Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion

by George M. Taber

  With the British now determining the fate of the Polish gold, the first proposal was to transfer the cargo to a British or French warship and take it to either London or Paris. The Turks vetoed that plan. The only other alternative was to send it overland by train across Turkey and the French-controlled Levant, the colonial name for the region of Syria and Lebanon, to Beirut. From there it could be shipped to France.

  Two hours after the Eocene landed, the Polish consul in Istanbul arrived with the news that the Turkish government had agreed to let the cargo be transported across its territory to Beirut. The consul also suggested that it be deposited temporarily in a local bank. Matuszewski rejected that suggestion. It was staying on board. The consul also passed along a rumor that Germans were attempting to buy a Greek boat so that they could ram into the Eocene and sink both the vessel and its cargo.

  It took Matuszewski and the others two days to work out all the details. The final issue was payment. The Turks were demanding that the Poles pay the equivalent of $30,000 in Turkish lira before the train could leave the country. They would not accept any other currency or even payment in gold. The Poles were not carrying that kind of money, but the local ambassador’s wife suggested asking Archibald V. Walker, the wealthy Middle East representative for Socony-Vacuum, who had that kind of cash on hand. Walker agreed, and the ambassador wrote him out a receipt.27

  The next afternoon on September 20, the Eocene pulled up anchor and moved to Istanbul’s majestic Haydarpaa Terminal, where during the evening the gold was offloaded to a train that consisted of a dining car, two sleeping cars, and nine baggage wagons. Late that evening, the passengers left the ship and boarded the train. Captain Robert Brett then returned to his routine life in Kabataç.

  Two days later, the Polish gold train in the evening reached the Syrian border, where a French military unit took over responsibility for it. The trip went smoothly and quickly, until it arrived in Riyak, a no-man’s-land between Syria and Lebanon, where the gold had to be unloaded once again to go from a standard to a narrow-gauge train. With that mission accomplished, the new train started up again, traveling through a pine forest that was a pleasant change after the barren Turkish desert. The Poles soon saw the lights of Beirut in the distance. The shipment arrived there on September 23, and went directly to the harbor, where the cruiser Émile Bertin, the fastest ship in the French fleet, was waiting to take the gold.28

  The city and the port were swelteringly hot, which may have been the reason why Matuszewski soon got into an argument with Gabriel Puaux, the French high commissioner for Syria and Lebanon. He wanted all the gold immediately loaded aboard the Émile Bertin so that it could depart for France before the German submarines knew what was happening. The vessel, he explained, was the fastest warship in the world and could make a rapid getaway. Its commander, Robert Battet, was ready to leave. Matuszewski disagreed, saying that they should split the cargo into two shipments to reduce the risk of losing everything in one sinking.

  Rear Admiral M.F.L.F. de Carpentier, the commander of the fleet, agreed with Matuszewski, and it was decided that three-quarters of it would go on the Émile Bertin. The rest would follow later. On the evening of September 23, three hundred men loaded 886 crates of Polish gold onto the cruiser. The project took three hours.29

  French naval regulations did not allow civilians on board a warship, but an exception was made so that two Polish central bank employees, Tomasz Kunierz and Władysław Bojarski, could accompany it on the voyage to France. Bojarski was watching a crane lift crates of gold and lower them into the ship’s hold, when a French sailor suddenly shouted to him to get below deck. When he arrived there, he saw that a net carrying several crates had ripped, sending the containers crashing down and breaking open. French sailors stood in stunned silence looking at the gold bars. They had never been told about the ship’s new cargo. A French boatswain quickly told the sailors to get to work nailing the boxes back together. Bojarski watched in the miserable heat below deck until the job was completed.

  Near midnight on September 23, and with its lights blacked out, the Émile Bertin headed out to sea. Its destination: the Toulon naval base on the French Mediterranean coast. The ship left on a zigzag course in order to make it harder for U-boats to attack. With French sailors manning anti-aircraft guns and mid-range artillery, the departure went smoothly. Once the ship was out to sea, the commanding naval officer in Beirut sent a message to his superior that the Poles had refused to send all the gold on one ship, so eighteen tons still remained there. It would have to come later. West of Malta, the Émile Bertin passed two convoys going in the opposite direction.

