France is
thinking
of that mo-
?
?
Soviet Union - 1931 - Fighting the Red Trade Menace
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. The most direct route is
due west through Syria, a French mandate, about
450 miles in a straight line from the Mosul Field to
Tripoli, Syrian port. By a southwestern route
through Irak, trans-Jordan and Palestine, all Brit-
ish mandates, the British port of Haifa can be
reached by a pipe line about 550 miles long.
The Compagnie Francaise des Petroles, a national-
ist company, formed under the auspices of the French
Government for the purpose of administering
France's interest in the Mosul Field and for the
further specific interest of securing for France in-
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? FIGHTING THE RED TRADE MENACE 47
dependent sources of oil, struggled for years with
the American and British stockholders to try to in-
duce them to consent to do something effective about
moving the Mosul production. Balked at every turn,
the French Government has finally found what it
believes is a way out.
On April 4 of this year the French Government
published a decree revolutionizing the petroleum in-
dustry in France. It is a complicated document, much
too long even for summary, but the important pro-
visions are: all imports of other than crude petroleum
into France must cease for three years; after those
three years all petroleum products used in France
must be refined in France; all imports of crude
petroleum are contingented among French and
foreign companies, Standard, Vacuum, Royal Dutch
and Anglo-Persian getting 51. 8 per cent of the im-
port licenses, the Cie. Francaise des Petroles getting
19. 8 per cent and independent French producers
getting 28. 4 per cent.
Lastly, but most important, the Cie. Francaise is
given the right during twenty years to import, treat
and distribute one-fourth of the total amount of
petroleum products consumed in France. This oil
may come from Mosul or from any other source that
is approved by the Government, Soviet oil not ex-
cluded. Here is the crux of the battle for the French
oil market. Soviet oil is the threat, Soviet oil the
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? 48 FIGHTING THE RED TRADE MENACE
weapon used by the French to force the American and
British interests to consent to the building of the
Irak pipe line, an enterprise that it is estimated
will cost around $50,000,000, may or may not be
profitable to the French, certainly will be unprofit-
able to the British and Americans.
But faced with the alternative of Mosul oil, in
France, or an increase of the Soviet's share in the
Market to 25 per cent, France's partners in the Irak
Company have gone at least far enough to have
enabled an announcement in the Chamber of Deputies
that an agreement had been reached whereby a trunk
line would be built part of the way from Mosul, with
a branch line to the French port of Tripoli and a
branch line to the British port of Haifa. The French
apparently had triumphed, but the line is not yet
built, and, until it is, there is no likelihood that they
will let drop the weapon that brought about the
victory.
Nobody knows exactly how large Soviet oil ex-
ports to France are, for nobody outside the con-
fidence of the French Government knows exactly
how much Soviet oil the French military and naval
establishment takes. For civil consumption there is
listed an import of 375,748 tons of Soviet oil out
of a total oil import of 3,525,000 tons, or a little
over 10 per cent. It is believed, however, that the
navy uses not less than 260,000 tons of Soviet fuel
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? FIGHTING THE RED TRADE MENACE 49
oil and oil products yearly, while the army is said to
use around 40,000 tons, making a total of 300,000
tons for the two services.
This large quantity, about 2,000,000 barrels, not
included in the foreign trade statistics and intended
exclusively for the French military and naval es-
tablishments, amounts to more than one-half of the
total imports by Italy of petroleum and petroleum
products.
Both the Italian and French navies nurse at the
oil reservoirs of the Soviet Union, the Italian navy
to strengthen itself against France, the French to
strengthen itself against whom? Only the French, or
time, perhaps can say. But as far as oil politics are
concerned, Soviet oil serves France as its best arma-
ment against American and British oil interests. And
"disarmament" is an unpopular cry in France today.
