ISBN 0-275-96337-3
265 pages

Preface; Abbreviations; Introduction; Notes; Bibliography; Index

Appendix A: Tables; Appendix B: German-Soviet Economic Treaties

   Edward Ericson's new work reveals much about the nature of the Russo-German economic collaboration not generally known even among those who study the Second World War. The book opens with an overview of the "traditional interdependence" between the two nations and discusses the trade agreements of the early inter-war years. These agreements resulted in brisk and mutually beneficial commerce between Germany and the Soviet Union for several years, but the rise of Hitler coincided with the decline of economic relations.
   From the mid-1930's, a series of new trade initiatives failed to get off the ground. Although Germany needed Soviet raw materials, Hitler provided unwilling to pay Moscow's asking price.

   At the same time that Germany was moving further away from Russia with the signing of the German-Polish Non-Aggression Pact of January 26, 1934, and was losing its claims to Soviet resources as the USSR paid off its debt, its demands for Soviet raw materials were increasing. Clearly, the economic balance of power between the two countries was changing. Hitler seems to have sensed his increasing need for Soviet political and economic support when he lamented in the spring of 1934, "Perhaps I shall not be able to avoid an alliance with Russia."

   Indeed, between 1936 and early 1939, Ericson chronicles no fewer than six failed attempts to re-establish an economic agreement between the nations with the Soviets trading grain and raw materials for German machinery and weapons. By March 1939, the last in the series of negotiations ended when Hitler refused to pursue them any further.

   Hitler still showed himself unwilling to force a reluctant military and industry to divert armament production to Soviet export as long as the West seemed ready to appease him with more easy victories like those in Austria and Czechoslovakia. Until this strategy had reached a dead end, Hitler apparently would rather use the USSR as a bogeyman to scare the West than pay the high Soviet economic and political price for their raw materials. Wiehl [head of the German Commercial Policy Division], therefore, told Schulenburg on March 8 to put the negotiations on hold indefinitely, and on March 11 ordered him to bring them "to a standstill in a suitable way...[and to] continue [them] in a dilatory fashion."

   Later in 1939, as war drew closer, both sides began to review the value of renewed trade arrangements. Ericson presents much data from contemporary German military and economic reports showing the Reich's perilous position in a long list of critical resources required for waging modern war. Similarly, the Soviets grew increasingly desirous of German machine tools and finished goods. A major turning point was the joint Anglo-French guarantee of Poland.

   Not only had the political situation been radically transformed, but so too had the economic situation. While Hitler probably thought the British support for Poland a bluff all the way up until September and Stalin appears to have had real doubts about British resolve as well, both men had to take into account the possibility that war in Poland and even war in Europe could occur in the near future. As a result, both Germany and the Soviet Union intensified their military building plans, often to the point of hysteria. Hitler, for example, called for a navy the size of Great Britain's and an air force so large that it would have taken 85 percent of the world's annual gasoline production just to fuel it! Stalin, for his part, pushed for a fifteen battleship, fifteen heavy cruiser navy to rival that of the United States.
   In order to build these huge arsenals, both sides required what the other power had—raw materials from the USSR in return for technology and machines from the Reich. A new series of German reports reinforced the long-standing point that Germany could not continue its rearmament drive without access to Soviet resources. War Economy and Armaments (WiRuAmt) officials complained on April 1 that the occupation of Bohemia had solved none of the economic dilemmas facing the Reich, but had instead merely added to Germany's raw material needs. As a result, the export situation was going from bad to worse. Similarly, an April 9 report on Germany's oil situation argued that if a long-term war developed against both the West and the USSR, Germany would have to secure at least Rumania and probably also the Caucasus to achieve victory, because current oil stocks were only sufficient for three to four months of war.

   For Hitler, the time had come to swallow his political reservations in favor of securing his economic needs. Stalin, on the other hand, held a position of strength. Knowing how much Hitler needed an agreement, he was able to hold out for the maximum price and the best terms. In addition, the Kremlin was still courted by the West which sought to encircle and isolate Germany before war broke out. Stalin skillfully played one suitor against the other. On 20 August 1939 the economic agreement was finally signed.

