Two questions about The Spy Who Came in From the Cold

(Complete Spoilers below, and use of offensive racial slurs in text)

Hello everyone, I'm re-reading this book and I just have a few questions. One of them I'm sure is me not being a British person who lived through the Cold War, and another is a plot detail. This is only for people familiar with the book.

1: When Leamas is doing this interview with Peters, the issue of Karl having help smuggling out intelligence from someone in a higher position than him is brought up. Leamas thinks to himself "Perhaps this was the Special Interest whom Control was so anxious to protect from Mundt."

That special interest *is* Mundt, correct? As in, from the beginning Control has of course known that Mundt was working for the Allies. Could Mundt even be the guy who had Karl killed at the beginning? After all in the earlier chapters Leamas recalls that when in London Mundt had two of his own agents killed to cover his tracks.

Given what we know by the novels end, am I correct in thinking that the death of Karl might well have been Mundt's doing in order to protect his own cover?

2: There's a part where Control casually drops the n-word. I know this is a different time, and people used these words way more openly back then. But I'm wondering what the specific context is of using this term. When Lemas is talking to Control, the man says "Then there was the Dresden man, and the arrests at Jena. Like the ten little n*****s. Now Paul, Viereck, and Landser - all dead. And finally Riemeck."

Reading that hit me out of now where like a truck. I just want to know what Control is talking about here, because it sounds like a specific reference to something.