Spies and Commissars

by Robert Service

  There was another snag, and it was a big one. Swedish industry lacked the capacity to manufacture so much railway equipment with any rapidity. The Stockholm deal would depend on Sweden’s metallurgical companies quietly buying around eight hundred locomotives from Germany.14 Business of this surreptitious nature had gone on between Russia and Germany throughout the Great War when German entrepreneurs established ‘Swedish’ electrical companies to trade with Russian firms in products essential to Russia’s military effort. Another wartime dodge had been for German enterprises to stick Scandinavian markings on goods made in Germany. So the Johann Faber works, which had sold pencils in the Russian Empire for decades, simply rebranded its output with Danish insignia; and German razors found their way into Russia emblazoned with the motto: ‘To a Brave Russian Soldier for Distinguished Service’.15

  The ratification of the Swedish contract was scheduled for 18 December, and Krasin had yet to be convinced. The Stockholm members of his negotiating team went to London to plead with him. Krasin was not overly receptive. His talks with the British had never been easy and the Swedish initiative might cause complications. On balance, he thought, a firm, open treaty with Britain was preferable to a dubious set of arrangements in Sweden. He was not being unnecessarily difficult; he bore a huge responsibility. Soviet Russia was economically shattered, and the Politburo would judge his efforts unkindly if he allowed unprofitable deals to be brokered. He was known as pragmatic but on this occasion he spoke to his team like the most ruthless Bolshevik, saying that they should be shot for the deal they were recommending. One of them replied: ‘It’s fortunate, Leonid Borisovich [Krasin], that you’ve been saying this to me in London rather than in Moscow. Right now, just listen to me. There will always be time to shoot us later.’16 Such was the grim humour of communist dictatorship, volunteered by a non-communist seeking to demonstrate his honesty and loyalty. After three hours of discussion Krasin finally gave his approval, admitting that his team had done a good job in Stockholm.17

  Worries about the Allied reaction had never deterred Lenin and Trotsky; and as the outstanding figures in the Soviet communist leadership, they felt freer to follow their instincts in negotiating with foreigners. Lenin met his first businessmen from abroad in summer 1920 when a certain Washington B. Vanderlip arrived from America. Vanderlip pretended to be a scion of the exceedingly wealthy Frank D. Vanderlip and his business dynasty and also suggested that he could speak on behalf of Senator Warren G. Harding of Ohio who, as the Presidential candidate for the Republican Party, was in favour of resuming trade with Russia. Although Vanderlip had nothing like the wealth or connections he claimed, he knew a bit about Russia since he had prospected for gold in Siberia at the turn of the century.18 He also had the gift of the gab, and Lenin fell for his blandishments to such a degree that the Soviet authorities signed a provisional deal for him and his backers to take up a vast mining concession in Kamchatka in the Soviet Far East. In November 1920 he fetched up in Stockholm, where he boasted that his company had leased 400,000 square miles in Siberia for sixty years. Vanderlip claimed that he was helping the Soviet government to purchase American goods to the value of $3,000,000,000 which would be paid for with Russian gold and other natural resources.19

  The New York Times immediately warned against Vanderlip’s personal credentials and about the dangers and morality of dealing with the communist government;20 and Senator Harding was not pleased on reading in the press about the ex-prospector’s claim to be his business intimate.21 Lenin incompetently increased American concerns by stating in public that he had granted the Kamchatka concession deliberately so as to play off America and Japan against each other.22 He naively assumed that no Westerner would read the Russian communist press. He was equally stupid in September when telling H. G. Wells that the Vanderlip deal was the first step towards a US–Russian defensive alliance against Japanese aggression in Siberia. Lenin said that he looked forward to allowing the Americans to build a naval station on the Soviet Pacific coast and signing long-term economic concessions with American companies.23 Theodore Rothstein, who was doing the interpreting, failed to stop him from blurting out these ideas and pleaded with Wells to keep quiet about what he had heard: ‘He is wonderful. But it was an indiscretion…’ Wells gave his word of honour, only to break it in his book Russia in the Shadows: the conversation proved too juicy for him to discard.24 The world received a lesson that the Soviet rulers could be wily in protecting their interests. Evidently, too, the artful Lenin could be a bungler when his tongue ran away with him.

  Vanderlip meanwhile performed like a snake-oil salesman: ‘I have joined the frontiers of Russia and America, making a broad band of republicanism around the world from Atlantic to Atlantic.’ He called on the US Congress to regularize trade relations without delay.25 Mining, timber-felling and fur-pelt production had made fortunes for entrepreneurs in Siberia before the Great War. The region’s general potential was famously under-exploited. Vanderlip continued his approaches to west-coast investors asking them to join his scheme and making it seem like a licence to print money; and soon he inveigled the Standard Oil Co. to purchase a quarter of his shares.26 The impetus towards a commercial treaty with Soviet Russia was gathering strength. On 4 January the Manchester Guardian reported that the US authorities were on the point of lifting their restrictions; its source was said to be ‘a Moscow wireless message’.27 The Soviet leadership was probably trying to bounce countries into restoring commercial links.28 Just as the Kremlin intended, the Republican Party in the US pricked up its ears. Senator Joseph I. France of Maryland led his colleagues in advocating official recognition of Soviet Russia. When the order was given to deport Ludwig Martens in early 1921, Senator France publicly protested and called for an end to the economic blockade.29 In his eyes simply no American interest was being served by ostracizing the Russian communist regime.