   Contemporaries and historians have had mixed opinions about the significance of this new economic partnership. One school of interpretations has asserted that the German war economy would have collapsed quickly without Soviet aid. Now, however, "the threat of the blockade...had been overcome" by the August treaties. Preventive-war theorists have gone even further with this theory. Stalin now had almost complete control of the German war economy and could effectively blackmail and manipulate Hitler: "By skillfully apportioning Soviet aid Stalin had it in his power to save Germany from defeat, but also to prevent them from achieving victory and so make the war drag on till both parties were exhausted, while the Soviet Union carried on rearming in safe neutrality in order to have the last word."
   On the other hand, the terms of the understanding were still relatively limited, which has led a third group of historians to claim that the agreement was mostly superficial. Since Hitler did not envision a long-term war of attrition, he intended these early economic accords to serve primarily as political ammunition to overawe the Allies and not to make Germany blockade-proof.

   In any event, as Ericson explains, the surest result of the hard-won economic agreement was the diplomatic agreement which soon followed. In less than two weeks Ribbentrop flew to Moscow and signed the Non-Aggression pact which effectively gave Germany a free hand to begin the war. Upon hearing that Stalin was ready to go along with the deal, Hitler banged on the table and exclaimed "I have them! I have them!"
   While the USSR appeared to have received the better political and economic deal, Ericson indicates Hitler was thoroughly pleased with the short-term advantages which allowed him to demolish Poland and, if necessary, face the West with a secure eastern border. Beyond that, it seems to have been only a matter of time before he expected to take by force anything denied him by treaty with Moscow.
   Despite the economic agreement and the crowning political settlement, Ericson shows how Stalin continued to delay and quibble about implementation of specific contracts, exchanges, and settlements. Berlin was frustrated to discover, for example, that not only did the Soviets unilaterally reduce the scheduled petroleum shipments, but they also provided much of the oil for Germany simply by diverting shipments already promised to Italy. Detailed German investigations also showed, disappointingly, that the lack of Soviet rail capacity, lagging production, and Soviet internal requirements would tend to limit Moscow's exports to Berlin of critical supplies such as grain, petroleum, and manganese.
   Whatever Hitler's motivations, Stalin was serious in his desire for German products. Moscow dispatched a team to Berlin to investigate German goods and weapons and, while they were at it, undertake a little industrial espionage.

   The forty-five-member Soviet delegation arrived in Berlin on October 26, all newly outfitted in the same mid-quality dark brown coats, bright yellow shoes, drab hats, and empty suitcases. The suitcases were to bring back all those wonderful German consumer goods that the Soviet utopia had somehow failed to produce. One fellow had apparently started his shopping immediately upon arrival and now stood out from the other delegates because he was wearing a sailor's cap. Almost all the members of the mission could speak German relatively well, though few would admit to their language abilities at first. The Germans, in turn, tried to gauge their opponents' level of understanding by providing only partial translations and observing who whispered the full version to his comrades....
   ...The Germans apparently assumed from their encounters with the poorly equipped Russians in Poland that they could intimidate the Soviets, as they had done with other countries, by a display of their military [manufacturing] prowess. So they showed the Soviets almost everything and expected them to be impressed. For their part, the Soviets assumed that the Germans would be much more technologically advanced than themselves and therefore complained bitterly when shown items inferior to what they already had in development. According to Guderian, the Germans noted this anomaly but did not fully understand its cause until 1941 when they ran into T-34s on the Russian steppes. By then it was too late....
   ...[the Soviets] finally submitted a forty-eight page, single-spaced list of detailed demands on November 30. Instead of 58 million RM in military goods and the up-front shipment of Russian raw materials called for in the September 28 treaty, the Soviets now wanted an impossible 1.5 billion RM in total deliveries by the end of 1940, 700 million RM from the navy alone, not counting extensive development costs. From ships to aircraft to synthetic fuel plants, the Soviets wanted the best Germany had to offer at rock-bottom prices, and they wanted it all right away! The Germans were stunned.

   Despite the economic framework already in place, it was clear that much detailed negotiating was needed before significant amounts of goods could actually be exchanged.
   Hitler remained loyal to his pact with Russian, and to his needs for Soviet raw materials, and stayed strictly neutral during the Russo-Finnish War which ignited at the end of 1939 while detailed economic discussions dragged on. The Germans considered Soviet prices for raw materials too high. The Soviets found German prices for goods exorbitant. The Russian negotiators demanded immediate delivery of finished products, including weapons, which the Reich's negotiators insisted could not be manufactured until after the requisite raw materials to make them had been delivered. Since the Germans wanted licensing fees for various items (for which they would be providing models and plans and the Soviets would be producing), Molotov himself countered that "the Germans should then pay licensing fees for Soviet oil and grain because of the money invested in those enterprises." By the end of the year, the negotiations in Moscow aimed at implementing the grand economic treaty were—despite some successes—largely deadlocked.
   The deal the Germans had originally expected to be finalized in October 1939 was not signed, sealed, and delivered until 11 February 1940.

