By Eric Vandenbroeck and co-workers
Russia, Germany, and Poland 1917-1945 Part Five
Lenin assumed that decreased grain collections that fall were a campaign of passive resistance by middle-class and “rich” farmers and ordered more aggressive measures to feed the increasingly hungry Soviet cities. This greatly compounded the problem.
As food supplies became exhausted in the “grain belt" of the Volga River valley during the winter of 1920-1921, the specter of starvation began to stalk the land. An English writer invited by the Bolsheviks to report famine conditions described his impressions of starving refugees in Samara - “everything human is lost in this terrible, slow public waiting for death.”2 Accompanying the famines were cholera and typhus, preying on the malnourished. Amid these horrors, a massive peasant rebellion broke out in the central Russian province of Tambov, 300 miles south of Moscow, in the fall of 1920. Conditions in the cities were a little better. Shortages of fuel and food emptied most of the factories. Strikes broke out among the working class, supposedly the bedrock of the Revolution.
In response to declining grain supplies, the government cut rations for the country's largest navy and army garrisons by 30 percent over the winter.3 On February 24, 1921, the Cheka, the Bolshevik secret police, fired into a crowd of protesters in Petrograd. Twelve were killed, and nearly a thousand others arrested. On March 7, a group of Soviet sailors, considered one of the core groups of the Revolution, mutinied. From their base on Kronstadt Island, 20 miles west of Petrograd in the Bay of Finland, they demanded new elections, loosening market controls, an end to grain confiscation, the right of assembly, free speech, and investigations into the Cheka concentration camps. In a panic, the Bolshevik Party leader in Petrograd, Grigory Zinoviev, wrote to Lenin in Moscow that the workers were joining the soldiers and that they were “going to be overrun.”4 An initial attack against the rebels launched by loyal members of the city garrison was repulsed. Lenin and Trotsky ordered a massive concentration of forces in Petrograd to crush the uprising. Once again, they called upon Mikhail Tukhachevsky to deal with the threat.
At 3 A M. on March 17, under cover of darkness and fog, Tukhachevsky ordered the first Red Army units forward across the frozen Gulf of Kronstadt. Part of the assaulting wave made it across the ice unseen. Others were caught in the beams of Kronstadt Island's searchlights. Artillery from the island’s forts broke up the ice, drowning hundreds. The rebelling sailors yelled to the Bolshevik troops attacking them, “We are your friends. We are for soviet power. We won't shoot you.”5 Their words were unintelligible to many of those attacking: Trotsky and Tukhachevsky had dispatched many non-Russian speaking units to assault Kronstadt, knowing it would decrease the chances of fraternization. Just in case, any hesitation among the Red Army forces was dealt with mercilessly: when a pair of soldiers abandoned the assault to hide in a barge trapped in the ice, their commander found them, shot both of them without hesitation, then ordered the rest of his forces forward. The assault against the sailors soon prevailed, though at the high cost of 10,000 Red Army casualties. A few of the surviving rebels fled across the ice to Finland. Hundreds of those unfortunate enough to remain were executed immediately more, and their families were sent to slave labor camps by the Cheka.6 Several thousand more, and their families, were sent to slave labor camps.
In Moscow, defeat by the Poles had led to an increasingly sober assessment of Soviet foreign policy by Lenin and Trotsky. The Kronstadt rebellion and its aftermath provided further impetus toward the normalization of Soviet international and domestic affairs. Lenin inaugurated the so-called New Economic Policy (NEP), which would allow peasants to be compensated for their grain. ' It also permitted limited free enterprise, created a new gold-backed currency, and established the possibility of large-scale exchanges with foreign corporations. The goal was to stabilize Soviet Russia's dire economic situation. Germany was a logical partner for economic exchange. To acquire arms and economic assistance, Lenin dispatched Soviet delegates to reach agreements with major German firms.8
The timing of these missions was opportune. Financial catastrophe loomed in Germany, as well. In January 1921, the government of Chancellor Constantin Fehrenbach (which had only been in office for six months) announced it would be unable to continue making payments on reparations liabilities under the terms of Versailles, though the final sum to be paid had yet to be determined. The Gennan economy struggled in the aftermath of the war, but the causes of Fehrenbach's announcement were primarily political.
