The Kremlin’s Recent Trading Activities

In midsummer of 1953, at about the time of the Korean armistice of July 27 and just before Malenkov’s major speech of August 8, the Soviet Union attracted world attention by a flurry of new trade agreements with non-Communist countries. There was another flurry around the end of the year.

During the last 9 months of 1953 and the early part of 1954, the representatives of U.S.S.R. adopted a somewhat more polite and businesslike manner in their commercial dealings with the free world. They not only said they wanted more trade (they had never stopped saying it) but they took more steps to bring it about. Besides trade agreements, they signed more contracts with private firms. In Moscow they warmly entertained traveling salesmen from the West. In Western capitals they staged a few cocktail parties and press conferences. They poured more funds into eye-catching exhibits at “trade fairs” from Copenhagen to Bangkok. They made grandiose offers to buy, and gave them great publicity. Some offers to buy, sell, or barter they made quietly through commercial channels. They showed signs of wanting the nonindustrial portions of the world to regard them as a helpful “big brother” bringing both trade and aid.

These activities, which many writers have called a “trade offensive,” carried with them important meanings for the free world. In this chapter we shall examine the activities and probe for the meanings.

The New Trade Agreements

In a period of about 3 weeks, in late July and early August, the U.S.S.R. concluded trade agreements with France, Greece, Argentina, Denmark, and Iceland. These were not mere renewals of expiring agreements. The U.S.S.R. had never before had trade agreements with France, Greece, or Argentina (or any other Latin American country). Its last trade agreement with Denmark had expired in 1950, and with Iceland in 1947. Its trade with three of the countries, Greece, Iceland, and Argentina, had been almost nonexistent in recent years. Considerable trade, however, had been carried on with France and Denmark without benefit of trade agreements.

The U.S.S.R. also renewed existing trade agreements with Iran and Afghanistan and signed a “payments agreement” with Egypt. Most of these trade agreements signed during the summer of 1953 became effective as of July 1.

The second group of trade agreements, clustered shortly before or after January 1, 1954, and mainly effective as of that date, was with India, Belgium, Norway, Sweden, and Finland. It was the first time the U.S.S.R. had ever had a trade agreement with India. There had not been one with Belgium since 1951. The others were renewals. Barter deals were also made with some of the countries already mentioned, and with Israel and Japan.

Not since 1948, when the U.S.S.R. had entered into annual or long-term trade agreements with eight countries of Western Europe, had there been a period of Soviet trade-agreement activity that could compare with the paper blitzkriegs just described. And the result was that in the early part of 1954 the U.S.S.R. had trade agreements with more free-world countries than at any other time in the postwar period.

This fact and the hefty amounts of trade which were called for in some of the agreements have given many people the impression that a historic increase in the size of East-West trade was taking place. The impression seems hardly justified.

In the first place, trade agreements are usually only hunting licenses. They merely authorize—but do not guarantee—the exchange of goods. The governments agree to permit the export and import of the types listed—if contracts can be arrived at between Soviet monopolies and Western business. If the goods turn out to be unavailable, or if the demand is not forthcoming, or if the price is too high or the quality too low, the publicized amounts of the trade agreements do not materialize in the export-import statistics. And this fact rarely receives as much public attention as the original announcement. To illustrate, a spokesman for the Greek Foreign Ministry told the press on January 19 that the U.S.S.R. had lagged far behind in shipments under the 1-year trade agreement of July 1953. That agreement had been publicized as calling for trade of $10 million each way, but the Greek official said few Russian deliveries had been made and “it will be a miracle” if these deliveries reached $3 million.

In the second place, even a big percentage of fulfillment would not necessarily increase trade between the U.S.S.R. and the free world to the high points of 1948 and 1952. The 1948 turnover—that is, the sum of exports and imports—had been about $1 billion. It declined to $545 million in 1950. By 1952 it was back up to $943 million. The preliminary estimate for 1953 is $790 million. Thus the year which saw the Kremlin’s new trading tactics was also the year that saw a slump of about 16 percent in the dollar value of its trade with the free world. The trade was rising moderately in the last part of 1953 and a further moderate rise in 1954 would not be surprising.

