Stalin soon gained an unexpected ally in his battle against Hitler. Harry Hopkins, Roosevelt’s international troubleshooter, had just finished a trip to London, where he had met with Churchill to work out details for funneling military aid to Britain. On July 25, Hopkins sent the president a cable saying, “I am wondering whether you would think it important and useful for me to go to Moscow . . . I think the stakes are so great that it should be done. Stalin would then know in an unmistakable way that we mean business on a long-term supply job.”37
The president jumped at the suggestion and instructed Sumner Wells, the acting Secretary of State, to send a message to Stalin saying that the president was sending Hopkins to Moscow in order to talk “with you personally” about how the United States could help “the Soviet Union in its magnificent resistance against the treacherous aggression of Hitlerite Germany.”38
After receiving the go-ahead from Washington, Hopkins asked Churchill to provide a Royal Air Force plane to take him to Stalin. In order to avoid the fighting on the continent, he left on a twenty-four hour flight to Archangel in the far north part of the Soviet Union. From there Hopkins took a four-hour flight to Moscow. A large delegation of Soviet officials greeted him there, but quickly ran into trouble with his name. They called him Garry Gopkins because the Russian letter “h” is pronounced like the English letter “g.”39
Hopkins had two long meetings with Stalin that lasted more than five hours. Following Stalin’s work habits, they began late in the afternoon. The American quickly picked up that he terrified everyone around him. They called him simply the Vozhd—the Boss. When Hopkins in the first session quickly asked what his country needed, Stalin rattled off a long list that included aircraft guns, one million rifles, machines guns, aviation fuel, aluminum for airplanes, and more. Stalin added that he was confident that his tanks were better than the best German ones. “Give us anti-aircraft guns and aluminum, and we can fight for three or four years.” He scribbled on a piece of paper his top four priorities and gave it to Hopkins:
1. light anti-aircraft guns
2. aluminum for airplanes
3. 50-calibre machine guns
4. 30-caliber rifles
The aluminum impressed Hopkins, who thought that anyone asking for that was thinking long term and wouldn’t be surrendering anytime soon. In a long report to Roosevelt, Hopkins wrote, “Mr. Stalin expressed repeatedly his confidence that the Russian lines would hold.”40
At a second meeting the two men went over the details of shipping goods via ports such as Murmansk and Archangel in the far north rather than through either the Persian Gulf-Iran route or the Pacific Ocean-Vladivostok one. Stalin was particularly concerned about the latter, fearing that the Japanese would attack his ships. Murmansk, on the other hand, was ice-free all year long, and Archangel could be kept open with the help of icebreakers. At the end of the session the famed Life magazine photographer Margaret Bourke-White, who was on assignment in Moscow, popped in and took pictures of the two men. She moved around the office trying to capture the drama of the war moment and became intrigued by the Soviet dictator’s eyes. She said they were the coldest she had ever seen.
Stalin’s translator in the talks said after the war that Stalin always had a high regard for Hopkins because “he was the first who came after the terrible blow we got from the Germans.”41 At the suggestion of Hopkins, Roosevelt sent Averill Harriman to handle the follow-up work on getting military equipment to the Soviet Union. Even though the U.S. was still not yet formally at war, the Allied Big Three Powers to fight Hitler were in place.
