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Lange's secret papers reveal USA's bully tactics

The papers also include a top-secret report by New Zealand's electronic spy agency that casts new light on the NZ-US intelligence relationship after the anti-nuclear policy and breakdown of Anzus.

It also shows that New Zealand was spying on the United Nations and many countries, including Japan, France and Pacific nations.

The Sunday Star-Times was given permission by Archives NZ -after it gained Cabinet approval - to view the documents, which were kept secret until Lange's death in August.

Among them is a letter from former minister David Caygill, written on March 21, 1986, in which he describes a lunch with United States ambassador Paul Cleveland.

"The ambassador asked me if I realised what was at stake in the dispute between the two countries," Caygill writes.

"I asked him what he meant. He replied trust. I asked him what he meant by that and he said that until now the USA, Canada, UK, Australia and New Zealand had had a unique relationship. `We have not spied on each other. If you go ahead with your policies we will not be able to trust you'.

"I took the clear implication from his remarks that if our relationship with the US deteriorated further, then the US would no longer feel any inhibition in conducting intelligence gathering operations against us."

Caygill writes that the ambassador said the head of the CIA was also concerned. He had considered what action should be taken, and had asked whether he should get tough with New Zealand.

The ambassador also told Caygill Lange had upset the US further when, in response to threats that the flow of intelligence from the US would be cut off, he replied "that would give more time to do the crossword".

In another letter a fortnight later, Lange's chief of staff, John Henderson, said he also lunched with the ambassador, who raised the same issues "and it was difficult not to reach the same conclusions as Caygill reached".

"When I asked him directly whether he was saying that if there was a breakdown in our relations, the US would conduct intelligence operations against us he said he did not know," Henderson writes.

"The fact that the ambassador raised it with both of us shows that he meant to get the message across and it certainly warrants our serious concern."

Also contained in Lange's papers is the 1985-86 annual report of the Government Communications Security Bureau, the government's electronic spying agency, which is marked "top secret" and "umbra" - the highest security classification given to intelligence documents.

It shows that while the intelligence flow to New Zealand from the US dropped after the anti-nuclear policy, the GCSB maintained significant links with American intelligence agencies.

GCSB director Colin Hanson describes the relationship as "a mixed state of official cautiousness and private cordiality", and the volume of overseas intelligence reports increased by 33% on the previous year.

Intelligence expert Nicky Hager said the GCSB report was the most secret and revealing intelligence document to reach the New Zealand public.

"Internationally, documents like this come to light maybe once a decade and there will be great interest in this from researchers in the US and other countries. Although it is 20 years old, it gives huge insights into New Zealand's intelligence operations and relationships, particularly with the US in that critical period."

The report lists the countries and agencies on which New Zealand was spying. They include targets that have never been officially acknowledged, including UN diplomatic communications, Argentine naval intelligence, Egypt, Japan, the Philippines, Pacific Island nations, France, Vietnam, the Soviets, North Korea, East Germany, Laotia and South Africa.

Its response to the Rainbow Warrior bombing and the Mikhail Lermontov sinking, names of its officers, staff numbers, training, activities with intelligence agencies from other countries, security planning, equipment, techniques and budgets are revealed.

Hager said it was a severe breach of security that the report had gone astray from the GCSB. Marked number 1 of 16 copies, the report should have gone back to GCSB after Lange finished reading it.

The Sunday Star-Times found it inside a brown envelope marked "prime ministers office", with "TOP SECRET PRIME MINISTER" handwritten on it, and the name of Gerald Hensley, head of the Prime Minister's department.

The envelope was in a large cardbox box - one of about a dozen boxes and files - containing Lange papers.