The German–Soviet commercial agreement

On 11 February 1940 representatives of the Third Reich and the Soviet Union signed in Moscow a commercial agreement which for a year and a half tied the supply of the German war machine to Soviet raw materials. On behalf of the USSR it was signed by Anastas Mikoyan, People’s Commissar for Foreign Trade and Deputy Chairman of the Council of People’s Commissars, and by the Soviet trade representative in Berlin; on behalf of Germany by Ambassador Karl Ritter, the government’s plenipotentiary for economic affairs, and Karl Schnurre, head of the German economic delegation. The Soviet Union undertook to deliver in the first year grain, oil, cotton, iron and chrome ores, phosphates, platinum and many other raw materials, and Germany was to pay for them with machinery, industrial plant and military equipment, including the unfinished heavy cruiser Lützow. Some sources place the event on 10 February. The document, however, is dated 11 February, and the same date was given in the communiqué broadcast by Moscow radio on the evening of 12 February and published by the Soviet press the following day.

From the credit agreement to the letters of 28 September

The exchange of raw materials for technology was the economic foundation of the understanding between Adolf Hitler and Joseph Stalin. A few days before the Molotov–Ribbentrop Pact, on the night of 19–20 August 1939, the two sides concluded a credit agreement in Berlin. Germany granted the USSR a credit of 200 million marks for the purchase of machinery and equipment, to be repaid in raw materials from 1946, and the Soviet Union undertook to supply goods worth 180 million marks within two years. Stalin attached great importance to it: Moscow delayed signing it until it was certain that a political agreement would follow as well.

The war changed the scale of Germany’s needs. Britain and France declared a naval blockade (PL) of Germany, and the Royal Navy began stopping ships carrying oil, rubber, non-ferrous metals and food to the Reich. Before the war two-thirds of Germany’s oil imports had come from the Americas, and most of its rubber from British and Dutch colonies. These routes could no longer be used. According to German calculations of the time, stocks of oil and rubber would last a few months of war. The Reich could count on overland deliveries from neutral states, above all from Romania, with which it had concluded an economic agreement in March 1939, and on Swedish iron ore, but the only country able to meet its needs on a large scale was the Soviet Union.

When Joachim von Ribbentrop and Vyacheslav Molotov signed the Boundary and Friendship Treaty in Moscow on 28 September 1939, they also exchanged two letters. In them the Soviet government declared that “on the basis and in the spirit of the general political understanding reached” it would develop trade with Germany by every means. The two sides were to draw up an economic programme under which the USSR would supply raw materials and Germany would balance them with deliveries of industrial goods “over a longer period”. A confidential annex promised the transit of German goods across Soviet territory from Romania, Iran, Afghanistan and the Far East. Stalin, who was unwilling to hand the Germans the oilfield around Borysław and Drohobycz, undertook to supply oil in an amount equal to its annual output in exchange for coal and steel pipes.

Four months of haggling

At the beginning of October 1939 a German economic delegation of several dozen people, led by Ritter and Schnurre, arrived in Moscow. Berlin hoped for a swift agreement and enormous figures: the first proposals spoke of Soviet deliveries worth more than a billion marks a year. A Soviet purchasing commission, which toured German factories and shipyards that autumn, responded with a list of orders that took the Germans by surprise. Moscow was not interested in consumer goods. It wanted machine tools, entire industrial plants, the latest aircraft, guns and, above all, warships and the technology needed to build the great ocean-going fleet that Stalin had been planning since the 1930s. The list included the unfinished Admiral Hipper-class heavy cruisers (Lützow, Seydlitz and Prinz Eugen), the plans of the battleship Bismarck and heavy naval gun turrets.

The German military considered these demands excessive. Producing everything Moscow wanted would take several years and huge quantities of steel, which the Wehrmacht needed for the war in the west. In December Hitler agreed to sell the Lützow but refused to part with the other cruisers. There were also disputes over prices, delivery dates and the sequence of deliveries: the Germans wanted the raw materials at once and to pay later, while the Russians insisted that the exchange be balanced. The talks were not helped by the Soviet attack on Finland, which provoked a wave of outrage across Europe and, in Germany, among the Finns’ old friends, a resentment that the Reich authorities did not, however, show in public. Berlin maintained a strict neutrality towards the Winter War, one that favoured Moscow.

When the negotiations stalled, Stalin stepped in. On the night of 31 December 1939 to 1 January 1940 he received Ritter and Schnurre in the Kremlin and spoke of the agreement not as an ordinary exchange of goods but as “mutual assistance”. He also announced that the Soviet Union wished to learn from Germany, especially in the field of armaments. In January German agencies warned that without Soviet deliveries oil stocks might run out within a few months and that a serious shortfall in grain supplies loomed. The Foreign Ministry wrote that Soviet raw materials could not be replaced by anything and that a breakdown of the talks must not be allowed. The breakthrough came with a personal letter from Ribbentrop to Stalin in early February. According to Schnurre, it was only this that made Moscow agree to spread German deliveries over a longer period than Soviet ones. In the final talks Stalin personally went through the technical details of the orders, and he had a clause written into the agreement allowing either side to suspend deliveries if the other fell behind with its own. The price of the Lützow, which the Germans had initially put at around 150 million marks, was reduced, according to some studies, to around 104 million.

What the agreement contained

The agreement covered 27 months. The Soviet Union was to deliver its goods within 18 months, and Germany was to balance them within 27. In the first year, from 11 February 1940 to 11 February 1941, the USSR undertook to supply, over and above what the credit agreement of August 1939 provided for, goods worth 420–430 million marks, and in the following six months goods worth 220–230 million. Every six months the two sides’ deliveries were to be balanced according to an agreed ratio.

