Diplomatic Isolation and the Beginnings of Stalinism

Michael Reiman has argued that the Opposition remained a crucial factor in Soviet politics for some time after December 1927, when Zinoviev and Kamenev surrendered to the Stalin-Rykov-Bukharin leadership, and the recalcitrant Trotsky and seventy-five of his followers were expelled from the CPSU. In the winter of 1928, the struggle with the Opposition decisively influenced consideration within the Politburo of the strategies necessary to secure urgently needed foreign financial assistance. On the one hand, the requisites of international politics suggested that the Politburo would do well to eliminate the Opposition completely, once and for all. Signs of political instability in the USSR only made the Americans and the British hesitant about concluding agreements. On the other hand, open repression such as the executions that took place at the height of the war scare crisis would produce a negative reaction in the West and endanger the prospects for getting foreign loans and credits. Rykov, Stalin, and Kuibyshev were particularly concerned with securing foreign loans. Liquidating the Opposition was of lower priority for them, and they were inclined to believe that it did not continue to represent a serious danger.^[18] Viacheslav Menzhinskii, the chairman of the OGPU (1926-34), on the other hand, argued that the Opposition could still make a comeback from remaining

centers of resistance within the USSR.^[19] And Bukharin was alarmed at the prospect that Communist political figures linked with the Opposition might make substantial gains in the national elections pending in France and Germany. Should they be victorious, they might challenge the domination of the Bukharin-led Russian delegation within the Communist International.

In the economic dislocation and political turmoil of the winter of 1928, fear of the Opposition prevailed within the Politburo. There was a realignment of forces, and Stalin joined with Menzhinskii and Bukharin in their drive to suppress what remained of it in Russia. Since late 1926 his support for relaxing the foreign trade monopoly had been crucial to the search for agreements with Europe and America. Now he moved away from that position, concluding that loans and credits from capitalist states were of less urgency than the complete defeat of the Opposition. At a decisive meeting of the Politburo held on 26 February, the Menzhinskii-Bukharin-Stalin group defeated the position held by Chicherin, who argued against any change in the direction of foreign policy. Proposals for extensive relaxation of the trade monopoly were withdrawn lest they provide ammunition to the Opposition. Instead, the Opposition was to be blamed for the condition of the economy. Within days, Sovnarkom declared that Opposition activities in particular were responsible for the economic crisis, that any and all economic sabotage would be punished, and that the OGPU would be given powers of surveillance over both the economy and the party organization.^[20]

Suppressing opposition could not relieve the economic crisis, however, and the emergency measures for grain procurement did not. Although the grain procurement rate rose dramatically in February, in March it slowed and in April it dropped severely. For the 1927/28 economic year, grain exports declined to 410,000 metric tons from a level of 2.256 million metric tons in 1926/27. Increased export of industrial raw materials, timber, oil, sugar, ores, and furs compensated for this decline, all of them—with the exception of furs—being priced at below world and domestic market levels. As a result, the total volume of exports actually increased by 12.7 percent for the year 1927/28. However, imports, largely of industrial equipment, increased even more substantially, resulting in a negative trade balance. Gold and foreign exchange reserves were exported and short-term loans negotiated to cover the 247-million-ruble deficit.^[21]

The prospect of a persistent grain procurement crisis brought Soviet domestic and foreign economic policy to an impasse in the spring of 1928. As that impasse was perceived by those who would come to be called the "Stalinists," either imports of the technology and foreign industrial raw materials on which the industrialization drive was premised had to be

sacrificed or the market relations in the countryside that were central to the New Economic Policy must end for the sake of increased industrial investment. It was out of this Stalinist-defined impasse that the Stalinist solution eventually emerged—forcible mass collectivization of agriculture, rapid industrialization keyed to heavy industry, preemptive internal state terror, and the cult of the leader.^[22]

