Loans and Legitimacy

The Evolution of Soviet-American Relations, 1919-1933

Katherine A.S. Siegel

• Publisher: The University Press of Kentucky
• Year: 2021
• ISBN:
  9780813183305
• Topic: Politique et relations internationales
• Subtopic: Relations internationales

In 1919 the Soviet government directed Ludwig Martens to open a trade bureau in New York. Before his deportation two years later, Martens had established contact with nearly one thousand American firms and conducted trade in the face of a stiff Allied embargo. His work planted the seeds for growing commercial ties between the U.S. and the U.S.S.R. throughout the 1920s.

Because the United States did not recognize the Soviet Union until 1933, historians have viewed the early Soviet–American relationship as an ideological stand-off. Katherine Siegel, drawing on public, private, and corporate documents as well as newly opened Soviet archives, paints a different picture. She finds that business ties flourished between 1923 and 1930, American sales to the Soviets grew twentyfold and American firms supplied Russians with more than a fourth of their imports. American businesses were only too eager to tap into huge Soviet markets.

Under the Soviets' New Economic Policy and first Five Year Plan, American firms invested in the U.S.S.R. and sold technical processes, provided consulting services, built factories, and trained Soviet engineers in the U.S. Most significantly, Siegel shows, this commercial relationship encouraged policy shifts at the highest levels of the U.S. government.

Thus when Franklin D. Roosevelt opened diplomatic relations with Russia, he was building on ties that had been carefully constructed over the previous fifteen years. Siegel's study makes an important contribution to a new understanding of early Soviet-American relations.

MARTENS
AND THE
FIRST SOVIET MISSION

In 1919, as the Soviet government slowly emerged from the combined threats and destruction of world war, revolution, and civil war, its new leadership looked to the United States. “We are decidedly for an economic understanding with America,” President of the Council of Peoples’ Commissars Vladimir Ilyich Lenin told a Chicago Daily News correspondent in October 1919. “With all countries,” he was quick to add, “but especially with America.”¹ As Tatiana N. Kargina explains, the Kremlin’s keen ambition to obtain trade and diplomatic ties with “the most powerful country of the capitalist world” was a product of the complete economic breakdown in Russia. Lenin planned to entice American businessmen with “such favorable arrangements that [they] will be compelled to come to do business with us.”² Similarly, Commissar of Foreign Affairs Chicherin declared the same year, “Our attitude toward official and non-official American representatives [is] different from our attitude toward representatives of other countries.”³

Thus, as Washington and the European powers were offering support to the anti-Bolshevik government of Admiral Alexander V. Kolchak in Omsk, Siberia, Moscow opened its first American commercial outpost, the Soviet Bureau.⁴ This office was set up to accomplish two of the Kremlin’s highest goals in regard to the United States: increased trade and diplomatic recognition. Though Martens was willing to concede that recognition and its “accompanying formalities” could be postponed without serious damage to trade, he had always believed in the need for “a definite minimum of political relations” for carrying out successful commerce.⁵ Despite an economic blockade, prevailing anticommunist and nativist hysteria, and harassment from the federal government’s legislative and executive branches, along with a New York State probe, the Soviet Bureau succeeded in shipping more than a quarter of a million dollars’ worth of products to Russia.⁶ This small office signed an additional $30 million in unfulfilled contracts, for meat, textiles, and machinery.⁷ The man who was chosen to orchestrate the Soviets’ extraordinary American effort, “the largest and most dangerous propaganda undertaking thus far started by Lenine’s party in any country outside of Russia,” according to the War Department, was Ludwig Martens.⁸

Martens was a blond-mustachioed, stockily built man with a “florid complexion.”⁹ Born in 1874 in Yekaterinoslav, South Russia, to parents who had emigrated from Germany in 1850, Martens took a degree in mechanical engineering from the Technical University at St. Petersburg. In 1893, he joined the antitsarist movement, and within three years his revolutionary activities led him to a Russian jail after he and Lenin had organized a strike of thirty thousand textile workers in the capital city.¹⁰ Martens remained in prison until 1899 and left then only to be pressed into the waiting arms of the Imperial German military forces because of his German citizenship. He served in the Reich’s Engineer Corps for two years. During the 1905 revolution, Martens clandestinely returned to Russia. “When things grew too hot for him” he fled, first to Switzerland, where he worked for the Russian Social Democratic revolutionary movement, and then to London for the next decade.¹¹ The police kept Martens under surveillance while his engineering talents were put to good use in Britain, where he developed the “Mertens [sic] Machine Gun.” Unfortunately, he sold his patent to an unscrupulous agent and was excluded from his rightful royalties. Martens’s life in England was penurious, and after World War I began, his German ancestry got him in trouble once again. His freedom jeopardized as an “alien enemy,” Martens departed for New York in 1915. There, his situation improved considerably. Martens first worked as an agent for Demidov San Donato, the largest steel maker in Russia, buying machinery and locomotives.¹² He then became vice president of Weinberg and Posner, a “wealthy Demidov engineering firm.”¹³