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? CHAPTER VI
Paris :
If the Soviet Union has nothing more to fear than
the present French efforts at "defense against the
Bolshevik menace" the future is rosy for Red
economic expansion. With more reasons than any
other nation to resent and fear the Five-Year Plan,
France, whom Moscow perpetually charges with
leadership of the anti-Soviet front in Europe, is to-
day actually thinking of nothing more aggressive
than a method to improve its trade relations with
the Five-Year planners.
Tight-lipped and determined, France announced
October, 1930 that she had found the way to curb
Russian "dumping. " It was in the month when more
than one-third of all the wheat, more than three-
fourths of all the rye, more than half of all the bar-
ley, and a third of all the oats coming on the world
market were pouring from the holds of Soviet and
Soviet chartered steamships.
In that month alone the Soviet Union sent abroad
eleven million bushels of wheat, nineteen million
bushels of rye, four million bushels of barley, twelve
million bushels of oats.
The Little Entente, Rumania, Czecko- Slovakia,
50
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? FIGHTING THE RED TRADE MENACE 51
Poland, France's allies, and Bulgaria and Hungary,
most of them heavy grain exporters, were stricken
with alarm, had met, passed protests, appealed to
France to help them, at Geneva, unite the nations to
dam the avalanche of Russian grain. At the League
in September, Fascist Italy, Republican Germany
refused to cooperate. Sympathetic, the others shared
the general regret, remembered their industrialists'
contracts to sell to the Soviet Union, asked France to
show what ought to be done.
France did. By decree under article 17 of her
customs laws, authorizing the Government to take
urgent measures in case foreign governments behave
in a way calculated to impede French commerce, the
Cabinet of Andre Tardieu, the man of the strong
line, on October 4 announced an edict subordinating
the importation of Soviet merchandise in fifteen
categories to special authorization of the Minister
of the Budget.
Applause was not only national but international.
The rest of the world saw France, defender of
Europe against the Red, as one time against the Ger-
man tide, taking the lead to check the Soviet march
toward industrialization, toward power, toward a
future heavy with portent for this continent and the
world. Moscow painted pictures of Briand, Poin-
car? , Weygand, plotting war.
High point of world reaction to the alarm over
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? 52 FIGHTING THE RED TRADE MENACE
Soviet "dumping," the French license system turned
out to be, however, not a measure for the defense of
Europe, not one for the defense of the capitalist
principle in France, but a measure for the defense
of the French balance of trade--of trade with the
state that avows eternal war with capitalism, pre-
dicts the eventual fall of all capitalist Governments.
Seven months after the license system was in-
augurated, the French Government admitted that it
had failed of even this modest goal.
The then Minister of Commerce, M. Flandin, in
October declared that French trade with the Soviet
Union was extremely adverse, that France in the
first six months of the year had bought $14,000,000
worth of products from the Soviet Union, and sold
but $4,000,000 worth, that this could not continue,
and that the license system should be the remedy.
He reckoned without Moscow. For despite all the
fanfare, and because of various somewhat intricate
reasons, having something to do with the attractive-
ness of low prices, Soviet or otherwise, and having
something to do also with the strong commercial
antagonism felt in France toward other countries
than the Soviet Union, the French Government could
not bring itself actually to refuse licenses to many
categories of Soviet products. Yet the Soviet Govern-
ment canceled contracts right and left, retaliating
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? FIGHTING THE RED TRADE MENACE 53
with a brusque effectiveness that evoked pain in
French industrial and official circles.
France's trade balance with the Soviet Union is
now worse than ever. In the five months, October 1,
1929, to March 1, 1930, the Soviet Union exported
to France goods to the value of $14,300,000; in the
same five months, 1930-31, after the license system,
Soviet exports to France fell off to $12,300,000. But
in the five months October 1929 to March 1930,
France exported to the Soviet Union goods to the
value of $5,700,000, while in the same five months,
1930-31, French exports to the Soviet Union fell off
to $1,300,000. The Soviet Union lost $2,000,000;
France lost $4,400,000. The Soviet Union's exports
to France fell off by 14 per cent; France's exports to
the Soviet Union fell off by 80 per cent.