In the 1970s, Moshe Lewin and others argued that this outcome was not a socioeconomic necessity; the problems of agriculture need not have meant the end of the New Economic Policy. Economic development might have continued under some version of NEP if the impact of the crisis upon the peasantry had been eased by a combination of grain and goods imports and an increase in procurement prices.^[23] Lewin's argument has been extended by some economists who have asserted that the rates of economic growth achieved during the 1930s could have been duplicated within the framework of NEP. Others have contended in opposition that the New Economic Policy constituted an economic blind alley: NEP could not extract surplus grain from the peasantry, and it was fundamentally incapable of supporting industrialization. Both these hypotheses have been rejected by Davies, Wheatcroft, and Cooper, who have argued that by 1926/27, resource allocation and capital investment within the framework of NEP were sufficient to produce a level of industrial growth equal to or better than 1909-13 levels, but not an expansion equal to that achieved by the mid-1930s.^[24]

In actuality, extraeconomic, political considerations determined the way out of the impasse. In 1927, Stalin had been a strong voice within the Politburo for the search for agreements with Europe and America, despite his public rhetoric. Foreign capital and technology, he maintained, were indispensable to the industrialization drive and to the construction of socialism in the USSR, which he called "the economic dictatorship of the proletariat." To gain foreign assistance he pressed harder than any other member of the collective leadership at the time for a policy of concessions to capitalism. As the economic crisis worsened in the late spring of 1928, however, Stalin and those who became aligned with him became convinced that the pace of industrialization must be sustained despite the agrarian problem, even if it meant shortages, inflation, and disequilibrium in the internal market. He became convinced that the economic crisis could not be resolved within the framework of the market mechanisms of the New Economic Policy and that the search for foreign credits to finance industrialization was destined to fail. At this point, Bukharin broke with Stalin and joined with Rykov and Tomskii, who, along with Kalinin and Voroshilov, formed a moderate majority of five within the Politburo—a grouping that

persisted off and on until the latter two joined the Stalin group later in the year. Stalin responded by abandoning the consensus-building procedures by which the collective leadership had operated up to that time. Increasingly he resorted to making decisions either unilaterally or in consultation with his own group alone. In May and June the hard-line solution to the grain procurement problem, the punitive extraordinary measures, were reintroduced, apparently on Stalin's personal initiative.^[25] Soon Bukharin and Stalin were no longer on speaking terms.

Gradually the Rykov-Bukharin group and the Stalin group compiled antithetical strategies for leading the country out of its economic impasse and foreign relations dilemma. Stalin advocated a program of industrialization through a "tribute" or "supertax" extracted from the peasantry by a purged and rejuvenated party and state apparatus. The moderates lined up behind the advice advanced by the nonparty economic experts of the People's Commissariat of Finance (Narkomfin), which included cancellation of "the extraordinary measures," no further increases in capital expenditure, and restoration of market equilibrium. They also supported the foreign policy advocated by Narkomindel—the continued search for economic and political agreements with Europe and America and participation in organized multilateral cooperation. The central role played by imports, both in the agricultural strategy and in the industrial strategy of the moderate program, made the quest for foreign credits and the search for agreements a crucial factor in determining the future course of economic development and the outcome of the struggle among the collective leadership for control of the instruments of political decision making.

What stood in the path of the search for agreements with Europe and America in the spring of 1928 was the Shakhty case. On 10 March, Pravda announced that the OGPU had uncovered a large-scale and long-standing conspiracy of engineers in the coal-mining industry in the Shakhty region of the north Caucasus and the nearby Donets Basin of the Ukraine. More than fifty engineers, including three Germans, were accused of sabotage and treason, their acts ranging from what the prosecutor at the trial called "irrational construction projects," "unnecessary waste of capital," and criminal waste of foreign currency to the flooding of mines and the wrecking of equipment. All this was done allegedly in collaboration with former mine owners who had close connections with agents of German firms and the Polish, German, and French intelligence services.^[26] The show trial that began on 18 May was not the first in Soviet history, but it was the most highly dramatized and widely publicized one up to that time.