Following the Hopkins visit to Moscow, Morgenthau’s Treasury Department established its own contacts with the Soviet Union with the help of Harry Dexter White, the Treasury Secretary’s top aide and a secret Soviet agent since the 1930s.42 At his initiative on December 24, 1941, White met with Andrei Gromyko, who was the counsel of the Soviet embassy in Washington and would go on to be his country’s longtime foreign minister. It is not certain, but likely, that Gromyko knew of White’s ties to Moscow, although he did not mention that in the report of the meeting. The two had many more meetings during the war, and White was an open champion of the Soviets within the Roosevelt administration.43
Hitler and German military leaders were delighted with the initial success of their invasion. On July 3, 1941, General Franz Halder, chief of staff of the army, wrote in his diary, “On the whole, then, it may be said even now that the objective to shatter the bulk of the Russian army this side of the Dvina and Dnieper has been accomplished. It is thus probably no overstatement to say that the Russian Campaign has been won in the space of two weeks.”44
Only two months later, however, the situation looked very different. On September 5, another German officer glumly wrote, “No victorious Blitzkrieg, no destruction of the Russian army, no disintegration of the Soviet Union.” Later that month, Göring issued orders to German troops to “live off the land.” In early November, General Guderian, the hero of the Nazi invasion of France, wrote his wife, “We have seriously underestimated the Russians, the extent of their country and the treachery of their climate. This is the revenge of reality.”45
Never in warfare, though, had so many prisoners been taken so quickly. In the three battles in Smolensk, Uman, and Gomel between August and October 1941, the Wehrmacht captured two million Soviet soldiers. Following Göring’s economic directive known as the Green Folder, the Germans instituted a policy of starving the local population. The three-pronged strategy was to kill 30 million people and eliminate the country’s Jews with the Final Solution. Germans would then populate an empty, but fertile land.46
Total victory remained elusive for the Nazis, even though their troops by November 1941 had advanced 600 miles into Soviet territory. The Wehrmacht now controlled most of the industrialized part of the country and nearly half of the population in a region as large as Britain, France, Italy, and Spain combined. Hitler made another fatal mistake on August 21, when he told his commanders that the primary objective was not to capture Moscow, the heart of the nation’s government as well as a major industrial complex, but to seize Crimea and the coal-mining region of the Ukraine, and then circle back to the capitol. By the end of September, the German military had devastated five more Soviet armies and taken 665,000 prisoners, but its forces had lost vital time in getting to Moscow. Field Marshal Fedor von Bock, the commander of Army Group Center, on October 2 resumed the drive toward Moscow. That was more than a month later than originally planned. The code name of the new offensive: Operation Typhoon. He had early success, but still lost some 35,000 men, 250 tanks and artillery pieces, and several hundred trucks. Fuel and ammunition supplies soon ran dangerously low. German forces traveled along the Mozhaisk Highway and were within 40 miles of the capital. The French had traveled that same road in 1812. Panic struck the capital, and people began evacuating the city. Most of the Soviet bureaucracy left for Kuibyshev 500 miles to the southeast. Martial law was declared. Stalin, though, remained in the capital after Zhukov assured him that it would not fall.47
On November 20, Bock moved his headquarters near the front lines. On December 2, German advance troops reached the Moscow suburb of Khimki, fourteen miles from the Kremlin. From there, German officers were able to see the spires of the Soviet capital through field glasses. That, however, marked the closest the army ever got to Moscow. The German High Command two days later decided that Army Group Center was “at present incapable of mounting a counterattack without bringing forward substantial reserves.”48
Bock’s staff began planning an orderly withdrawal. He angrily wrote in his diary, “We could have finished the enemy last summer. We could have destroyed him completely. Last August, the road to Moscow was open. We could have entered the Bolshevik capital in triumph and in summery weather. The high military leadership of the Fatherland made a terrible mistake when it forced my army group to adopt a position of defense last August. Now all of us are paying for that mistake.” If Hitl
er had stayed with his original date to launch Barbarossa, Bock would have arrived at the door of Moscow in mid-October rather than at the beginning of December, when General Winter was primed to launch his own attack.49
On 6 December and with the temperature -50 degrees Celsius, Zhukov’s troops launched a huge counterattack. German troops retreated all along the Moscow front, destroying whatever equipment they could not salvage. The attack was slow but relentless. Several days later, the German High Command ordered a halt to all offensive operations. The Wehrmacht was losing twice as many men from frostbite as from enemy attacks.50
By mid-December, German forces had retreated more than 50 miles from the capital, and Hitler relieved Bock of his command. Général Hiver had once again defeated an invasion of Russia.
On December 7, 1941, the Japanese attacked Pearl Harbor, and the following day the American Congress declared war on the Empire of Japan. Four days after that, Hitler supported his Axis partner by declaring war on America. The European conflict was now a global conflict, and with America in the war, the balance of military might was now on the side of the Allies. In January, the Red Army launched a surprise counter offensive that ultimately broke the German front. The relentlessly fierce battles lasted until spring and have gone into history as the Rzhev Meat-Grinder. Nazi forces were pushed westward, with the army lines moving as fast as 25 miles a day. The tide of war had changed.