If the purpose of the license system had been to
sacrifice French trade in order to hurt the Soviet
Union, it might have been said to have achieved a
meager success, but nevertheless a success. For the
Soviet Union was hit. If the purpose had been to help
French trade and only incidentally to hurt the Soviet
Union, the license system must be said to have failed.
For France was hit harder.
Proof that the French Government did really only
intend to protect French industries and agriculture,
and only incidentally to hurt the Soviet Union is
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? 54 FIGHTING THE RED TRADE MENACE
provided by an examination of the articles subjected
to the license system, and of those omitted and of the
way it has been applied. It is at the same time of
particular interest to the United States to note the
degree to which the French Government has been
embarrassed in its possibly sincere, if incidental, de-
sire to strike a blow at Bolshevism by its unwilling-
ness to deprive the French people of the advantages
of low priced Soviet commodities if the competing
commodities are of other than French or of French-
allied origin.
The decree listed as requiring special authoriza-
tion for import: cereals and their derivatives, sugar,
molasses, common woods, flax, live poultry, refriger-
ated pork, killed poultry, eggs, isinglass and glue,
gelatine, oleine, stearine, and oleic and stearic acid.
Omitted was the largest item of Soviet export to
France, petroleum and petroleum products, an item
that made up nearly 30 per cent of Soviet sales to
France in 1930, one of the items of Soviet exports
with which the United States products compete in-
tensely in this country.
After the license system was invoked, France in-
creased her purchases of petroleum from the Soviet
Union, buying more than twice as much in the first
two months of 1931 as in the first two months of
1930, or 108,900 tons as against 42,300 tons. The
fact that France has no petroleum production of her
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? FIGHTING THE RED TRADE MENACE 55
own was certainly decisive for the omission of
petroleum from the list of Soviet goods requiring
licenses, and was an indication of the absence of any
French intent merely to block Soviet trade.
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. The most direct route is
due west through Syria, a French mandate, about
450 miles in a straight line from the Mosul Field to
Tripoli, Syrian port. By a southwestern route
through Irak, trans-Jordan and Palestine, all Brit-
ish mandates, the British port of Haifa can be
reached by a pipe line about 550 miles long.
The Compagnie Francaise des Petroles, a national-
ist company, formed under the auspices of the French
Government for the purpose of administering
France's interest in the Mosul Field and for the
further specific interest of securing for France in-
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? FIGHTING THE RED TRADE MENACE 47
dependent sources of oil, struggled for years with
the American and British stockholders to try to in-
duce them to consent to do something effective about
moving the Mosul production. Balked at every turn,
the French Government has finally found what it
believes is a way out.
On April 4 of this year the French Government
published a decree revolutionizing the petroleum in-
dustry in France. It is a complicated document, much
too long even for summary, but the important pro-
visions are: all imports of other than crude petroleum
into France must cease for three years; after those
three years all petroleum products used in France
must be refined in France; all imports of crude
petroleum are contingented among French and
foreign companies, Standard, Vacuum, Royal Dutch
and Anglo-Persian getting 51. 8 per cent of the im-
port licenses, the Cie. Francaise des Petroles getting
19. 8 per cent and independent French producers
getting 28. 4 per cent.
Lastly, but most important, the Cie. Francaise is
given the right during twenty years to import, treat
and distribute one-fourth of the total amount of
petroleum products consumed in France. This oil
may come from Mosul or from any other source that
is approved by the Government, Soviet oil not ex-
cluded. Here is the crux of the battle for the French
oil market. Soviet oil is the threat, Soviet oil the
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? 48 FIGHTING THE RED TRADE MENACE
weapon used by the French to force the American and
British interests to consent to the building of the
Irak pipe line, an enterprise that it is estimated
will cost around $50,000,000, may or may not be
profitable to the French, certainly will be unprofit-
able to the British and Americans.
