High point of world
reaction
to the alarm over
?
?
Soviet Union - 1931 - Fighting the Red Trade Menace
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. But the
part played in this omission by the French attitude
toward American and other foreign oil importers re-
quires more detailed treatment in a further chapter.
The feeling of France toward America also played
a role in her attitude toward Soviet wheat. It was
joyfully expected by the wheat exporting countries
of the world, including the United States, that the
French license system would mean a flat embargo
on Soviet wheat. Had the license system not come
partly as a result of the protest that Soviet wheat,
selling in October at 73 to 75 cents a bushel, ca. f.
ports, before customs, as compared with Manitoba
and American wheat at 91 cents a bushel, was ruin-
ing the French wheat grower even when protected
by a tariff of 90 cents a bushel? Even today the im-
pression prevails that the French did embargo Soviet
wheat, but the foreign trade statistics of the Min-
istry of France tell a different story.
According to these statistics, France in the fivr>>
months after passing the license decree, from October
4,1930, to March 1,1931, imported a total of 1,764. -
000 bushels of Russian wheat, in October 788,000
bushels, in November 637,000, in December 235,000,
in January 83,000, and in February 21,000 bushels.
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? 56 FIGHTING THE RED TRADE MENACE
The Soviet Union's total exports of wheat to all
countries in January and February fell off to 2,900,-
000 bushels, so that it is difficult to say whether the
decline in French imports of Soviet wheat in January
and February was due to the license system or due to
the diminished supply of Soviet wheat.
A part but not all of the October imports may
have been due to the clause exempting from the
operation of the license decree "merchandise which
it can be shown was shipped directly for France be-
fore October 4. " In other words, while it is certain
that Soviet wheat entered the country in smaller
volume after the license decree than would have been
the case had there been no license decree, it is equally
clear from the French official statistics that the Gov-
ernment issued licenses for the import of a consider-
able quantity of Soviet wheat.
To have forbidden it entry after the French grow-
ers had disposed of their crop would have been to
benefit whom? The principal competitors of the
Soviet Union for the French wheat markets are
America, Canada, Australia.
A similar picture is provided in the records of
timber imports from the Soviet Union, another item
placed on the list of commodities requiring licenses.
After the license system had been established, in the
five months from October, 1930, to the end of March,
1931, France imported 128,080 metric tons of timber
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? FIGHTING THE RED TRADE MENACE 57
from the Soviet Union, compared to 125,250 metric
tons in the same period 1929-30. To have forbidden
its entry, in any case, after the artificially stimulated
French timber industry had taken its share of the
market would have been to benefit whom? The prin-
cipal competitors of the Soviet Union for the French
timber market are America, Germany, Austria, Fin-
land, Sweden and, to a less extent Poland.
These three commodities, oil, wheat, timber, with
flax constitute the most important Soviet exports to
France. But the French Government's treatment of
flax provides an instructive comparison. It, too, was
put on the license list.
French flax growers complained they were over-
whelmed by Russian flax. In this case the Govern-
ment acted energetically, so energetically, in fact,
that, whereas Soviet imports of flax into France in
the five months October to April in 1929-30 had
been 13,086 metric tons, they amounted to only
3,003 metric tons in the five months after the license
system was passed. To prohibit its introduction
would benefit whom ? Belgium, firmest ally of France,
large flax producer, has heretofore shared with the
Soviet Union the privilege of supplying France with
the seventy to eighty thousand tons of flax France
needs to import yearly.
America and other countries compete with the
Soviet Union for the French oil market. Oil is omitted
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? 58 FIGHTING THE RED TRADE MENACE
from the license system decree against Soviet prod-
ucts. America and other countries compete with the
Soviet Union for the French wheat and timber
market. Soviet wheat and timber are put on the
license system, but considerable quantities permitted
admission. Not America, nor Germany, nor Great
Britain, but only Belgium competes with the Soviet
Union for the French flax market. Flax is put on
the license system, and the Soviet imports choked
down to nearly nothing.
Illuminating were the remarks of M. Louis Rollin,
successor in the Laval Cabinet to M. Flandin as
Minister of Commerce, at an official celebration of
the Lille Fair, on April 12, 1931, after six months
of experience with the license system on Soviet im-
ports. With regard to Russia, he said, France had
no intention of breaking off trade relations and was
far from desiring the economic isolation of that
country! It would be better for all, he declared, if
Russia could take her place in the international ex-
changes and improve both her economic situation
and the well being of her people. But commercial ex-
changes, he emphasized, must be based on equality
and reciprocity, at present completely absent.
The Minister went on, however, to observe that
"certain overseas countries" were disregarding the
facilities accorded them in the French market and
were confronting French goods with insurmountable
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? FIGHTING THE RED TRADE MENACE 59
tariff walls. The French Government, he said could
not tolerate this and would take appropriate meas-
ures of retaliation.