The most important items were listed by Schnurre in a confidential memorandum of 26 February 1940. In the first year the Soviet Union was to supply a million tons of fodder grain and legumes, 900,000 tons of oil and oil products, 100,000 tons of cotton, 500,000 tons of phosphates, 100,000 tons of chrome ore, 500,000 tons of iron ore, 300,000 tons of scrap and pig iron, 2.4 tons of platinum, as well as manganese ore, metals and timber. Over 18 months these were to be joined by copper, nickel, tin, molybdenum, tungsten and cobalt, which Germany needed among other things to manufacture the goods Moscow had ordered. Together with the deliveries under the credit agreement, exports to the Protectorate of Bohemia and Moravia and transit fees, Schnurre estimated Soviet deliveries and services in the first year at around 800 million marks. The USSR also agreed to buy metals and other raw materials for Germany in third countries and to carry them across its territory. Of particular importance was the transit of soya beans from Manchukuo: the Trans-Siberian Railway halved its freight rates for them. A separate article confirmed the promise of oil from the Borysław–Drohobycz field in exchange for German coal and pipes.

Germany’s obligations filled lists dozens of pages long. The most valuable item was the cruiser Lützow, launched in July 1939 at the Deschimag yard in Bremen, which was to be handed over to the USSR together with its armament, equipment and full documentation. The name Lützow, thus freed, was given on 25 January 1940 to the pocket battleship Deutschland, which Hitler did not want to risk being sunk under the name of the country, and the two ships should not be confused. Germany further undertook to hand over the plans of the Bismarck and of a large destroyer, complete machinery for a destroyer, 381 mm naval gun turrets, designs for 406 mm and 280 mm turrets, periscopes, and sonar, mine and torpedo equipment. The aviation list comprised some thirty examples of the latest aircraft, including Messerschmitt Bf 109 and Bf 110 and Heinkel He 100 fighters and Junkers Ju 88 and Dornier Do 215 bombers. The Russians were also to receive heavy howitzers, a battery of anti-aircraft guns, a ballistics laboratory, a Panzer III tank, samples of explosives, signals equipment and chemical warfare equipment, and besides these locomotives, turbines, diesel engines, equipment for the oil industry and power stations, plant for producing synthetic rubber, and coal. The Soviets undertook not to disclose the industrial processes passed to them and not to use them to compete with German firms on world markets.

How it was judged

The Soviet communiqué stressed that in the very first year trade would exceed the highest level reached since the First World War. The content of the agreement was not disclosed. Schnurre wrote that the Soviet Union had promised far more than was economically justified and would have to meet some of the deliveries at the expense of its own supplies, and that Mikoyan had had to take many matters directly to Stalin. The memorandum’s conclusion was unequivocal: the agreement meant for Germany “a wide-open door to the East”, and if the Reich fulfilled its own obligations, the effects of the English blockade would be “decisively weakened”.

For Stalin the calculation looked different. The Soviet Union was getting what it could not buy elsewhere: modern military technology, weapon prototypes and machinery for the armaments industry. Stalin is said to have told members of the Politburo that a warship bought from a future enemy is worth two: one more for us and one fewer for him. The agreement also strengthened the political understanding with Hitler, which had allowed Moscow to seize eastern Poland, impose bases on the Baltic states and attack Finland without fear of Germany.

In London and Paris it was understood that the British blockade was leaking on land. Royal Navy warships could stop a ship on the Atlantic, but not trains coming from Russia across occupied Polish territory. Grain and oil travelled through the old border crossings, among them Brest, where they were transferred from Soviet broad-gauge wagons to European ones. The idea that the Soviet Union had become the Reich’s economic hinterland strengthened proposals in the Allied staffs to strike at the sources of German supply: at the Swedish ore discussed at the Paris meeting of 5 February, and in the following months even at the Soviet oilfields in the Caucasus.

Place in the war

Deliveries began at once. The Soviet Union generally met its obligations on time, while Germany, which had been given more time, delayed its own deliveries in the expectation that, if the war went its way, some of its commitments would never have to be honoured. The hull of the Lützow was towed out of Bremen in April 1940 and reached Leningrad at the end of May, far less complete than the Russians had expected and without engines. As the Petropavlovsk she never put to sea. In 1941, serving as a floating battery, she shelled the German troops besieging Leningrad with the guns that had been mounted on her. In August 1940 Moscow briefly suspended its deliveries, citing precisely the German arrears, but soon resumed them. During this period the Kriegsmarine also benefited from Soviet help: in the summer of 1940 the German armed merchant cruiser Komet passed through the Northern Sea Route into the Pacific, guided by Soviet icebreakers.

After the fall of France, Soviet trade became even more important to Germany. On 10 January 1941 the two sides signed a further border and commercial agreement that extended the exchange for another eighteen months. According to the calculations of the American historian Edward E. Ericson, between January 1940 and June 1941 the Soviet Union sent Germany goods worth around 598 million marks and received goods worth around 437 million. In that period the Reich received, among other things, some 1.5 million tons of grain, more than 800,000 tons of oil and around 130,000 tons of manganese ore. According to the same author, without Soviet deliveries Germany’s stocks of rubber and grain would have run out even before the attack on the USSR. Soviet trains loaded with raw materials were still crossing the border in the last hours before 22 June 1941, when the Wehrmacht launched Operation Barbarossa. The agreement of 11 February 1940 is one of the clearest proofs that in the first two years of the war the Soviet Union was not a neutral onlooker but an economic partner of the Third Reich, whose grain and oil helped Germany defeat France and then turn on its supplier.