65 per cubic meter against Baltic
quotations on similar material to $61.
quotations on similar material to $61.
Soviet Union - 1931 - Fighting the Red Trade Menace
This is
a feature of Italo-Soviet relations being closely
watched by France, for the Soviet Union needs tor-
pedo boats, small cruisers and submarines for the
minimum requirements of its long neglected navy
and Italian yards are well equipped to supply them.
Another item of interest that does not, however,
appear as yet in the Italo-Soviet statistics concerns
airplanes. Early in March the Soviet Union ordered
seventy-five Savoya Macchetti hydroplanes equipped
with 750-horsepower Fraschini single motors, the
order including 150 spare motors. They were the
type of planes used by Balbo in his South American
flight and Maddalena for his rescue flight to the
Pole for Nobile.
Besides this deal, Italian manufacturers recently
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? FIGHTING THE RED TRADE MENACE 23
had almost closed the sale to the Soviet Union of
150 Savoya Pomillo planes, deliverable fifty per year,
Italy to take wheat for them, but the transaction
broke down for causes unknown. The barter feature,
however, was taken up by the Fiat Company, and
according to unofficial information, Italy has agreed
to deliver 2,000 Fiat trucks for grain, the Italian
Government Treasury giving two-year notes for 75
per cent of the sum to Fiat who are to discount
them. The Government promises to take up the notes
within a year, the Soviet Union to deliver wheat to
the amount of the sales price, and the Italian Gov-
ernment to sell the wheat and with the proceeds re-
deem the Fiat notes.
Included in the new treaty is a clause wherein the
Italian Government promises to invite the attention
of Italian engineers hitherto seldom employed in the
Soviet Union to the opportunities for rendering
technical assistance in the Five-Year Plan. Italian
industry is hopeful over the agreement and for the
moment producer interest is in the foreground of
Italian economic thinking about the Soviet Union. It
is, however, the consumer interest in Italy that is
really decisive for the Italian attitude toward Rus-
sia. And it is the Italian market for wheat, oil, lum-
ber, coal that interests most the American and other
exporters, who, under Soviet competition, have seen
or fear they may see their Italian customers slip-
ping away from them into Russian hands.
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? CHAPTER III
Savona, Italy:
Tucked away in this little Mediterranean port,
surrounded by vineyards, almost hidden in a hollow
of the hills and unknown to any except the alert
observers of foreign oil companies, there is going up
an outpost of the Soviet's Five-Year Plan in Europe.
A huge oil depot for the storage of Soviet petro-
leum and petroleum products, the Savona station
of the Soviet Oil Trust provides one of the most
impressive evidences to be found anywhere in Eu-
rope of the far-reaching plans and self-confidence
of the Soviet foreign trade monopoly and of the
hospitality the Russians have found in Italy.
Here is a bit, and a very significant bit, of Soviet
Russia in Italy. After a prolonged tour of Soviet
industrial plants in Russia under the Five-Year
Plan, it brought a flood of familiar recollections to
find in Savona just such another plant, also not
quite completed, also very large, also packed full of
meaning for the future.
Only the environment is quite different from the
bleak surroundings of most great Soviet plants in
Russia. A fast hour and a half drive along a highway
that skirts the Gulf of Genoa, past coves and bays
24
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? FIGHTING THE RED TRADE MENACE 25
improbably blue, through tunnels that pierce pro-
jecting cliffs, through sleepy towns, where sun-
browned girls sit knitting at flowery doorways,
brings one to Savona. The port is full of idle ships,
beflagged. It is a national holiday. We inquire the
way to the new Soviet oil station. The car winds and
turns through narrow village streets, walled high on
either side by gray stone, topped by nodding blos-
soms. Out of such an alley we emerge into a broader
way and there before us lies a huge complex of
freshly built buildings encompassed by a brick wall
and dominated by a tall water tower. The plant
looks foreign--an intruder among the peaceful hills.
Designed to accommodate an initial capacity of
50,000 tons of petroleum, the plant's liberal use of
space makes it appear even larger, The walled in-
closure is about 400 yards long by 150 wide. Inside
there are an administration building, a double row
of fifteen of the largest size oil tanks, two rows of
warehouses, various auxiliary buildings, all con-
nected by narrow-gauge railroad tracks.
Nearly completed, the plant should be ready to use
this summer. There is no doubt about the permanent
character of the structure. It would do credit to any
great bourgeois oil trust.
Walking about the interior of the enclosure, I
thought involuntarily of Baku, the oil capital of the
Soviet Union, of its streets placarded with signs
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? 26 FIGHTING THE RED TRADE MENACE
"Five-Year Plan for oil in two and one-half years. "
Just this spring Moscow announced that the Five-
Year Plan for oil actually had been accomplished
in two and a half years. On that occasion the presi-
dent of the Soviet Oil Trust announced "our daily
production now has reached 58,000 tons, compared
with an estimate of 57,000 tons for the conclusion of
the Five-Year Plan in 1933. "
Here in Savona this new Soviet plant will hold
about one-tenth of all the petroleum Italy imports
in a year, but it would lack 8,000 tons of holding
even one day's production of the Soviet Oil Trust.
Second oil producing country in the world, now
having leaped ahead of Venezuela and only behind
--though, of course, far behind--America, the So-
viet Union plans to produce this year 27,500,000
tons as compared with the original estimate of 20,-
800,000 tons for 1933, and has shoved its production
goal for 1933 ahead to 46,000,000 tons. The United
States produced 137,000,000 tons in 1929. If Amer-
ican production under restrictive measures remains
about static, and if the Soviet Union carries out the
Five-Year Plan for oil in the future as it has done in
the past, the Soviet Union by 1933 will have nearly
one-third of the production of the United States.
These are considerations that are bringing wrin-
kles to the brows of representatives of foreign oil
companies in Italy, as well, it may be said, as almost
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? FIGHTING THE RED TRADE MENACE 27
everywhere else in the world. "The Five-Year Plan
for oil," remarked one American oil man in a neigh-
boring country, "is a catastrophe for us. "
Why the sober-minded representative of one of the
most realistic business organizations on earth should
feel justified in using such strong language may per-
haps be understood by consideration of the oil situ-
ation in Italy.
Until Russian oil re-entered the field, Standard
and Shell divided between themselves the Italian mar-
ket, Russian production had sunk from the pre-war
figure of 8,000,000 tons to 5,000,000 in 1924 and
the field was clear for the Americans and British.
It took until 1926 for the Soviet Oil Trust to re-
cover lost ground and reach approximately pre-war
production. There had been some Russian oil coming
into Italy, but not much until the formation about
this time of "Acienda Generale Italiana Petrolio,"
called "Agip" for short, which under Italian Govern-
ment control took over on contract all Soviet oil for
Italy and in a short time was disposing of 25 per
cent of all the petroleum and petroleum products
consumed in this country. Soviet imports of fuel
oil alone into Italy rose from 102,000 tons out of
a total import of 420,000 tons in 1928 to 264,000
tons out of a total of 705,000 tons in 1930. In crude
oil Soviet imports reached one-third of the total by
1930 and in benzine Soviet imports were one-fifth
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? 28 FIGHTING THE RED TRADE MENACE
of the total in 1930, compared to one-eighth in 1928.