The traffic of arms going east and gold going west picked up sharply at the end of 1941 and during early 1942. In mid-November 1941 the Federal Reserve Bank in San Francisco sent to the New York Fed a message that it had just received $5.6 million in gold aboard the SS Azerbaidjan. On January 6, 1942, Morgenthau’s Treasury Department put out a press release announcing that it had purchased $20 million more gold from the Soviet Union.
Bullion continued to be necessary in getting weapons to the Soviets because there was a strong group in Congress that did not want Moscow included in the Lend-Lease program. They lobbied at first to restrict it only to Britain and Ireland. In the end Congress passed an extension to the law to include the Soviet Union. Although Lend-Lease had been signed into law in March 1941, countries still had to pay for weapons in gold or other assets until September of that year. The program was not fully in operation until the following July. The Soviet Union eventually received $11.3 billion in goods through Lend-Lease, second only to Britain.
The most vital Allied supply route to the Soviet Union during World War II was the 1,500-mile long Murmansk Run that Stalin had outlined to Hopkins. Located nearly one thousand miles north of Moscow on the Barents Sea, Murmansk was the Soviet Union’s safest entry point. Convoys of thirty or more ships carried war hardware from ports in Scotland and Iceland to the beleaguered country that was now bearing the brunt of the Nazi offensive. The route had been busy before the Hopkins trip to Moscow, but shipments picked up sharply afterwards.
In October 1941, Morgenthau told his staff that the U.S. would be soon buying $30 million in Soviet gold as an advance payment for more military hardware. That later went up to $40 million. Moscow wanted to make sure that payment issues did not hold up the delivery of war goods. Allied ships, unfortunately, were floating targets for Nazi planes, ships, and submarines working out of military installations in Norway. Dozens of Allied vessels went to the bottom of the Arctic Sea. Enough got through, however, to keep a military pipeline to the Soviet Union open, and ultimately that turned the tide against the Nazis.51
Immediately after the Hopkins visit to Moscow, the Soviet tanker Batumi arrived in San Francisco with gold. In early 1942, the pace of Soviet shipments picked up sharply. Most of the gold arrived in the U.S., but some also went to Britain. The SS Cairo in February took twelve tons to London, which was then sent on to New York. The HMS Kenya took ten tons to the U.S.
On April 28, 1942, the convoy named PQ 11 was ready to depart from the Soviet harbor to return to Britain. Among the escorts was HMS Edinburgh, a 10,000-ton cruiser that was 613 feet long and had a maximum speed of 32.5 knots. It had two-dozen large guns and carried four aircraft on board. It was the largest and most powerful vessel in the group and had a crew of 850 men. Rear Admiral Stuart Bonham Carter was the convoy’s commander. He had fought World War I at sea, and early in the new conflict had commanded the Third Battle Squadron that protected Atlantic convoys landing in Halifax.
The day before the Edinburgh was due to leave, nearly one hundred small wooden boxes arrived at dockside and were stored in a bomb room on the starboard side deep inside the vessel. The cargo was supposed to be top secret, but one of the containers fell on the deck during the loading and smashed open. Everyone now knew the secret. The ship was carrying 93 boxes containing 465 bars of gold. Total weight: five-and-a-half tons worth just over $6 million. The Soviets were sending it to the U.S. to buy weapons.52
The second day at sea, the Edinburgh was steaming along fifteen miles in front of the other convoy ships. At about noon, the Nazi sub U-456 began following it. Captain Max-Martin Teichert, the commander of the German submarine, stalked the British ship for five hours and then gave the order to fire a torpedo. The shot hit the starboard side near the bomb room and the gold. The badly damaged Edinburgh headed back to Murmansk, which was now 250 miles away. The HMS Foresight gave it a tow, but the two vessels had to limp along at only four knots.
