Papers Relating to the Foreign Relations of the United States, The Paris Peace Conference, 1919, Volume II

Paris Peace Conf. 861.48/1

Memorandum by Lieutenant A. A. Berle, Jr.,⁹ December 10, 1918

December 10, 1918

American Economic Intervention in Russia

Economic intervention was proposed as a solution to the Russian problem in the early days of the Bolshevist regime, in the belief that this would foster stable government, alleviate suffering, and lead to resumption of Russian hostilities against the Central Powers. At that time Russian territory was open to representatives of the United States. Throughout the subsequent difficulties the United States Government has continued to regard the Russian people as friends and allies, whose rights were nowise modified by their misfortunes. Economic aid was recognized as merely extending the policy adopted when the Stevens Railway Commission was sent in 1916 [1917]¹⁰ at the expense of the Petrograd government, a portion of the deposit then paid us remaining at present in the United States treasury. Famine and want have lent a strong humanitarian appeal in addition to the political motives involved.

As an economic unit, the Russian Empire was integrated and self-supporting above all other powers. Divided into separate units, no single part, save perhaps Siberia, can exist without imports. The north-Russian block,—Great Russia, so-called—never produced either food or raw materials sufficient to supply her needs. Three of her old dependencies, the Ukraine, Western Siberia, and the Caucasus, with the product of her own Volga Provinces, supplied food. The Ukraine and the Urals produced all necessary raw materials. When the Bolshevist revolution paralyzed the distributive processes and its nationalization decrees of March and April, 1918, wrecked the manufacturing and commercial processes, the outlying regions were glutted with some products and in want of others, while Great Russia had no products and no manufactures to attract their import. The relief problem therefore involved distribution—that is, transportation,—and rehabilitation of industry. With a friendly central government the United States might have undertaken the task. When in June de facto warfare commenced, the situation changed. In July the President announced that the United States would attempt economic intervention as its primary policy, but would couple it with a military force to protect its process.¹¹

The summer of 1918 injected various external elements. Czech troops, proceeding to Vladivostok, were first disarmed and then attacked by Bolshevist forces, but, encouraged by Allied promises, seized the Trans-Siberian railroad and maintained a precarious front on the Volga River, capturing the Grain Provinces instead of pursuing their original intention of cutting a way out to the Pacific, and thus imposing on the Allies the obligation of aid. This could not be accomplished in the Far East without American approval. The Japanese proposed and actually commenced, the occupation of Manchuria, with the object of continuing into Transbaikalia. The French and British looked to us. Meanwhile the Jews in the United States urged immediate economic aid on the one hand, though opposing any military operation against the Bolshevists. Early in August, in cooperation with the British, we landed troops in Kola, Archangel and Vladivostok, and thus became actively hostile to the de facto Russian government. It was by this time obvious that a mere Economic Mission was impracticable, as it could operate only within the lines of an Allied force.

Meanwhile the organization of an Economic Mission to Russia had been entrusted to the Department of Commerce, under Secretary Redfield’s supervision. Fanatics and intriguers of all sorts attacked that department.^* The situation became unfortunate, and offered no promise of success. The first week in August found a Czech representative in Washington asking whether anything was to be done for the heavily-pressed and starving Czech army. The President announced publicly that while the idea of economic intervention had not been given up, the departure of the Mission was indefinitely postponed, despite which the preparations of the Department of Commerce continued. The President then requested Mr. Vance McCormick, Mr. Hurley, and Mr. Baruch informally to submit plans for the relief of the Czechs, for his personal attention. Almost simultaneously he requested a project for the relief of the available regions in Siberia; and at this juncture the Allied troops made connections with the Czechs at Chita and opened thereby the entire Trans-Siberian line. Specifications for the relief of the Czech troops and for economic relief to Siberia were drawn,^† and as a result the War Trade Board was formally entrusted with the assistance to the Czecho-Slovaks and informally charged with carrying out the present program of economic intervention. It accordingly organized a Russian Bureau,¹² to which was assigned $5,000,000 of funds at the President’s personal disposal, and undertook the supply of material to the Czecho-Slovaks, and the relief of the population of the parts of Russia under Allied control, including Archangel and Murmansk.

Consuls Cole at Archangel and Caldwell at Vladivostok were instructed to ascertain the exact needs in their respective fields, and to secure for export to the United States such products as could be shipped, the object being to supply credits against which American shipments could be made. Fifteen thousand tons per month was supplied as an initial instalment by the Shipping Board, and cargoes were dispatched the second week in September to Vladivostok for the Czech troops. Hardware, railway spare parts, shoes and cloth were got together for consignment for the civil population, and food was sent to Archangel. Licenses for the import of furs from the Maritime Province, and of flax from North Russia were granted, and applications for licenses to export to those regions from the United States were invited. In September relations were opened with the Union of Siberian Cooperative Societies and with the American offices of the Moscow Narodny Bank representing the Russian cooperative associations. Ambassador Morris was sent as temporary director of the policy from Tokio to Vladivostok, and was replaced on the first of October by Mr. Heid, representing the War Trade Board, who is at present in charge. The National City Bank at his invitation opened a Vladivostok agency two weeks later. The plan was adopted of sending men along the line of the Trans-Siberian Railway to collect goods for export, and to distribute in return the products shipped from the United States for relief purposes, so as to

“ensure the supplies reaching on equitable terms the actual consumers who need the same.…¹³ It is of the utmost importance that excessive profits be avoided, and that no basis be permitted for charges of exploitation.…¹³ You will have clearly in mind the military situation and the importance of creating a friendly population in the areas where American and other allied troops are operating. We regard it as most important that supplies be made available to Russians located in areas where the Czecho-Slovaks are operating or along the route over which supplies to the Czecho-Slovaks are to be shipped.” (Cable, Oct. 3, State department to American Consul, Siberia.)