Shell and Standard were hit but could do nothing
effective, for "Agip," an Italian Government cor-
poration, was selling the Russian oil and if any
charge of "dumping" was to be made, it would have
to be a charge of Italian, not Russian, dumping.
"Agip's" contracts with the Russians were an in-
teresting example of Soviet price practice. They pro-
vided for the sale of oil products f. o. b. Batum or
Novorossisk at a base price always a bit below that
of similar American products f. o. b. Gulf ports. With
this initial advantage, the Italian purchaser then
had the advantage of difference in transport costs
between Gulf-Italy and Black Sea-Italy, a difference
that sometimes mounted as high as thirty-five shil-
lings per ton, although it is now four shillings per
ton.
Even with this diminution in transport price dif-
ference, the net advantage of Soviet over American
and other foreign oil in Italy is very considerable.
It enables the "Agip" to sell Russian gasoline at
from three-quarters to one and one-half cents per
gallon less than the Americans' price, or about 18 to
20 per cent lower at the present market.
On bunkering oil the resale price of Russian
Mazout here is 35 shillings per ton, against 45 to 50
for American fuel oil, but no American fuel oil is
now being offered in face of this competition.
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? FIGHTING THE RED TRADE MENACE 29
All this is not well and not good for the other
foreign oil companies operating in Italy, but until
now they have been able at least to keep a good
share of the market and have not suffered fatally.
What they now fear, however, is that the Italian
Government intends to permit the Russians to open
their own direct selling agency. The Savona plant
seems to them clear proof that this is the Govern-
ment's intention, for the Savona plant has been
built by and belongs directly to the Soviet Govern-
ment. Somewhere on the books of the Five-Year
Planners, among countless items of Russian fac-
tories, is one item, "Savona plant. "
Hitherto, other foreign oil companies have felt
Soviet competition only through the Italian Govern-
ment agency. "Agip" has been able to sell Russian
oil under the market and thus to cause discomfort to
foreign competitors, but there was a limit to "Agip's
price-cutting capacity. It could never go below the
price it had paid the Russians. Now foreign com-
panies fear that if the Russians are permitted to
open their own importing and distributing agencies
the specter of real Russian "dumping" will be upon
them, for the Russians, independent of intermedi-
aries, may fix what price they please. This is why
Savona is an unpleasant spot for foreign oil men in
Italy.
Behind this fear is the apprehension that the
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? 30 FIGHTING THE RED TRADE MENACE
Italian Government may be planning to give the
Soviet Union a virtual monopoly on the importation
of fuel and crude oil. The Italian navy uses large
quantities of Soviet fuel oil now and from year to
year is progressively using more.
American and other foreign oil men are looking
at Italo-Russian rapprochement anxiously, but not
more anxiously than the French Government. De-
spite Italian protestations that there is nothing
political in the economic cooperation of Rome with
Moscow, the French worriedly check off: Soviet oil
to Italian navy, Italian ships and Italian airplanes
to the Soviets, to mention only items of immediate
wartime significance. Oil men and Frenchmen have
their own special interests in Italo-Soviet relations.
For the world at large the important conclusion is
that Italian Fascism has, for business and political
reasons, joined hands with Russian Communism.
Six years ago I attended the trial in Moscow of
three students, two German youths, one Esthonian,
charged with entering the country for the purpose
of attempting to assassinate Stalin and Trotzky.
Attorney General Nicholas Krylenko, who had
charged the defendants with being members of a
Fascist organization, wound up his address to the
court with the flaming sentence, "Bayonets and ma-
chine guns are our welcome to Fascists who come
to the Soviet Union. " Upon the conclusion of the new
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? FIGHTING THE RED TRADE MENACE 31
Italo-Soviet trade agreement, the Soviet Government
invited a group of Italian industrialists to follow
the example of the German business tourists and
come to Moscow as guests. The invitation has been
accepted.
From the Italian side one is bound to admit the
cogency of the comment made by the Fascist organ,
"Lavoro Fascista," upon the conclusion of the Italo-
Soviet trade agreement, "It is true we are aiding in a
way the execution of the Five-Year Plan, which in-
tends to put Russia in a state of complete economic
independence. But are not there quite a few demo-
cratic countries which have not refused to have com-
mercial relations with the Soviet Union? "
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? CHAPTER IV
Genoa:
"Red Trade Menace? "
"Please give us more of it. "
This is the attitude of Italians in Italy today.
For it is not the Italians, but Americans, Canadians,
British, Argentinians, Swedes, Finns, Jugoslavians,
Rumanians,--in fact, all exporters of countries sup-
plying the great staples, grain, oil, lumber and coal
who are suffering from Soviet competition in Italy.
Soviet prices are the chief object of criticism on
the part of Soviet competitors. As a general rule, the
complainant charges broadly that the Soviets for
other than economic reasons are "dumping" to "ruin
the market," "upset trade," "cause unrest. " A sub-
jective examination of Soviet intentions at present
is just as impossible as a certain forecast of what
they may do in the future, but an objective examina-
tion of the actual comparative prices of Soviet and
other goods, at least in Italy, does not bear out this
particular description of Soviet export policy.
Summarily, this examination shows that Soviet ex-
port policy just now, is designed first and last to
get the business and that Soviet prices are, as a rule,
just low enough--but always low enough--to get the
32
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? FIGHTING THE RED TRADE MENACE 33
business and not, if the Soviets can help it, any
lower. On a commodity market, where business is
done on exchanges, as in the grain market, Soviet
prices are just a shade below their competitors. On
a market where the Soviets must compete with power-
ful foreign trusts, as in oil, the Soviets cut fairly
heavily, because only fairly heavy cuts may not be
equaled by countercuts from competing trusts. On a
market where the Soviets are new, where they must
"muscle in," they do so ruthlessly with slashing re-
ductions, as in the lumber market here.
This market presents a classical example of Soviet
methods of conquering a new field. Italy is a large
user of plywood and the Russians in the last two
years have developed an extraordinary production
of that commodity, admitted even by competitors to
be of first-class quality. They only began this spring
to campaign for the Italian market seriously. It was
necessary to make the campaign a determined one,
since the Baltic countries, Jugoslavia and Rumania,
had for years enjoyed a firm and, as they believed,
unshakable position in the Italian trade. A few quota-
tions will show just how determined the Russian
campaign was and how shakable the old-established
purveyors proved to be.
A leading lumber broker supplied the informa-
tion. On grade BB plywood the Russians quote a
price about 30 per cent under the Finnish price on
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? 34 FIGHTING THE RED TRADE MENACE
similar material, and, surprisingly enough, deliver
grade B plywood, one grade better. Buyers here
now have become accustomed to this practice and are
sure that when they order from the Russians BB
quality they will get B quality. Such competition, not
only on price but on quality, makes Russian plywood
almost irresistibly attractive to brokers, even though
they may wish to remain loyal to their old sources.
Prices are illustrative. On BB plywood the Rus-
sians quote from $32 to $38. 80 per cubic meter
against Baltic countries' quotations of from $44. 37
to $53. 35. On B grade plywood the Russians quote
$37. 31 to $43.