Shortly thereafter, on May 5, 1921, the Allied Reparation Commission finally assessed Germany’s reparations liabilities. The sum they considered recoverable was $12.5 billion.9 This figure was not, in fact, extraordinary. Later American estimates placed the damage inflicted by the German military on Western Europe at more than $40 billion.10 While the German economy was in poor shape after the war; the amount was well within the means of the German state to repay, especially given that the Allies were expending large sums to feed Germany’s population in the occupied zones.11 Nonetheless, Germany claimed that the amount was impossibly high, a claim the Commission did not recognize.12
Shortly thereafter, Aristide Briand, the prime minister of France, declared French military mobilization and a plan to occupy the Ruhr if Germany did not comply. In the face of this crisis, German Chancellor Fehrenbach resigned. His successor, Joseph Wirth, resumed payment. Rather than attempt the politically toxic maneuver of raising taxes on a weakened economy, his government sought a way out by printing money at an accelerated rate.13
As the parallel economic crises unfolded, communication channels between the Kremlin and the Reichswehr's headquarters in Berlin grew. In his strategic assessment during the Polish-Bolshevik War, Seeckt argued that open trade, conducted legally, would moderate Bolshevism and help Germany. Seeckt had an additional concern, however: the decline of the German armaments industry. He was apprehensive about the drastic circumscription of technological expertise and research. In 1921, while Germany was in the final stages of its Versailles-mandated reductions, its armament industries experienced severe losses. To offset those losses and find an outlet for the development of banned technologies, Seeckt decided to provide funding to German military manufacturers in critical areas of future development.14 Some of this work, particularly in areas with civilian utility, could be conducted through German-owned subsidiaries and shell corporations, many of which would be established in Sweden, Switzerland, the Netherlands, and elsewhere. But for weapons systems like combat aircraft, tanks, and chemical weapons, Seeckt required a partner state willing to host and conceal research, development, and testing. An alliance with Soviet Russia would provide a place for those activities and a market for German goods.
Such efforts required state support in the difficult economic circumstances of 1921. To that end, Seeckt ordered the establishment of a secret bureau, Sondergrappe Russland (Special Group Russia), under which military relations with Russia would be managed.15 To staff Sondergruppe R—as it was called—he drew heavily from his former associates. By December, five officers under the command of General Wilhelm Heye had been appointed to the group. Most were close colleagues of Seeckt or had been members of his staff when he had been assigned to Turkey during World War One.16 These included Fritz Tschunke, who, as seen earlier, had served with Seeckt in Turkey and rescued Enver Pasha in Lithuania in 1919; Major Herbert Fischer, Seeckfs personal aide since early 1920; and Major Wilhelm Schubert, the former military attache to Russia. In a senior supervisory role was General Otto Hasse, who would become Chef des Truppenamts (Chief of the Troop Office) in 1922.17 Seeckt— concerned about the political consequences were the arrangement to be made public—would serve as the architect of the cooperative measures in Russia, but remained behind the scenes, avoiding meeting with Soviet officials. Hasse would play that role instead.18
Oskar von Niedermayer joined these officers.19 An explorer and spy, Niedermayer is sometimes called “the German Lawrence of Arabia.”20 He had spent two years traveling across Asia while on paid leave from the military before World War One. After a brief stint on the Western Front, he was dispatched to Afghanistan in December 1915.21 His mission was to incite the Afghans into an uprising against the British government. After limited success, he went to Persia and Turkey, where he spent most of the war.22 After the war, he completed a Ph.D. in geography, then joined the extreme right-wing Freikorps of Ritter von Epp in Bavaria.23 Through the Freikorps, he reentered the military, though this second stint would prove brief; he “resigned” from the Reichswehr in 1921 to supervise the activities of Sondergruppe R in Moscow.24