But there is still another reason why the new Soviet trade arrangements will not necessarily mean a historic upsweep in East-West trade: The satellite countries have not been behaving in quite the same way.

The U.S.S.R. is only one part of the Soviet bloc, albeit the center of power. The U.S.S.R. accounts for about 30 percent of the trade which the European Soviet bloc carries on with the free world. (The percentage would be still less if Communist China were included, but Communist China will be discussed in another chapter.) In other words, Czechoslovakia, Poland, Hungary, the Soviet zone of Germany, Rumania, Bulgaria, and Albania, despite the long, steady decline of their trade with the free world ever since “sovietization” took hold in about 1948, still exchange about twice as much merchandise with free-world countries as does the U.S.S.R. These satellites, or some of them, have long had trade agreements with countries in Western Europe. During the last year or so they have renewed about 45 of those. In addition they renewed about a dozen agreements with non-European countries.

The brand-new agreements which the satellites concluded in Europe were mainly with France and Greece, thus conforming to the Soviet pattern of increased attention to those two countries. But in other respects the satellite trade pattern was different from that of the U.S.S.R., for while recent U.S.S.R. commitments, if fulfilled, seem to indicate increased trade, there was no evidence of a reversal in the long slide of the East-West trade of the satellites. Therefore one could not ignore the possibility that the U.S.S.R., with a flourishing of fountain pens and a blare of trumpets, was merely shifting to itself a bigger percentage of all bloc trade with the rest of the world.

Now let’s see what kinds of goods are involved in the new trade agreements and other commitments that the U.S.S.R. has been making.

More Consumer Goods Ordered

Consumer goods, the items about which Malenkov, Khrushchev, and Mikoyan made such a fanfare in announcing the new course for the Soviet domestic economy, make up one class of commodities, though not the most important, that the U.S.S.R. has been ordering from the Western world. It appears that the U.S.S.R. has committed itself to buy consumer goods at a somewhat brisker rate than in recent years.

Most of these consumer goods were food items. During the last 6 months of 1953 and the first month of 1954, the known Soviet arrangements to buy food from the free world amounted to about $90 million. Some of the deliveries were scheduled in 1953, some in 1954.

Butter was the biggest item. In trade agreements and contracts, butter quotas amounted to 37,500 tons, with an estimated value of $40 million. Denmark was to provide about $18.6 million of this. The second most important source of butter was to be the Netherlands, with $13.7 million. Lesser amounts were to come from New Zealand, Australia, Sweden, and Uruguay.

Meat quotas came to about $22 million, with Denmark and Argentina the leading suppliers. Smaller amounts were to come from the Netherlands, Uruguay, and other countries.

Fish quotas amounted to $15 million. Nearly all of this was herring. The leading suppliers were to be Iceland and Norway, and others were the United Kingdom, the Netherlands, and Denmark.

The U.S.S.R. during the 7-month period also arranged to buy $7 million worth of citrus fruits from Italy, Japan, and Israel (and apparently made a whopping profit selling oranges to the Russian people); $4 million worth of cheese from Argentina and the Netherlands; $2.4 million worth of lard from Denmark and Argentina; and $1.4 million worth of sugar from the United Kingdom and Cuba.

Besides food, the most important consumer item ordered from the West was textiles. The amount is harder to estimate, but it was somewhat larger than the Soviet textile imports of any recent year. The principal suppliers were to be Belgium, France, the Netherlands, Italy, and the United Kingdom.

In addition to contracts already made, the Soviet officials were still putting out feelers for consumer goods. Some of them reached across the Atlantic. In January much publicity was given to the efforts of an American firm to buy a large quantity of Government-owned surplus butter and sell it abroad—ultimate destination Russia.