65 per cubic meter against Baltic
quotations on similar material to $61. 56 to $69. 10.
In addition to these price differences of 30 or more
per cent, the Russian prices carry a flat discount of
4 per cent, plus 3 per cent cash discount, while Bal-
tic prices are net. Taking quality and price differ-
ences into consideration, the Russians, it may be esti-
mated, offer a 50 per cent advantage on plywood.
All prices given are c. i. f. Italian ports.
Other plywood exporters complain that as soon as
they reduce their prices, down go the Russian prices
still lower. Under these circumstances, lumber deal-
ers in Genoa and Baltic, Finnish Rumanian and
Jugoslavian exporters are convinced that the Soviets
soon will control completely the Italian plywood
market. It is reported that Soviet exports of ply-
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? FIGHTING THE RED TRADE MENACE 35
wood into Italy will reach 24,000 cubic meters this
year, while Italy's entire consumption last year was
only 25,000 cubic meters. At the present moment,
however, the market is stagnant, for consumer brok-
ers are reluctant to buy, uncertain whether the Rus-
sians have touched rock bottom with their prices.
Lumber brokers, and these are the only Italian
merchants I found dissatisfied over Soviet trade, are
not cheerful over their cheap plywood because many
of them were caught with supplies or contracts for
supplies with the Soviet's competitors, and the ply-
wood market having slumped so heavily considerable
sums of money must be lost before the market is
readjusted.
As concerns the United States, there is no Amer-
ican plywood competing on the Italian market, but
there is a tendency here to substitute cheap Russian
white pine where before American long leaf yellow
pine or Swedish redwood had been used. For doors
and window sashes, the Russian product at the usual
price advantage is being accorded preference.
In all Russian exports it is not so much the ab-
solute figures that are meaningful but the direction
and rate of change. The Soviets are just beginning
to develop their anthracite industry. It is not today
a serious competitor in the Italian market. But
whereas in 1928 the Soviet Union sent 66,000 tons
of anthracite to Italy, or six-tenths of one per cent
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? 36 FIGHTING THE RED TRADE MENACE
of Italy's total imports, Soviet anthracite exports to
Italy in 1930 were nearly 300,000 tons, or about two
and five-tenths per cent of a total of 12,000,000 tons
imported.
The United States only exported 366,000 tons of
anthracite to Italy in 1930 and it is anticipated that
this year the Soviet anthracite will pass the American
product. Neither the Soviet Union nor America are
yet important factors in the Italian anthracite
market, as Great Britain supplies 60 per cent of the
total imports and Germany 30. Important, however,
is the declaration of Italian anthracite dealers that
they are prepared to take all the anthracite the Soviet
Union has to offer, declaring it is of superior quality
and cheaper. This "most backward" sector of the
Soviet's Five-Year Plan is suffering difficulties but
produced last year 17 per cent more than the year
before.
Much more important for the United States is
Russian competition in wheat here. The wheat market
presents a quite different picture from that, for ex-
ample, of the plywood market. It only takes a shade
to get the business on the grain market, but that
shade will usually get it. The Soviets have cut the
shade regularly. Their share of the Italian grain
market is growing steadily, although it is difficult
to speak of a steady line of development in grain
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? FIGHTING THE RED TRADE MENACE 87
exports of a country that, according to the London
"Grain Seed and Oil Reporter," exported 37,736,-
000 bushels in 1927; 8,000 bushels in 1928; 7,088,-
000 bushels in 1929; and already in the period of
this season from August 1, 1930, to April 2, 1931,
had exported 89,880,000 bushels.
The general expectation that the Soviets would
resume grain shipments this spring has been ful-
filled. Their shipments in January had fallen to
1,536,000 bushels. In February Soviet shipments
picked up to 5,800,000 bushels and in March to
6,800,000 bushels.
How large a part of Italy's wheat needs have been
met by these spring shipments of Soviet wheat is
indicated by "Bulletin of Arrivals" published in
Genoa, showing that out of a total of 1,980,000
bushels of wheat arriving in Italy in January, 759,-
000 were from the Soviet Union, while in February
out of a total of 3,234,000 bushels, 1,518,000 were
from the Soviet Union and in March out of 7,689,000
bushels, 2,156,000 were Russian.
It is most interesting to observe on the general
question of Russian wheat how its role in the world
market varies from month to month. In August,
1930, Soviet shipments of wheat were ten per cent of
world shipments; in September they were 11 per
cent, in October thirty-seven: November, thirty-
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? 38 FIGHTING THE RED TRADE MENACE
eight; December, twenty-one; January, 1931, two
per cent; February, nine per cent, March, ten per
cent.
It was in October and November when the Soviet
Union was pouring on the market more than one-
third of the total world wheat supply that cries of
pain were loudest from the other wheat-producing
countries. The injuries inflicted during those two
months have not been forgotten and the wheat world
is looking anxiously toward the Black Sea.
This anxiety is explicable on the part of Amer-
ican wheat exporters, for to consider the Italian
market alone it would appear from the Italian Gov-
ernment's figures on wheat imports that in the calen-
dar year 1930 the Soviet Union took away from the
United States a quite perceptible share of the Ital-
ian wheat business. Italy bought a total of 6,600,000
bushels more wheat in 1930 than she did in 1929, yet
the United States, that sold Italy 13,827,000 bushels
in 1929, sold her only 11,385,000 in 1930, although
American supplies in 1930 were the largest in his-
tory, while the Soviet Union, that sold no wheat to
Italy in 1929, sold her 9,900,000 bushels in 1930.
American sales of wheat to Italy fell off 2,442,000
bushels in 1930, while Soviet sales increased by the
total amount of her sales--nearly 10,000,000 bushels.
Most of last year's Soviet wheat, however, re-
placed that of the Argentine, whose sales to Italy
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? FIGHTING THE RED TRADE MENACE 39
declined 8,000,000 bushels from 14,421,000 in 1929
to 5,511,000 in 1930. These figures shed some light
on the bitter complaints of the Argentine repre-
sentative at the world wheat conference in Rome
over Soviet competition.
Grain dealers handling Soviet wheat here assert
it is only reasonable that Italy should buy from the
Soviet Union; that the shorter haul from the Black
Sea to Mediterranean ports makes it naturally
cheaper than American, Argentine or Manitoba
wheat. They say that the high gluten content of
Russian hard wheat is particularly desirable for
macaroni and that this quality of Russian grain is
just as good as the more expensive Manitoba and
American hards.
Italy is the third largest wheat-importing country.
Her average yearly import is from 60,000,000 to 90,-
000,000 bushels. Despite the most determined efforts
of the Italian Government to develop its home sup-
ply, the "battle of wheat" appears to have been
stale-mated at the 1929 domestic production of 260,-
000,000 bushels, the top limit ever reached, 32,000,-
000 more than the previous year, itself a record.
In 1930, the Italian crop was 216,000,000 bushels,
34,000,000 less than the 1929 high. In 1929 the
best year, Italy, nevertheless, had to import 63,000,-
000 bushels. This would appear to be her minimum
requirement from abroad, enough to make the Ital-
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? 40 FIGHTING THE RED TRADE MENACE
ian one of the most attractive of markets for foreign
wheat growers.