In New York he also met Leon Trotsky, Finnish radical Santeri Nuorteva, and others active on the Bolshevik scene. In 1918 his connections led him to the executive committee of the New York Left Wing Socialist party’s American Bolshevik Bureau of Information.¹⁴ The Bolshevik Bureau was formed that February under the auspices of Louis C. Fraina and included activists in the émigré socialist community.¹⁵ Martens was a frequent speaker before local left-wing groups and a member of the editorial board of the Bolshevik magazine Novy Mir. He also linked up with the Russian Federation, a group of antitsarist émigrés in the Left Wing Socialist organization who later formed the American Communist party.¹⁶

When Martens started his work at the Bureau in 1919, he put his revolutionary activity aside. Though his continued attendance and speeches at radical meetings attest that he never lost interest in these pursuits, he removed himself from leadership in the factionalized American communist movement, enraging the more dogmatic socialists who wished to control him.¹⁷ His main task became the cultivation of American business contacts. He hoped to sell a variety of Russian products including caviar and furs to American customers and in return wanted to buy large quantities of tea, boots and shoes, underwear, and machinery and tools.¹⁸ His claim that he had $200 million with which to purchase American goods drew the greatest interest in the American press.¹⁹

Armed with credentials signed by Chicherin in January, Martens became the Soviet “ambassador” on March 19, 1919. As the first official Soviet representative in America, Martens hoped to establish operations at the Russian embassy in Washington. He believed that his credentials gave him the right to “all moveable and real estate of the former embassy and consulates” of Russia and requested that the provisional government’s commercial attaché in Brooklyn, C.J. Medzikhovsky, hand all Russian official property over to him.²⁰ Martens also wrote to a number of owners of private American warehouses, factories, and other facilities that were holding millions of dollars in Russian assets from the First World War. He made claims for close to $75 million for undelivered railroad supplies, cash in the National City Bank, damage claims from the Black Tom explosion in New Jersey, funds in the Russian embassy, and undelivered shoes, clothing, ammunition, and other items.²¹

Secretary of State Robert Lansing flatly rejected Martens’s diplomatic credentials.²² The Soviet Bureau chief’s appeals were ignored owing to the United States’ continued recognition of Boris Bakhmetev, ambassador of the defunct provisional government, and Martens was forced to share offices in Nuorteva’s Bureau of Information on Soviet Russia at 299 Broadway. He nevertheless attempted to recover the Russian assets through Morris Hillquit, head of the Bureau’s legal department and former socialist mayoral candidate of New York. Hillquit was aided by Charles Recht, an attorney prominent in Soviet causes. Yet there was really little that the Bureau could do to impress Washington that it had a legal claim upon the Russian money. American officials continued both to see a “Democratic Russia” as viable and to offer some limited support through Bakhmetev for Kolchak.²³ Indeed, Under Secretary of State Frank Polk “resented” the Bureau’s attempt to remove Bakhmetev “as an insolent interference with American affairs.”²⁴

Despite these protestations on Bakhmetev’s behalf, several historians have pointed out that the Russian ambassador was increasingly ignored by leading members of the Wilson administration after the Bolshevik Revolution, even as the symbolism of his office and its usefulness as a conduit for funding anti-Bolshevik causes were clearly recognized. Linda Killen suggests that by the end of 1919, the rout of Kolchak’s armies and the American people’s reluctance “to shoulder the whole burden” in Russia made Bakhmetev’s cause hopeless. David W. McFadden contends that Bakhmetev’s influence declined even earlier, during 1918, as influential men like Col. Edward M. House, Wilson’s close confidant, recognized “the necessity of finding a way to work with the Bolshevik government.”²⁵

At the same time, Sen. William E. Borah also pushed hard for Bakhmetev’s exit from the United States. Further, he introduced resolutions calling for the return of American soldiers from the Allied intervention effort in Russia. Borah was able to undermine Bakhmetev by showing the Senate how the ambassador had transferred millions of dollars to the unsuccessful White armies using Treasury credits originally meant for Russia’s World War efforts. Borah’s vigilance helped finally to eject Bakhmetev from his post in 1922, five years after the Bolshevik Revolution. Yet his financial attaché, Serge Ughet, maintained the fiction of provisional government representation in the United States until 1933.²⁶