But faced with the alternative of Mosul oil, in
France, or an increase of the Soviet's share in the
Market to 25 per cent, France's partners in the Irak
Company have gone at least far enough to have
enabled an announcement in the Chamber of Deputies
that an agreement had been reached whereby a trunk
line would be built part of the way from Mosul, with
a branch line to the French port of Tripoli and a
branch line to the British port of Haifa. The French
apparently had triumphed, but the line is not yet
built, and, until it is, there is no likelihood that they
will let drop the weapon that brought about the
victory.
Nobody knows exactly how large Soviet oil ex-
ports to France are, for nobody outside the con-
fidence of the French Government knows exactly
how much Soviet oil the French military and naval
establishment takes. For civil consumption there is
listed an import of 375,748 tons of Soviet oil out
of a total oil import of 3,525,000 tons, or a little
over 10 per cent. It is believed, however, that the
navy uses not less than 260,000 tons of Soviet fuel
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? FIGHTING THE RED TRADE MENACE 49
oil and oil products yearly, while the army is said to
use around 40,000 tons, making a total of 300,000
tons for the two services.
This large quantity, about 2,000,000 barrels, not
included in the foreign trade statistics and intended
exclusively for the French military and naval es-
tablishments, amounts to more than one-half of the
total imports by Italy of petroleum and petroleum
products.
Both the Italian and French navies nurse at the
oil reservoirs of the Soviet Union, the Italian navy
to strengthen itself against France, the French to
strengthen itself against whom? Only the French, or
time, perhaps can say. But as far as oil politics are
concerned, Soviet oil serves France as its best arma-
ment against American and British oil interests. And
"disarmament" is an unpopular cry in France today.
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? CHAPTER VI
Paris :
If the Soviet Union has nothing more to fear than
the present French efforts at "defense against the
Bolshevik menace" the future is rosy for Red
economic expansion. With more reasons than any
other nation to resent and fear the Five-Year Plan,
France, whom Moscow perpetually charges with
leadership of the anti-Soviet front in Europe, is to-
day actually thinking of nothing more aggressive
than a method to improve its trade relations with
the Five-Year planners.
Tight-lipped and determined, France announced
October, 1930 that she had found the way to curb
Russian "dumping. " It was in the month when more
than one-third of all the wheat, more than three-
fourths of all the rye, more than half of all the bar-
ley, and a third of all the oats coming on the world
market were pouring from the holds of Soviet and
Soviet chartered steamships.
In that month alone the Soviet Union sent abroad
eleven million bushels of wheat, nineteen million
bushels of rye, four million bushels of barley, twelve
million bushels of oats.
The Little Entente, Rumania, Czecko- Slovakia,
50
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? FIGHTING THE RED TRADE MENACE 51
Poland, France's allies, and Bulgaria and Hungary,
most of them heavy grain exporters, were stricken
with alarm, had met, passed protests, appealed to
France to help them, at Geneva, unite the nations to
dam the avalanche of Russian grain. At the League
in September, Fascist Italy, Republican Germany
refused to cooperate. Sympathetic, the others shared
the general regret, remembered their industrialists'
contracts to sell to the Soviet Union, asked France to
show what ought to be done.
France did. By decree under article 17 of her
customs laws, authorizing the Government to take
urgent measures in case foreign governments behave
in a way calculated to impede French commerce, the
Cabinet of Andre Tardieu, the man of the strong
line, on October 4 announced an edict subordinating
the importation of Soviet merchandise in fifteen
categories to special authorization of the Minister
of the Budget.
Applause was not only national but international.
The rest of the world saw France, defender of
Europe against the Red, as one time against the Ger-
man tide, taking the lead to check the Soviet march
toward industrialization, toward power, toward a
future heavy with portent for this continent and the
world. Moscow painted pictures of Briand, Poin-
car? , Weygand, plotting war.