Some among the party/state leadership feared the economic and politi-

cal consequences of the affair and worked to limit the scope of the prosecution. Among them were Kuibyshev and Rykov, who reminded Menzhinskii that "the Central Committee has declared that the reconstruction of the socialist economy is not possible without the help of foreign capital and foreign experts"; the activities of the OGPU, he added, were "likely to sabotage not only our foreign policy position but also our entire economic life."^[27] Chicherin informed the head of the OGPU that the arrest of German engineers threatened to bring economic negotiations in Berlin to a halt and that it only assisted the efforts of "hostile bourgeois elements in foreign countries, who for weeks have been working quite openly to try to win Germany definitely to a Western orientation and include it in the English front."^[28] Others, however, sought to extend the scope of the affair— Menzhinskii himself and, above all, Stalin, who saw in Shakhty another example (following "the grain strike") of bourgeois counterrevolution, this time aided by Western European economic intervention against socialist industrialization, all of which he used as a confirmation of his doctrine that class struggle would intensify during the building of socialism, requiring, accordingly, greater use of police measures and state terror.^[29] The Shakhty affair sustained the war scare mentality of suspicion and blame, a mentality that within months would lay responsibility for all that went wrong with the industrialization drive at the feet of "bourgeois specialists."

International reaction to the arrest and trial of the German engineers was both immediate and vigorous. A month earlier, German and Soviet negotiators had begun trade and credit discussions in Berlin.^[30] To entice the Germans into an agreement, the Soviet delegation promised that orders amounting to 600 million marks would be placed in Germany over the next two years if Berlin granted a 600-million-mark credit, made additional long-term loans, and opened German financial markets to Soviet bonds. German industrial, commercial, and banking circles were not disposed toward an easy agreement, however. They had assumed that, as a result of the German-Soviet commercial agreement of October 1925 and the government-guaranteed 300-mark credit, they would have an increased share of Soviet foreign purchases. Instead, cash orders that had previously gone to Germany were diverted to England and the United States.^[31] Germany's total share of Soviet imports had not increased, and the hopes of German business for an even greater share of the Russian market (of which they controlled the largest portion) went unfulfilled. In preparation for the trade negotiations, they had prepared a list of complaints and demands, including a demand for relaxation of the government foreign trade monopoly, which in their opinion placed cumbersome and arbitrary restrictions on German commerce.

At the German Foreign Ministry also this was a time of agonizing reappraisal. Many of the expectations of 1926 had evaporated. The Wilhelmstrasse could no longer assert with confidence that ties to the USSR would directly improve Germany's international position as Berlin shepherded an increasingly pragmatic and moderate Soviet regime out of isolation. In the aftermath of the war scare crisis, it could not even hope that German diplomacy would be able to abate that isolation. Russia's economic difficulties and diplomatic isolation meant that the Rapallo-Berlin relationship was not likely to be of immediate use, either in an effort to revise the postwar settlement in Eastern Europe or as a card to play at this time as the Stresemann-Schubert Foreign Ministry pressed for negotiations with the Allied powers on a definitive reparations agreement, an end to the military occupation of the Rhineland and what came to be called "the final settlement of the war."^[32] However, no other strategy was available to the German Foreign Ministry. It therefore encouraged the trade talks with Moscow lest a refusal by German banks to extend new loans to the USSR, what Stresemann referred to as a "withdrawal of German business from Russia," jeopardize German-Soviet political relations.^[33] The arrest of the German engineers, however, infuriated both public opinion and business interests, and on 15 March, Berlin broke off the trade talks.

In Moscow, a parallel policy review took place. Since early 1927 the Soviet military leadership had been concerned that Germany seemed to be moving into the British orbit, thereby creating the danger that intelligence gathered by German officers in the USSR would fall into the hands of Russia's enemies. To prevent security leaks, they pondered gradually severing relations with the Reichswehr.^[34] Similar concerns were apparently raised in the Politburo as a result of the Shakhty affair, and it appointed a special commission to review cooperation between the Red Army and the Reichswehr and to propose whether it should be continued. Informed of this, Krestinskii complained directly to Stalin. In an appeal paralleling that made by Kuibyshev and Rykov, he argued that military collaboration with the Germans was the only way "to overtake and surpass European military technology" and that it directly increased Soviet security. German military officers in Russia could see firsthand the strength of the Red Army, he wrote, and, as a result, estimation of Soviet military power would be raised throughout Europe. This would, he maintained, "reduce the danger of attack on us." All this was achieved at bargain rates, Krestinskii added, because "we take more than we give."^[35]

Elsewhere, the arrest of the German engineers was regarded as proof that one could not do business with Communists, and suspension of the trade negotiations in Berlin was applauded. Relations with France, in which

Chicherin had placed considerable hope, now quickly deteriorated. In a move that displayed little interest in improving them, the French government renewed its demands for the return of the French gold held in the Soviet state bank since the revolution.^[36] With such unfavorable turns in relations with both Berlin and Paris, the diplomatic and economic isolation of the USSR deepened. Russia's situation in international politics was reminiscent of what it had been at the time of the war scare crisis. New rumors of an impending Polish-Soviet war circulated. And what hope there remained for the policy of agreements depended on the United States.

