The German–Romanian economic agreement

On 23 March 1939 in Bucharest, the Romanian Foreign Minister Grigore Gafencu and the Minister of National Economy Ioan Bujoiu (PL), together with the German envoy Wilhelm Fabricius and Helmuth Wohlthat, a ministerial director in the office of the Plenipotentiary for the Four-Year Plan, signed the “Treaty on the Promotion of Economic Relations between the German Reich and the Kingdom of Romania”. On paper it was an agreement on cooperation between two states “in pursuit of their peaceful aims”. In reality the document was meant to subordinate the development of the Romanian economy – its agriculture, forests, mines and, above all, its oil – to the needs of the German war machine. Signed a week after the seizure of Prague, on the day Adolf Hitler arrived by sea in Klaipėda and a treaty of protection with Slovakia was signed in Berlin, the agreement was seen by the Western press as yet another victory for the Reich, this time won without troops. The American weekly Time wrote that in modern times no state had made such humiliating economic concessions to another.

Romanian oil and Germany’s hunger for raw materials

In the 1930s Romania was the largest oil producer in Europe outside the Soviet Union. The oilfields around Ploiești, at the foot of the Carpathians, were largely owned by Western capital: the Anglo-Dutch Shell, the American Standard Oil, and French and Belgian companies. Germany, which had been a major investor in Romania before 1914, had lost its holdings there after the war. The country was also a granary, exporting wheat, maize, timber and cattle.

For the Third Reich, raw materials were the weakest point of its preparations for war. Germany had no oil of its own, and the Four-Year Plan of Hermann Göring, which from 1936 was supposed to free the economy from dependence on imports, was falling short of expectations: plants producing synthetic petrol from coal were being built more slowly and at greater cost than planned. Germany was also short of foreign currency. From the mid-1930s the Reich traded with the countries of South-Eastern Europe through a clearing system, exchanging goods for goods without paying in hard currency. It bought their grain and raw materials and paid with machinery, weapons and manufactured goods, binding these countries ever more tightly to its market.

Throughout the interwar period Romania had relied on France. It was a member of the Little Entente with Czechoslovakia and Yugoslavia, of the Balkan Pact of 1934, and of an alliance with Poland directed against the USSR. The Munich Agreement destroyed this system: France had not defended Czechoslovakia, so it was hard to count on it defending Romania. King Carol II, who had ruled as a dictator since February 1938, tried to manoeuvre between the powers. In November 1938 he met Hitler, and a few days later he had the imprisoned leader of the fascist Iron Guard, Corneliu Codreanu, killed, which provoked a furious press campaign in Germany. Economic interests soon prevailed, however. On 10 December 1938 the two states concluded a trade agreement that increased deliveries of Romanian oil to the Reich.

The Wohlthat mission and the Tilea affair

In February 1939 Göring sent his trusted official Helmuth Wohlthat to Bucharest; that winter Wohlthat had negotiated with the American George Rublee a plan for the emigration of Jews from Germany. He brought far-reaching demands with him. According to some historians, Germany wanted the oil industry to pass under the control of a joint German–Romanian company and Romania to subordinate the development of its agriculture and industry to German needs. The Romanians played for time. The negotiations went badly, and after 15 March they acquired a dramatic backdrop: Germany occupied Bohemia and Moravia, and Hungary, with which Romania was in dispute over Transylvania, occupied Carpatho-Ukraine and reached the Polish border. Carol II sent several army corps to the Hungarian frontier.

On 16 and 17 March the Romanian envoy in London, Viorel Virgil Tilea, painted a dramatic picture first at the Foreign Office and then to the Foreign Secretary, Lord Halifax, himself: Germany had presented Romania with an ultimatum, demanding a monopoly of its exports and restrictions on its industry in exchange for a guarantee of its borders. The news shook London, which had just revised its policy towards Hitler after the seizure of Prague. On the evening of 17 March Neville Chamberlain made a speech in Birmingham in which he asked publicly for the first time whether Hitler was attempting to dominate the world by force. British telegrams went out to Warsaw, Moscow, Athens, Ankara and Belgrade. Meanwhile Gafencu denied that any ultimatum existed, and the British envoy in Bucharest confirmed that the talks were proceeding normally. Historians still argue over whether Tilea acted on his own initiative, on the King’s orders, or deliberately exaggerated in order to win British economic and political help. Whatever his intentions, the “Tilea affair” hastened the shift in British policy. As early as 20 March London proposed a joint declaration by Britain, France, the USSR and Poland on resistance to aggression.