Last year out of a total import of 69,000,000
bushels, Italy took 11,000,000, or 16 per cent, from
the Soviet Union. Before the war Italy took in in
some years as high as 60 per cent of her wheat from
Russia. Today one hears on every hand from the
Soviet's competitors that Italy now intends to take
more and more Russian wheat until eventually she
will be drawing most of her supplies from the Soviet
Union. One hears the same of oil, of lumber, of coal.
These gloomy forebodings may be exaggerated, but
in these commodities American and other foreign
exporters must be prepared for severe competition
from the Soviet Russians in the Italian market.
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? CHAPTER V
Marseilles:
This sleepy, noisy, lazy, busy, twelfth port of the
world, country town and big city, with morals that
make Paris blush and food that makes Paris envious,
has one link left with the Soviet Union, since the
French license system cut Franco-Soviet trade to a
minimum. The link is visible by day and by night in
the trim forms of French sailors in their cruisers,
destroyers, torpedo boats at anchor, in the curling
wisps from funnels of the oil-burning vessels of the
fleet.
For the link is one of fuel, Soviet fuel for the
French Navy. And what is more important to a navy
than fuel?
The curious facts are that Soviet petroleum is
treasured by France as her most effective weapon in
the battle she has just begun to wage with redoubled
energy with American and other foreign oil com-
panies; that for the sake of maintaining France's
independence or comparative independence of the
American petroleum supply, the French Government
will not break with the Soviet Union, no matter if the
other reasons for not breaking were absent, and that
the French Navy, instrument of war of the one
41
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? 42 FIGHTING THE RED TRADE MENACE
country in Europe that was supposed to harbor an
undying resentment against the Soviet Union, is one
of the largest single consumers of Soviet petroleum in
the world. To complete the picture one must recollect
that the other largest single consumer of Soviet
petroleum is the Italian Navy.
The struggle for the French oil market is one of
the most dramatic in the never-dull history of the
greatest international trusts. It has been going on
for seven years in its present setting, with the Irak
Petroleum Company noisily in the fore-front, the
Soviet Oil Trust silently in the background.
Stakes are, for the foreign oil trusts, the market
for the 30,000,000 to 35,000,000 barrels of petro-
leum consumed by France yearly; for the French
Government, independence of foreign oil in time of
war; for the Soviet Union--guarantee that France,
most feared by Moscow of any European country,
shall not take up arms against her, nor lead an
economic boycott. In other words, in a sense, the
Soviet stake is the Five-Year Plan, for war or boy-
cott are the two elements beyond Soviet control that
the Kremlin daily dreads.
France has nearly one million automobiles. She is
one of the largest consumers of petroleum. She has
none worth mentioning within her own boundaries.
Foreign oil companies are thinking of the French
peacetime market. France is thinking of that mo-
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? FIGHTING THE RED TRADE MENACE 43
ment at the height of the battle of Verdun when
German submarines had sunk so many tankers that
France's gasoline reservoirs went nearly dry. The
Soviet Union is thinking that it is worth selling the
French Navy oil at any price to keep the nation
with the strongest military establishment in the world
satisfied to continue relations, unwilling to take
leadership of the anti-Soviet crusade.
Arena of this struggle appears to be France. In
reality it is a distant Eastern kingdom, the realm of
Irak, British mandate, but ruled by Feisal, wily
prince. He makes the fourth in the game. His trump
is political power over the Irak dominions, where
France wants to obtain her independent oil. Trump
of the foreign oil companies, Standard, Shell and
Anglo-Persian, is their financial power, their expe-
rience and their influence on French officials. Trump
of France is the just established license system re-
quiring all oil companies to refine their petroleum in
France, forbidding import of other than crude oil.
Finally, the trump of the Soviet Union, in this oil
game, is simply oil, cheap oil, good oil and oceans
of it.
The story of Mosul oil would fill a book, has filled
many, but it is doubtful if the role of the Soviet Oil
Trust ever has been properly portrayed. For an
examination of the chances, or lack of them, that
capitalist Europe should unite in one form or an-
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? 44 FIGHTING THE RED TRADE MENACE
other against the Red power in the East, the gap in
the story deserves to be filled in.
One of the events, it will be recalled, that formed
the background to the outbreak of the war was the
acquisition by Germany from Turkey not only of the
concession for the Bagdad Railway, but for the
Mosul oilfields. Nobody knows just how rich those
fields are. They lie inland, some 450 miles from the
coast, on the left bank of the Tigris River, not far,
perhaps, from the Garden of Eden. Oil experts, how-
ever, know that the fields are rich enough probably to
supply France with all the oil she needs, if it could
only be moved.
The German concessions led at the time to inter-
national complications that were finally settled by
the organization of an international company known
as the Turkish Petroleum Company, in which Ger-
man and British interests predominated. The French
were left out until during the war, after Turkey had
entered against the Allies, France succeeded, under
the Sykes-Picot agreement, in obtaining title to the
former German concession, when and if the allies won
and could take it.
Defeated, Germany relinquished Mosul. Victorious,
France demanded possession, but in 1920 at San
Remo, France gave up to England her territorial
rights in the Mosul district in exchange for Eng-
land's recognition of her right to have a share in the
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? FIGHTING THE RED TRADE MENACE 46
petroleum produced in that district. Under the "open
door" the United States also demanded and received
a share.
Thus was born the Irak Petroleum Company, Brit-
ain with the lion's share, Anglo-Persian Oil Com-
pany 23% per cent, Anglo-Saxon Oil Company, or
Royal Dutch Shell, 23% per cent; the United States
--Near East Development Company, or Standard
Oil, 23% per cent and France 23% per cent, with 5
per cent to Mr. Gulbenkian, original promoter of
the Turkish Petroleum Company. In 1924 the Com-
pagnie Francaise des Petroles was organized to take
title to the French Government's shares in the capital
stock of the Irak Petroleum Co.
At the time of the organization of the Irak Com-
pany every one concerned was more or less keen to
develop the fields, get the oil out. Then came a rush
of world production, and today there is so much oil
that "limitation" is the worldwide cry. Everywhere,
be it said, except in the Soviet Union.
All this world oil, however, was doing France no
good. She wanted badly to develop her own oil sup-
ply. If she did so, it would mean loss to the foreign
oil companies of their rich French market. Without
reference to their interest in the French market, the
British and American oil companies do not want to
move their own oil out of this field because of the
over production in British and American territory.
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? 46 FIGHTING THE RED TRADE MENACE
It is much more economical to use the Mosul oil as a
future reserve, leaving it in the ground, the cheap-
est warehouse.
The foreign oil companies selling to France about
78 per cent of all her oil were the same companies
representing American and Great Britain in the
Irak Petroleum Company. It was then to the interest
of the French to speed production and delivery of
Irak oil; to the interest of her partners in the com-
pany to prevent production. On this issue the battle
has been fought, is still being fought between the
French and the Americans and British, and in this
issue the Soviet Oil Trust has played a role in the
past important, today decisive.