As "the most technologically advanced capitalist country" (as it was termed in the Soviet debate on economic development), the United States occupied a highly significant place in the Bolshevik concept of economic foreign relations, both as a source of technology and machinery and as a model of large-scale standardized production, assembly-line techniques, economies of scale, worker productivity, and high growth rates. So important was America to Soviet economic development that the Soviet government made an exception to its standard practice and traded with the United States even in the absence of official diplomatic relations.^[37] Soviet engineers, designers, and planners preferred American technology to that of Germany, and by 1928 the American model of steel making, rather than the smaller German blast furnaces, had become the model for Soviet installations.^[38] Nevertheless, after having led the world in exports to the USSR in 1924/25, the United States thereafter fell to second place behind Germany. As viewed from Moscow, the policy of the U.S. government was responsible for this. While the German government had bolstered trade with the USSR by guaranteeing long-term credits, Washington refused to discuss credits and withheld diplomatic recognition, permitting only private trade contracts to be entered into by American firms. In turn, the NKID stopped asking Washington for diplomatic recognition after 1923, although Litvinov made known Moscow's desire for normal relations through occasional statements before the Central Committee.^[39]

According to calculations made by the NKID Collegium in the summer of 1928, however, the prospects for improving relations with Washington were growing. The November presidential elections would bring a change of administration, and the election of Herbert Hoover, they thought, would mean a shift in American policy toward the USSR. Such a shift would in turn influence the governments of Western Europe.^[40] In an effort to gain access to American policymakers and to influence American policy attitudes, the Soviet government indicated its interest in ratifying the peace pact proposed by Frank B. Kellogg, the American secretary of state (1925-29), and in attending the signing ceremony in Paris. The Kellogg pact was

another instance of multilateral international cooperation—following the Geneva Economic Conference and the Preparatory Disarmament Commission—where Soviet spokesmen could impress European and American policymakers with the sincerity of their "peace policy" and with the prospects for profit through economic exchange with the USSR. Diplomatically, participation in the pact was essential. To sign it would reduce the level of Soviet isolation; to remain outside could only solidify the capitalist powers into an anti-Soviet bloc.^[41]

The German Foreign Ministry played a mediating role in the negotiations leading to the Kellogg-Briand Peace Pact. In its continuing effort to shepherd the USSR out of isolation, the Wilhelmstrasse used its influence in Washington, London, and Paris to gain admission for the USSR to the group of nations signing the agreement. In response, articles appeared in the Moscow press encouraging the German Foreign Ministry in its efforts to bridge the diplomatic gap between Russia and the West and looking forward to a new era in German-Soviet political relations.^[42] In what may well have been a signal to Berlin and the other European capitals of a renewed desire for rapprochement and agreement, the Politburo liquidated the Shakhty case expeditiously and freed the German engineers.

In the Politburo, the decision to join the peace pact figured strongly in the efforts of the moderate group to rescue NEP through the financial assistance of Europe and America. This was not the only policy consideration however. Soviet participation in the pact was a way of continuing "the struggle for peace"—in this case, not only peace between the USSR and the capitalist world but also peace among the capitalist powers themselves— and of thereby preventing a repetition of the general European war of 1914. Inherent in this stance was acknowledgment that a second total war would inflict destruction on Russia as well as on Europe, on the bastion of socialism as well as on the centers of capitalism. In that sense, it represented a departure from the Leninist doctrine that counted on the antagonisms among the imperialists to promote the security of the Soviet state. Some substantiality is given to this interpretation of Russia's Kellogg pact policy by the way the supporters and defenders of the peace pact lined up as it was being formulated. Litvinov and Bukharin supported the idea of signing the pact, arguing that the USSR should be associated with any project that offered the possibility of establishing international peace. Chicherin, on the other hand, was critical, maintaining that it would allow the major powers to interfere in Russia's foreign affairs.^[43]