Secretary of Commerce Sinclair Weeks announced on January 15 that he would not approve any application “which would permit an exporter to buy butter at considerably lower prices than those paid by the American housewife and then send that butter into Russia.” On February 10 he announced that it had been “decided as a matter of policy to deny commercial export license applications for the export for cash of United States Government-owned surplus agricultural or vegetable fiber products to Russia or her satellites.” He pointed out, however, that this ban “does not preclude study of export license applications for these nonstrategic products to the Soviet bloc if acquired by exporters in the open market and not from the Commodity Credit Corporation surplus stocks.”

It is difficult at this writing to compare the Soviet Union’s new commitments to buy consumer goods with the actual imports of previous years. Total free-world exports to the U.S.S.R. in 1953 are estimated at $410 million (compared with $481 million in 1952) but how much of this $410 million was consumer goods is not yet determined. The 1954 figure can only be speculated upon. But certain generalizations about consumer goods are possible.

As evident in chapter 1, the U.S.S.R. was never very much interested in importing consumer goods from the West. The items it did import for the consumer were not the household appliances and luxury items we sometimes think of as consumer goods—but were usually food. These imports have been higher at times than others: for example they were relatively high in the late 1930’s and again in 1948. Since 1950 they have been rising again, but by 1953 they were still breaking no records. They have always represented a relatively small percentage of total Soviet imports. At the same time, during the postwar years Soviet policies were forcing the consumer-goods imports of the European satellites steadily downward.

These contrasting trends of rising Soviet imports and sinking satellite imports seemed likely to continue in 1954. This probability, plus Mikoyan’s statement in his October speech that “we are helping the People’s Democracies with certain commodities,” made one wonder how much of the new Soviet imports of butter and other food were being reshipped to Eastern Germany and other satellites to alleviate the unrest there.

A Shopping Spree for Ships

The U.S.S.R., while ordering more consumer goods, seemed even more anxious to buy ships.

Every trade agreement which the U.S.S.R. has signed with a shipbuilding nation of Western Europe since mid-1953—that is, with Finland, Italy, Belgium, the Netherlands, Denmark, France and Sweden—has included a sizeable quota for ship purchases, particularly fishing vessels and refrigerator ships. Contracts for fishing vessels were also made with firms in the United Kingdom and Western Germany.

It was safe to say that Soviet activity with respect to Western European shipyards since mid-1953 surpassed the biggest previous shopping expedition for ships, which came around 1949. And it was clear that by early 1954 the U.S.S.R. had greater commitments on the books to buy ships from the West than at any other time in its history. This was true in tonnage, value, and number of vessels.

Probably not all the trade agreement commitments will result in actual deliveries; on the other hand, the shopping spree is still going on and further commitments are likely.

Because of Western restrictions on the export of certain types of ships, the new vessels destined for the Soviet Union were mainly of smaller types. A large number were fishing vessels, such as trawlers, fish processing craft, and refrigerator ships. Others were cargo ships, tugs and barges.

The buying of fishing vessels accords with the shortage of food in the Soviet bloc. Mikoyan in his October speech admitted there had been many complaints about the fish supply and that the Soviet fishing goals had not been met. But the Soviet search for ships could not be viewed entirely in the light of a desire to produce more consumer goods. The U.S.S.R. was seeking cargo ships in addition to fishing boats, ordering other marine equipment such as component parts and floating cranes and trying to arrange for more ship repairs in free-world ports. Western shipbuilders were inclined to be receptive to orders for vessels at a time when ship orders from Western countries were declining. At the same time it was impossible to ignore the fact that Soviet-bloc orders in the West can have the effect of freeing Soviet-bloc shipyards for the building of naval vessels. The campaign to buy ships thus presented the free world not only with more orders but also with a security problem.