There has never been much dispute about the abil-
ity of the Mosul Field to produce oil. The only ques-
tion was how to get it out.
a feature of Italo-Soviet relations being closely
watched by France, for the Soviet Union needs tor-
pedo boats, small cruisers and submarines for the
minimum requirements of its long neglected navy
and Italian yards are well equipped to supply them.
Another item of interest that does not, however,
appear as yet in the Italo-Soviet statistics concerns
airplanes. Early in March the Soviet Union ordered
seventy-five Savoya Macchetti hydroplanes equipped
with 750-horsepower Fraschini single motors, the
order including 150 spare motors. They were the
type of planes used by Balbo in his South American
flight and Maddalena for his rescue flight to the
Pole for Nobile.
Besides this deal, Italian manufacturers recently
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? FIGHTING THE RED TRADE MENACE 23
had almost closed the sale to the Soviet Union of
150 Savoya Pomillo planes, deliverable fifty per year,
Italy to take wheat for them, but the transaction
broke down for causes unknown. The barter feature,
however, was taken up by the Fiat Company, and
according to unofficial information, Italy has agreed
to deliver 2,000 Fiat trucks for grain, the Italian
Government Treasury giving two-year notes for 75
per cent of the sum to Fiat who are to discount
them. The Government promises to take up the notes
within a year, the Soviet Union to deliver wheat to
the amount of the sales price, and the Italian Gov-
ernment to sell the wheat and with the proceeds re-
deem the Fiat notes.
Included in the new treaty is a clause wherein the
Italian Government promises to invite the attention
of Italian engineers hitherto seldom employed in the
Soviet Union to the opportunities for rendering
technical assistance in the Five-Year Plan. Italian
industry is hopeful over the agreement and for the
moment producer interest is in the foreground of
Italian economic thinking about the Soviet Union. It
is, however, the consumer interest in Italy that is
really decisive for the Italian attitude toward Rus-
sia. And it is the Italian market for wheat, oil, lum-
ber, coal that interests most the American and other
exporters, who, under Soviet competition, have seen
or fear they may see their Italian customers slip-
ping away from them into Russian hands.
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? CHAPTER III
Savona, Italy:
Tucked away in this little Mediterranean port,
surrounded by vineyards, almost hidden in a hollow
of the hills and unknown to any except the alert
observers of foreign oil companies, there is going up
an outpost of the Soviet's Five-Year Plan in Europe.
A huge oil depot for the storage of Soviet petro-
leum and petroleum products, the Savona station
of the Soviet Oil Trust provides one of the most
impressive evidences to be found anywhere in Eu-
rope of the far-reaching plans and self-confidence
of the Soviet foreign trade monopoly and of the
hospitality the Russians have found in Italy.
Here is a bit, and a very significant bit, of Soviet
Russia in Italy. After a prolonged tour of Soviet
industrial plants in Russia under the Five-Year
Plan, it brought a flood of familiar recollections to
find in Savona just such another plant, also not
quite completed, also very large, also packed full of
meaning for the future.
Only the environment is quite different from the
bleak surroundings of most great Soviet plants in
Russia. A fast hour and a half drive along a highway
that skirts the Gulf of Genoa, past coves and bays
24
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? FIGHTING THE RED TRADE MENACE 25
improbably blue, through tunnels that pierce pro-
jecting cliffs, through sleepy towns, where sun-
browned girls sit knitting at flowery doorways,
brings one to Savona. The port is full of idle ships,
beflagged. It is a national holiday. We inquire the
way to the new Soviet oil station. The car winds and
turns through narrow village streets, walled high on
either side by gray stone, topped by nodding blos-
soms. Out of such an alley we emerge into a broader
way and there before us lies a huge complex of
freshly built buildings encompassed by a brick wall
and dominated by a tall water tower. The plant
looks foreign--an intruder among the peaceful hills.
Designed to accommodate an initial capacity of
50,000 tons of petroleum, the plant's liberal use of
space makes it appear even larger, The walled in-
closure is about 400 yards long by 150 wide. Inside
there are an administration building, a double row
of fifteen of the largest size oil tanks, two rows of
warehouses, various auxiliary buildings, all con-
nected by narrow-gauge railroad tracks.
Nearly completed, the plant should be ready to use
this summer. There is no doubt about the permanent
character of the structure. It would do credit to any
great bourgeois oil trust.
Walking about the interior of the enclosure, I
thought involuntarily of Baku, the oil capital of the
Soviet Union, of its streets placarded with signs
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? 26 FIGHTING THE RED TRADE MENACE
"Five-Year Plan for oil in two and one-half years. "
Just this spring Moscow announced that the Five-
Year Plan for oil actually had been accomplished
in two and a half years. On that occasion the presi-
dent of the Soviet Oil Trust announced "our daily
production now has reached 58,000 tons, compared
with an estimate of 57,000 tons for the conclusion of
the Five-Year Plan in 1933. "
Here in Savona this new Soviet plant will hold
about one-tenth of all the petroleum Italy imports
in a year, but it would lack 8,000 tons of holding
even one day's production of the Soviet Oil Trust.
Second oil producing country in the world, now
having leaped ahead of Venezuela and only behind
--though, of course, far behind--America, the So-
viet Union plans to produce this year 27,500,000
tons as compared with the original estimate of 20,-
800,000 tons for 1933, and has shoved its production
goal for 1933 ahead to 46,000,000 tons. The United
States produced 137,000,000 tons in 1929. If Amer-
ican production under restrictive measures remains
about static, and if the Soviet Union carries out the
Five-Year Plan for oil in the future as it has done in
the past, the Soviet Union by 1933 will have nearly
one-third of the production of the United States.
These are considerations that are bringing wrin-
kles to the brows of representatives of foreign oil
companies in Italy, as well, it may be said, as almost
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? FIGHTING THE RED TRADE MENACE 27
everywhere else in the world. "The Five-Year Plan
for oil," remarked one American oil man in a neigh-
boring country, "is a catastrophe for us. "
Why the sober-minded representative of one of the
most realistic business organizations on earth should
feel justified in using such strong language may per-
haps be understood by consideration of the oil situ-
ation in Italy.
Until Russian oil re-entered the field, Standard
and Shell divided between themselves the Italian mar-
ket, Russian production had sunk from the pre-war
figure of 8,000,000 tons to 5,000,000 in 1924 and
the field was clear for the Americans and British.
It took until 1926 for the Soviet Oil Trust to re-
cover lost ground and reach approximately pre-war
production. There had been some Russian oil coming
into Italy, but not much until the formation about
this time of "Acienda Generale Italiana Petrolio,"
called "Agip" for short, which under Italian Govern-
ment control took over on contract all Soviet oil for
Italy and in a short time was disposing of 25 per
cent of all the petroleum and petroleum products
consumed in this country. Soviet imports of fuel
oil alone into Italy rose from 102,000 tons out of
a total import of 420,000 tons in 1928 to 264,000
tons out of a total of 705,000 tons in 1930. In crude
oil Soviet imports reached one-third of the total by
1930 and in benzine Soviet imports were one-fifth
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? 28 FIGHTING THE RED TRADE MENACE
of the total in 1930, compared to one-eighth in 1928.
