Origins
The All-Russian Co-operative Society, Ltd., began operations in London in October 1920. The name "Arcos" is 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,"The Work of Arcos", p. 19. and was a British company, operating under British law, although the stockholders were all Soviet citizens. Arcos made £1,970,000 worth of purchases during the calendar year 1920, with payment for its purchases made in gold via the city of Reval (now known as Tallinn) in Estonia. 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, primarilyArcos Bank
On 29 May 1923, the Managing Board of Arcos decided to establish its own bank to handle the financial transactions of the organisation."Arcos Banking Corporation", ''Russian Review,'' vol. 1, no. 17 (17 May 1924). Washington, D.C.: Russian Information Bureau, pp. 351–352. In accordance with this decision the Arcos Banking Corporation, Ltd. – commonly known as the Arcos Bank – was launched on 5 July 1923, with £250,000 in working capital. Arcos Bank was a separate legal entity and ostensibly operated independently of the Arcos trading company. All funds involved in the import or export of commodities of the Soviet Union were to be controlled by this new institution. In addition to handling the transmission of funds used in the import and export trade, Arcos Bank issuedEspionage
The suspicions of MI5 that Arcos was acting as a cover 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, a Communist-controlled news agency for the American labour press which served as a journalistic cover for left-wing espionage in the UK. MI5 tapped the telephone lines of the FPA which revealed a raft of calls not only to Arcos but also suspected Soviet intelligence operatives, while interception of its post revealed copies of classified French dispatches.Arcos affair of 1927
On 31 March 1927, SIS (that is, MI6) 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.The National Archives, Kew, file no.KV3/15. At 16:20 on 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 known as the Russia House or Soviet House. 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 wrest 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. The raid and subsequent diplomatic incident 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 in accord with the Anglo-Soviet Trade Agreement of 16 March 1921.Fischer, ''The Soviets in World Affairs,'' vol. 2, p. 687. In an attempt to provide justification for the raid on Arcos, Prime MinisterSee also
* Campbell Case * Zinoviev letter *Footnotes
External links
* {{Authority control Economic history of the Soviet Union Russia–United Kingdom relations Foreign relations of the Soviet Union Companies of the Soviet Union Soviet Union–United Kingdom relations 1920 establishments in the United Kingdom Organizations established in 1920 Foreign trade of the Soviet Union