The development of a Soviet merchant fleet is relatively recent. In 1939 the U.S.S.R. had seagoing merchant vessels totaling only 1,135,000 gross tons. It emerged from World War II with more than twice this tonnage. The main sources of the increase were lend-lease ships from the United States and war reparations. The United States in its lend-lease program leased to the U.S.S.R. 121 merchant vessels with gross tonnage of some 750,000 tons. Of these, 30 were returned to the United States and 4 were lost. The U.S.S.R. kept the others, and long exhaustive negotiations since 1946 have failed to settle this and other lend-lease claims. Through war reparations the U.S.S.R. acquired 170 more ships with gross tonnage just over one-half million tons. By 1953 the Soviet bloc—the U.S.S.R. and Poland for the most part—had a seagoing merchant fleet with a gross tonnage of 2-1/2 million tons, compared with free-world fleets totaling about 21 million tons.

Most of All, They Want Hard Goods

The new Soviet purchases of butter, meat, and other consumer items have sometimes obscured the continuing heavy demand for equipment and raw materials needed for industrialization. There has been no appreciable decline in the Soviet interest in buying industrial commodities. Such goods still dominate Soviet imports and new agreements to import—and that goes for the European satellites, too.

The Soviet bloc has shifted some of its priorities. The Soviet eagerness to buy ships is an example of a raised priority. The sharp drop in Soviet buying of Malayan rubber from the United Kingdom in 1953 was an example of a lowered priority. There are some other changes, but no change in the emphasis on industrial goods in general.

All the trade agreements concluded between countries of Eastern and Western Europe since mid-1953 have included quantities of such items—limited, of course, by the West’s security controls which provide for the embargo of some items and quantitative restrictions on others. In the trade agreements of Czechoslovakia and Poland, we find quotas for deliveries from the free world of electrical equipment, ball bearings, steel products, pyrites, lead, zinc, aluminum, and many others. Bulgaria also has shopped for capital equipment. In exchange for their grain, vegetables, fruits, tobacco, and a small amount of manganese and chrome, the Bulgarians made trade-agreement commitments to get important amounts of cables, rods, bars, plate steel, railroad equipment, floating cranes, electrical machines and installations, mining equipment, and miscellaneous machinery. The U.S.S.R., besides its procurement program for ships, has written into its trade agreements certain kinds of machine tools, various kinds of steel, equipment for electric power plants, construction equipment, chemical products, textile machinery and machinery for the timber and food-processing industries. An analysis of one recent trade agreement showed that three-quarters of the value of the Soviet imports consisted of products of the metal working industries. Businessmen in the United Kingdom, which has concluded no recent trade agreement with the U.S.S.R., have reported that the Soviet bloc’s real interest in buying British goods was confined mainly to items for production.

The attempts to purchase items like those named in the foregoing paragraph are nothing new. The point is, these efforts are continuing.

Many of these items have been under quantitative controls by the major free-world countries—that is, exported to the bloc in limited quantities only. Some of the most highly strategic items, such as the types of machine tools and bearings that are essential to war production, have been under embargo, and when that was true, the free countries that participate in the international control program have generally shipped them only to fulfill commitments made before controls went into effect, or in special cases where the countries felt strongly that the shipment was justified in view of the benefits to the free world that resulted from the two-way trade made possible by the shipment. In 1952 and 1953, for example, all nations receiving aid from the United States permitted the shipment to the Soviet bloc of roughly $15 million in items that were listed for embargo under the Battle Act (Mutual Defense Assistance Control Act of 1951), as compared with total free-world shipments to the bloc of about $2.7 billion in the same 2 years.

These highly strategic items, of course, are the ones which the countries of the Soviet empire have wanted most of all. And when not able to get them legally, they have continued their efforts to get them illegally. The third semiannual Battle Act report, World-Wide Enforcement of Strategic Trade Controls, contained a detailed account of the underground trade that violates Western regulations. Since all foreign trade of a Soviet-bloc country is a state monopoly, it follows that the state is an active participant in this underground traffic. With the bloc, circumvention is an official policy.