  The two Poles bunked in the cabin normally reserved for Admiral Jean-François Darlan, the commander of the French fleet, and his wife, when they were on board. The guests also ate in the officer’s mess and were delighted with the French cuisine and the wines that were served. Commodore Battet, on the other hand, remained on the bridge for the entire voyage, even eating his meals and sleeping there.

  The French officers and crew grew nervous when the ship approached the Italian coast near Sicily. Everyone on board worried that German U-boats might be stationed there, but nothing untoward occurred. The Émile Bertin reached the French coast at sunrise on September 27. A small scouting plane took off from the deck to make a reconnaissance flight, but immediately went into the sea because the strong morning sun had temporarily blinded the pilot. The ship’s crew quickly pulled both the pilot and plane out of the water. In Toulon, Commodore Stanislaw Lasocki, the Polish naval attaché in Paris, welcomed the ship, its passengers, and the gold to France. The ship’s cargo was temporarily stored in the base’s armory.

  On October 2, two French cruisers, Épervier and Vauban, left Beirut for Toulon under the command of Commodore Chardenot with the remaining 205 crates and 93 bags of Polish gold. A Bank of Poland official was on each ship, which arrived safely in Toulon on October 6.30

  After all the gold had landed, it was sent by armored train to the Banque de France’s regional office in Nevers, three hundred miles northwest of Toulon. On October 18, Zygmunt Karpiski and Stanislaw Orczykowski, two Bank of Poland officials, inspected and counted all the crates and bags of gold at Nevers. The gold was exactly the same amount that had left Sniatyn, Poland on September 13. Only the three tons that Floyar-Rajchman and his men lost to the Romanians at the Polish embassy in Bucharest, were missing.

  Pierre-Eugène Fournier, the governor of the Banque de France, offered the Polish bankers two options for storing their gold. It could be handed over as an earmarked account, the popular way central banks held foreign bullion, or he would give vault space at no cost in one of their branches. In the latter case, the Poles would have total responsibility for it. They selected the second option. The Polish government-in-exile sold eight tons of the bullion to the Banque de France in order to obtain money to run this new set of operations.31

  A total of 70 tons of Polish gold had been shipped out of Warsaw in the early days of September 1939. All but the small amount left in Poland or confiscated in Romania had safely reached France. The long saga of the Polish gold, though, was far from over.

  Chapter Eleven

  NORTHERN LIGHTS GO OUT

  At the end of World War I, several new nations were on the map of northern Europe. Three of them were called the Baltic States, and they were Latvia, Lithuania, and Estonia. The fourth was Finland. None had been independent prior to the war. The Russian Empire had ruled Latvia for nearly two centuries. Lithuania had been incorporated into either Poland or Russia. Estonia had been part of Denmark and Sweden. Finland had been part of the Kingdom of Sweden from the thirteenth century to 1809, and then most of the Finns became citizens of an autonomous part of the Russian Empire. The czar then ruled the area as its Grand Duke.

  The small states had received their independence thanks to Woodrow Wilson’s policy of promoting ethnic self-determination. As part of establishing their new nationhood, these four set out to establish
or strengthen their central banks. The new Soviet government helped the Baltic states get started, and in early 1920 sent them 31.5 tons of the remaining Russian imperial gold. Estonia received just over eleven tons, and Latvia and Lithuania received slightly less. Finland’s Central Bank already existed, and dated back to 1812. With the European political situation growing worse in the 1930s, all four countries tried to protect their gold by moving it to France, Britain, Sweden, and the U.S. as well to the Bank for International Settlements.1

  No sooner had Germany and the Soviet Union crushed Poland in September 1939 than the Germans and the Soviets quickly moved in to redraw the map of northern Europe and grab back land that had once been theirs. Article One of the secret protocol of the Ribbentrop-Molotov Treaty of August 1939 divided the area into Nazi and Soviet spheres of influence and allowed for future “territorial and political rearrangements.” Estonia, Latvia, and Finland plus eastern Poland basically went to the Soviet Union, while Germany took western Poland and Lithuania. Stalin and Ribbentrop sealed the deal on the new political boundaries of northern Europe by autographing a map that showed the new borders and their respective spheres of influence.2