The early work of Sondergruppe R centered on expanding economic cooperation in areas relevant to the military industry. Seeckt considered airpower to be critical to the future of warfare. He worried about the declining production capacities and loss of expertise by the German aviation industry. As a result, he expended a particular effort to shift combat aircraft production to Russia, enthusiastically supporting creating a cartel of German aircraft manufacturers called Aerounion, which would target the Soviet market.-' However, Aerounion eventually decided against manufacturing aircraft in Russia because the costs would make Russian-built aircraft competitive on the world market.26 In addition, the risks of working with a government hostile to the very idea of private property appeared to them to be too great.2 Aerounion did agree to a concessionary agreement that established the Soviet Union's first passenger airline but declined to move production facilities there.28
While Aerounion debated partnering with the Soviet state, Seeckt also turned to Hugo Junkers, an engineer who had manufactured aircraft for the German military during the First World War. His firm, Junkers AG, had declined to participate in Aerounion and was looking to enter the Soviet market29 The firm had already developed several foreign production facilities—in Turkey and elsewhere—to avoid Versailles restrictions that handicapped the sale of civilian aircraft. In early 1921, Niedermayer reached out to Junkers, promising him financial support from the Reichswehr to expand his operations in Soviet Russia. From the outset. Junkers expressed worries over the costs and risks of the joint venture. Hasse agreed to cover any costs arising from the difficulties of working in Soviet Russia to make the contract possible.30 Mollified, Junkers moved forward with negotiations. In December 1921, Director Gotthard Sachsenberg of AeroLloyd, a Junker's subsidiary, and Germany’s state airline traveled to Moscow in the company of Junkers AG's corporate director. Sondergruppe R set up a meeting between Junkers and Leon Trotsky that winter. Although no deal was immediately forthcoming, Soviet interest in a partnership with Junkers was clear.
Lenin was eager to take advantage of German firms’ interest in investing in the Soviet Union—whatever their motivations. Even before the Junkers’ trip to Moscow in late 1921 and the Krupp agreement in January 1922, he had already moved to him; however, the real advantage was gaining time, “and to gain time to win means everything.”34 Offering raw materials concessions to German firms to acquire machine tools, technology, and industrial equipment was a win-win.35
The Soviet Council of People's Commissars ratified the first concessionary agreement with a German firm on July 21, 1921.36 Several others followed. The most important was made with German shipping company Otto Wolff Aktiengesellschaft (Aktiengesellschaft—usually abbreviated AG—meaning a publicly-traded company) to establish Russgertorg—“the Russian-German Trading Company,” which would oversee Soviet imports from and exports to Germany.37 Within twelve months of its creation, Russgertorg was handling 20 percent of all Soviet trade. '38
As the framework for economic investment in the Soviet Union grew clearer, another German firm also proved eager to participate in Seeckt’s schemes—steel giant Krupp AG, the leader in German military industry. One of the largest companies in the world before 1914, Krupp had been Germany's biggest wartime manufacturer, employing more than 168,000 people at its height.39 As a result, Krupp was particularly hard hit by the terms of Versailles. Its central plant in Essen in the industrial Ruhr Valley lost more than half of its heavy machinery, removed by IAMCC inspectors and given to France as reparations. A series of strikes, hyperinflation and revolutionary violence in the Ruhr had cost Krupp. Further fueling a desire to work with the Reichswehr were the family's politics. The Krupps had a long history of militant nationalism; future head of the company Alfred Krupp would become a major Nazi Party donor and join the Nazi paramilitary organization Schutzstaffel (Protection Squadron, or SS) in 1931.40
