remainder of Five Eyes knew about Operation Rubicon is unclear. The US likely shared intercepts with Five Eyes, the global intelligence alliance comprising the Anglosphere; the US, UK, Canada, New Zealand, and Australia (source). It is possible that the US shared Indonesian traffic with Australia in support of their peacekeeping operation in East Timur (1999), though this is conjecture. 

3.2: The Neutral Countries

Switzerland is confirmed to have known about Operation Rubicon since 1993, though it likely knew beforehand (source). Crypto AG’s leaders were close to Swiss intelligence and probably kept them informed of the operation (source).

Sweden is likely to have known, too (source). Hagelin had numerous contacts in Swedish intelligence and can be assumed to have also kept them informed (source).

Having received valuable intelligence and not subject to the compromised equipment manufactured by Crypto AG under Hagelin’s deal with the Americans, they had little reason not to be on board with Operation Rubicon (source).

3.3: Allied Countries

Germany is sure to have known about the continuation of Operation Rubicon after their exit. Their agreement stipulated that the Americans continue to share intelligence derived from it, confirming the above point (source). Similarly, their intimate knowledge of American operating procedures concerning Operation Rubicon means they had to expect it to continue to target European countries and even Germany itself.

France also knew of Operation Rubicon, given that they (and West Germany) were initially poised to purchase Crypto AG in 1967 (source). Additionally, they continually requested to participate in the program throughout the Cold War but were rebuffed by the BND and CIA (source).

3.4: The General Public

The first mention of Operation Rubicon in the news came with a Baltimore Sun article written in 1995 (source). Investigative journalists Scott Shane and Tom Bowman exposed the programme over the course of several reports (source). The reports went so far as to name specific individuals involved in the operation and identify Intercom Associates as a front company through which NSA and CIA operatives interacted with Crypto AG (source). The CIA and NSA fervently denied these allegations, labelling them as irrelevant and ‘pure invention’ (source). 

In 1996, the German newspaper Der Spiegel (The Mirror) published a similar article, listing several of the same names that appeared in the Sun article (source). Der Spiegel uncovered that Crypto AG had modified its cypher machines, ostensibly to prevent eavesdropping by unauthorised third parties (source). However, it also recognised the ability of these machines to be intercepted by an “authorised fourth” party (source). It correctly identified the Americans as this fourth party (source).

Egyptian President Anwar Sadat (left), American President Jimmy Carter (centre), and Israeli Prime Minister Menachem (right) at the signing of the Camp David Accords. This was one of many diplomatic successes enabled by Operation Rubicon. Original Image: https://il.usembassy.gov/the-camp-david-accords-40-years-later/

In 1998, Wayne Masden, writing for CovertAction Quarterly, again exposed Operation Rubicon to the public (source). His article details Siemens’s involvement with the programme (source). Furthermore, he expanded on the works of the Baltimore Sun and Der Spiegel by further developing the connection of the BND and CIA to Siemens and, therefore, Crypto AG (source). In conjunction with the European Parlament hearings on Project 415, this final article caused Crypto AG to issue a press statement in its defence (source). This denied the allegations of the articles above while also asserting the autonomy of Crypto AG by downplaying Siemens consulting (source).

3.4.1: Final Exposure

The public largely forgot about these exposés during the first two decades of the 21st century. However, in 2020, the Washington Post published an article titled ‘The intelligence coup of the century’ (source). This dossier proved beyond a shadow of a doubt the existence of Operation Rubicon (source). Swiss authorities promptly launched an investigation, which confirmed Swiss knowledge of the program (source). 

Crypto International AG maintains that it has no relation to the now-defunct Crypto AG (source). Regardless, during its investigation, the Swiss government imposed export restrictions on its products overseas (source). The company promptly issued mass layoffs (source). In 2021, Crypto International AG relocated to Hünenberg, Switzerland, leaving Steinhausen, where it had been for decades prior (source). 

4.0: Summary

It is easy to see why Operation Rubicon is often considered the greatest intelligence operation of the post-war world. It allowed American and German interception of high-level diplomatic cables from over 120 countries. Such knowledge allowed for much more effective diplomacy. Successful use of the information provided by Operation Rubicon includes the signing of the Camp David Accords and the identification of Libya as the architect of the La Belle discotheque bombing in Berlin (source). Additionally, it did all of this while maintaining secrecy for nearly five decades and plausible deniability for a further two and a half. It is impossible to deny its effect on the late 20th century. 

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