  The dismantling of Poland in September along the lines of the Molotov-Ribbentrop Treaty, though, did not go exactly according to plan. The Nazis had seized area around Lublin, Poland that was supposed to be in the Soviet zone, while the Soviets had captured Vilnius, Lithuania, which was to go to Germany. In late September, Stalin suggested that the two countries have another look at the zones of influence. The second secret accord put Lithuania into the Soviet sphere and gave the Germans more of Poland.3

  The Soviets now quickly moved to consolidate their gains in the four nations in their sphere. Stalin was not enthusiastic about bringing the small countries into the ethnic hodgepodge that was already straining his country’s national unity, but he still wanted to make sure that his militarily weak neighbors were firmly under Moscow’s control. He may also already have been thinking about an ultimate conflict between Nazi Germany and the Soviet Union, and saw the small countries as a buffer zone for his young communist nation.

  In late September and early October 1939, the Soviets demanded that all the Baltic States agree to mutual assistance pacts that gave Moscow the right to establish military bases in those countries. Estonia complied first on September 28; Latvia came next on October 5, and Lithuania agreed only after heavy pressure on October 10. The Soviet Union by then already had thousands of troops in each country.4

  That, however, was not enough for Moscow. In June 1940, while the world was fixated on German victories over Holland, Luxembourg, Belgium, and France, Stalin brought the Baltic countries totally under his control. On June 15, Soviet forces invaded Lithuania, and the following day they entered Estonia and Latvia. Only the Estonians put up any defense against the overwhelming Soviet might. In mid-July elections were held for the People’s Parliaments in all three nations. Results were announced twenty-four hours before the polls even closed. The new legislative bodies met and voted on only one issue: to request becoming republics within the Soviet Union. They naturally passed the legislation, and the next month the Supreme Soviet accepted their applications.5 The Council of the People’s Commissar of the U.S.S.R. passed a resolution instructing the three central Baltic banks to liquidate on June 15 and to send all their precious metals and stones plus securities to Gosbank, the Soviet state bank.6

  During three days in the middle of July, the central banks of the three Baltic States sent out to several central banks around the world and also to the Bank for International Settlements instructions to send all the gold that had been deposited in those institutions to Gosbank. The cable to the Federal Reserve Bank in New York from the Latvian Central Bank in Riga was dated Monday, July 14, and read in telegram style: “Close our account transfer balance account state bank U.S.S.R. Moscow with you. Under cable advise Moscow and us. Likewise transfer account State Bank U.S.S.R. Moscow with you any amounts received our account subsequently.”7 The Latvian bank at the time had only 4.4 tons of gold at the New York Fed. The central banks of Lithuania and Estonia sent similar cables with the same wording and instructions.

  When the messages arrived, officials at the New York Fed Reserve were reluctant to make the transfers and quickly turned the highly sensitive issue over to the Treasury Department. Bernard Bernstein, the key staff person dealing with monetary and legal issues, took over the issue. He had been watching the situation in Europe closely because it hit him close to home. His parents were both Russian immigrants, and he was one of the many young men who had idealistically gone to work for Roosevelt’s New Deal. One admirer described him as looking like a football quarterback. His parents had escaped their native country’s virulent anti-Semitism, which he learned about at an early age and which left him with a deep respect for their religion. Accounts of Kristallnacht and other Nazi atrocities against Jews in Germany touched Bernstein personally and poignantly. Nevertheless, he was able to write dispassionately about what he called, in one memo, the Götterdämmerung, which he was witnessing as Allied armies marched across Europe.

  Bernstein took the problem of the Baltic gold to Morgenthau, who bumped it over to the White House. On Monday, July 15, President Roosevelt used a presidential power dating back to 1917 to block the transfer of Latvian, Estonian, and Lithuanian gold to Moscow.8 The Federal Reserve two days later informed Moscow of that action.9

  The amount of gold the Soviets seized in the Baltic States upon annexation was relatively small since by then the countries had sent most of their bullion abroad. They all had some in London and in Sweden. Lithuania had its mainly in France and the U.S, while Latvia had its largely in Britain, and Estonia had it spread out to Britain, Sweden, and the U.S. They all also had small amounts with the Bank for International Settlements. The stock remaining at the Latvian Central Bank, for example, was just 1.6 tons. The amount at the Lithuanian bank was equally small. Some of the countries used the gold stored in the U.S. during the war and even afterward to pay for their diplomatic offices there.