In January 1922, Gustav Krupp, then the head of the family, signed a secret “gentlemen’s agreement” with the Reichswehr to participate in a vast, long-term program for the rearmament of Germany.41 The document stated that “in the common interest, Krupp must use its own expertise for the development of up-to-17 cm caliber guns, ammunition, and vehicles, as well to make available to the Ministry of Defense the capabilities of Krupp on these subjects.”42 Many of the items detailed in the agreement, such as tanks, heavy artillery, naval guns, and other military equipment, were explicitly banned by Versailles —hence the secrecy. In exchange for Krupp’s cooperation and the considerable liability is assumed, the Reichswehr guaranteed Krupp precedence to patents and licenses in areas of future military development, specifically those curtailed by Versailles.43 Krupp also gained priority when it came to Reichswehr military purchases. Simultaneously, and with help from the Reichswehr, the Krupp Corporation proposed to Soviet emissary Viktor Kopp a vast program of fifty-year leases on industrial properties in the Soviet Union for the “production of agricultural machines and appliances, production of machined instruments, household-merchandise and mass-produced articles for rural economies, the repair of locomotives, construction of locomotives and rail-wagons, construction of merchant-ships.” Also included in the deal were agreements on the production of “artillery, shells, gun-barrels, gun mounts, munitions wagons” and even submarines.44 There can be no doubt about the objective of these agreements, whose particulars reveal German strategic thinking. For instance, the Waffenamt sent Krupp a memorandum with specifications of a new tank to build in contravention of Versailles. Among the technical details was a note that the dimensions “should be such that the vehicle can be loaded onto an open railway car in keeping with the lowest gauge of the French and Belgian” railways.45 The aim, clearly, was to rebuild a German military capable of offensive action. The entire economic partnership program with the Soviets intended to create a source of strategic depth—in both economic and physical terms—for a new war of revenge. Specifically, the agreement with Krupp was a central part of Seeckt’s master plan for a potential war against France and Poland. Between Junkers and Krupp, Seeckt was collecting the partners he needed to fulfill his vision. Numerous foreign firms and businesses—ranging from Italian carmaker Fiat to American financier Averell Harriman—sought entry to the Soviet market, despite the political and economic dangers. Thanks to the superior organization, historical ties, and the assistance of its government, German firms would acquire the largest share of concessionary agreements: in 1922, nearly 39 percent of concessionary firms were of German origin.46 Military concessions were even more heavily tilted toward Germany. During the Rapallo Era between 1922 and 1933, the Red Army negotiated 526 concessionary or “technical aid” agreements.47 Of those, 255, or 48.5 percent, were with German firms.48 In all, German businesses invested tens of millions of rubles worth of capital annually in the Soviet economy.49 Nor was this traffic all one-way. By 1924, the German Foreign Ministry estimated that 40 percent of Russian exports—primarily raw materials and foodstuffs—went to Germany.50 By the spring of 1922, channels of communication between Germany and the Soviet Union, particularly from the Reichswehr to Moscow, were fully open.51 Through the POW offices, as noted, there were already official envoys in each capital. Sondergruppe R had been established to supervise the Reichswehr’s program of corporate cooperation. Krupp and Junker had signed preliminary contracts to invest in the Soviet military industry. Large-scale trade began to resume under the concessionary agreement system. Powerful figures in both Germany and the Soviet Union concluded that they had mutual interests in opposing the postwar status quo in Europe. This would pave the way for a major, formal declaration of mutual interests, one that would shock Europe.
1. R. W. Davies, Soviet Economic Development from Lenin to Khrushchev (Cambridge, UK: Cambridge University Press, 1988), 19.
2. Carl Eric Bechhofer-Robert, Through Starving Russia, Being a Record of a Journey to Moscow and the Volga Provinces, in August and September 1921 (London: Methuen, 1921), 41–46.
3. Stephane Courtois, Nicolas Werth, Jean-Louis Panne, Andrzej Paczkowski, Karel Bartosek, and Jean-Louis Margolin, The Black Book of Communism: Crimes, Terror, Repression, trans. Jonathan Murphy and Mark Kramer (Cambridge, MA: Harvard University Press, 1999), 119.
4. Ibid., 112.
5. Paul Avrich, Kronstadt 1921 (New York: W. W. Norton, 1970), 205.
6. Ibid., 207, 211, 215.
7. For more on the context and consequences of NEP see R. W. Davies, Mark Harrison, and S. G. Wheatcroft, The Economic Transformation of the Soviet Union, 1913–1945 (Cambridge, UK: Cambridge University Press, 1994).
8. These included Viktor Kopp, who first arrived in Berlin in July 1919, and Leonid Krasin, who arrived in April 1920. “Geschäftliche Beziehungen der Firma Krupp mit der Sowjet-Regierung in Russland in den Nachkriegsjahren” [Business Relationships between Krupp and the Soviet Government in Russia in the Postwar Years], KA-E, WA4/1361, 0197, 1–43, 1.