It has become evident that the French attitude
toward the Soviet Union, though it may have a dif-
ferent affective tone, is in its concrete application
not much different from her attitude toward all other
nations not bound to her by ties of national selfinter-
est, by common fear of a common enemy. In par-
ticular the resentment now lessened but still keen felt
in all circles against America's refusal to cancel the
French debt, is so strong that it is not an exaggera-
tion to compare it with the resentment felt against
the Soviet Union for having repudiated the Czarist
pre-war debt to France that amounted on April 30,
1926, to 6,738,000,000 gold francs ($1,347,000,-
000).
This, the original basis of French hostility to the
Soviet Union, was a business matter. Today the
French, whatever their sentiments may be and con-
trary to widespread opinion abroad, regard their
relationship with the Soviet Union as a business mat-
ter. The Roland of the capitalist world against the
"Red Trade Menace" must be sought elsewhere.
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? CHAPTER Vn
Paris:
A new sect of Russian racketeers had grown up in
Paris, and their motor cars and villas, their mis-
tresses and champagne parties have pre-empted a
place of their own in the life of this pleasure capital
of the world. They enjoy one of the oddest of advan-
tages. They live on assassination, insurrection, bomb
assaults and mutinies. Every time Joseph Stalin is
killed, every time the Kremlin is blown to bits, every
time Trotsky returns to the Soviet Union at the head
of an army to throw out the rascals and every time
the peasants of Mother Russia rise as one man to
destroy their oppressors, the Parisian money lenders,
men of the "Black Bourse," knot their ties more hur-
riedly in the morning, get down to business earlier,
for that day there will be fat pickings.
Into their offices come streams of business men, or
their agents, bearing Soviet notes--Soviet promises
to pay to American, French, Austrian manufac-
turers.
"But you promised to take this bill and charge me
only 22 per cent," exclaims one.
"My friend, love you as I do! Have you not seen
the morning paper. What? Yes, I see you have, but
60
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? FIGHTING THE RED TRADE MENACE 61
you didn't think I had. What? Twenty per cent and
the paper says the Red Army has mutinied, Kron-
stadt rebelled, peasant uprisings in the Ukraine!
Why here it is, from Bucharest. The correspondent
says that drum fire was heard in the distance across
the Bessarabian border all night last night. Twenty
per cent! I wouldn't take a piece of Soviet paper for
100 per cent. "
The customer pleads, offers 25, 30, 35 per cent.
"No--not for any price. "
He turns to go. The broker waits until the lagging
feet cross the threshold and calls.
"See, here, you are an old customer, I am an old
Russian. I know I shouldn't do it, but I feel that now
those things are happening in Russia and my dear
fatherland is about to throw off the Bolshevik yoke,
it will be worth the money to me. I'll take your note;
45 per cent! "
Which is to say that for a note drawn by the
Soviet Trade Delegation for $100,000 payable in
full with 6 per cent interest in one year to the French
or American or other manufacturer who has sold
electrical machines to the Soviet Government, the
"Black broker" pays $55,000. He tucks the note
away in his safety deposit box, and at the end of the
year, if the Soviet Government has not resigned and
fled to Sweden disguised in green spectacles, the
patriotic Emigre" will collect. He has been collecting
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? 62 FIGHTING THE RED TRADE MENACE
for many years, and the profits from the chronic
collapse of his fatherland's tottering Government
have filled out the frame that was meager when he
left Russia in 1919.
It was one of the most curious and instructive
events of this trip to learn here that most of the
business of discounting Soviet bills is done by Rus-
sian emigres. The majority are men of the merchant
class willing to turn an honest penny at anything,
who started on a shoe string and, by constantly re-
investing their winnings in the same business, have
acquired fortunes. While Russian princes tend bar,
drive taxicabs, play the balalaika in dance halls, the
lowly merchant turns his penny so swiftly that al-
ready he has become a minor power in the financial
world.
To these worthies of the Bourse, the "Red Trade
Menace" is an abominable idea. Their dialectics are
interesting. "Menace! Of course they are a menace.
They don't pay their bills," exclaims the broker of
Soviet notes. "Five-Year Plan? Already completely
failed. They will never be able to export enough to
meet their obligations. Anyway, they spend all their
money on propaganda. "
Any argument that the Five-Year Plan is succeed-
ing, that the Soviet Government is more powerful
than ever, that its future growth has become a matter
of a great deal more concern to European Govern-
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? FIGHTING THE RED TRADE MENACE 63
ments than the mostly imaginary sums spent by the
Third International for foreign Communist parties,
is met by the glance of suspicion, the sure and ready
word, "Bolshevik.
