German–Soviet Credit Agreement (1939)

Traditional commerce and pre-Nazi trade Germany lacks natural resources, including several key raw materials needed for economic and military operations. Before World War I, Germany imported 1.5 billion Reichsmarks of raw materials and other goods per year from Russia. In the early 1930s, Soviet imports decreased as the more isolationist Stalinist regime asserted power and dwindling adherence to the disarmament requirements of the Treaty of Versailles decreased Germany's reliance on Soviet imports. Deteriorating relations The rise to power of the Nazi Party increased tensions between Germany and the Soviet Union, with Nazi racial ideology casting the Soviet Union as populated by "untermenschen" ethnic Slavs ruled by their "Jewish Bolshevik" masters. Even with rising tensions, in the mid-1930s, the Soviet Union made repeated efforts to reestablish closer contacts with Germany., which were rebuffed by Hitler, who wished to steer clear of such political ties. Relations further declined in 1936, when Germany supported the Fascist Spanish Nationalists in the Spanish Civil War, while the Soviets supported the partially socialist-led Spanish Republic opposition. The same year, Germany and Japan entered the Anti-Comintern Pact. Stalinist purges also disrupted Soviet diplomacy. Late 1930s economic needs By the late 1930s, because an autarkic economic approach or an alliance with Britain were impossible, Germany needed to arrange closer relations with the Soviet Union, if not just for economic reasons alone. Soviet imports of Ukrainian grains or Soviet transshipments of Manchurian soybeans could make up the shortfall. However, German needs for military supplies and Soviet needs for military machinery increased after the Munich Agreement. ==Negotiations==

Preliminary discussions In October 1938, Germany started pushing for expansion of economic ties between the two countries and presented a plan to the Soviets on December 1, 1938. The Soviets were willing to engage in talks discussing a new German offer in February and March 1939 in Moscow. Germany put the talks on hold in mid-March. A few days thereafter, Germany occupied Czechoslovakia and then the Klaipėda Region (Memel), making a German war with Poland far more likely. aircraft developed for and used by Lufthansa, 1938 Germany and the Soviet Union discussed entering into an economic deal throughout early 1939. During spring and summer 1939, the Soviets negotiated a political and military pact with France and Britain, while at the same time talking with German officials about a potential political Soviet–German agreement. On April 7, Soviet diplomat Georgii Astakhov stated to the German Foreign Ministry that there was no point in continuing the German–Soviet ideological struggle and that the two countries could come to an agreement. Ten days later, Soviet ambassador Alexei Merekalov met with German State Secretary Ernst Weizsacker and presented him a note requesting speedy removal of any obstacles for fulfillment of military contracts signed between Czechoslovakia and the USSR before the former was occupied by Germany. According to German accounts, at the end of the discussion the ambassador stated "there exists for Russia no reason why she should not live with us on a normal footing. And from normal the relations might become better and better." Other sources claim that it could be an exaggeration or inaccurate recounting of the ambassador's words. Immediately after the meeting, the Soviet ambassador had been withdrawn to Moscow and never returned to Germany. German planners in April and May 1939 feared that a cessation of Swedish trade would cut key iron ore supplies. Germany already faced severe rubber shortages because of British and Dutch refusals to trade. On May 8, German officials estimated that Germany had oil reserves for only 3.1 months. Three days later, on May 20, Molotov told the German ambassador in Moscow that he no longer wanted to discuss only economic matters, and that it was necessary to establish a "political basis", which German officials saw an "implicit invitation" On May 30, Germany directed its diplomats in Moscow that "we have now decided to undertake definite negotiations with the Soviet Union." The ensuing discussions were channeled through the economic negotiation, because the economic needs of the two sides were substantial and because close military and diplomatic connections had been severed in the mid-1930s after the creation of the Anti-Comintern Pact and the Spanish Civil War, leaving these talks as the only means of communication. The Soviet ambassador explained that a deal with Germany better suited Soviet needs than a deal with Britain and France or inconclusive negotiations resulting in no deal. Thereafter, official talks were started in Berlin on July 22. Meanwhile, hoping to stop the German war machine, in July, Britain conducted talks with Germany regarding a potential plan to bail out the debt-ridden German economy at the cost of one billion pounds in exchange for Germany ending its armaments program. The British press broke the story and Germany eventually rejected the offer. On July 26, over dinner, the Soviets accepted a proposed three-stage agenda which included the economic agenda first and "a new arrangement which took account of the vital political interests of both parties." and that "there was no problem between the Baltic and the Black Sea that could not be solved between the two of us." The Germans discussed prior hostilities between the countries in the 1930s. They addressed their common ground of anti-capitalism, stating "there is one common element in the ideology of Germany, Italy and the Soviet Union: opposition to the capitalist democracies," "neither we nor Italy have anything in common with the capitalist west" and "it seems to us rather unnatural that a socialist state would stand on the side of the western democracies." Astakhov characterized the conversation as "extremely important." By August 10, the countries worked out the last minor technical details, but the Soviets delayed signing the economic agreement for almost ten days until they were sure that they had also reached a political agreement. Meanwhile, every internal German military and economic study had argued that Germany was doomed to defeat without at least Soviet neutrality. ==German–Soviet deal==