9. This sum was disguised in a total reparations claim of $27.9 billion for reasons related to the Allied Reparation Commission’s domestic audiences, who sought maximum reparations payments from defeated Germany. Marks, 642; Jürgen Tampke, A Perfidious Distortion of History: The Versailles Peace Treaty and the Success of the Nazis (Melbourne, Australia: Scribe, 2017), 169.
10. Marks, 643.
11. Tampke, 164–165.
12. Haigh, Morris, and Peters, German-Soviet Relations, 92–93.
13. Tampke, 171–172.
14. “Geheim-Abkommen, Vereinbarungen über Zusammenarbeiten von Reichswehrministerium und der Firma Fried. Krupp Aktiengesellschaft, Essen” [Secret-Accord, Agreement on Cooperation between the Ministry of Defense and the Fried. Krupp Firm], 25 January 1922, KA-E, WA/40 B 1350, 1.
15. Zeidler, 54.
17. Ibid., 49, 54.
18. Köstring, General Ernst Köstring, 46–47.
19. “Ritter Oskar von Niedermayer,” in Gerd R. Ueberschär, Hitlers militärische Elite: 68 Lebesläufe (Zürich: Primus Verlag, 2011), 78–84. The only major work on Niedermayer’s career to date, besides Niedermayer’s own writings, is Hans-Ulrich Seidt, Berlin, Kabul, Moskau: Oskar Ritter von Niedermayer und Deutschlands Geopolitik [Berlin, Kabul, Moscow: Oskar von Niedermayer and German Geopolitics] (Munich: Universitas Press, 2002).
20. Hilger and Meyer, The Incompatible Allies, 195. Hans-Ulrich Seidt, “From Palestine to the Caucasus—Oskar Niedermayer and Germany’s Middle Eastern Strategy in 1918,” German Studies Review, 24:1 (Feb., 2001), 1–18, at 1.
21. For the best treatment in English of this mission, see Peter Hopkirk, Like Hidden Fire: The Plot to Bring Down the British Empire (Tokyo: Kodansha International, 1994).
22. Seidt, Berlin, Kabul, Moskau, 97–119.
23. Ibid., 125.
24. Ueberschär, Hitlers militärische Elite, 78–84.
25. “Expose: Aerounion,” 19 November 1921, Daimler-Benz Corporate Archive (hereafter DBCA), DB 167, 1–3; “Aufnahme einer Flugzeug- und Motoren, Fabrikation im Russland” [Report on Aircraft and Engine Manufacturing in Russia], 20 March 1922, DBCA, DB 167, 1–2.
26. “Zweiter Schriftsatz des Reichsministeriums zur Klärung seiner Beziehungen zu Prof. Dr. Junkers,” 15 February 1926, BA-MA, RH/2, 1130, 4, 6.
27. Ibid., 6.
28. Wolfgang Wagner, Hugo Junkers Pionier der Luftfahrt—seine Flugzeuge [Hugo Junkers, Pioneer of Aviation: His Aircraft] (Bonn: Bernard und Graefe, 1996), 201.
29. The Soviets had already granted Junkers AG a monopoly upon air travel on the Sweden-Persia air route via the Soviet Union and would pay it to conduct a number of aerial surveys of Soviet territory. “Vereinbarung zwischen der russischen Regierung und den Junkerswerken” [Agreement between the Russian Government and the Junkers Works], 6 February 1922, BA-MA, RH/2, 1130, 1–5.
30. These included the problems of transport, shortages of skilled labor, inconsistent deliveries of raw materials, food shortages, and the still unstable political regime. “Zweiter Schriftsatz des Reichsministeriums zur Klärung seiner Beziehungen zu Prof. Dr. Junkers,” 7.
31. Vourkoutiotis, Making Common Cause, 122–123; Zeidler, 54. Niedermayer and Wilhelm Schubert organized the meeting.
32. “Thezisi Prezidiuma VSNKh o kontsessiakh,” 25 March, 1920, RGASPI 5/1/2694, 2–3, reprinted in S. S. Khromov, Innostrannie kontsessii v SSSR: Istoricheskii ocherk. Dokumenti, Chast I [Foreign Concessions in the USSR: Historical Essay, Documents, Part I] (Moscow: Rossiiskaia Akademiya Nauk Institut Rossiiskoi Istorii, 2006), 117–121.