High point of world reaction to the alarm over
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? 52 FIGHTING THE RED TRADE MENACE
Soviet "dumping," the French license system turned
out to be, however, not a measure for the defense of
Europe, not one for the defense of the capitalist
principle in France, but a measure for the defense
of the French balance of trade--of trade with the
state that avows eternal war with capitalism, pre-
dicts the eventual fall of all capitalist Governments.
Seven months after the license system was in-
augurated, the French Government admitted that it
had failed of even this modest goal.
The then Minister of Commerce, M. Flandin, in
October declared that French trade with the Soviet
Union was extremely adverse, that France in the
first six months of the year had bought $14,000,000
worth of products from the Soviet Union, and sold
but $4,000,000 worth, that this could not continue,
and that the license system should be the remedy.
He reckoned without Moscow. For despite all the
fanfare, and because of various somewhat intricate
reasons, having something to do with the attractive-
ness of low prices, Soviet or otherwise, and having
something to do also with the strong commercial
antagonism felt in France toward other countries
than the Soviet Union, the French Government could
not bring itself actually to refuse licenses to many
categories of Soviet products. Yet the Soviet Govern-
ment canceled contracts right and left, retaliating
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? FIGHTING THE RED TRADE MENACE 53
with a brusque effectiveness that evoked pain in
French industrial and official circles.
France's trade balance with the Soviet Union is
now worse than ever. In the five months, October 1,
1929, to March 1, 1930, the Soviet Union exported
to France goods to the value of $14,300,000; in the
same five months, 1930-31, after the license system,
Soviet exports to France fell off to $12,300,000. But
in the five months October 1929 to March 1930,
France exported to the Soviet Union goods to the
value of $5,700,000, while in the same five months,
1930-31, French exports to the Soviet Union fell off
to $1,300,000. The Soviet Union lost $2,000,000;
France lost $4,400,000. The Soviet Union's exports
to France fell off by 14 per cent; France's exports to
the Soviet Union fell off by 80 per cent.
If the purpose of the license system had been to
sacrifice French trade in order to hurt the Soviet
Union, it might have been said to have achieved a
meager success, but nevertheless a success. For the
Soviet Union was hit. If the purpose had been to help
French trade and only incidentally to hurt the Soviet
Union, the license system must be said to have failed.
For France was hit harder.
Proof that the French Government did really only
intend to protect French industries and agriculture,
and only incidentally to hurt the Soviet Union is
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? 54 FIGHTING THE RED TRADE MENACE
provided by an examination of the articles subjected
to the license system, and of those omitted and of the
way it has been applied. It is at the same time of
particular interest to the United States to note the
degree to which the French Government has been
embarrassed in its possibly sincere, if incidental, de-
sire to strike a blow at Bolshevism by its unwilling-
ness to deprive the French people of the advantages
of low priced Soviet commodities if the competing
commodities are of other than French or of French-
allied origin.
The decree listed as requiring special authoriza-
tion for import: cereals and their derivatives, sugar,
molasses, common woods, flax, live poultry, refriger-
ated pork, killed poultry, eggs, isinglass and glue,
gelatine, oleine, stearine, and oleic and stearic acid.
Omitted was the largest item of Soviet export to
France, petroleum and petroleum products, an item
that made up nearly 30 per cent of Soviet sales to
France in 1930, one of the items of Soviet exports
with which the United States products compete in-
tensely in this country.
After the license system was invoked, France in-
creased her purchases of petroleum from the Soviet
Union, buying more than twice as much in the first
two months of 1931 as in the first two months of
1930, or 108,900 tons as against 42,300 tons. The
fact that France has no petroleum production of her
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? FIGHTING THE RED TRADE MENACE 55
own was certainly decisive for the omission of
petroleum from the list of Soviet goods requiring
licenses, and was an indication of the absence of any
French intent merely to block Soviet trade.