What the treaty contained

Under German pressure, but also in the hope that economic concessions would spare the country Czechoslovakia’s fate, the Romanian government agreed to a compromise. The treaty signed on 23 March was short – it had five articles – but its first article contained a whole programme. The two sides were to draw up a long-term economic plan taking into account “on the one hand German import needs, and on the other the possibilities of developing Romanian production”, as well as Romania’s domestic needs and its trade with other countries. The plan was to cover:

• the development and direction of Romanian agriculture, including the cultivation of new crops – above all fodder, oilseed and fibre crops – and the building of processing plants;
• the development of forestry and the timber industry;
• deliveries of mining machinery and the founding of mixed German–Romanian companies to extract copper-bearing pyrites in Dobruja, chrome ore in the Banat and manganese ore near Vatra Dornei, as well as surveys of bauxite deposits and the possible creation of an aluminium industry;
• the founding of a mixed German–Romanian company to prospect for oil and carry out a programme of drilling and refining;
• industrial cooperation;
• the creation of free zones with industrial and commercial enterprises, warehouses and transhipment facilities for German shipping;
• deliveries of military equipment for the Romanian army, navy, air force and arms industry;
• the expansion of transport, roads and waterways, the construction of public utilities, and cooperation between banks.

Implementation of the treaty was entrusted to government committees set up in 1935. Part of the payment for German deliveries could be converted into capital shares in new ventures. The treaty was subject to ratification but applied from the day of signature. It was to remain in force until 31 March 1944 and thereafter to be renewed automatically unless denounced. The instruments of ratification were not exchanged in Berlin until 20 December 1939.

The text contained no figures, no quotas and no obligation to sell Germany a set share of output, such as some later studies describe. What it did contain was a framework that allowed the Reich to plan the development of the Romanian economy around its own needs and to invest capital in its key sectors. Wohlthat reported to Berlin that the agreement was also intended to help eliminate Jews from the Romanian timber industry.

Reactions

In London the agreement was taken as proof that Germany was bringing the Balkans under its control by economic means. Britain and France set about salvaging their position. On 31 March France signed a trade agreement with Romania, and in the spring Britain granted it a credit and undertook to buy Romanian grain above market prices. On 13 April, after the Italian invasion of Albania, Chamberlain and Édouard Daladier announced guarantees of the independence of Romania and Greece. Carol II accepted them but did not believe the West would be able to help him. Romania, like Poland, avoided ties with the Soviet Union, and Gafencu, faithful to a policy of balance, was still assuring Berlin of his friendship and willingness to sell further quantities of oil in the summer.

Significance

The agreement of 23 March was one of the cornerstones of the German war economy. In July and August 1939, as Hitler prepared the attack on Poland, he knew that in the event of a British naval blockade he could count on Romanian oil and grain delivered overland and along the Danube – and, after the Molotov–Ribbentrop Pact, on Soviet raw materials as well.

When war broke out, Romania declared its neutrality, even though it was Poland’s ally. In September 1939 thousands of Polish soldiers and refugees passed through its territory, as did shipments of the Bank of Poland’s gold. The President, the government and the Commander-in-Chief were interned in Romania. On 21 September 1939 Iron Guard legionaries – with support from Berlin, according to many historians – murdered Prime Minister Armand Călinescu, the most pro-Allied politician in the King’s circle. Throughout the Phoney War the British and the Germans waged a quiet struggle for Romanian oil. In May 1940, as Germany was crushing France, Romania concluded an oil-for-arms agreement with it, and in the summer of 1940 it lost Bessarabia and northern Bukovina to the USSR, northern Transylvania to Hungary and southern Dobruja to Bulgaria. Carol II abdicated, General Ion Antonescu took power, and on 23 November 1940 Romania joined the Tripartite Pact.

From then on Romanian oil powered the Wehrmacht’s tanks and aircraft. According to the calculations of the German historian Andreas Hillgruber, between 1939 and 1944 Romania supplied the Reich and the German forces at the fronts with some 11 million tonnes of oil and oil products, the most in 1941, the year of the attack on the USSR. Ploiești became one of the most important targets of the Allied air forces: on 1 August 1943 American bombers carried out the costly raid on the refineries known as Operation Tidal Wave, and in the spring and summer of 1944 a series of raids seriously reduced output. In August 1944, after the coup in Bucharest and Romania’s switch to the Allied side, the Red Army took the oilfields, which sharply deepened Germany’s fuel crisis. The 1939 treaty, which the Romanians had signed in the hope of buying their independence, set their country on the road that led it into the war on Hitler’s side.