The Soviet Union, despite its publicized buying of consumer goods—which have never been restricted by the free world—has definitely not slackened its efforts to obtain industrial goods whether strategic or nonstrategic in nature.

Something Different in Soviet Exports

As told in chapter I of this report, the economic planners of the Soviet empire first figure out their import requirements and then decide what they want to export in order to pay for the imports. They look upon exports primarily as a means of obtaining goods which are more advantageous to import than to produce, or which they cannot produce.

In the present chapter, we have seen what sort of items they are currently interested in importing. Now we turn the coin over and look at the export side.

The most noticeable feature is that the U.S.S.R. in the last half of 1953 and the early part of 1954 introduced into free-world markets a number of mineral products which they had not sold in such quantities for some years.

These commodities included manganese, petroleum, and gold. All of them at one time or another have been among the major Soviet exports. Together with grain, timber, and furs, they make up the principal means that the U.S.S.R. possesses to procure the imports they want.

Why have the mineral exports been revived at this time? This leads us to the grain situation.

Grain has long been the Soviet Union’s No. 1 export commodity, and still is. But Soviet grain shipments declined precipitately in 1953. The United Kingdom, usually the main Western customer for this commodity, stopped buying grain on a government-to-government basis and turned the purchasing over to private firms. At the same time the U.S.S.R. apparently decided to keep more of its grain stores at home. The efforts to furnish more fodder to livestock, together with below-average crops and collective-farm headaches in the U.S.S.R. and satellites, suggest the motivation for this. At any rate the private British firms were unenthusiastic about signing large contracts at the high prices set by the U.S.S.R., and grain shipments to the United Kingdom skidded from $101 million in 1952 to only $10.1 million in 1953.

Although grain was far from disappearing as a Soviet export to the West, it became less potent—for the time being, at least—as a means of acquiring foreign exchange to pay for imports. This loss was only partially offset by a moderate increase in sales of Soviet timber to Britain and a big drop in the amount of Malayan rubber that the U.S.S.R. bought from the British. Meanwhile war reparations from Finland had ended in 1952, and deliveries of Swedish goods under a long-term credit agreement ended the same year. The Finnish and Swedish developments meant that about $80 million worth of goods which the U.S.S.R. had received from those countries in 1952 could not be duplicated in 1953 unless some other means of payment were created. All these events contributed to the reviving of some other export commodities.

How far the shift is going and how long it will continue cannot be predicted. Abrupt alteration in Soviet exports is hardly a novel development. For a time, around 1930, when forced collectivization of agriculture and forced exports of grain had induced famine in some areas of the U.S.S.R., the Kremlin opened the pressure valves a mite, heavily slashed the exportation of grain, and even bought some grain on the Baltimore exchange. That was a breathing spell in the midst of the first big Soviet push toward rapid industrialization. During the same general period, the U.S.S.R. found it expedient to force more production and more exports of furs, coal, and some of the same commodities now receiving special attention—petroleum and metallic ores—in order to get imports of capital goods needed in the ambitious industrial program.

They Have Dug Up Manganese

Manganese is a silvery-white metal used in the making of hard steels. The U.S.S.R. is one of the world’s major sources of manganese. It can produce a large amount each year, depending on how much manpower it decides to throw into the effort. It consumes a lot in its own steel industry, even using manganese as a substitute for scarcer alloys like nickel and molybdenum. In addition, its plans usually provide for certain quantities of manganese ore to sell abroad.

These exports have continually fluctuated. Before the war they ranged from about 400,000 metric tons a year to about 1 million. The United States, which produces very little manganese, was a major customer. In the 1930’s we got about 40 percent of our manganese imports from the U.S.S.R. Other important customers were France, Germany, Belgium, and Japan.

During the war, Soviet manganese vanished from world markets. The United States and other customers turned to sources in Africa, Latin America, and India.

