29. TRADE TALKS ABROAD
The Polish war punctuated a year of talks on a trade treaty between Soviet Russia and the United Kingdom. The British government played its hand with some caution. Its ministers were determined to prevent foreigners from stirring up revolution and on 16 July 1920 deported Santeri Nuorteva of the Russian Soviet Bureau, as the front organization was known by then—who had landed in Liverpool from New York. Nuorteva was carrying a ‘diplomatic passport’ stamped by his comrade Ludwig Martens. Back in New York, the Russian Soviet Bureau blustered that Canadian contracts to the value of six million dollars would be cancelled.1 Martens attended a gathering of 8,000 supporters in Madison Square Garden where he wanted to call on the US government to permit the transport of medical supplies to Russia. He received fifteen minutes of applause before he could start speaking. The Internationale was sung. Martens haltingly read out his speech in English before giving a vivid delivery in Russian: ‘There is much talk of Bolshevist propaganda against America. There is no such thing. But there is propaganda against Soviet Russia.’2 This was of no help to Nuorteva in England, where Lloyd George had to be seen to be standing up to communism to placate the Conservative MPs in the governing coalition. Rejecting pleas on Nuorteva’s behalf, he said that his papers were not in order and that normal procedures had been followed.3
Yet rather than sending Nuorteva back to America, Lloyd George allowed him to travel on to the Estonian capital, from where he would be able to reach Russia.4 Nor did Lloyd George object to Kamenev and Krasin coming to London.5 Things had changed since Kamenev ’s fruitless visit in 1918. Lloyd George was giving communists a chance to show that they deserved admittance inside the perimeter of formal international relations. Lenin understood this. Worrying that Kamenev and Krasin might get over-excited, he warned them against summoning far-left socialists to get arms for the British working class.6
The dominant theme in the talks with Kamenev and Krasin at 10 Downing Street on 4 and 8 August was the Soviet military advance on Warsaw.7 But after demanding peace and security for Poland, Lloyd George and Bonar Law also took the opportunity to set out their conditions for future trade with Soviet Russia. They insisted that Soviet leaders should cease their political subversion and ideological propaganda in the United Kingdom and its empire. Kamenev affected to understand and agree. But the evidence from telegrams between Moscow and London told a different story, evidence that was eagerly published in The Times.8 Ernst Fetterlein at the Government Code and Cypher School had decrypted the intercepts between Lenin and Kamenev, which were then leaked to the press. Lloyd George disliked what he learned from Fetterlein about the Kremlin’s basic intentions and told Kamenev that there was no prospect of resuming Anglo-Russian trade unless Lenin changed his posture.9 The Times also alleged that Kamenev had a hand in Moscow ’s delivery of the secret subsidy to the Daily Herald and was in regular contact with the Council of Action, which the Labour Party and the trade unions had established on 5 August as part of a campaign to prevent Britain from intervening in the Soviet–Polish war. Other newspapers soon took the same line that Kamenev had come as a diplomat and behaved as a subversive. All this angered Lloyd George and he rebuked Krasin and Kamenev for breaking their word that they would not interfere in British politics. He told Kamenev that if he did not quickly leave the United Kingdom, he would be deported.10
Lloyd George grew more truculent when news reached London of the Red Army’s defeat east of Warsaw. Kamenev accepted that he was no longer persona grata in the United Kingdom. Before he departed he sent an open letter to the Prime Minister claiming that the government was exploiting ‘paltry and unproved’ charges supplied to it by secret police agents; he also deplored the French government’s decision to recognize Wrangel rather than Lenin as the leader of Russia. Kamenev worried that the Allies might rediscover their enthusiasm for military intervention, but in fact Lloyd George was being crafty. Nobody in Whitehall really thought Kamenev was worse behaved than Krasin, yet Krasin was allowed to keep his New Bond Street office and continue the trade talks.11 The truth was that the Prime Minister still desired some kind of commercial treaty with Soviet Russia. By making a fog of the situation he alleviated the criticism in the press. Lacking the military or political means to eliminate Bolshevism, he was doing what he thought was the next best thing by undermining the Soviet order through a resumption of commercial contacts. Lloyd George saw himself as the mole-catcher who would grub out communism.
Like the other Liberals in his governing coalition, he wanted to avoid giving any impression that ministers were out to provoke an armed clash with Soviet Russia. He also needed to show himself as a friend of the British working man, which would be difficult if he threatened a so-called proletarian government elsewhere in Europe. He was also straining to promote Britain’s economic recovery from the post-war recession. Industrialists who had done good business in Russia before 1914 were lobbying him for a resumption of trade with the Russians. National economic self-interest was put forward in justification, and Lloyd George acted with confidence that more people would eventually support him than were writing to The Times to denounce him.
Krasin still goaded the British by mentioning the progress being made by the rest of his negotiating team elsewhere in Europe. Among the experts on banking and railways he had left behind in Stockholm was Professor Yuri Lomonosov, once a monarchist but now a supporter of the October Revolution. Lomonosov was involved in Sovnarkom’s offer to sell its gold reserves in exchange for locomotives, carriages and rail track, and industrial companies in Sweden competed for the contracts being dangled in front of them.12 Originally the Soviet intention had been to make such purchases in Germany, but this was scuppered when the Allied powers reaffirmed their ban on deals involving Russian gold of disputed ownership. The Germans, having lost the war, had to comply with what the Allies demanded. Sweden, which had been neutral in the Great War and was therefore unaffected by the Paris peace treaties, was the next best option for the Bolsheviks. An agreement was drafted and, with Krasin’s consent, a provisional deal for one thousand locomotives was signed on 22 October 1920. Gold was already in place in Tallinn to complete the agreement. Sovnarkom was delighted at this latest breach in the wall of Russia’s economic isolation. It was consequently odd that it should be Krasin who raised an objection. He belatedly expressed the fear that the Allies would compel Sweden to withhold any railway exports under the terms of the contract. He thought there was a risk of depleting Russian gold reserves for the benefit of Swedish business partners but not for Sovnarkom.13
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 and 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 Azerbaij an—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.