Captain Teichert called in three German destroyers to help him finish off the Edinburgh, and the group finally caught up with the British ship on May 2. In an ensuing battle the crippled vessel quickly sank a German ship, but then a Nazi destroyer scored a direct hit on the side of the Edinburgh, which miraculously continued limping along through the night. Rather than let the Germans capture the cruiser and its gold, Bonham Carter took the decision every commander dreads. He instructed the Foresight to fire a torpedo at the Edinburgh at a range of 1,500 yards. The ship and its bullion quickly sank, with the stern going down first. Some of the men aboard were lost, but others were picked up by other vessels. As the Edinburgh slipped into the freezing dark waters, British sailors on nearby vessels saluted. Treasure hunters in the 1980s found much of the gold from the sunken ship and brought it up.53
That catastrophic loss of gold, however, did not stop the Soviets from sending more. On April 10, 1942, the Convoy QP 10 was returning nearly empty after dropping off weapons. It was headed for Reykjavik, Iceland. The group included sixteen merchant ships and five destroyers. The British cruiser Liverpool, one of the escorts, carried twenty-six tons of gold. Shortly after the convoy departed, German U-boats and aircraft began attacking the Allied ships. The fierce encounter lasted three days. Four merchant vessels were sunk, and another had to return to the Soviet Union. The convoy’s escorts, though, shot down six Nazi planes and damaged others. The Liverpool and its gold survived, and the treasure was soon on its way to the New York Federal Reserve. The Murmansk convoys continued to send a steady flow of gold to the U.S. On July 30, 1942, the Soviet vessel SS Smolny arrived in Nome, Alaska from Vladivostok with $3.7 million in gold. That was one of the last gold shipments, as finally Lend-Lease kicked in.54
As a result of their courageous efforts in moving the central bank gold and the Hermitage treasures to the far side of the Urals and because Soviet citizens held little personal gold, the Nazis captured only a small amount of gold in the Soviet Union. According to postwar studies done for the Nuremberg Trial, the country lost only a ton-and-a-half of gold bars and twenty-three tons of gold fragments and jewelry despite having suffered the lion’s share of human casualties in World War II.55
Chapter Twenty-Four
MELMER GOLD
Walther Funk, the president of the Reichsbank in the summer of 1942 called Emil Puhl and asked him to come to his plush office at the Reichsbank building in Berlin. Puhl was the managing vice president and the person who ran the bank’s day-to-day operations since Funk lacked the finance background for the job. He was more interested in the trappings of power than actually doing the work. Puhl was a bank car
eerist and a complex figure. A member of the Nazi party since 1934 and one of only two board members who had survived the purge when Hitler fired Schacht, Puhl climbed to a high level in Hitler’s Reich.
At the same time, though, he attended the Berlin church of Pastor Martin Niemöller, one of the founders of the Confessional Church in Berlin, who spent years in the Sachsenhausen and Dachau concentration camps because of his anti-Nazi activities. Hjalmar Schacht was also a member of the church. As the German delegate on the board of the Bank for International Settlements, Puhl attended its monthly meetings in Switzerland. He sometimes brought back for the pastor new books about religion that were banned in Germany. While there, Puhl also regularly attended a cabaret that satirized Hitler and the Nazis. Few people in Berlin knew what he did in Basel outside of his BIS business, and back in Berlin he was a reliable civil servant who never spoke out of turn and followed orders. He left his ethics at the door and was one of the key Germans who made Hitler’s government work.1
Funk explained at the meeting with Puhl that Heinrich Himmler, the Reichsführer of the SS, the Nazi terror organization, had contacted him and asked that the bank take charge of valuables that people had “deposited” in what Funk called the “eastern occupied territories.” He then told Puhl to “ask no other questions.” The shipments were from inmates in the death camps Bełec, Sobibór, Treblinka and Auschwitz. The conversation between the two bankers was full of euphemisms, but there was no misunderstanding that Funk was talking about valuables of concentration camp victims. Himmler had explained that his own headquarters lacked a secure enough storage facility to house the valuable property. Funk told Puhl that the material had to be handled with utmost secrecy. Nothing they were discussing was to be put on paper. Funk told him to work out the details with Oswald Pohl, the head of the economics department of the SS and also a concentration camp inspector. Funk said that Himmler and Finance Minister Lutz Schwerin von Krosigk had already reached an agreement on the matter.2
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