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. But the
part played in this omission by the French attitude
toward American and other foreign oil importers re-
quires more detailed treatment in a further chapter.
The feeling of France toward America also played
a role in her attitude toward Soviet wheat. It was
joyfully expected by the wheat exporting countries
of the world, including the United States, that the
French license system would mean a flat embargo
on Soviet wheat. Had the license system not come
partly as a result of the protest that Soviet wheat,
selling in October at 73 to 75 cents a bushel, ca. f.
ports, before customs, as compared with Manitoba
and American wheat at 91 cents a bushel, was ruin-
ing the French wheat grower even when protected
by a tariff of 90 cents a bushel? Even today the im-
pression prevails that the French did embargo Soviet
wheat, but the foreign trade statistics of the Min-
istry of France tell a different story.
According to these statistics, France in the fivr>>
months after passing the license decree, from October
4,1930, to March 1,1931, imported a total of 1,764. -
000 bushels of Russian wheat, in October 788,000
bushels, in November 637,000, in December 235,000,
in January 83,000, and in February 21,000 bushels.
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? 56 FIGHTING THE RED TRADE MENACE
The Soviet Union's total exports of wheat to all
countries in January and February fell off to 2,900,-
000 bushels, so that it is difficult to say whether the
decline in French imports of Soviet wheat in January
and February was due to the license system or due to
the diminished supply of Soviet wheat.
A part but not all of the October imports may
have been due to the clause exempting from the
operation of the license decree "merchandise which
it can be shown was shipped directly for France be-
fore October 4. " In other words, while it is certain
that Soviet wheat entered the country in smaller
volume after the license decree than would have been
the case had there been no license decree, it is equally
clear from the French official statistics that the Gov-
ernment issued licenses for the import of a consider-
able quantity of Soviet wheat.
To have forbidden it entry after the French grow-
ers had disposed of their crop would have been to
benefit whom? The principal competitors of the
Soviet Union for the French wheat markets are
America, Canada, Australia.
A similar picture is provided in the records of
timber imports from the Soviet Union, another item
placed on the list of commodities requiring licenses.
After the license system had been established, in the
five months from October, 1930, to the end of March,
1931, France imported 128,080 metric tons of timber
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? FIGHTING THE RED TRADE MENACE 57
from the Soviet Union, compared to 125,250 metric
tons in the same period 1929-30. To have forbidden
its entry, in any case, after the artificially stimulated
French timber industry had taken its share of the
market would have been to benefit whom? The prin-
cipal competitors of the Soviet Union for the French
timber market are America, Germany, Austria, Fin-
land, Sweden and, to a less extent Poland.
These three commodities, oil, wheat, timber, with
flax constitute the most important Soviet exports to
France. But the French Government's treatment of
flax provides an instructive comparison. It, too, was
put on the license list.
French flax growers complained they were over-
whelmed by Russian flax. In this case the Govern-
ment acted energetically, so energetically, in fact,
that, whereas Soviet imports of flax into France in
the five months October to April in 1929-30 had
been 13,086 metric tons, they amounted to only
3,003 metric tons in the five months after the license
system was passed. To prohibit its introduction
would benefit whom ? Belgium, firmest ally of France,
large flax producer, has heretofore shared with the
Soviet Union the privilege of supplying France with
the seventy to eighty thousand tons of flax France
needs to import yearly.
America and other countries compete with the
Soviet Union for the French oil market. Oil is omitted
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? 58 FIGHTING THE RED TRADE MENACE
from the license system decree against Soviet prod-
ucts. America and other countries compete with the
Soviet Union for the French wheat and timber
market. Soviet wheat and timber are put on the
license system, but considerable quantities permitted
admission. Not America, nor Germany, nor Great
Britain, but only Belgium competes with the Soviet
Union for the French flax market. Flax is put on
the license system, and the Soviet imports choked
down to nearly nothing.
Illuminating were the remarks of M. Louis Rollin,
successor in the Laval Cabinet to M. Flandin as
Minister of Commerce, at an official celebration of
the Lille Fair, on April 12, 1931, after six months
of experience with the license system on Soviet im-
ports. With regard to Russia, he said, France had
no intention of breaking off trade relations and was
far from desiring the economic isolation of that
country! It would be better for all, he declared, if
Russia could take her place in the international ex-
changes and improve both her economic situation
and the well being of her people. But commercial ex-
changes, he emphasized, must be based on equality
and reciprocity, at present completely absent.
The Minister went on, however, to observe that
"certain overseas countries" were disregarding the
facilities accorded them in the French market and
were confronting French goods with insurmountable
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? FIGHTING THE RED TRADE MENACE 59
tariff walls. The French Government, he said could
not tolerate this and would take appropriate meas-
ures of retaliation.