  On 26 January his campaign bore fruit in the Senate when Henry Cabot Lodge convened the Committee on Foreign Relations to hold hearings on Russia.30 Senator France, as a prosperous man of affairs, spoke his mind; but the witnesses were chosen mainly from the American labour movement. This was deliberate. Lodge and France wanted to appear as if they had the interests of working men and women at the forefront of their minds — and they allowed plenty of time for them to argue that trade with Russia would boost industrial production and employment. The trade unionists spoke with admiration for Vanderlip’s Kamchatka initiative. They pointed out that a treaty would open the way for the US import of Russian raw materials and export of American manufactured goods. Senators asked briefly about the dictatorship established by the Bolsheviks, then dropped the matter. They were somewhat more persistent in questioning the labour movement’s representatives about their attitude to democracy in America. The unionists were ready for this and presented themselves first and foremost as US patriots. Yet this failed to convince several members of the Senate Committee. Under further interrogation, some witnesses declined to repudiate the potential benefits of introducing Bolshevism to the American political scene, and Alexander L. Trachtenberg from the Socialist Party admitted to favouring the ‘nationalisation of property’.31

  This was not what Senators Lodge and France wanted to hear; they knew they would be thwarted in their objective of changing US foreign policy if the idea got around that labour movement leaders were crypto-communists. (They really should have done more research on Trachtenberg, who wanted his Socialist Party to become an affiliate of Comintern.)32 Lodge and his colleagues were happier when witnesses quoted H. G. Wells and his arguments for a trade treaty. They also liked it when John Spargo was cited as warning that America was falling behind Britain in looking after its economic interests;33 and under Republican leadership the Committee took the unusual step of including the entire report of the British Labour delegation to Russia in its published proceedings. The thinking behind this was obvious. The Labour delegation argued for the resumption of commercial links, and this was exactly what Lodge an
d Cabot sought for America.34 Fortunes could be made in Russia. America should not miss out on the lucrative opportunities.

  The divergences among the Allied powers — or rather their governments — were getting wider. The French were resolute in their stand against dealing with Soviet Russia while Lenin refused to recognize obligations for the foreign loans incurred by Russian governments before October 1917. The Americans, through the Senate hearings, were only just beginning to consider whether to change policy. Even in the United Kingdom the situation was fluid. The British were still talking to Krasin, and no one outside the negotiations could yet tell whether they would produce a signed agreement. But the Western Alliance was practically at an end. Indeed Allied leaders took only one big decision jointly about Russia. This was reached on 24 January 1921 when the Allies granted their de jure recognition of Estonia and Latvia as independent states.35 The signal was being given that the Russian Whites were a lost cause. Until then the Allies had avoided contradicting the ambition of Kolchak, Denikin, Yudenich and Wrangel to reconstitute ‘Russia One and Indivisible’. They now accepted that at least two new Baltic states deserved official acceptance. As the remnants of Wrangel’s forces clambered on boats for Constantinople in November 1920, they left behind the battlefields of defeat and looked to the future without solace. Their paymasters and advisers abandoned them.

  The Bolshevik leadership and the Whites were in agreement on one thing: the desirability of gathering back the territories of the Russian Empire. The recent military defeat in Poland ruled out speedy action to the west of Russia, and the Kremlin set about assuring Estonia, Latvia and Lithuania that it had only peaceful intentions towards them. The south Caucasus was a different matter. Azerbaijan fell to the Red Army in April 1920, Armenia in December that year; like Ukraine, they were quickly turned into Soviet republics. For a while, the Georgians remained under Menshevik rule, but on 26 January 1921 the Party Central Committee decided to correct this anomaly with a plan to provoke a diplomatic breach with Georgia with a view to organizing an invasion.36

  The same day, the Central Committee examined the latest reports from London. Lloyd George was proving amenable even though the legal status of Russian gold had still presented difficulties as recently as December.37 But although Krasin had done well with the Prime Minister, the judicial system was another matter. Mr Justice Roche in the same month found in favour of the Briton who had lost his timber in Sovnarkom’s nationalizing campaigns of two years earlier and was seeking to impound a Soviet cargo of veneer about to be unloaded in the United Kingdom. Roche’s judgment endangered any contract entered into by Krasin, and the New York Times warned that this could also have adverse consequences for any American businessmen tempted to trade with communist Russia.38 The oil of the south Caucasus was another contentious matter. Two British companies, the Baku Consolidated Oilfields and the gloriously named Spies Petroleum Co., had suffered the nationalization of their assets when the Red Army marched into Azerbaijan — some of their staff were thrown into prison. The companies raised a hue and cry when Krasin offered to make these assets available to other British enterprises.39 The disgruntled Leslie Urquhart also continued to make trouble for Soviet negotiators by denouncing the London talks in The Times.40