In March 1945, Soviet manganese ore reemerged. The United States was the principal buyer, receiving 1,168,000 tons in about 4 years. In February 1947 the Soviet Foreign Trade Journal pointed out the importance of the United States to future Soviet plans for the export of manganese. But late in 1948 the Kremlin suddenly reduced its shipments to the United States almost to the point of embargo. A few shipments trickled in during the next 2 years and stopped entirely in 1951. Meanwhile deliveries to Western Europe did not undergo a compensating rise; they were little more than 100,000 tons a year.

Came the season of the last half of 1953 and the early part of 1954. The Kremlin’s zeal for exporting manganese bloomed again. Commitments to ship over 300,000 tons of the ore were written into trade agreements with Western European countries. Offers of manganese reached the United States through various channels.

Chrome is usually part of the package when manganese is sold. As could be expected, Soviet chrome commitments also climbed in late 1953.

There was also a revival of activity in the export of silver, platinum, and palladium.

The Emergence of Russian Oil

But a more interesting commodity which the U.S.S.R. has begun to put on the market in bigger quantities was oil.

In approximately the last half of 1953 the U.S.S.R. made agreements to ship to free-world countries about 3.5 million metric tons of crude petroleum, kerosene, diesel fuel, and other petroleum products. The countries due to receive the largest amounts—if delivered—were Finland, France, and Argentina. Other customers were Greece, Italy, Iceland, Denmark, Sweden, Israel, and the Netherlands. Some deliveries were made in 1953; more would be made in 1954; there was no certainty that all the commitments would be fulfilled. But even a two-thirds fulfillment apparently would be enough to hoist petroleum ahead of lumber and furs and place it second only to grain among Soviet exports to the free world.

What would this mean to the free world? What problems would it raise? Again we can find clues in the past. The present situation is not the first time that the U.S.S.R. has created a stir by abruptly entering oil markets. This also happened in the late 1920’s, when the U.S.S.R. began exporting large amounts of oil as a means of obtaining industrial imports. These exports grew each year and were 6.1 million metric tons in 1932. This was around 10 percent of the world’s oil exports, and was almost 30 percent of Soviet oil production at the time. The United Kingdom and Italy were the major customers for this oil, but there were many others. The marketing was done through various channels. The Soviet monopoly that controlled all oil exports set up a network of sales offices abroad. Long-term contracts were made in Spain, Italy, France, Belgium, and the Netherlands.

The expansion of Soviet oil sales gave rise to bitter price wars with established oil groups. The bitterness was made more intense by the fact that the Bolsheviks had neglected to settle for the foreign oil properties that they had seized after the revolution. As in all exports, the U.S.S.R. was more interested in total receipts of foreign exchange than in making high per-unit profits; so it could and did use price cutting as a means of achieving a foothold. Subsidiaries of some of the world oil trusts then tried to drive the Soviet oil back home by underselling the Soviet monopoly. But the attempts failed, and Soviet oil won an important place in world markets.

In the late 1930’s, the oil was withdrawn. Soviet exports dropped back to 1.4 million tons in 1938, and kept fading. After the war, they came back only in a trickle—for example, 100,000 metric tons in 1951 and 250,000 in 1952, then rising to 450,000 in 1953 as some of the new commitments of 3.5 million tons began to be fulfilled.

Meanwhile the war had swept additional oil into the Kremlin’s hands, including the oil wells of Rumania and those which were taken over as “German assets” in the Soviet zone of Austria. And the oil exported to the West from these new Eastern European acquisitions greatly exceeded the exports of the U.S.S.R. itself, amounting to 1.2 million metric tons in 1951, 1.7 million in 1952, and 2.3 million in 1953. In recent months, while the U.S.S.R. was making agreements to ship 3.5 million tons, the new export commitments of these other properties in Eastern Europe became known only in part, at least at this writing.