THE SOVIET BUREAU’S OPERATIONS

Within two weeks of opening shop, the Bureau reported that large steel mill owners and machinery makers were calling, and claimed that “the largest and most influential bank in New York” was ready to finance shipments.²⁷ The main problem to increased sales was the ongoing inter-Allied economic embargo against Russia.²⁸ Not to be deterred, in April Martens moved his staff to larger quarters in the World’s Tower Building at 110 West Fortieth Street, where the Bureau occupied the entire third floor.²⁹ Santeri Nuorteva bragged that “six hundred and twenty of ‘the largest capitalists in America’” had been in contact with the office. Nuorteva, like Martens also “stockily built, florid [and] prosperous in appearance,” took over the Bureau’s diplomatic department. He had come to the United States in 1911 after being imprisoned for antitsarist activity.³⁰ Nuorteva had headed the Bureau of Information for Soviet Russia and in 1918 had also served as director of the Finnish Information Bureau, an agency of the revolutionary and short-lived “Finnish Workers’ Government.”³¹ According to Felix Cole of the State Department, the “Hebrew” Nuorteva was the “brains” of the Soviet Bureau.³² Nuorteva’s academic training was in languages, and he had recently edited a Finnish-English dictionary.

The Bureau’s general office department was headed by Gregory Weinstein, editor of Novy Mir and activist among New York’s Left Wing Socialists, and included a large clerical staff.³³ The heart of the Bureau was the commercial department, where Abraham A. Heller was in charge. Heller had immigrated to the United States from Russia in 1891 at the age of sixteen. A long-time member of the Socialist party of America, he also ran the International Oxygen Company. Heller’s publicity director was Evans Clark, husband of The Nation editor Freda Kirchwey. In addition to the diplomatic, general office, and commercial departments was the financial department, personified in Julius Hammer, who played an important role in financing the Bureau. Hammer also was manager of the Chemico-Pharmaceutical section of the commercial department, which served as a useful sales venue for many of his own company’s medical products. Industrial data were collected in the statistical department, directed by Dr. Isaac Hourwich. Hourwich had been dismissed from the University of Chicago’s economics department, according to the New York City police department, “on account of his radical views and his stubborn attitude to all persons who opposed him.”³⁴ Martens also had attorneys on retainer, including Charles Recht, Walter Nelles, and Morris Hillquit. Although Nuorteva insisted that his Bureau had no tsarist or provisional government employees, one of the Bureau’s key people was the Kerensky government’s former Railway Mission head, Professor George Lomonosov, who ran the railroad department.³⁵

Lomonosov had an unusual background for a Bureau employee. The New York Police Department noted that under the tsar, he had been a “reactionary and a strict disciplinarian demanding execution of all persons who would commit any acts against the government.”³⁶ Three months after the first Russian revolution, Lomonosov became head of the Russian Railway Mission to the United States and continued in this position even after the provisional government was overturned in November. In June 1918, Nuorteva reported, “He came out for the Soviets . . . [at] a time when it was dangerous to say a word in their favor.”³⁷ Lomonosov was identified in Soviet Bureau files as a “Menshevik intellectual,” and he was thought to be “strongly opposed to the tactics of the Bolsheviki.” But Nuorteva was pleased with Lomonosov’s criticism of the Allied intervention, criticism that culminated in a speech Lomonosov gave at a “Justice for Russia” meeting at Madison Square Garden. Ambassador Bakhmetev, angered at his employee’s disloyalty in making this speech, fired the railroad expert.³⁸

In May 1919 Lomonosov also had to leave his office at the Soviet Bureau, when Maxim Litvinov ordered him back to Europe. The deputy commissar of foreign affairs was dubious that Lomonosov’s work at the bureau would bear fruit “in view of the absence of all possibility of receiving railroad equipment from Ameri...

Table of contents

• Cover
• Half title
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Introduction
• 1. Martens and the first soviet mission
• 2. The Demise of the soviet bureau
• 3. Diplomatic, military, and humanitarian initiatives, 1919-1923
• 4. Economic foreign policy under harding
• 5. The soviet commercial missions under harding, coolidge, and hoover
• 6. Trade and foreign policy, 1923-1929
• 7. American businessmen, the nep, and the first five-year plan
• 8. Soviet-american relations, 1929-1933
• 9. Conclusion
• Abbreviations
• Notes
• Bibliography
• Index