All Russian Co-operative Society

1920s trade organisation in UK
Arcos, the All Russian Co operative Society

The All Russian Co operative Society (ARCOS or ARKOS, АРКОС) was the principal body responsible for orchestrating Anglo Soviet trade in the early days of the Soviet Union, following the development of Vladimir Lenin's New Economic Policy. Its headquarters was located in Hampstead, London. In 1927 the organisation was raided by British authorities, who accused the company as serving as a front for subversive activities.

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, 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. 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. 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.

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. 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. In an attempt to provide justification for the raid on Arcos, Prime Minister Stanley Baldwin read aloud in the House of Commons from a handful of deciphered telegrams, specifically one mentioning Comintern agent Mikhail Borodin, that proved Soviet guilt of espionage. Baldwin admitted that these telegrams were not acquired in the Arcos raid, but stated they were evidence that the Soviet Union was using the organisation for the conduct of "military espionage and subversive activities throughout the British Empire and North and South America". 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. Britain severed diplomatic and economic ties with Soviet Union shortly after the incident in late May 1927, marking the end of the Anglo Soviet Trade Agreement, and a war scare swept the Soviet Union. Despite the highly publicised 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:

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