In what was probably the last dispute between him and Litvinov, Chicherin lost out in the decision. In September he left Moscow for a second extended period of medical treatment in Germany. Litvinov was appointed

acting commissar and took over operational leadership of the NKID. Chicherin was in effect leaving the Foreign Commissariat forever.^[44] Although he returned in June 1930 with some of his previous energy restored, he resigned the next month to be succeeded by Litvinov. What combination of ill health, discouragement at the course of Soviet foreign relations, rivalry with Litvinov, and the problems associated with conducting a consensus foreign policy for an internally conflicted party leadership led to the demise of Chicherin has not been documented. Sheinis suggests that the internal conflicts, along with his failing health, constituted the crucial factor in the erosion of Chicherin's position in policy making and his eventual resignation. Although Litvinov lacked Chicherin's powers of policy conception, he was well suited to dealing with the party leadership. He was less outwardly emotional than Chicherin, stronger-willed, and more capable of concealing his personal policy preferences. Above all, he was less confrontational and less demanding in his relations with the Central Committee.^[45] Typically, Chicherin's last interventions in policy formation were directed at reprimanding Comintern spokesmen for making public statements that he considered damaging to relations with Germany.^[46] He regarded Weimar Germany and Kemalist Turkey as the anchors of Soviet policy in Europe and Asia, respectively; promoting favorable relations with them was his major achievement as commissar and his chief legacy.

Washington meanwhile rejected the idea of Soviet participation in the ceremonies held in Paris on 27 August to sign the Kellogg-Briand Peace Pact. (The United States, the Locarno powers, Czechoslovakia and Poland, the British Commonwealth, and Japan attended.) It did agree, however, to a formula stating that no future distinction would be made between the original and subsequent signatories. Of the latter, the USSR was the first to adhere to the pact. The NKID also seized that opportunity to improve Russia's stalemated relations with Poland. In December, Litvinov proposed to Warsaw an agreement to bring the peace pact into force separately and in advance of its ratification by the original signatories. Warsaw agreed but insisted that the Baltic states and Romania be included too. Russia, Poland, Estonia, Latvia, and Romania signed the "Litvinov Protocol" (officially the Moscow Protocol) in Moscow on 9 February 1929. By April, Turkey, Persia, Lithuania, and the Free City of Danzig had also joined.^[47]

In the immediate aftermath of the Kellogg Pact negotiations, the Soviet government took steps to indicate to the United States and Europe the economic potential of improved relations. In September 1928, it authorized an easing of the regulations governing the granting of concessions to foreign entrepreneurs and approved a list of enterprises, including large-scale enterprises and municipal ventures, that foreign businesses might

take over. If the right offers were made, this move suggested, favorable deals could be concluded. The Soviet diplomatic offensive of the summer of 1928 was besieged with difficulties however. Foreign governments were well aware of the economic difficulties prevailing in the USSR and were reserved about signing trade or credit agreements. At the same time, the NKID suspected that an exhibition of too much eagerness for economic agreements would only bring increased pressure from Europe and America for more favorable terms. The proposed changes in the concessions policy yielded no new economic negotiations with the Americans, the French, or the British. Trade talks with Germany resumed, but Berlin avoided any discussion of new credits, and it made the outcome of negotiations dependent on payment of the first two installments on the credits the Soviets had received in 1926.

After 1928 the Soviets deemphasized foreign concessions as a channel for technology transfer. They had proved unpopular with foreign investors, and the economic benefits they yielded were offset by the threat they posed to socialist independence. Over 300 foreign concession contracts had been signed since 1920; in July 1928, 97 still operated—among them, 31 German, 14 American, 10 British, 6 French, and 5 Austrian. In 1929 only 59 of these still existed, accounting for less than 1 percent of industrial production in the USSR.^[48] During the period of the First Five-Year Plan, concessions were replaced by technical aid contracts, which foreign investors preferred because they were paid for in gold or foreign exchange and did not require long-term commitments.^[49]