Shell and Standard were hit but could do nothing
effective, for "Agip," an Italian Government cor-
poration, was selling the Russian oil and if any
charge of "dumping" was to be made, it would have
to be a charge of Italian, not Russian, dumping.
"Agip's" contracts with the Russians were an in-
teresting example of Soviet price practice. They pro-
vided for the sale of oil products f. o. b. Batum or
Novorossisk at a base price always a bit below that
of similar American products f. o. b. Gulf ports. With
this initial advantage, the Italian purchaser then
had the advantage of difference in transport costs
between Gulf-Italy and Black Sea-Italy, a difference
that sometimes mounted as high as thirty-five shil-
lings per ton, although it is now four shillings per
ton.
Even with this diminution in transport price dif-
ference, the net advantage of Soviet over American
and other foreign oil in Italy is very considerable.
It enables the "Agip" to sell Russian gasoline at
from three-quarters to one and one-half cents per
gallon less than the Americans' price, or about 18 to
20 per cent lower at the present market.
On bunkering oil the resale price of Russian
Mazout here is 35 shillings per ton, against 45 to 50
for American fuel oil, but no American fuel oil is
now being offered in face of this competition.
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? FIGHTING THE RED TRADE MENACE 29
All this is not well and not good for the other
foreign oil companies operating in Italy, but until
now they have been able at least to keep a good
share of the market and have not suffered fatally.
What they now fear, however, is that the Italian
Government intends to permit the Russians to open
their own direct selling agency. The Savona plant
seems to them clear proof that this is the Govern-
ment's intention, for the Savona plant has been
built by and belongs directly to the Soviet Govern-
ment. Somewhere on the books of the Five-Year
Planners, among countless items of Russian fac-
tories, is one item, "Savona plant. "
Hitherto, other foreign oil companies have felt
Soviet competition only through the Italian Govern-
ment agency. "Agip" has been able to sell Russian
oil under the market and thus to cause discomfort to
foreign competitors, but there was a limit to "Agip's
price-cutting capacity. It could never go below the
price it had paid the Russians. Now foreign com-
panies fear that if the Russians are permitted to
open their own importing and distributing agencies
the specter of real Russian "dumping" will be upon
them, for the Russians, independent of intermedi-
aries, may fix what price they please. This is why
Savona is an unpleasant spot for foreign oil men in
Italy.
Behind this fear is the apprehension that the
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? 30 FIGHTING THE RED TRADE MENACE
Italian Government may be planning to give the
Soviet Union a virtual monopoly on the importation
of fuel and crude oil. The Italian navy uses large
quantities of Soviet fuel oil now and from year to
year is progressively using more.
American and other foreign oil men are looking
at Italo-Russian rapprochement anxiously, but not
more anxiously than the French Government. De-
spite Italian protestations that there is nothing
political in the economic cooperation of Rome with
Moscow, the French worriedly check off: Soviet oil
to Italian navy, Italian ships and Italian airplanes
to the Soviets, to mention only items of immediate
wartime significance. Oil men and Frenchmen have
their own special interests in Italo-Soviet relations.
For the world at large the important conclusion is
that Italian Fascism has, for business and political
reasons, joined hands with Russian Communism.
Six years ago I attended the trial in Moscow of
three students, two German youths, one Esthonian,
charged with entering the country for the purpose
of attempting to assassinate Stalin and Trotzky.
Attorney General Nicholas Krylenko, who had
charged the defendants with being members of a
Fascist organization, wound up his address to the
court with the flaming sentence, "Bayonets and ma-
chine guns are our welcome to Fascists who come
to the Soviet Union. " Upon the conclusion of the new
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? FIGHTING THE RED TRADE MENACE 31
Italo-Soviet trade agreement, the Soviet Government
invited a group of Italian industrialists to follow
the example of the German business tourists and
come to Moscow as guests. The invitation has been
accepted.
From the Italian side one is bound to admit the
cogency of the comment made by the Fascist organ,
"Lavoro Fascista," upon the conclusion of the Italo-
Soviet trade agreement, "It is true we are aiding in a
way the execution of the Five-Year Plan, which in-
tends to put Russia in a state of complete economic
independence. But are not there quite a few demo-
cratic countries which have not refused to have com-
mercial relations with the Soviet Union? "
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? CHAPTER IV
Genoa:
"Red Trade Menace? "
"Please give us more of it. "
This is the attitude of Italians in Italy today.
For it is not the Italians, but Americans, Canadians,
British, Argentinians, Swedes, Finns, Jugoslavians,
Rumanians,--in fact, all exporters of countries sup-
plying the great staples, grain, oil, lumber and coal
who are suffering from Soviet competition in Italy.
Soviet prices are the chief object of criticism on
the part of Soviet competitors. As a general rule, the
complainant charges broadly that the Soviets for
other than economic reasons are "dumping" to "ruin
the market," "upset trade," "cause unrest. " A sub-
jective examination of Soviet intentions at present
is just as impossible as a certain forecast of what
they may do in the future, but an objective examina-
tion of the actual comparative prices of Soviet and
other goods, at least in Italy, does not bear out this
particular description of Soviet export policy.
Summarily, this examination shows that Soviet ex-
port policy just now, is designed first and last to
get the business and that Soviet prices are, as a rule,
just low enough--but always low enough--to get the
32
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? FIGHTING THE RED TRADE MENACE 33
business and not, if the Soviets can help it, any
lower. On a commodity market, where business is
done on exchanges, as in the grain market, Soviet
prices are just a shade below their competitors. On
a market where the Soviets must compete with power-
ful foreign trusts, as in oil, the Soviets cut fairly
heavily, because only fairly heavy cuts may not be
equaled by countercuts from competing trusts. On a
market where the Soviets are new, where they must
"muscle in," they do so ruthlessly with slashing re-
ductions, as in the lumber market here.
This market presents a classical example of Soviet
methods of conquering a new field. Italy is a large
user of plywood and the Russians in the last two
years have developed an extraordinary production
of that commodity, admitted even by competitors to
be of first-class quality. They only began this spring
to campaign for the Italian market seriously. It was
necessary to make the campaign a determined one,
since the Baltic countries, Jugoslavia and Rumania,
had for years enjoyed a firm and, as they believed,
unshakable position in the Italian trade. A few quota-
tions will show just how determined the Russian
campaign was and how shakable the old-established
purveyors proved to be.
A leading lumber broker supplied the informa-
tion. On grade BB plywood the Russians quote a
price about 30 per cent under the Finnish price on
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? 34 FIGHTING THE RED TRADE MENACE
similar material, and, surprisingly enough, deliver
grade B plywood, one grade better. Buyers here
now have become accustomed to this practice and are
sure that when they order from the Russians BB
quality they will get B quality. Such competition, not
only on price but on quality, makes Russian plywood
almost irresistibly attractive to brokers, even though
they may wish to remain loyal to their old sources.
Prices are illustrative. On BB plywood the Rus-
sians quote from $32 to $38. 80 per cubic meter
against Baltic countries' quotations of from $44. 37
to $53. 35. On B grade plywood the Russians quote
$37. 31 to $43.