And eventually, by this process of collection and redistribution, at normal commercial exchange throughout the empire was to be attained.

International cooperation in this program has been, and is now being sought with rather barren results. Owing to the attitude of Japan, Great Britain and France there has been constant danger of our becoming involved in an apparently imperialist policy. The machinery of cooperation is indeed present. In Archangel, the Tchaikovsky government is virtually in the hands of the Ambassadors. In the far East, Japan on August 19 announced the appointment of a Temporary Economic Mission, headed by Baron Megata, to deal with the Siberian situation, and about the same time Great Britain and France appointed High Commissioners. It is understood these governments regret the decision of the United States not to appoint a similar official. But despite the apparent cooperation in organization, differences in policy immediately developed which have never been reconciled.

The first question presenting itself was that of currency: the local Kerensky rubles varied in value from six to thirteen cents, and were not accepted by the peasants. The United States Government proposed an international ruble, guaranteed by the Associated Governments, and communicated this view to Japan, France and Great Britain. While the matter was pending, Japanese General Headquarters issued in Manchuria and Eastern Siberia “headquarters notes”, redeemable in yen, and enforced a rate of exchange which virtually excluded non-Japanese activities. The British Government, apparently agreeing in principle to our proposal, caused the printing in August of ruble notes redeemable in pounds sterling, to the amount of one hundred million rubles for issue in Archangel, and on Oct. 26 the flotation of this currency was formally proposed. A conference between representatives of the four powers engaged in intervention was held in London, which agreed, over the protest of the United States, to the establishment of this form of money in North Russia, and likewise to a French issue in Siberia. The situation was forced by the extreme shortage of money in both the north and east. The War Trade Board cabled to Stockholm on November 2 that

“It is evident to us from our conversation and from exchanges of notes with the British that they desire to work toward the establishment of certain spheres of influence in Russia, and that they desire a free hand in Archangel, leaving to the United States to work out with Japan and France the question of which of these governments shall take the lead in Siberia.…¹⁵ We regard it as most unfortunate that the Allies should at different points introduce different currencies.”

Similar difficulties developed in other fields. On October 22, a month after American food shipments to North Russia had commenced, Ambassador Francis cabled

“The British entirely control the Allied food Committee and they are endeavoring to impress the civil population with the idea they are the sole distributors of supplies.…¹⁶ I am not disturbed but amused over the report that (General) Poole has gone to London for the purpose of demanding my recall from Archangel.…¹⁶”.

Poole had already acquired prominence by supporting the Chaplin coup d’état against the Tchaikovsky government although the Ambassadors, including the British, had supported the latter.^* Meanwhile the Japanese troops substantially excluded the Stevens Commission from the Chinese Eastern and Amur railways, causing the suspension by the United States of licenses to export cotton and import silk to and from Japanese markets: a situation which apparently remains unresolved. It may consequently be assumed that our own purposes toward Russia are not identical with those of the other Associated Governments, and that a plain understanding as to the status of both economic and military intervention has yet to be reached.

The present situation may be summarized concisely. The new areas opened by naval occupation of the Black Sea have (so far as the writer is informed) not yet been included in the scope of the economic program. Archangel however is being relieved by shipments of food distributed by an Allied Food Committee, and by an independent program of commercial relations with the United States, the basis of the operation being the barter of flax and North-Russian products, including timber, for American steel and textiles, under the direction of the now incorporated Russian Bureau. The Siberian program is in its initial stages, but has already engaged the space of thirty thousand tons of bottoms monthly; and a force of 250 agents is being gathered and sent out to attend to distribution and barter. The currency question is unsettled: Kerensky rubles are used in Archangel, provided they have been stamped by the local banks, and the British issue is ready for delivery. The Siberian Expeditionary Force has apparently been authorized to issue small-denomination notes for temporary use. Yet in Siberia, and even more so in Archangel and Murmansk, the shortage of currency is so great as to cause serious popular unrest. It is, meanwhile, increasingly apparent that the United States Government possesses the confidence of the Russian People more than any other, and that the logical consequence of intervention will force upon it the responsibility for a large share in the guidance of Russian affairs.

A. A. Berle, Jr.

2nd Lt., Inf., U. S. A.

9. Member of Russian Section, Commission to Negotiate Peace.
10. See Foreign Relations, 1918, Russia, vol. iii, pp. 183 ff.
11. See aide-mémoire of July 17, 1918, to the Allied Ambassadors, ibid., vol. ii, p. 287.
12. The writer, out of a number with whom he came into contact, mentions three: Batolin, of the Russo-Asiatic Bank, Lied, of Lied, Inc., and M. C. Martens & Co. [Footnote in the original.]
13. The writer had some part in drawing these plans. [Footnote in the original.]
12. See Foreign Relations, 1918, Russia, vol. iii, pp. 147 ff.
13. Omission indicated in the original memorandum.
13. Omission indicated in the original memorandum.
15. Omission indicated in the original memorandum.
16. Omission indicated in the original memorandum.
16. Omission indicated in the original memorandum.
17. Report of Prof. A. C. Coolidge. This incident took place Sept. 12–15. [Footnote in the original.]