Russian Debt “Great Default” – Part 2.

The revolution is preparing for a crushing blow to imperialism

By Sergey Pahkomov

The Soviet “Declaration on the Recognition of Debts”, which made it possible to convene the Genoa Conference, from Lenin’s point of view, did not mean that these debts must be paid. The leader set the task for the Soviet “revolutionary diplomats” to achieve completely different goals during the conference.

Keynes as Lenin’s companion and inspirer!

At the 1922 Genoa Conference, the issue of relations with Soviet Russia was to take centre stage. The pernicious influence of the economic devastation in Central and Eastern Europe on the state of Western European industry, trade and economy led the political leaders of the countries of Western Europe and the United States to the conclusion that without the restoration of Germany and Russia, one cannot count on a quick recovery from the world war. 

Lenin, on this occasion, proudly noted: “… we know that the economic situation of those who blocked us turned out to be vulnerable. There is a force greater than the desire, will and decision of any of the hostile governments or classes, this force is the general economic world relations that force them to enter this path of relations with us. “

Lenin, who ruled Soviet Russia practically in “manual mode” with the help of a stream of notes, written instructions, instructions, resolutions and speeches, carefully followed the international situation and was aware of all the contradictions between the European powers. Lloyd George said of the leaders of the Bolsheviks: “No matter how you evaluate them, they are people of exceptional ability and excellent acquaintance with the international situation.” 

Back in December 1920, speaking in Moscow to the RCP organization, Lenin made a “Freudian slip”, which showed his true attitude to the problem of Russian debt: “We have been at war with the capitalists so far, and they told us: either we will strangle you, or we will make you pay 20 billion. But they are not able to strangle us, and we will not repay our debts. ” He carefully studied Keynes’s book The Economic Consequences of the Treaty of Versailles, published in 1919, and all his subsequent works on the relationship of the Entente with defeated Germany. 

Keynes was instrumental in shaping the Leninist worldview after World War I. The revision of the Versailles Peace Treaty, the repayment of the mutual debts of the allies, the cancellation of war debts, the international loan and reform of the monetary system, the settlement of relations with Soviet Russia and Germany, the economic restoration of Russia in cooperation with Germany – all these ideas were taken by Lenin from Keynes. 

“Keynes came to the conclusion that Europe and the whole world with the Peace of Versailles are heading for bankruptcy. … cancel all debts as Keynes suggests! … And millions of people hear … that there is no way out except for debt cancellation… Such economists-agitators for Bolshevism should have sent a thank-you address on behalf of the Congress of the Communist International.”

Lenin actively operated in his articles and speeches with Keynes’s arguments and statistics on the debt to Russia and the allies, the economic situation in Germany, France, England and the United States. In June 1920, Lenin gave instructions to translate this book into Russian and, in preparation for the Genoa Conference, categorically demanded: “All members of the delegation must know perfectly well Keynes’s book “The Economic Consequences of Peace”.

Keynes’s ideas found a warm response in Lenin because, despite the Bolsheviks’ declaration on the possibility of recognizing the tsarist pre-war debts in exchange for diplomatic recognition and economic cooperation, Soviet Russia was completely insolvent. In 1919, Russia’s debt accounted for 90% of the country’s “national property”. 

“The country is suffering from unheard devastation.” Servicing the pre-war debts of the RSFSR alone would require 240 million gold rubles a year, and taking into account the military debt – 640 million rubles a year. 

To restore the Russian economy to the pre-war level, according to American experts, it took several decades and new loans of about 3 billion gold rubles (1.5 billion US dollars), which in 1922 would have needed at least an annual 8% interest rate. With the almost no gold reserves, the only source of payments for old and new debts could only be exports. 

The most favourable forecasts of possible export earnings from the extractive and agriculture sectors were insufficient  and the only way out is to eliminate all old debts and limit new debt. f

“Not a single person … will agree to participate in a new loan for Russia. … If the existing obligations are to be satisfied, then it is clear that payments for the new ones are not possible. … In case of refusal from the complete destruction of old debts, the only way out is a very long moratorium on their servicing and repayment. … Even if Russia recognizes its former debts, it cannot pay them. ” (L. Pasvolsky and L. Maulton). Lenin, who regularly demanded reports on the state of foreign aid for the hungry and on the remaining gold in the State Bank, independently came to similar conclusions.

