On the other side of the hill the codebreakers of Germany, Japan, Italy and Finland also solved many important enemy cryptosystems both military and diplomatic. The German codebreakers could eavesdrop on the radio-telephone conversations of Franklin Roosevelt and Winston Churchill, they could decode the messages of the British and US Navies during their convoy operations in the Atlantic and together with the Japanese and Finns they could solve State Department messages (both low and high level) from embassies around the world.The M-138-A strip cipher was the State Department’s high level system and it was used extensively in the period 1941-44. Although we still don’t know the full story the information available points to a serious compromise both of the circular traffic (Washington to all embassies) and special traffic (Washington to specific embassy) in the period 1941-44. In this area there was cooperation between Germany, Japan and Finland. The German success was made possible thanks to alphabet strips and key lists they received from the Japanese in 1941 and these were passed on by the Germans to their Finnish allies in 1942. The Finnish codebreakers solved several diplomatic links in that year and in 1943 started sharing their findings with the Japanese. German and Finnish codebreakers cooperated in the solution of the strips during the war, with visits of personnel to each country. The Axis codebreakers took advantage of mistakes in the use of the strip cipher by the State Department’s cipher unit.
Apart from diplomatic messages their success against the strip cipher also allowed them to read some OSS -Office of Strategic Services messages from the Bern station. The compromise of OSS traffic did not remain secret for long. In 1943 Allen Dulles (head of the OSS Bern station) received word from Admiral Canaris and General Schellenberg that his communications had been compromised and in addition the German officials Hans Bernd Gisevius and Fritz Kolbe showed him actual decoded US messages. It’s not clear what measures the US authorities took to protect their communications but the diplomatic traffic continued to be read by the Germans and the Finns in the period 1943-44. It seems that the US authorities attributed the German success to physical compromise (probably a spy in the embassy) and thus didn’t realize that their ciphers could be solved cryptanalytically. They would realize how wrong they were in late 1944 when more information became available on the compromise of State Department codes and ciphers.In September 1944 Finland signed an armistice with the Soviet Union. The people in charge of the Finnish signal intelligence service anticipated this move and fearing a Soviet takeover of the country had taken measures to relocate the radio service to Sweden. This operation was called Stella Polaris (Polar Star). In late September roughly 700 people, comprising members of the intelligence services and their families were transported by ship to Sweden. The Finns had come to an agreement with the Swedish intelligence service that their people would be allowed to stay and in return the Swedes would get the Finnish crypto archives and their radio equipment. At the same time colonel Hallamaa, head of the signals intelligence service, gathered funds for the Stella Polaris group by selling the solved codes in the Finnish archives to the Americans, British and Japanese.
The Finns revealed to the American representatives that they had solved several State Department codes and could read the messages from a number of embassies including Berne (Carlson-Goldsberry report). Obviously the OSS leadership was interested in finding out whether OSS communications passing over diplomatic links were also read.
Unfortunately the relevant files in the OSS collection do not reveal the final outcome of this investigation.It seems that during the same period the OSS received more concrete evidence regarding the compromise of the communications of the Bern embassy. In the US National Archives and Records Administration, RG 226 ‘Records of the Office of Strategic Services’ - Entry 123 there are intelligence reports from Bern received in late 1944. Some of them contain summaries of decoded US messages of the Bern embassy that must have come from German reports given to the OSS by members of the German Resistance (probably Gisevius and Kolbe). For example:
Sources: NARA-RG 226-entry 123-Bern-SI-INT-29 -Box 3-File 34 ‘German intelligence, Hungary’, ‘Hitler, the Allies, and the Jews’