65 per cubic meter against Baltic
quotations on similar material to $61. 56 to $69. 10.
In addition to these price differences of 30 or more
per cent, the Russian prices carry a flat discount of
4 per cent, plus 3 per cent cash discount, while Bal-
tic prices are net. Taking quality and price differ-
ences into consideration, the Russians, it may be esti-
mated, offer a 50 per cent advantage on plywood.
All prices given are c. i. f. Italian ports.
Other plywood exporters complain that as soon as
they reduce their prices, down go the Russian prices
still lower. Under these circumstances, lumber deal-
ers in Genoa and Baltic, Finnish Rumanian and
Jugoslavian exporters are convinced that the Soviets
soon will control completely the Italian plywood
market. It is reported that Soviet exports of ply-
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? FIGHTING THE RED TRADE MENACE 35
wood into Italy will reach 24,000 cubic meters this
year, while Italy's entire consumption last year was
only 25,000 cubic meters. At the present moment,
however, the market is stagnant, for consumer brok-
ers are reluctant to buy, uncertain whether the Rus-
sians have touched rock bottom with their prices.
Lumber brokers, and these are the only Italian
merchants I found dissatisfied over Soviet trade, are
not cheerful over their cheap plywood because many
of them were caught with supplies or contracts for
supplies with the Soviet's competitors, and the ply-
wood market having slumped so heavily considerable
sums of money must be lost before the market is
readjusted.
As concerns the United States, there is no Amer-
ican plywood competing on the Italian market, but
there is a tendency here to substitute cheap Russian
white pine where before American long leaf yellow
pine or Swedish redwood had been used. For doors
and window sashes, the Russian product at the usual
price advantage is being accorded preference.
In all Russian exports it is not so much the ab-
solute figures that are meaningful but the direction
and rate of change. The Soviets are just beginning
to develop their anthracite industry. It is not today
a serious competitor in the Italian market. But
whereas in 1928 the Soviet Union sent 66,000 tons
of anthracite to Italy, or six-tenths of one per cent
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? 36 FIGHTING THE RED TRADE MENACE
of Italy's total imports, Soviet anthracite exports to
Italy in 1930 were nearly 300,000 tons, or about two
and five-tenths per cent of a total of 12,000,000 tons
imported.
The United States only exported 366,000 tons of
anthracite to Italy in 1930 and it is anticipated that
this year the Soviet anthracite will pass the American
product. Neither the Soviet Union nor America are
yet important factors in the Italian anthracite
market, as Great Britain supplies 60 per cent of the
total imports and Germany 30. Important, however,
is the declaration of Italian anthracite dealers that
they are prepared to take all the anthracite the Soviet
Union has to offer, declaring it is of superior quality
and cheaper. This "most backward" sector of the
Soviet's Five-Year Plan is suffering difficulties but
produced last year 17 per cent more than the year
before.
Much more important for the United States is
Russian competition in wheat here. The wheat market
presents a quite different picture from that, for ex-
ample, of the plywood market. It only takes a shade
to get the business on the grain market, but that
shade will usually get it. The Soviets have cut the
shade regularly. Their share of the Italian grain
market is growing steadily, although it is difficult
to speak of a steady line of development in grain
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? FIGHTING THE RED TRADE MENACE 87
exports of a country that, according to the London
"Grain Seed and Oil Reporter," exported 37,736,-
000 bushels in 1927; 8,000 bushels in 1928; 7,088,-
000 bushels in 1929; and already in the period of
this season from August 1, 1930, to April 2, 1931,
had exported 89,880,000 bushels.
The general expectation that the Soviets would
resume grain shipments this spring has been ful-
filled. Their shipments in January had fallen to
1,536,000 bushels. In February Soviet shipments
picked up to 5,800,000 bushels and in March to
6,800,000 bushels.
How large a part of Italy's wheat needs have been
met by these spring shipments of Soviet wheat is
indicated by "Bulletin of Arrivals" published in
Genoa, showing that out of a total of 1,980,000
bushels of wheat arriving in Italy in January, 759,-
000 were from the Soviet Union, while in February
out of a total of 3,234,000 bushels, 1,518,000 were
from the Soviet Union and in March out of 7,689,000
bushels, 2,156,000 were Russian.
It is most interesting to observe on the general
question of Russian wheat how its role in the world
market varies from month to month. In August,
1930, Soviet shipments of wheat were ten per cent of
world shipments; in September they were 11 per
cent, in October thirty-seven: November, thirty-
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? 38 FIGHTING THE RED TRADE MENACE
eight; December, twenty-one; January, 1931, two
per cent; February, nine per cent, March, ten per
cent.
It was in October and November when the Soviet
Union was pouring on the market more than one-
third of the total world wheat supply that cries of
pain were loudest from the other wheat-producing
countries. The injuries inflicted during those two
months have not been forgotten and the wheat world
is looking anxiously toward the Black Sea.
This anxiety is explicable on the part of Amer-
ican wheat exporters, for to consider the Italian
market alone it would appear from the Italian Gov-
ernment's figures on wheat imports that in the calen-
dar year 1930 the Soviet Union took away from the
United States a quite perceptible share of the Ital-
ian wheat business. Italy bought a total of 6,600,000
bushels more wheat in 1930 than she did in 1929, yet
the United States, that sold Italy 13,827,000 bushels
in 1929, sold her only 11,385,000 in 1930, although
American supplies in 1930 were the largest in his-
tory, while the Soviet Union, that sold no wheat to
Italy in 1929, sold her 9,900,000 bushels in 1930.
American sales of wheat to Italy fell off 2,442,000
bushels in 1930, while Soviet sales increased by the
total amount of her sales--nearly 10,000,000 bushels.
Most of last year's Soviet wheat, however, re-
placed that of the Argentine, whose sales to Italy
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? FIGHTING THE RED TRADE MENACE 39
declined 8,000,000 bushels from 14,421,000 in 1929
to 5,511,000 in 1930. These figures shed some light
on the bitter complaints of the Argentine repre-
sentative at the world wheat conference in Rome
over Soviet competition.
Grain dealers handling Soviet wheat here assert
it is only reasonable that Italy should buy from the
Soviet Union; that the shorter haul from the Black
Sea to Mediterranean ports makes it naturally
cheaper than American, Argentine or Manitoba
wheat. They say that the high gluten content of
Russian hard wheat is particularly desirable for
macaroni and that this quality of Russian grain is
just as good as the more expensive Manitoba and
American hards.
Italy is the third largest wheat-importing country.
Her average yearly import is from 60,000,000 to 90,-
000,000 bushels. Despite the most determined efforts
of the Italian Government to develop its home sup-
ply, the "battle of wheat" appears to have been
stale-mated at the 1929 domestic production of 260,-
000,000 bushels, the top limit ever reached, 32,000,-
000 more than the previous year, itself a record.
In 1930, the Italian crop was 216,000,000 bushels,
34,000,000 less than the 1929 high. In 1929 the
best year, Italy, nevertheless, had to import 63,000,-
000 bushels. This would appear to be her minimum
requirement from abroad, enough to make the Ital-
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? 40 FIGHTING THE RED TRADE MENACE
ian one of the most attractive of markets for foreign
wheat growers.
