There is no indication in Russian records as to how Collins was recruited as a spy, although money may well have been a factor. It would seem from the commentary in his file that he was not exactly prospering in business when he was first recruited. From the Russian point of view, he was most useful by virtue of his language abilities and his knowledge of Japan and her people. Accordingly, the Russians were paying him $300 per month plus expenses.29
Whether Reilly’s discovery of the Russian agent was made by chance or through a third party is unknown. However, bearing in mind the suggestion that he was involved in an affair with a woman by the name of Anna, one candidate stands out in particular – Anna Grigoryevna Collins, Horace Collins’ Russian-born wife.30 She not only knew of his work for the Russians, but was also known to be having an affair with an associate of her husband.
Having made a swift exit from Port Arthur, Winfried Ludecke suggests that Reilly headed for Japan in the company of ‘a lady with whom he had been flirting’.31 Whether Anna and the lady companion are one and the same is conjecture. If Reilly did go to Japan, he could not have stayed there very long, for in June 1904 we find him in Paris.32 During the brief time he spent in the city he renewed his acquaintance with William Melville, whom he had last seen in 1899, shortly before his hurried departure from London. Reilly’s meeting with Melville is most significant, for within a matter of weeks Melville was to enlist his help in what would later become known as the D’Arcy Affair.
Authors writing about Reilly’s role in the D’Arcy Affair have often relied on Reilly’s own tale of what happened. Other sources lead to a rather different train of events. The background to the affair is succinctly set out in a letter of reminiscence dated 30 April 1919 from E.G. Pretyman MP to Sir Charles Greenway, the chairman of The Anglo-Iranian Oil Company,33 in which Pretyman recounts his own involvement some fifteen years earlier, as Civil Lord of the Admiralty, in securing the Persian oil concession for Britain, which led indirectly to the founding of the Anglo-Iranian Oil Company:
In 1904 it became obvious to the Board of the Admiralty that petroleum would largely supersede coal as the source of fuel supply to the Navy. It was also clear to us that this would place the British Navy at a great disadvantage, because, whereas we possessed, within the British Isles, the best supply of the best steam coal in the world, a very small fraction of the known oilfields of the world lay within the British Dominions, and even those were situated in very distant and remote regions. Lord Selborne therefore decided to appoint a small Standing Committee to deal with this question and to take any steps they found possible to bring additional sources of petroleum supply under British control. I was appointed Chairman of this Committee and was assisted by Sir Boverton Redwood and the late Sir Henry Gordon Miller, then Mr Gordon Miller, Director of Navy Contracts. In the course of our investigations we learned through Sir Boverton Redwood that the late Mr D’Arcy had secured a valuable concession from the Persian government of the oil rights in southern Persia, and that he was negotiating for a similar concession from the Turkish Government for oil rights in Mesopotamia. We also ascertained that Mr D’Arcy was desirous of disposing of his rights under the Persian Concession to some financial Syndicate with the necessary capital and experience to undertake development operations. We further ascertained that D’Arcy was, at that moment, in the Riviera negotiating for the transfer of his concession to the French Rothschilds. I therefore wrote to Mr D’Arcy explaining to him the Admiralty’s interest in petroleum development and asking him, before parting with the concession to any foreign interests, to give the Admiralty an opportunity of endeavouring to arrange for its acquisition by a British Syndicate.
I further asked him to come and see me on the subject. Mr D’Arcy accepted my invitation and returned from the Riviera to discuss the position with me. As a result of our conversation, the Committee approached the Burmah Oil Company with whom arrangements had already been made for emergency supplies of Naval Oil fuel, and, after investigating the prospects of the Persian Oil Field, they agreed to undertake its development and to form a Syndicate.
D’Arcy had already spent over £150,000 in the search for oil over and above what he had spent in obtaining the concession in the first place. It was clear that he could not continue in this way. He soon found, however, that he was very much in a ‘chicken and egg’ position, as potential backers, including the British government, would have nothing to do with the project until oil was found. Then, in December 1903, there seemed to be hope in that Lord Rothschild, who had heard of D’Arcy’s venture, had expressed the view that it was of ‘great importance’. D’Arcy’s intermediary, Sir Arthur Ellis, met with Lord Rothschild and on 30 December wrote to D’Arcy to inform him that Rothschild would be writing to his cousin Baron Alphonse de Rothschild in Paris. It was indicated to the Rothschilds by Sir Arthur Ellis that £2 million would have to be spent in Persia. A personal meeting was therefore arranged between D’Arcy, who was accompanied by John Fletcher Moulton, and Baron de Rothschild in Cannes. According to the records of the Anglo-Iranian Oil Company, this meeting took place towards the end of February 1904.34
Pretyman’s letter also raises a number of other questions: why, for example, had the British government had such a quick and fundamental change of heart in now wanting to assist D’Arcy? Back in November of the previous year they had shown a distinct lack of enthusiasm for assisting him. Now, three short months later, they had not only a dramatic change of mind but were positively pursuing him to the negotiating table.
It may well be that in December 1903 the government view was that in the absence of any other potential D’Arcy backers they could afford to wait for a sign of the concession’s potential before committing any money. The situation changed dramatically the following month, however, when it seemed not only that D’Arcy had now found potential funding, but that potential funding was sourced abroad and might purchase the concession outright.
In Ace of Spies, Robin Bruce Lockhart repeats one of Reilly’s oft-recited tales of how, at the British Admiralty’s behest, he tracked down D’Arcy and covertly approached him in the south of France. According to Reilly, he boarded de Rothschild’s yacht disguised as a priest and persuaded D’Arcy to break off negotiations and return to London to meet with Pretyman and the Admiralty.35 This story is clearly fantasy on Reilly’s part, for in February 1904 he was thousands of miles away in Port Arthur. However, this should not discredit the theory that the Admiralty was engaged in efforts to entice D’Arcy from the clutches of the Rothschilds.