“Divide and rule”

After defeat in the war with Poland, Lenin pragmatically switched to a policy of “peaceful coexistence” based on the use of contradictions “in the camp of world imperialism” to strengthen the positions of Soviet Russia. “World revolution” was removed from the nation’s agenda. Lenin’s “picture of the world”, which took shape by the end of 1920, was based on the use of conflicts between the leading countries of capitalism: 

“Are there fundamental opposites in the modern capitalist world that should be used? There are three main ones:
1. The first is the relationship between Japan and America. A war is being prepared and that a war is inevitable, it is undoubtedly 

2. The other is between America and the rest of the capitalist world. America is strong, everyone is indebted to it, everything depends on it, it is hated more and more, it robs everyone and robs everyone in a very original way… America cannot make peace with the rest of Europe – this is a fact proven by history. … There is deepest economic strife between them. 

3. The third discord we have between the Entente and Germany. Germany is defeated, suppressed by the Versailles Treaty, but it has enormous economic potential. … Germany is one of the most powerful, advanced capitalist countries, it cannot endure the Versailles Treaty, and Germany must look for an ally against world imperialism. This is the position we should use. “ 

By the beginning of the Genoa Conference, Lenin was convinced that it was more profitable for Soviet Russia not to make ideological and political concessions and recognise old debts, while hoping for new loans and economic cooperation, but to develop bilateral trade relations with the countries of Europe and the United States, and, most importantly, to conclude a separate peace treaty with Germany, accompanied by extensive economic agreements. 

In this he was unexpectedly supported by England, having concluded a trade agreement on March 16, 1921, which resumed economic relations between the countries and left the issue of tsarist and war debts outside its framework. Then, on May 6, 1921, an Interim Agreement with Germany followed, which provided for the development of economic relations. On October 2, 1921, a similar agreement with Norway followed. This meant the breakthrough of the economic blockade of the Russia and the de facto recognition of Soviet Russia, which greatly inspired Lenin and prompted him for further strategy and tactics in relation to the capitalist world: 

“Our existence depends on the fact that there is a fundamental divergence of the imperialist powers, on the one hand, and on the other hand, the victory of the Entente and the Peace of Versailles threw the vast majority of the German nation into a position of impossibility to live. … The only way for her to save herself is only in alliance with Soviet Russia, where she directs her gaze. … The German bourgeois government madly hates the Bolsheviks, but the interests of the international situation are pushing it towards peace with Soviet Russia against its own will. This is … the second whale of our international, foreign policy … “. 

Lenin is supported by Lloyd George: “I see the greatest danger of the current situation in the possibility of an alliance between Germany and Russia. Germany can place her wealth, her experience, her vast organizational skills at the disposal of fanatical revolutionaries who dream of the conquest of the world by Bolshevism by force of arms. This danger is not a simple chimera. “

Lenin’s “cannonball” to the camp of world imperialism

The Genoa conference was planned with the participation of the top leaders of European countries, Lenin was approved as the head of the RSFSR delegation. In connection with the progressive deterioration of health and fears of an attempt on the part of the White Guards, it was decided to delegate the leadership of the delegation to the technocrat – People’s Commissar for Foreign Affairs GV Chicherin. Lenin was against the candidacies of independent political figures – Trotsky and Zinoviev. Attaching paramount importance to the conference, he personally supervised its preparation in detail up to the order to prepare a special code for correspondence with the delegation, the key to which would change daily. The leader himself developed the “Directive of the Central Committee of the RCP (b) for the Soviet delegation at the Genoa conference” and the “Draft decree of the Central Committee of the RCP (b)” On the tasks of the Soviet delegation in Genoa. Both documents were approved by decisions of the Politburo in February 1922 and contained a categorical instruction to the leaders of the delegation not to sign any agreements without the sanction of the Central Committee, and therefore Lenin. Lenin well remembered Trotsky’s independence in the peace negotiations with Germany in 1918 and what this led to.

