Inquiry into spying file found in Lange's papers

The Government will look into how a top-secret report, which should have been tracked and carefully monitored, found its way into a box of archives left by former Prime Minister David Lange.

The document indicated that the United States had threatened to spy on New Zealand in the wake of its anti-nuclear stance.

The report, by the Government Communications Security Bureau, was among the private papers retained by Mr Lange, who died in August.

Duty Minister Jim Anderton last night said such a confidential report should have been closely monitored by intelligence officials and handed straight back after Mr Lange read it.

"There was a failure of the system somewhere. It's 20 years or so ago ... but there are lessons to be learnt and that should be learnt," he said.

"Officials will look at the circumstances surrounding the presence of the report in the archives ... [and] how that paper was handled."

He said the contents of the archived box - including cheque butts and other miscellaneous material - suggested that the report had not been deliberately misplaced.

"It strikes me that it's probably all just been bundled into a box. Nevertheless the system of monitoring should have been able to track it down."

He said the inquiry would take place shortly, although there may be limited accountability due to the time that had since lapsed.

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

"It's no surprise that this is the only time I think in New Zealand history that something like this has come out."

The Sunday Star-Times was given permission by Archives NZ - after it gained Cabinet approval - to view the documents, which were kept secret until Mr 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," Mr 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."

In another letter a fortnight later, Mr 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".

Mr Anderton said last night that New Zealand had no reason to apologise for its nuclear-free stance.

"I believe we were right to adopt that policy. It was a long time ago and it's now upheld by all significant political parties in New Zealand."

Also contained in Mr 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.

The report 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 per cent.

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, Laos and South Africa.

Mr Hager said the documents would provide insights into New Zealand's intelligence operations and its relationship with the US during a critical period.