   Though largely a compromise that stretched both sides to the limits of what their respective systems could comfortably handle, this treaty probably favored the Soviet Union—not surprising given Stalin's close supervision of the negotiating process. Germany received enough raw materials to keep it in the war, but in limited amounts and at such a cost that they probably (and under Stalin's watchful eye, definitely) would not provide a decisive edge against the Allies in the short term. The war, therefore, was likely to drag on into 1941 and beyond, making Germany even more dependent on Soviet resources and allowing Stalin to twist the screws even tighter in future negotiations. In the meantime, the Soviet Union would receive the technology and equipment necessary to rearm.

   But, as Ericson points out, Stalin's careful scheming was predicated on a lengthy stalemate in the West while the USSR rearmed and prepared for the decisive phase of the war.
   Despite all the time and effort, the February signing proved to be just another set of guidelines, albeit the final opening of the door, toward specific import and export activity. Unlike the state-controlled producers of the Soviet Union, the capitalist firms in Germany had to individually sign contracts for prices and terms.
   These talks proved as slow and tedious as anything which had gone before. Partly, it appears, the Soviets were reluctant to move closer to Germany due to fears that the Allies would intervene on the side of Helsinki in the Russo-Finnish War or via the Near East. In April, with the Russo-Finnish War concluded and the German invasion of Denmark and Norway sealing off Scandinavia from Allied intervention, Moscow became more accommodating in trade talks. Negotiations in April made better progress.

   On the other hand, trade and negotiations on certain key items remained problematic. Soviet oil and items shipped via the USSR still only trickled into the Reich, even though adequate transportation was no longer a major problem. Tea sent from Vladivostok on December 16 arrived in Germany only on April 16, and some November shipments from Iran had yet to reach the Reich nine months later. In addition, the Soviets had almost scuttled talks on manganese with their high price demands. Delivery of German synthetic-material plants also looked increasingly questionable as the Soviets continued to require extensive guarantees and technical access that the German firms found impossible to provide...
   By the end of May, the Soviets had shipped only 155,000 tons of oil to the Reich in comparison to German oil stocks of 1,115,000 tons, 8,600 tons of manganese in comparison to reserves of 230,000 tons, and 128,100 tons of grain in comparison to stockpiles of 4,693,000 tons. And these were the most important categories. The rest of Soviet deliveries mattered even less to Germany's raw-material situation during the first few weeks of the conflict in France. In short, Soviet economic aid had relatively little impact on the initial fighting in the West.

   The entire political and economic equation suddenly lost equilibrium, however, due to the rapid and unexpected German victory in France. No longer in a position of strength which enabled him to afford hard bargaining for long-term gains while the capitalist nations bled each other in a protracted conflict, Stalin suddenly needed to encourage Germany to continue the war with England while the Soviet Union concentrated on short-term security measures. Although this would seem to have eroded Stalin's bargaining position, the voracious German appetite for raw materials, and the lack of alternative suppliers, ensured that the Kremlin still held some trump cards.
   Even so, the Soviet takeover of the Baltic states and part of Rumania caused further strains and reduced the level of trade in July 1940. Furthermore, German leaders realized, despite their impressive military victories, economically they were not yet out of the woods.

   Far from solving Germany's raw-material problems, as many historians have assumed, the booty from the new conquests provided only temporary relief and actually made the long-term situation much worse. The Reich was now cut off from much of its remaining overseas trade, a large part of which had come in via neutrals such as Italy and the Netherlands. As a result, German overseas exports plummeted from 222,100 tons in March to 7,600 tons in May. Meanwhile, the conquered territories only added to the growing demand. Based on 1938 figures, Greater Germany and its sphere of influence lacked, among other items, 500,000 tons of manganese, 3.3 million tons of raw phosphate, 200,000 tons of rubber, and 9.5 million tons of oil! Conservation and synthetics could make up only some of the difference. The logical choice to take up the rest of this slack was the USSR, but it remained unwilling and increasingly unable (what with its own military buildup) to provide the enormous amounts required by the Germans.

   For Hitler, this lead inevitably to a decision for a showdown with Bolshevism. According to Goering, "...the Fuehrer desired punctual delivery to the Russians only till spring 1941. Later on we would have no further interest in completely satisfying Russian demands." Despite Moscow's security concerns, however, Stalin was not about to roll over.

