British agents foiled a desperate German plot to monitor troop movements ahead of D-Day, capturing three spies and uncovering information about German codes, secret writing and sabotage, according to MI5 files released today.
During the Second World War, Iceland became tactically important for both sides and Germany sent a series of spies to gather weather information about the area to send back to the Luftwaffe.
But by May 1944 they had become convinced that any naval assault on their forces would be launched from Iceland, MI5 files released today by the National Archives in Kew show.
The Germans put together a hurried plan to send three spies to the country to monitor troop movements in a bid to foil Allied attempts to liberate France.
Three Allied forces agents, named Miller, Hoan and Frick, were having dinner in their hotel in Seydisfjordur, Iceland, on the evening of May 5, 1944, when they got wind of the scheme.
A seal hunter had spotted three strangers behaving suspiciously near Borgarfjordur.
The agents tried to alert an Allied ship anchored off the coast in that area but were told it could take hours before it got up enough steam to sail, by which time the men could be deep into the Icelandic wilderness.
So they persuaded the seal hunter to be their guide, borrowed a boat and in the early hours of the morning landed near where the men had been seen.
They hiked across the snow, through the night, following the faint trail left by the spies until finally, at 6am the following day, they spotted them.
Their report notes: "We cocked our pistols and quickened our pace."
They surrounded the men, who very quickly confessed to being German soldiers but claimed they had been sent only to gather meteorological information.
Ernst Fresenius, an avowed Nazi loyalist, was in fact the only German. The other two men, Hjalti Bjornsson and Sigurdur Juliusson, were Icelanders who had been hired as mercenaries by the Nazi military.
They were frogmarched to a farmhouse two miles away where Miller and Frick kept them prisoner while Hoan went back to find the radio transmitter the men had hidden.
A search revealed that the men had £9,000 of sterling, dollars and German marks on them.
It took six interrogation sessions back in UK to establish that the arrested men were in fact trained spies looking for information on troop and naval movements and ships in fjords.
They had attended a special school in Oslo where they learned secret writing, code and sabotage.
The two Icelanders were happy to talk freely about who ran the school, what they learned and even draw diagrams of each room, hoping that they would be set free to return home.
But the German Fresenius was a harder nut to crack and withheld his secret radio call sign from interrogators right until the very end in a bid to stop them sending double-crossing information back to his German masters.
Despite his efforts, British agents did manage to send a message to German control purporting to be from Fresenius and discovered a second radio transmitter he had hidden in the Icelandic hills.
The file notes that it was a badly planned expedition and so rushed that the three enemy spies had barely been given a cover story. They were told to admit to being German spies looking for meteorological information but to keep back the true aim of the trip in a bid to conceal German concern about a naval attack.
Even an examination of their wireless transmitter by British experts found that it had been hurriedly put together without proper parts and valves - which was taken as a sign of increasing equipment shortages in the German forces.
Any hopes that Fresenius, Bjornsson and Juliusson had of returning home or of a dramatic rescue by their spymasters proved hollow.
All three were handed over to the American forces and their file ends with a report from the interrogation camp. It concludes: "There is a vague suggestion that the Germans would be sufficiently interested in Fresenius to arrange for his return from Iceland in a U-boat. My own view is that the Germans will abandon these unsuccessful spies and that any attempts to arrange for a submarine will be doomed to failure.
"In my report of 22.5.44 I said the decision may well be that this man should be court martialled and shot. Today I see no reason to depart from that view."