Richard Alrich’s GCHQ: The Uncensored Story of Britain’s Most Secret Intelligence Agency describes a number of instances of longstanding allies conducting espionage against one another, including signals intelligence (SIGINT). Aldrich describes how the ‘Echelon’ system run by British and U.S. intelligence was used to “read the traffic of their minor allies, including France and West Germany”. This system is now estimated to process five billion intercepts per day, probably filtering them for suspicious words and phrases. Aldrich talks about how, after the second world war, Britain’s codebreakers were “doing extensive work on Britain’s European allies, regarding them as either insecure or untrustworthy, or both”.
Of course, more awkward allies have been a higher priority for codebreaking and other forms of covert activity. During the interwar period, Russian ciphers were the the “core business” of Britain’s codebreakers, and apparently work on them didn’t stop despite their subsequent alliance. The Soviets were also spying on the allies, though with more of an emphasis on human intelligence (HUMINT). For example, John Cairncross worked at GCHQ’s predecessor – Bletchley Park – and warned the KGB of the impending German armoured offensive at Kursk, one of the decisive battles of the war. He also saw some of Britain’s early thinking on atomic weapons while working at the Cabinet Office, while his fellow Russian spy Klaus Fuchs was virtually able to provide the blueprints of the devices built at Los Alamos. The Soviet Union achieved other notable HUMINT successes throughout the Cold War, such as the John Walker espionage within the navy. Surely, there are other examples that are still secret.
Allied SIGINT against Soviet targets continued after 1945, as GCHQ and others started to intercept messages between Moscow and the capitals of new client states.
The most subtle reference to inter-allied spying comes from a passage on the Diplomatic Wireless Service, developed in 1944 and 1945. Aldrich describes how the DWS was primarily a system of military SIGINT collection stations, but that it also “doubled as a secret monitoring service working from within British Embassies and High Commissions”. High Commissions are only located in Commonwealth countries, on whom Britain is presumably still spying. They seem to be returning the favour, as demonstrated by another anecdote from the book, in which Prime Minister Tony Blair discovered his hotel room in India to be laced with listening devices that would have had to be drilled out of the walls to disable.