It has become evident that the French attitude
toward the Soviet Union, though it may have a dif-
ferent affective tone, is in its concrete application
not much different from her attitude toward all other
nations not bound to her by ties of national selfinter-
est, by common fear of a common enemy. In par-
ticular the resentment now lessened but still keen felt
in all circles against America's refusal to cancel the
French debt, is so strong that it is not an exaggera-
tion to compare it with the resentment felt against
the Soviet Union for having repudiated the Czarist
pre-war debt to France that amounted on April 30,
1926, to 6,738,000,000 gold francs ($1,347,000,-
000).
This, the original basis of French hostility to the
Soviet Union, was a business matter. Today the
French, whatever their sentiments may be and con-
trary to widespread opinion abroad, regard their
relationship with the Soviet Union as a business mat-
ter. The Roland of the capitalist world against the
"Red Trade Menace" must be sought elsewhere.
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? CHAPTER Vn
Paris:
A new sect of Russian racketeers had grown up in
Paris, and their motor cars and villas, their mis-
tresses and champagne parties have pre-empted a
place of their own in the life of this pleasure capital
of the world. They enjoy one of the oddest of advan-
tages. They live on assassination, insurrection, bomb
assaults and mutinies. Every time Joseph Stalin is
killed, every time the Kremlin is blown to bits, every
time Trotsky returns to the Soviet Union at the head
of an army to throw out the rascals and every time
the peasants of Mother Russia rise as one man to
destroy their oppressors, the Parisian money lenders,
men of the "Black Bourse," knot their ties more hur-
riedly in the morning, get down to business earlier,
for that day there will be fat pickings.
Into their offices come streams of business men, or
their agents, bearing Soviet notes--Soviet promises
to pay to American, French, Austrian manufac-
turers.
"But you promised to take this bill and charge me
only 22 per cent," exclaims one.
"My friend, love you as I do! Have you not seen
the morning paper. What? Yes, I see you have, but
60
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? FIGHTING THE RED TRADE MENACE 61
you didn't think I had. What? Twenty per cent and
the paper says the Red Army has mutinied, Kron-
stadt rebelled, peasant uprisings in the Ukraine!
Why here it is, from Bucharest. The correspondent
says that drum fire was heard in the distance across
the Bessarabian border all night last night. Twenty
per cent! I wouldn't take a piece of Soviet paper for
100 per cent. "
The customer pleads, offers 25, 30, 35 per cent.
"No--not for any price. "
He turns to go. The broker waits until the lagging
feet cross the threshold and calls.
"See, here, you are an old customer, I am an old
Russian. I know I shouldn't do it, but I feel that now
those things are happening in Russia and my dear
fatherland is about to throw off the Bolshevik yoke,
it will be worth the money to me. I'll take your note;
45 per cent! "
Which is to say that for a note drawn by the
Soviet Trade Delegation for $100,000 payable in
full with 6 per cent interest in one year to the French
or American or other manufacturer who has sold
electrical machines to the Soviet Government, the
"Black broker" pays $55,000. He tucks the note
away in his safety deposit box, and at the end of the
year, if the Soviet Government has not resigned and
fled to Sweden disguised in green spectacles, the
patriotic Emigre" will collect. He has been collecting
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? 62 FIGHTING THE RED TRADE MENACE
for many years, and the profits from the chronic
collapse of his fatherland's tottering Government
have filled out the frame that was meager when he
left Russia in 1919.
It was one of the most curious and instructive
events of this trip to learn here that most of the
business of discounting Soviet bills is done by Rus-
sian emigres. The majority are men of the merchant
class willing to turn an honest penny at anything,
who started on a shoe string and, by constantly re-
investing their winnings in the same business, have
acquired fortunes. While Russian princes tend bar,
drive taxicabs, play the balalaika in dance halls, the
lowly merchant turns his penny so swiftly that al-
ready he has become a minor power in the financial
world.
To these worthies of the Bourse, the "Red Trade
Menace" is an abominable idea. Their dialectics are
interesting. "Menace! Of course they are a menace.
They don't pay their bills," exclaims the broker of
Soviet notes. "Five-Year Plan? Already completely
failed. They will never be able to export enough to
meet their obligations. Anyway, they spend all their
money on propaganda. "
Any argument that the Five-Year Plan is succeed-
ing, that the Soviet Government is more powerful
than ever, that its future growth has become a matter
of a great deal more concern to European Govern-
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? FIGHTING THE RED TRADE MENACE 63
ments than the mostly imaginary sums spent by the
Third International for foreign Communist parties,
is met by the glance of suspicion, the sure and ready
word, "Bolshevik.