The Soviet bloc, though still short of certain specialized refined products, probably has the oil capacity to make considerable exports for at least some years, if the Kremlin so decides. Whether the bloc will indeed step into the world markets in an important way, as the U.S.S.R. did in the twenties, is of course not known. The West is watching closely to see whether the Kremlin will again use its monopoly control to undertake a major campaign of underselling other suppliers in world markets.

It was natural for oil-importing countries in the free world to be interested in new supplies from the Soviet bloc, especially if the price was attractive or if the transaction also enabled a free country to market its own products in the East. But the West could not forget past patterns, nor ignore the problems brought by new Soviet sales.

When the Russians abruptly disappear from markets, free-world importers turn to free-world sources to make up the difference. And if the importers later jump whenever the Soviet Government decides to stage another of their dramatic entrances, the free-world sources whose production has been stimulated will be the losers. And who can predict when the dictates of the Kremlin—economic or political—will override the dictates of the market place, and the oil, manganese, chrome, or whatever it may be, will suddenly be whisked out of reach?

Gold Sales Expanded

Down through the centuries, the word gold has exerted a powerful effect upon the imaginations of mankind. And last December, when the news came out that airplanes laden with gold bullion were flying from Moscow to London, there was a great buzz of interest. What were the Russians up to now?

The export of Russian gold was not new. The Soviet Union had been selling a sizeable amount each year in the free world. But in the last few months of 1953 a larger amount of Russian gold came out into the free world than had emerged in any recent year. Most of it, instead of entering the free market, went to the Bank of England. The total amount exported to England, Switzerland, and other countries during 1953 was not announced, but it was somewhere between $100 and $200 million.

There has been much speculation on the reasons for an increase in gold sales. The best explanation seemed to be that the Kremlin, hard pressed for adequate exports, decided—as in the case of manganese and oil—to use a fraction of its gold hoard so that it could continue to import the things it wanted from the free world. It has done the same thing on past occasions. For example, in 1928 the U.S.S.R. exported $167 million worth of gold and in 1937, $212 million worth.

Whether still larger amounts of Russian gold would be exported in the future was of course unknown. Concerning the size of the Soviet gold stock many guesses have been made, most of them ranging from $3 billion to $6 billion. The Soviet Union attaches great importance to its gold reserve. It has been willing to part with gold only in limited amounts or for special purposes. In any event, the gold hoard would not be big enough to use as a base for a large-scale, long-term trade relationship. Nevertheless, over the short run, and for limited purposes, the U.S.S.R. could, if it desired, export a lot more gold than it has to date. Gold therefore is an intriguing question mark of East-West trade.

Reaching Outside Europe

Moscow, while shopping for more ships, peddling more gold, and making other moves in the industrial countries of Western Europe, also reached outside Europe and tried to fasten closer economic ties with Asia and Latin America. The trade of the Soviet Union with the non-Communist areas of Asia, and with Latin America, has never amounted to more than driblets. That of Czechoslovakia and Poland has been a little bigger. The U.S.S.R. entered this field in 1953 with a good deal of propaganda effect. The effect in delivery of goods was still to be seen.

The Soviet trade bosses used a number of devices.

One device was to offer loans and technical assistance. Some of the loans were connected with trade. Others, related to construction activities within free-world countries, were more suggestive of investments and provided opportunity for increased Soviet or Communist Party economic penetration. There was a marked interest in assisting in the establishment of storage and supply facilities. So far, few Soviet offers have been accepted. Possibly this is because they are disturbingly reminiscent of the penetration techniques that were used to gain economic leverage inside the Eastern European countries and China prior to Soviet political domination of these regions. Or it may be that skepticism has been aroused by the experience with Communist Party use of commercial enterprises in some Western European countries to finance the local party and the Kremlin’s activities.

Another device has been to build lavish exhibits at “trade fairs.” This activity, though carried on in Western Europe too, was especially marked in South Asia. On an increasing scale, since 1951, the Soviet Union and its satellites have been using trade fairs for a double purpose—to promote the kind of trade the bloc desires and to propagate Communist ideas.

