The perils of East-West trade
The UK's China debate mirrors past controversies over economic links with the Soviet Union
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Then UK Foreign Secretary Philip Hammond welcomes President of China, Xi Jinping to London, 19 October 2015 (UK Foreign and Commonwealth Office, CC.2.0).
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Two major developments brought the debate about Chinese influence in the UK back into the spotlight this week.
On Monday, businessman Yang Tengbo was named as the alleged Chinese agent of influence who is reported to have been linked to Prince Andrew. Yang was banned from the UK last year on the advice of MI5.1
On Tuesday, the Investigatory Powers Tribunal upheld an ‘interference alert’ issued last year by MI5 in relation to Christine Lee, a lawyer and lobbyist accused in the alert of being ‘engaged in political interference and activities on behalf of the United Front Work Department (‘UFWD’) of the Chinese Communist Party (CCP).’
While the alert said that both Lee and the UFWD had acted covertly, the judgement revealed that MI5’s definition of unlawful political interference includes activity which ‘can be deceptive, coercive or corruptive and is not limited to the covert domain.’2
Unlike the classically clandestine business of espionage, the line between covert action and normal politics is never an easy one to draw. As I suggested last year, ‘Some of the Chinese activities now seen as subversive might have been considered tolerable and even desirable, when the British government was prioritising economic relations a decade ago.’3
I wrote then that the recently passed National Security Act might provide some clarity through its provision for a foreign agent registration scheme. However, the Conservative Government never got around to implementing the scheme, and the task has been left to its Labour successor.
The renewed salience of the issue could be an opportunity to tighten up foreign funding of political parties generally, something Labour has been reticent about in response to Elon Musk’s threat to bankroll Nigel Farage’s Reform party. Former MI5 director-general Lord Evans is among those calling for more stringent regulation of donations.4
On China though, the key issue is whether it is included on the list of named states subject to an ‘enhanced tier’ of scrutiny under the scheme, something supported by former MI6 chief Alex Younger last year.5 Former Conservative Security Minister Tom Tugendhat told The Guardian that MI5 advised him, ‘If China isn’t in the enhanced tier it’s not worth having.’
Major British financial services firms reportedly lobbied against the enhanced tier under the Conservatives, and battle has been rejoined under Labour ahead of a cross-Whitehall audit of the UK-China relationship due to be completed in March.6
In balancing trade and security in relations with a major communist power, Prime Minister Keir Starmer faces a challenge that would have been familiar to Harold Wilson, a Labour predecessor with whom he has often been compared.
As President of the Board of Trade in the late 1940s, Wilson became involved in building up the so-called ‘East-West trade’ with the Soviet Union as a source of raw material imports, notably timber, that did not require scarce dollars.
This was a particularly risky enterprise at the outset of the Cold War. Biographers Stephen Dorril and Robin Ramsay record that ‘one of the ironies of the security and intelligence game is that while MI6 exploited the East-West Traders for intelligence purposes, MI5 - responsible for monitoring subversion - issued warnings about trade with the Communists. As so often is the case, the right hand of the British Secret State did not know what the left hand was doing.’7
When Labour left office in 1951, Wilson became an advisor to timber importer Montague Meyer. Two years later he travelled to the Soviet Union on a trip cleared by Prime Minister Winston Churchill, who personally debriefed him on his return.8
Many other British businessmen played similar roles, although few shared the covert function of the most famous, Greville Wynne, who acted as a go-between for the MI6 agent Oleg Penkovsky, and was played by Benedict Cumberpatch in the 2021 film, The Courier.
For all the intelligence possibilities of the East-West Trade, it was the counterintelligence vulnerabilities that became most politically salient. Wilson was unfairly blamed for the Attlee Government’s export of jet engines to the Soviets.9 MI5 monitored his contacts among the East-West Traders for many years, notably Joseph Kagan, who was in contact with KGB officer Richardas Vaygauskas.10 CIA counterintelligence chief James Angleton suspected Wilson himself of being a Soviet agent.11 Wilson in turn suspected the CIA of engaging in covert action in Britain, despite denials by London Station chief Cord Meyer.12
Perhaps there would have been less Whitehall infighting if the East-West Traders had been subject to agent registration, but it is doubtful that any amount of transparency can assuage the tensions unleashed when economic links cut across political alliances.
Johanna Chisholm (ed.), Prince Andrew will not join Royal Family for Christmas at Sandringham as alleged Chinese spy named, BBC News, 16 December 2024.
Lee and Wilkes v Security Service, Investigatory Powers Tribunal, 17 December 2024.
China spy row shifts UK critical engagement strategy, Tom Griffin on Intelligence History, 11 September 2023.
Michael Savage, Ministers resist calls to block Musk donations to Farage’s Reform UK, The Observer, 21 December 2024.
Andrew Sparrow, Parliamentary researcher arrested on suspicion of spying for China says he is ‘completely innocent’ – UK politics live, Guardian, 11 September 2023.
Jessica Elgot and Eleni Courea, Alleged Chinese spy linked to Prince Andrew named amid row over foreign interests register, The Guardian, 16 December 2024.
Stephen Dorril and Robin Ramsay, Smear: Wilson and the Secret State, Fourth Estate Limited, 1991, p.6.
Stephen Dorril and Robin Ramsay, Smear: Wilson and the Secret State, Fourth Estate Limited, 1991, p.18.
Stephen Dorril and Robin Ramsay, Smear: Wilson and the Secret State, Fourth Estate Limited, 1991, p.9.
Christopher Andrew, The Defence of the Realm: The Authorized History of MI5, Allen Lane, 2009, p.627.
David Wise, Molehunt: How the Search for a Phantom Traitor Shattered the CIA, Avon Books, 1992, p.107.
Christopher Andrew, The Defence of the Realm: The Authorized History of MI5, Allen Lane, 2009, p.632.