Russian Debt – Crushing Blow to Imperialism – Part 3.

By Sergey Pahkomov

During the Genoa Conference and subsequent negotiations on the debt problem, the Bolsheviks managed to impose their “solution to the problem” on the Western countries and actually free the devastated country from the debt burden. However, 80 years later, the problem returned.

Scandal in the “higher spheres

The above photos show the Genoa Conference room with the Soviet delegation, Negotiations with Germany in Rapallo, L. Bartou, Minister of Foreign Affairs of France, and H. Rakovsky, member of the Soviet delegation.

The Genoa Conference lasted from April 10 to May 19, 1922. At the first general meeting, Chicherin, “staying on the point of view of the principles of communism,” said: “The restoration of Russia as the largest country in Europe with innumerable reserves of natural resources is an indispensable condition for universal restoration. … Meeting the needs of the world economy … the Russian government … is ready to open its borders for international transit routes, to provide millions of acres of fertile land for cultivation, the richest forest, coal and mining concessions, especially in Siberia. ” In accordance with Lenin’s instructions, Chicherin then came up with a proposal for a “pacifist program” of general disarmament, which provoked outrage on the part of the French leader Bartou. Nothing was said about Russia’s recognition of old debts.

Western countries believed that the problem of Russian debts could not be solved by simply writing them off and restoring trade and financial cooperation with Soviet Russia by individual Western states. Therefore, in response to Chicherin’s “pacifist declaration”, the allies put forward uniform demands developed by a group of experts from the Entente countries in London at the end of March 1922. 

Russia was asked to recognize all the debts and financial obligations of all the authorities in Russia; to take responsibility for all losses of foreign citizens from the actions of both the Soviet and previous governments, create a special Commission of Russian debt and mixed arbitration courts to consider all controversial issues. 

According to this request this Commission would have the right to influence the financial and budgetary policy of Russia in the interests of the creditor countries. All loans entered into by Russia after August 1, 1914 would be considered repaid upon payment of a certain amount to be established in the future. When calculating this amount, all claims of Russian citizens for losses and damage would be taken into account, all enterprises nationalized from foreigners  would be returned to their previous owners. The monopoly of foreign trade would be abolished, and a “regime of extraterritoriality and surrender”would actually be established for foreign nationals on the territory of Russia. Communist propaganda would cease in all countries.

Such demands were completely unacceptable to the Bolshevik government, which had just won a civil war followed by foreign intervention. If a compromise was possible on the issue of debts, and even if Stalin was ready for this in negotiations with England in 1924, then the revision of nationalization presented an insoluble ideological, political and economic problem for the Bolsheviks. 

It was this requirement of the allies that became the main reason for the failure of the Genoa Conference. Ideologically, this was completely unacceptable, since the “gains of the revolution and civil war” were devalued, politically it threatened to lose power, but economically it was completely beyond the strength of the devastated country. Foreign investment in Russian industrial and trading companies by 1917 reached 2 billion rubles. The shares were distributed as follows: 33% – French investors, 23% – British, 20% – German, 14% – Belgian and 5% American. Over 54% of this capital was invested in the mining and metallurgical industry, and French investors accounted for 75% of all coal mined and pig iron production in Russia.

The Soviets strike back

The entire course of the Genoa Conference changed after April 16, 1922, when Chicherin and Rathenau, as a result of intensive secret negotiations, signed a peace treaty in Rapallo, which shocked and panicked the Allies. 

England and France categorically protested and began to threaten Germany with punishment for violating the Treaty of Versailles, and Germany began to accuse the Allies of their own separate negotiations with the Soviet delegation. Under the terms of the Rapallo Treaty, Russia and Germany, in addition to mutual diplomatic recognition, provided each other with the most favored nation economic status. They renounced mutual claims caused by the war and pledged to maintain friendly economic relations. Germany renounced all financial claims and claims for compensation for losses to German citizens as a result of the nationalization of their companies, provided that Russia would not satisfy similar claims of other states. This provision was an undesirable compromise with the allies on the issue of nationalized foreign property for Soviet Russia. Further participation of Russia in the Genoa conference for Lenin was meaningless who  searched for a pretext to stop attending.