By elaborate and costly displays the Soviet-bloc governments seek to dominate the fairs; to overshadow the exhibits of the United States and other free-world countries; and to create the illusion of an industrial and commercial superiority over the Western nations, especially the United States. The U.S.S.R. makes a concerted and determined effort to discredit and minimize the industrial and technological achievements of the United States by contrasting the great size of the Communist nations’ participation with the usually modest representation by United States firms. An important distinction between Soviet and U.S. exhibits is that the former are developed as a state trade promotion and propaganda undertaking, and involve the building of special pavilions, whereas U.S. participation amounts to the sum total of exhibits of individual U.S. industrial and commercial companies assembled for the single purpose of promoting the sale of individual products.

The importance which the bloc attaches to these undertakings is found not only in the mountains of propaganda it issues on the subject, but in the sizeable expenditures it makes. For example, in 1952 the U.S.S.R. and its satellites dominated the Bombay International Industries Fair with four big exhibits. The Soviet exhibit was the largest; it cost more than $200,000 and was manned by a staff of 40. Communist China’s exhibit was the second most pretentious, with Czechoslovakia and Hungary also participating in an impressive way. At the Thailand Constitution Fair at Bangkok in December 1953, the Soviet exhibit was again the most elaborate. The Soviet Government established a special pavilion that cost an estimated $500,000 and housed 5,000 items, including trucks, automobiles, precision equipment, glassware, rugs, and preserved foods.

Yet another device was to join hands with a key nation of each continent in a brand-new impressive trade agreement which seemed to offer attractive benefits to that nation and which might stimulate neighboring countries to hanker after similar opportunities. The Kremlin chose India and Argentina. The U.S.S.R. concluded trade agreements with those two countries for the first time. So did some of the European satellites, and other satellites renewed existing agreements. The U.S.S.R. and the satellites also renewed existing agreements with certain other countries in Asia and Latin America.

The two-year Russian trade agreement with Argentina, signed in August 1953, was one of the most interesting of the year. For one thing it came at a time when trading missions of the U.S.S.R. and its satellites were becoming more active throughout Latin America—and the Soviet-Argentina agreement helped those missions to gain a somewhat more receptive audience for their overtures. Latin American governments have cooperated with other Western nations in withholding highly strategic commodities from the Soviet bloc; for example, bloc proposals to buy Chilean copper and Bolivian antimony and lead were not accepted. Obviously the Kremlin hoped to bring about more resistance to the control of strategic materials and to create Western disunity over that issue.

This trade agreement between the U.S.S.R. and Argentina was also interesting for its size and composition, at least on paper. It called for deliveries of $60 million in each direction, presumably during the first year, with an additional Soviet credit of $30 million. Argentine shipments were to include wool, hides, linseed oil, meat, and other goods that the Soviet Union could undoubtedly use. But the list of Soviet exports included some items for which the Soviet bloc seemed to have equal or greater need. The U.S.S.R. promised to deliver a large quantity of machinery and transportation equipment on credit, as well as petroleum, coal, and other items. Proposals to deliver certain kinds of machinery also cropped up in Soviet agreements with India and Iran.

Machinery, as we know, is what the Soviet rulers go to extreme pains to import. If they were serious now about exporting it, and if they really intended to deliver large quantities and not mere tokens, it would be something new, although even then they would probably not be exporting the advanced types which they usually seek to obtain in the West. It remained to be seen whether the U.S.S.R. would come anywhere near to complete fulfillment of the trade agreement with Argentina, for example. But one could only suspect that the promises of big and attractive deliveries—whether fulfilled or not—were made in large part for the purpose of weakening the ties of those countries with the rest of the free world.

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In this chapter we have traced various threads of the Soviet trading activities, and have suggested reasons why they engaged in each kind of activity.

Now it is necessary to look more deeply into the whole complex of Soviet foreign trade policy and sum up what’s behind it all.

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