33. A. Köves, “Chapters from the History of East-West Economic Relations,” Acta Oeconomica, 17:2 (1976), 159–176; 159–160.
34. Khromov, Innostrannie kontsessii v SSSR, 11.
35. M. V. Klinova, Gosudarstvo i chastnyy kapital v poiskakh pragmatichnogo vzaimodeistviya [The State and Private Capital Searching for Pragmatic Cooperation] (Moscow: IMEMO RAN, 2009), 41–42.
36. Khromov, Innostrannie kontsessii v SSSR, 236.
37. Antony C. Sutton, Western Technology and Soviet Economic Development, 1917–1930 (Stanford, CA: Hoover Institution on War, Revolution and Peace Press, 1968), 272–273. Sutton’s work has been regarded, rightly so, as controversial. While this early monograph is generally considered reliable, I have here relied on his work only when it clearly cites German Foreign Ministry archival records or published Soviet document collections.
38. Sutton, Western Technology and Soviet Economic Development, 273; Haigh, Morris, and Peters, German-Soviet Relations, 172–173. Russgertorg’s financial success helped encourage a wave of capital investment in Soviet industry and resource exploitation. In fact, it was so successful that by 1925, the Soviet state viewed it as a threat to the economic independence of the Soviet Union and began shifting its responsibilities to state organs.
39. Harold James, Krupp: A History of the Legendary German Firm (Princeton, NJ: Princeton University Press, 2012), 141.
40. Ibid., 208–209.
41. “Geheim-Abkommen, Krupp” [Secret-Accord, Krupp], 25 January 1922, 1.
44. Vourkoutiotis, Making Common Cause, 122–123.
45. “Vorgang: Bb. Nr. 3566 vom 11 November 1927,” 16 November 1927, KA-E, WA 40/252, 255, 140–143, 2.
46. Khromov, Innostrannie kontsessii v SSSR, 17.
47. Not all of these were finalized: RGVA contains lists of 526 contracts filed between 1921 and 1933, but not all of them were signed by both sides.
48. “Archivist’s Note,” 1933, RGVA, f. 31863, op. 1.
49. Concessionary investment in 1925 totaled 32.6 million gold rubles; in 1926, that figure was 48.8. (E. Kantinik-Ulina, “Kharakteristika raboti sushchestvyushchikh kontsessii,” 26 November 1926, 8350/1/512, 312–317, State Archive of the Russian Federation (Hereafter GARF), reprinted in Khromov, Innostrannie kontsessii v SSSR, 284–288. Much of the capital generated by the concessionary agreements was plowed back into purchases from German firms. For instance, the “Association of German Locomotive Building Companies” would arrange the sale of 700 German locomotives and (along with an English company) the sale of 1,000 oil tanker cars in 1922 alone; those two contracts were worth more than 100 million gold rubles, or 37 percent of all Russian imports in 1922. Heywood, Modernizing Lenin’s Russia, 216–217.
50. “Niederschrift über die informatorische Besprechung über die gegenwärtige Lage der deutsch-russischen Beziehungen im Auswärtigen Amt” [Minutes of an Informational Meeting in the Foreign Ministry about the Current State of German-Russian Relations], 25 June 1924, PA-AA, R 31492K/KO96760, 1.
51. Foreign governments were not unaware of German activities. Polish intelligence in particular remained cognizant of German investment and intentions in the USSR. Polish embassy staff in Moscow drafted a report on the growth of German concessionary activity in the USSR in 1922. The Polish Foreign Ministry ordered the report dispatched to their London and Paris embassies, indicating that such information was likely shared with the British and French governments in 1922—and then ignored. Adam Zielesninski, “Do pana Ministra Spraw Zagranicznych: Stosunki sowiecko-niemieckie” [To the Minister of Foreign Affairs: Soviet-German Relations], 22 October 1922, Archiwum Akt Nowych (hereafter AAN), 510/22, 1–11.