To this end, the Soviet delegation on April 20, 1922 gave a detailed “answer to Bart and Lloyd George” that was agreed with Lenin. In the “Memorandum of the delegation of the RSFSR of April 20, 1922” all the proposals from allied experts were categorically rejected, counterclaims were put forward for financial compensation for the destruction during the civil war, intervention and for damage from the economic blockade, which was double the total of Russia’s debt. 

The pre-war and military debts of the tsar and the Provisional Government were completely rejected, the demand was put forward to eliminate all war debts, the possibility of revising the nationalization of foreign property was categorically rejected. 

Together with the Memorandum, a Note of the Russian Delegation was presented with counter-proposals: “Provided that Russia is provided with immediate and sufficient assistance and de jure recognition of the Russian Soviet Government,” a willingness to pay in the future on pre-war debts to holders of state and city bonds was expressed, but only to those who owned them before March 1, 1917. All arrears on unpaid interest were to be canceled. A moratorium was to be introduced, and all debt repayments to begin only 30 years after the signing of the corresponding agreement. Foreign owners who have suffered from nationalization were to be offered only the priority right to obtain concessions for confiscated enterprises. Foreign powers were to be obliged to return to Russia all foreign property belonging to it. 

After fruitless quarrels in the Committee on Russian Issues, on May 2, 1922, the Russian delegation was handed a joint ultimatum Memorandum of Russia’s Allies, which confirmed its tough position on the recognition of all old debts by Russia and the return of nationalized foreign property to its former owners without any conditions. Soviet counter-claims for the damage inflicted by the interventionists were categorically rejected.

“The Victory of Lenin’s Policy of Peaceful Coexistence”

This is exactly what Lenin needed. On April 30 and May 5-6, 1922, encrypted telegrams from Lenin to Chicherin follow: “Do not take upon yourself at the close of the Genoa conference in any case a shadow of financial obligations, even no semi-recognition of debts, and do not be afraid of a break at all.” 

And finally, the finale: “We will not make a concession to the owners, and there is no better moment at hand . They will weaken us. With the German treaty in hand, we will never give up now from a long attempt to stand on its basis. “ 

On May 3, 1922, in order to comply with the formalities in the Financial Committee of the Hague Conference, Rakovsky was provided with the “Russian Memorandum on Loans” required for the restoration of various sectors of the Russian economy. Their volume was determined at 4 billion rubles over the next three years. On May 11, the Allies were presented with a detailed “Russian response of May 11 to the Allied memorandum of May 2”. 

France was sarcastically reminded that “the French Convention, of which France claims to be the legitimate heir, proclaimed on September 22, 1792 that” the sovereignty of peoples is not bound by treaties of tyrants. ” In accordance with this statement, revolutionary France … refused to pay its public debts. ” All the demands of the union memorandum were categorically rejected. “For the Russian people, no agreements are acceptable in which their concessions are not compensated for by real benefits for them,” – this is how the line was drawn under the negotiations.

Lloyd George proposed to convene a new conference in The Hague to continue discussions on debts and claims, which took place June 15-July 19, 1922, and ended in failure as neither side backed away from their positions. 

Soviet Russia took a different path. In 1922-23, a third of all Soviet imports already came from Germany, from where more than 2,000 industrial engineers came to work in the USSR. Germany provided loans for the supply of industrial equipment, and Soviet-German military cooperation began to develop intensively. 

In 1922-25. England, Austria, Greece, Italy, France, Norway, Sweden, Mexico and Japan recognized the USSR, during this period with more than 40 bilateral economic agreements being concluded with various countries. “This process took place on the terms of the Soviet state, which … refused to pay the debts of the tsarist government, but did not renounce the role of the world center of the revolutionary movement.”

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