Holodomor Background – Soviet Grain Exports and Loan Repayment

The Foreign Office and the Famine. British Documents on Ukraine and the Great Famine of 1932–1933 (1988)
Edited by Marco Carynnyk, Lubomyr Y.Luciuk and Bohdan S. Kordan
with a foreword by Michael R. Marrus

Ovey wrote in a letter to Henderson in march 1930 that the encouraging of British exports to the Soviet Union was a “pressing matter.” Britain’s policy, he gathered, was “to maintain correct and friendly relations with the Soviet Government, with a view to encouraging trade as much as possible.” Ovey then discussed ways of increasing exports to the soviet union. “That we buy commodities from Russia,” he wrote, “arises principally from the fact that it is the cheapest market.” The Soviet ability to buy from Britain depended on its ability to sell to Britain. ” The more Russia sells to us the more she should be sympathetically inclined ceteris paribus to buy from us,” Ovey concluded.(63)
(63) woodward and Butler, eds.,Documents on British Foreign Policy 7: 111-12

Moscow had borrowed a dreat deal of money in the west,especially in Germany, to finance its industrialization, and it could repay its loans only by selling grain. The Soviets were financing their programme of industrialization with short term loans which they paid off by exporting wheat. Between 1926 and 1930 Britain lent between 30 and 40 million pounds to Germany. The germans kept a percentage for themselves and passed the credits on to the Soviet Union, which used them to purchase goods,principally heavy machinery, in Germany. Britain was thus financing Germany’s export trade with the Soviet Union. (66) A serious public campaign to alleviate the famine by returning the grain to those who needed it most would,therefore, have brought about a reduction of Soviet grain exports,and that in turn, would have upset the international banking system, in which London had such a great stake. (67)

(66) R. Boothby, Conservative MP, speaking at the Congress of Peace and Friendship with the USSR in London in December 1935. Britain and the Soviets: The Congress of Peace and Friendship with the USSR (London: Martin Lawrence, 1936), 3.
(67) In a memorandum on the solvency of the Soviet government, G.P. Paton, the commercial counsellor of the British embassy in Moscow, revealed in June 1932 that the Soviet Government was not able to pay the bills that would mature in Germany in October 1932. In October -December 1931 Soviet bills amounted to 40 million marks, but a year later the Soviet government would be faced with bills totaling 165 million marks. ” If all reports regarding this year’s sowing are true.” wrote Paton, ” the prospects of a bumper crop are very remote, and wheat acreage is up all over the world. The Concensus of opinion, in fact, is that Soviet Russia will be fortunate if it can produce sufficient grain to meet domestic requirements; and that exports, if any, will be relatively insignificant as compared with the past 2 years. Assuming this forecast to be true, where is the Soviet government to find the wherewithal to pay the bills maturing in Germany from October onwards? And what of the bills maturing in other countries?” FO.371/16323 N 3840