  The French Central Bank soon received a message also asking that the gold be sent to the Soviet Central Bank. By that time, however, the gold from the two countries had already gone to Senegal along with the French, Belgian, and Polish bullion.10

  The Bank for International Settlements also received cables from the three Baltic banks with virtually the same wording asking that their gold be sent to Moscow. President Thomas McKittrick was suspicious when he received the messages and asked a Swiss legal expert to provide him an opinion on whether he was obligated to follow Moscow’s instructions. The expert view was that he didn’t need to make the payments, and McKittrick informed his board members.11

  In July 1940, the Bank of England sequestered the Baltic gold reserves deposited in the U.K., but Barclays Bank in Britain confirmed in a cable to the Latvian bank that it had transferred $190,864.38, minus 3.25% for expenses, to the State Bank of the U.S.S.R. The Swedish State Bank also sent Moscow small amounts that it was holding for the Baltic States.12

  There was no way for the foreigners to know the situation that existed in those countries, but the similar wording indicated that the requests were done under duress. Under the treaties that made them part of the Soviet Union, the countries gave Moscow the right to buy their gold and whatever the three countries held abroad.13

  The Nazis initially supported the Soviet claims for the Baltic gold, but after their invasion of the Soviet Union, Berlin sent a cable to the New York Federal Reserve requesting cancellation of the earlier order to ship the bullion to Moscow. By then, though, it was too late. The Soviet Union had successfully seized a small chunk of what the Baltic states had once hoped would protect their independence.14

  Foreign central banks generally continued to keep the gold the Baltic states had put in their charge. Come the early 1990s and the breakup of the Soviet Union, France and Britain sent 5.1 tons of gold back to Lithuania, and the Bank for Internati
onal Settlements sent bullion to the Bank of Lithuania account at the Bank of England. Latvia received eight tons, and Estonia also got a small amount. Russia, though, did not return any to the newly independent countries, arguing that they had assumed all their debts.15

  The Soviet cruiser Kirov was due to pick up 3.1 tons from the Estonian Bank gold stocks between August 22-28, 1941, but by then the German invasion of the Soviet Union was well underway.16

  Soviet troops retreated from the Estonian capital Tallinn on the morning of August 27, when the Nazis overran the city. A flotilla of 225 ships steamed out of the harbor. Nazi mines and torpedoes plus Luftwaffe attacks destroyed more than sixty ships. Luckily, the Estonian Soviet government and their gold left on the Kirov and reached the port of Kronstadt near Leningrad. The bullion was sent first to Moscow and then further east.

  As a newly independent country following World War I, Finland tried to build up its gold stocks. About one-third of its international reserves was in bullion, while the rest was in foreign currencies. In the summer of 1939, the Bank of Finland held eighteen tons of bullion at the Bank of Finland in Helsinki and at one of its regional offices. After the German invasion of Poland, however, it began moving gold abroad, first to Sweden and then to more distant locations. At the start of the Winter War in November 1939, the bank had 4.5 tons at the Bank of England, 18.1 tons at the Swedish National Bank, 1.3 tons at the Federal Reserve in New York, and 0.7 tons at the Bank for International Settlements.17

  Despite the German-Soviet alliance, Moscow was nervous about Nazi intentions and wanted to enlarge its buffer with Germany even beyond the Baltic states. Stalin first tried to convince Helsinki through negotiation to surrender to it the province of Karelia, which lies between the Gulf of Finland and Lake Ladoga. That was an important piece of territory for the defense of Leningrad, since artillery fire from Finland could hit that city. After talks failed, Stalin decided to invade, expecting that the war would be a walk in the park. Nikita Khrushchev, who then administered Ukraine, was involved in the war planning and shared the optimism. As he wrote in his memoir, “All we had to do was raise our voices a little bit, and the Finns would obey.”18 On November 30, 1939, the Soviet Union invaded Finland.