  Even so, the Prime Minister was willing to keep the talks going. With a little more compromise on the Soviet side it might soon be possible to conclude a trade treaty. A small working party was created in Moscow to examine questions about Russia’s foreign debts in case Krasin needed to give some sort of commitment to recognizing them.41 Better to sign a half-good treaty than to lose the chance of any treaty at all. But when Lloyd George kept up the pressure on Krasin for the Bolsheviks to refrain from conducting their propaganda and subversion in the British Empire, Krasin affected outrage. If the government in Russia were to accept such a clause, he asked, what was to be done about Secretary for War Winston Churchill’s contributions to the Western press?42 Churchill doubtless caused annoyance to the Kremlin. But his commentary was never published in Moscow, and Krasin understood full well that Lloyd George simply wanted a reciprocal understanding that the British and the Russian authorities would not interfere in each other’s politics. Krasin could easily — if insincerely — give this guarantee. Almost without anyone expecting it, the muddled negotiations began to look as if they might end in a treaty.

  30. THE ECONOMICS OF SURVIVAL

  Although the Bolsheviks believed they were close to concluding trade negotiations with Britain and faced no immediate military threat, the domestic situation was far from easy. Until the winter of 1920–1 it looked as if the Kremlin would indefinitely maintain its wartime economic system which involved the forcible requisitioning of grain from the peasantry without compensation. Previous attempts to modify this policy, first by Trotsky and then by Lenin, met with furious objections from the rest of the leadership. In February 1920, indeed, Lenin himself had led those who shouted down Trotsky as a promoter of capitalism. At the end of the same year he received his own come-uppance when he recommended a milder scheme of his own.1

  The party had been distracted by an internal dispute between Lenin and Trotsky about what limits to place on the freedoms of trade unions in peacetime, but the leadership could not ignore the growing danger of serious insurrection for long. Industrial strikes had broken out in most cities. There was discontent in every garrison, and mutinies were not unknown. And the peasants grew ever more hostile to a government that seized their harvests. On 8 February 1921 the Politburo came to its senses when reports reached Moscow about the crescendo of rural revolts. Western Siberia and Ukraine — Russia’s bread basket — were ablaze. If their crucial agricultural contribution was threatened, the cities would starve. The final straw for the Soviet leaders was a rebellion led by Socialist-Revolutionary A. S. Antonov throughout Tambov province in the mid-Volga region. Having won the Civil War, the Bolsheviks were on the point of losing the peace. The Politburo urgently needed to offer some concessions to the peasants. The solution was obvious: the authorities had to stop seizing the whole agricultural ‘surplus’ from the villages and introduce a tax-in-kind, allowing them to make a profit from what was left of their harvest after meeting their fiscal obligation. A corner of private trade would be restored to them through this New Economic Policy.

  Still troubled by the wrangling over the unions, Lenin was keenly aware that the New Economic Policy would be even more divisive. He and the rest of the Politburo were determined to keep the proposals strictly confidential until all the details had been worked out. The same degree of caution was exercised over the London trade talks, with Pravda keeping its reports deliberately vague. Lenin had delayed reopening his campaign on concessions until December 1920 at the Congress of Soviets, where he cited the Kamchatka deal with Vanderlip as the model. But his ideas had met with a stormy reaction from Bolsheviks, and he reverted to discussing the matter behind closed doors; but he had no doubt that the collapse of Soviet oil production made it crucial to attract foreign companies back to Baku.2 This was deeply uncongenial to Azerbaijani communist leaders who remembered the Nobel Brothers’ Petroleum Co. and other enterprises for their careless attitude both to the health of workers and to the environment. Lenin’s blandishments to Western petrochemical companies would flood the republic with capitalism. Soviet leaders were naturally nervous about changes in policy that could touch off a split in their fiery party.

  The discussions continued long into the New Year, and on 5 February 1921 the Politburo asked Kamenev and Rykov to enquire whether concessions were simply the best way to reverse the decline in Azerbaijani oil output.3 If Baku industry was to be restored, rapid action was required — and there was no evidence that the communist leaders in Azerbaijan had any idea how they would raise their own capital to begin the process. At a further discussion, nonetheless, the votes in the Politburo were split and the matter was referred to the Party Central Committee rather than risk a dispute throughout the party.4 This deflected the de
bate to a wider circle of party leaders as regional officials got to hear about what was being proposed. The Central Committee itself was divided but eventually decided to pronounce concessions acceptable in principle if the ‘mortal danger’ of the slump in production could be prevented (although it was recognized that foreign companies might not wish to operate again in Baku). Lenin had won the debate, but it was only by a slim majority that he did so; and nobody could be sure that the rest of the party would not raise objections when the decision became public knowledge.5

  In London, despite reports of continued objections to a trade treaty appearing regularly in The Times,6 there was an air of expectancy. Krasin had signed contracts with British companies in advance of a settlement between the two governments, and Yorkshire textile factories queued to sell cloth to Russia.7 Businessmen travelled from the United Kingdom to Tallinn to sign their Russian deals using Sweden as the umbrella for their business and readying themselves for what was expected to be an enormous expansion of commerce.8