Last year out of a total import of 69,000,000
bushels, Italy took 11,000,000, or 16 per cent, from
the Soviet Union. Before the war Italy took in in
some years as high as 60 per cent of her wheat from
Russia. Today one hears on every hand from the
Soviet's competitors that Italy now intends to take
more and more Russian wheat until eventually she
will be drawing most of her supplies from the Soviet
Union. One hears the same of oil, of lumber, of coal.
These gloomy forebodings may be exaggerated, but
in these commodities American and other foreign
exporters must be prepared for severe competition
from the Soviet Russians in the Italian market.
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? CHAPTER V
Marseilles:
This sleepy, noisy, lazy, busy, twelfth port of the
world, country town and big city, with morals that
make Paris blush and food that makes Paris envious,
has one link left with the Soviet Union, since the
French license system cut Franco-Soviet trade to a
minimum. The link is visible by day and by night in
the trim forms of French sailors in their cruisers,
destroyers, torpedo boats at anchor, in the curling
wisps from funnels of the oil-burning vessels of the
fleet.
For the link is one of fuel, Soviet fuel for the
French Navy. And what is more important to a navy
than fuel?
The curious facts are that Soviet petroleum is
treasured by France as her most effective weapon in
the battle she has just begun to wage with redoubled
energy with American and other foreign oil com-
panies; that for the sake of maintaining France's
independence or comparative independence of the
American petroleum supply, the French Government
will not break with the Soviet Union, no matter if the
other reasons for not breaking were absent, and that
the French Navy, instrument of war of the one
41
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? 42 FIGHTING THE RED TRADE MENACE
country in Europe that was supposed to harbor an
undying resentment against the Soviet Union, is one
of the largest single consumers of Soviet petroleum in
the world. To complete the picture one must recollect
that the other largest single consumer of Soviet
petroleum is the Italian Navy.
The struggle for the French oil market is one of
the most dramatic in the never-dull history of the
greatest international trusts. It has been going on
for seven years in its present setting, with the Irak
Petroleum Company noisily in the fore-front, the
Soviet Oil Trust silently in the background.
Stakes are, for the foreign oil trusts, the market
for the 30,000,000 to 35,000,000 barrels of petro-
leum consumed by France yearly; for the French
Government, independence of foreign oil in time of
war; for the Soviet Union--guarantee that France,
most feared by Moscow of any European country,
shall not take up arms against her, nor lead an
economic boycott. In other words, in a sense, the
Soviet stake is the Five-Year Plan, for war or boy-
cott are the two elements beyond Soviet control that
the Kremlin daily dreads.
France has nearly one million automobiles. She is
one of the largest consumers of petroleum. She has
none worth mentioning within her own boundaries.
Foreign oil companies are thinking of the French
peacetime market. France is thinking of that mo-
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? FIGHTING THE RED TRADE MENACE 43
ment at the height of the battle of Verdun when
German submarines had sunk so many tankers that
France's gasoline reservoirs went nearly dry. The
Soviet Union is thinking that it is worth selling the
French Navy oil at any price to keep the nation
with the strongest military establishment in the world
satisfied to continue relations, unwilling to take
leadership of the anti-Soviet crusade.
Arena of this struggle appears to be France. In
reality it is a distant Eastern kingdom, the realm of
Irak, British mandate, but ruled by Feisal, wily
prince. He makes the fourth in the game. His trump
is political power over the Irak dominions, where
France wants to obtain her independent oil. Trump
of the foreign oil companies, Standard, Shell and
Anglo-Persian, is their financial power, their expe-
rience and their influence on French officials. Trump
of France is the just established license system re-
quiring all oil companies to refine their petroleum in
France, forbidding import of other than crude oil.
Finally, the trump of the Soviet Union, in this oil
game, is simply oil, cheap oil, good oil and oceans
of it.
The story of Mosul oil would fill a book, has filled
many, but it is doubtful if the role of the Soviet Oil
Trust ever has been properly portrayed. For an
examination of the chances, or lack of them, that
capitalist Europe should unite in one form or an-
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? 44 FIGHTING THE RED TRADE MENACE
other against the Red power in the East, the gap in
the story deserves to be filled in.
One of the events, it will be recalled, that formed
the background to the outbreak of the war was the
acquisition by Germany from Turkey not only of the
concession for the Bagdad Railway, but for the
Mosul oilfields. Nobody knows just how rich those
fields are. They lie inland, some 450 miles from the
coast, on the left bank of the Tigris River, not far,
perhaps, from the Garden of Eden. Oil experts, how-
ever, know that the fields are rich enough probably to
supply France with all the oil she needs, if it could
only be moved.
The German concessions led at the time to inter-
national complications that were finally settled by
the organization of an international company known
as the Turkish Petroleum Company, in which Ger-
man and British interests predominated. The French
were left out until during the war, after Turkey had
entered against the Allies, France succeeded, under
the Sykes-Picot agreement, in obtaining title to the
former German concession, when and if the allies won
and could take it.
Defeated, Germany relinquished Mosul. Victorious,
France demanded possession, but in 1920 at San
Remo, France gave up to England her territorial
rights in the Mosul district in exchange for Eng-
land's recognition of her right to have a share in the
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? FIGHTING THE RED TRADE MENACE 46
petroleum produced in that district. Under the "open
door" the United States also demanded and received
a share.
Thus was born the Irak Petroleum Company, Brit-
ain with the lion's share, Anglo-Persian Oil Com-
pany 23% per cent, Anglo-Saxon Oil Company, or
Royal Dutch Shell, 23% per cent; the United States
--Near East Development Company, or Standard
Oil, 23% per cent and France 23% per cent, with 5
per cent to Mr. Gulbenkian, original promoter of
the Turkish Petroleum Company. In 1924 the Com-
pagnie Francaise des Petroles was organized to take
title to the French Government's shares in the capital
stock of the Irak Petroleum Co.
At the time of the organization of the Irak Com-
pany every one concerned was more or less keen to
develop the fields, get the oil out. Then came a rush
of world production, and today there is so much oil
that "limitation" is the worldwide cry. Everywhere,
be it said, except in the Soviet Union.
All this world oil, however, was doing France no
good. She wanted badly to develop her own oil sup-
ply. If she did so, it would mean loss to the foreign
oil companies of their rich French market. Without
reference to their interest in the French market, the
British and American oil companies do not want to
move their own oil out of this field because of the
over production in British and American territory.
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? 46 FIGHTING THE RED TRADE MENACE
It is much more economical to use the Mosul oil as a
future reserve, leaving it in the ground, the cheap-
est warehouse.
The foreign oil companies selling to France about
78 per cent of all her oil were the same companies
representing American and Great Britain in the
Irak Petroleum Company. It was then to the interest
of the French to speed production and delivery of
Irak oil; to the interest of her partners in the com-
pany to prevent production. On this issue the battle
has been fought, is still being fought between the
French and the Americans and British, and in this
issue the Soviet Oil Trust has played a role in the
past important, today decisive.
There has never been much dispute about the abil-
ity of the Mosul Field to produce oil. The only ques-
tion was how to get it out.