Economic deal While the treaty was ready at 4 pm on August 19, the Soviets announced that they could not sign it that day, worrying German officials that the Soviets were delaying for political reasons. When TASS published a report that the Soviet–British–French talks had become snarled over the Far East and "entirely different matters", Germany took it as a signal that there was still time and hope to reach a Soviet–German deal. The agreement covered "current" business, which entailed Soviet obligations to deliver 180 million Reichsmarks in raw materials and German commitment to provide the Soviets with 120 million Reichsmarks of German industrial goods. Under the agreement, Germany also granted the Soviet Union a merchandise credit of over seven years to be financed by the German Gold Discount Bank. The credit was to be used to finance Soviet "new business" Schnurre also wrote "[a]part from the economic import of the treaty, its significance lies in the fact that the negotiations also served to renew political contacts with Russia and that the credit agreement was considered by both sides as the first decisive step in the reshaping of political relations." Molotov wrote in Pravda that the August 19 deal was "better than all earlier treaties" and "we have never managed to reach such a favorable economic agreement with Britain, France or any other country." It contained secret protocols dividing the states of Northern and Eastern Europe into German and Soviet "spheres of influence." At the signing, Ribbentrop and Stalin enjoyed warm conversations, exchanged toasts and further addressed the prior hostilities between the countries in the 1930s. They characterized Britain as always attempting to disrupt Soviet-German relations, stated that the Anti-Comintern pact was not aimed at the Soviet Union, but actually aimed at Western democracies and "frightened principally the City of London [i.e., the British financiers] and the English shopkeepers." In 2010, Timothy Snyder linked the improvement in Nazi-Soviet relations in 1939 to Stalin's objective of disrupting the Anti-Comintern Pact and waging war on Japan. Snyder said: "On 20 August 1939, Hitler sent a personal message to Stalin, asking him to receive Ribbentrop no later than the twenty-third. Ribbentrop made for Moscow, where, as both Orwell and Koestler noted, swastikas adorned the airport of the capital of the homeland of socialism. This, the final ideological shock that separated Koestler from communism, was really a sign that the Soviet Union was no longer an ideological state. The two regimes immediately found common ground in their mutual aspiration to destroy Poland ...the Soviet Union had agreed to attack Poland along with Germany. ... In August and September 1939, Stalin was reading maps not just of east Europe but of east Asia. He had found an opportunity to improve the Soviet position in the Far East. ...Stalin could now be confident that no German-Polish attack was coming from the west... The Soviets (and their Mongolian allies) attacked Japanese (and puppet Manchukuo) forces... on 20 August 1939. Stalin's policy of rapprochement with Berlin of August 23, 1939, was also directed against Tokyo. The Molotov-Ribbentrop Pact between Germany and the Soviet Union, signed three days after the offensive, nullified the Anti-Comintern Pact between Germany and Japan. Even more than the battlefield defeat, the Nazi-Soviet alliance brought a political earthquake to Tokyo. The Japanese government fell, as would several more in the coming months. Once Germany seemed to have chosen the Soviet Union rather than Japan as its ally, the Japanese government found itself in an unexpected and confusing situation... if the union between Moscow and Berlin held, the Red Army would be able to concentrate its forces in Asia rather than in Europe. ... Hitler had given Stalin a free hand in Asia, and the Japanese could only hope that Hitler would betray his new friend. ... When the Red Army defeated the Japanese, on 15 September, Stalin had achieved exactly the result that he wanted. ... Stalin had replaced the phantom of a German-Polish-Japanese encirclement of the Soviet Union with a very real German-Soviet encirclement of Poland, an alliance that isolated Japan." ==Later events and total trade==

(Sept. 20, 1939). After the German invasion of Poland, to administer the economic blockade of Germany, the British Ministry of Economic Warfare was established on September 3, 1939. By April 1940 Britain realized that blockade appeared not to be working because of "leaks" in the blockade, with two major "holes" in the Black Sea and Mediterranean provided by several neutral countries, including Italy. : On September 17, the Red Army invaded eastern Poland and occupied the Polish territory which held up to 70 per cent of Poland's pre-war oil production. In October three German trade partners - Baltic States – Estonia, Latvia, and Lithuania – were given no choice but to sign a so-called Pact of defense and mutual assistance which permitted the Soviet Union to station troops in them. German-Soviet tensions were also raised by the Soviet invasion of Finland started at November 1939. Several German merchant ships were damaged. Germany and the Soviet Union continued economic, military and political negotiations throughout the last half of 1939, which resulted in a much larger German–Soviet Commercial Agreement being signed on February 11, 1940. Under that agreement, the Soviet Union became a major supplier of vital materials to Germany, including petroleum, manganese, copper, nickel, chrome, platinum, lumber and grain. They also received considerable amounts of other vital raw materials, including manganese ore, along with the transit of one million tons of soybeans from Manchuria. G-6 production site During both the first period of the 1940 agreement (February 11, 1940, to February 11, 1941) and the second (February 11, 1941, until the Pact was broken), Germany received massive quantities of raw materials, including over: • 1,600,000 tons of grains • 900,000 tons of oil • 200,000 tons of cotton • 140,000 tons of manganese • 200,000 tons of phosphates • 20,000 tons of chrome ore • 18,000 tons of rubber • 100,000 tons of soybeans • 500,000 tons of iron ores • 300,000 tons of scrap metal and pig iron • 2,000 kilograms of platinum In August 1940, Soviet imports comprised over 50% of Germany's total overseas imports, which declined at this time to 20.4 thousands of tons. The trade relations ended when Germany began Operation Barbarossa and invaded the Soviet Union on June 22, 1941. The various items that the USSR had sent to Germany from 1939 to 1941 in significant amount, could be substituted or obtained by increased imports from other countries. Conversely, without Soviet deliveries of these major items, Germany could barely have attacked the Soviet Union, let alone come close to victory, even with more intense rationing. ==Notes==