By the time of the beginning of the Genoa Conference, Lenin, as can be seen from these documents, was finally strengthened in the need to strengthen the split between Germany and the Entente, and within the Entente between Britain and France. On the basis of Keynes’s statistics, Lenin concluded that France had turned from a creditor into bankrupt and would fiercely resist the cancellation of other people’s debts. England will take a compromise position, since it still retained the position of a net creditor, is aware of the position of the Bolsheviks regarding the war debts to Russia and signaled that it is ready to write them off by concluding a trade agreement. “England agrees, but France does not want this,” Lenin replied during the VIII Congress of Soviets when asked about the possibility of writing off the tsarist debts. Therefore, the directives on the recognition of the RSFSR of old debts are no longer there, and the debt issue plays in this strategy only the role of a propaganda ram and a subject of diplomatic bargaining. 

Lenin’s instructions regarding the negotiating position of the Soviet delegation boiled down to the following: the proposed program must be bourgeois-pacifist, not present a communist program. Beat the enemy with his own weapon. “Use pacifists to corrupt the enemy, the bourgeoisie.” Demand the cancellation of all debts, the application of the “Irish solution” to all colonies, a radical revision of the Versailles Treaty, the provision of loans on favorable terms to the countries most ravaged by the war, the establishment of a single international gold unit for the monetary systems of different countries. We do not accept the Cannes conditions in advance. To admit debts “only on condition that our counterclaims cover them.” If this does not succeed, “go to the rupture, declaring that we are ready to recognize private debts, but … we consider them covered, as well as the entire amount of our obligations in general, by our counter-claims. … If you have to tear, you have to expose … the only reason for the gap: the greed of a handful of private capitalists … that governments serve. … To do everything possible and something impossible in order to strengthen the pacifist wing of the bourgeoisie and at least slightly increase the chances of its victory in the elections, this is – firstly; and secondly, in order to divide the bourgeois countries united against us – this is our two-fold political task in Genoa. “

Germany as a “weak link” of world imperialism

The main task in Genoa for Soviet Russia is not getting Western economic and financial assistance, but separating the United States from Europe, separating the Entente powers and isolating France, protecting Germany and Turkey, and ultimately concluding a separate peace with Germany. Lenin believed that the easiest way to get foreign capital and technology was from Germany, which was looking for a way out of the shackles of the Treaty of Versailles. Germany did not insist on the recognition of old debts and revision of nationalization, its losses were modest and were partially compensated by the terms of the Brest Peace, business circles hoped to receive concessions. 

The economies of Germany and Russia traditionally complemented each other, the countries were the largest trading partners before the war, and German business circles, believing that the only hope for the viability of Germany in the post-war world ruled by the “Anglo-Saxons” lies in cooperation with Soviet Russia, independently acted in this direction. 

In May 1921, German industrialists proposed to Krasin a plan for large-scale investments that would restore the economy of the RSFSR in exchange for German control over its key industries. “The restoration and development of Russia’s foreign trade will depend more … on the German demand for Russian exports than on the demands of the allied countries of Western Europe. In terms of exports, Germany is more important to Russia than France, Belgium, Italy and the United Kingdom taken together. … The economic recovery of Russia is closely linked to the economic recovery of Germany. ” In addition, in the long term, there was a very necessary military cooperation for both Germany and Russia, for which since 1919 the highest generals of Germany spoke out, pushing political leaders to conclude secret agreements with Soviet Russia.

In January 1922, Karl Radek was sent to Berlin to negotiate with the German leaders, who at a meeting with the German Foreign Minister Rathenau reported sensational “secret news”: Soviet Russia is almost ready to conclude an agreement with France, which will provide her with official recognition and new loans in exchange for a promise to seek, together with France, the fulfillment by Germany of the terms of the Versailles Treaty. 

In order to prevent the revival of the Franco-Russian alliance, Germany should urgently conclude a peace treaty with the RSFSR and be ready to provide large loans. Rathenau, frightened, even offered loans of 5 billion paper marks, but without an agreement. Radek rejected the “insignificant amount.” Radek in this disinformation was supported by Chicherin, who visited Berlin on his way to Genoa. He brought an outline of the proposed Soviet-German agreement, which, after being finalized by German experts, formed the basis of the future Rapallo Treaty. The Bolsheviks, led by Lenin, approached the Genoa Conference with a well-developed plan of action.

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