   The Soviets had also tightened the screws in other parts of their trade relationship. They halted shipments from Manchuria, for example, claiming that the plague had broken out in that region, an assertion no other country seemed able to verify. They also threatened to cancel German shale-oil contracts with Estonia because of the Reich's growing deficit with that state.

   While both sides continued shipping trainloads of freight for which specific contracts had already been signed, Moscow and Berlin squabbled and haggled for further deliveries. Large quantities of raw materials and manufactured goods changed hands, but neither side was willing or able to provide everything its partner desired. Still, talks dragged on, new contracts were hammered out, and trade rolled on.
   At the beginning of 1941, yet another broad agreement was reached, ostensibly to clear away all the remaining obstacles and at last open the way to massive and mutually advantageous commerce. In order to seal the bargain, Germany acceded to most of Moscow's demands. Based on historical precedent and Soviet performance, it remained to be seen if this latest document could be translated into real trade any better than previous ones.

   Nonetheless, a deal had been reached. On January 10 a series of documents were signed in Moscow, completing the arrangements on the new borders, property compensation in the occupied territories, trade balances for Year One, trade with the Baltics and Bessarabia, control of the Lithuania Strip, transit costs, and delivery schedules for Year Two. As the Soviets had wanted, the new treaty structure regulated almost all of the remaining economic questions and laid the foundation for a long-term relationship that would greatly benefit the Soviet Union. Unfortunately for Stalin, Hitler had no intentions of developing such a long-lasting partnership.

   Some historians have concluded from this agreement that Stalin was appeasing Hitler to avoid being attacked, but Ericson makes it clear this was not the case. Increasingly desperate for raw materials from Russia or trans-shipped from the Far East on Russian rails, Berlin did everything possible to keep the raw materials coming, including shipping goods to Moscow ahead of schedule even as Soviet deliveries fell behind. Meanwhile, plans for the German invasion moved forward despite predictions by the Wehrmacht's economic experts that the conquest of the Soviet Union would actually prove to be a net economic loss for the Reich "unless a series of impossible preconditions were met: the Soviet economy had to be captured intact, the people had to be won over to the German cause, the [rail] link to the Far East had to be rapidly reestablished, and the Caucasus oil fields had to be captured in the first blow."
   In the spring of 1941, according to Ericson, Stalin finally adjusted his policies to one of "cautious appeasement" in which he attempted to fulfill his trade obligations and convince the Germans not to conduct an invasion during the campaigning season of that year. Abiding by these contracts, he hoped, could buy another year in which to prepare the Red Army. Oil, rubber, and grain began piling up in warehouses on both sides of the border faster than either country's transportation network could move the goods. "The pace continued until the eve of battle with a Soviet express train, carrying 2,100 tons of desperately needed rubber, crossing the border only hours before the invasion began.... Stalin's attempts to buy off Hitler for the short term, however, had no effect."
   On 22 June 1941 the German armies crossed the border and began to roll across the Soviet Union.

   Over and over again on the eastern front, the same ironic scene was played out. German soldiers fed by Ukrainian grain, transported by Caucasus oil, and outfitted with boots made from rubber shipped via the Trans-Siberian railroad fired their Donetz-manganese-hardened steel weapons at their former allies. The Red Army hit back with artillery pieces and planes designed according to German specifications and produced by Ruhr Valley machines that burned coat from the Saar.

   How did the Russo-German agreements balance at the time of the invasion? According to Ericson, the Soviets gained some utility from the machine tools and other equipment they received; while much of this material was overrun by the advancing German armies, a portion was evacuated and played a role in re-equipping the Red Army. The German cruiser Luetzow, one of the main points of the economic negotiations, counted for little in Soviet hands during the campaign. At the political level, Stalin's complicity in aligning himself with Hitler gave Germany the freedom to conquer much of Europe and put itself in a position to attack the Soviet Union.
   Furthermore, Ericson concludes that without Soviet deliveries of oil, grain, manganese, and trans-shipped rubber, Hitler would have been unable to expand and equip his armed forces for the invasion. "Hitler had been almost completely dependent on Stalin to provide him the resources he needed to attack the Soviet Union."
   The book concludes with a substantial selection of appendices covering tonnages and currency values of imports and exports, details of trade in specific commodities, figures for German stocks of raw materials, information on German imports from other nations trans-shipped via the USSR, and the text of various Russo-German economic agreements.
   This is a fine, scholarly analysis of an important topic, and one that will no doubt set readers thinking in a new light about how the war began, the relationship between Berlin and Moscow, and the overall European balance of power. Recommended.
   Available from online booksellers, local bookshops, or directly from Praeger.
   Thanks to Praeger for providing this review copy.