Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (51 page)

The United States and the Soviet Union were natural partners. The Americans could provide industrial equipment for Moscow, and the Soviets had gold to pay for it. So it was not surprising that trade flourished, with Roosevelt and Morgenthau watching developments closely. American exports to Moscow went from $8.9 million in 1933 to $33.4 million in 1936, while U.S. imports jumped from $12.1 million to $21.4 million in the same period.
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Morgenthau in April 1937 suggested to the Soviets that the central bank of the Russian Federation open an account with the Federal Reserve Bank of New York to handle earmarked gold transactions, which they did in June. Moscow made an initial deposit of $100,000. As part of the new relationship, the New York Fed staff produced a detailed study of the Soviet gold industry since the Russian Revolution. Given Soviet secrecy in such matters, it was more guesstimates than hard facts. It showed that the Soviet bank’s official balance sheet on January 1, 1937, reported assets of $120 million, with twenty-four percent of that in gold. It estimated that the country’s bullion stocks were worth $1.2 billion, with the central bank holding $300 million. The study estimated that in the fifteen years since 1923, the Soviet Union had exported $730 million of the $1.2 billion in gold that it mined. The Soviet Union was the world’s second largest producer after South Africa. Moscow now probably had twenty-one percent of the global gold market. The study predicted that the Soviet Union in 1937 would buy $30 million in goods from the U.S., with most of that going toward products such as aircraft engines.
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In August 1939, the Soviet central bank sent the New York Fed a cable saying that they would soon be sending a first shipment of gold from Leningrad to New York. On September 27, the State Bank delivered 160 bars of gold to San Francisco. The following month a second shipment worth $11 million arrived.
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While most of the bullion arrived in New York City and was taken immediately to the Federal Reserve vault, some also landed in San Francisco after crossing the Pacific Ocean. The gold departed from the port of Vladivostok on the Pacific Coast. There were two routes out of the harbor. In the winter, when the northern way was frozen, it left by the southern one. The bullion was stored at the U.S. Mint in San Francisco, which had been built originally to handle the California gold rush. The funds were immediately booked in the Secretary of the Treasury’s special account.
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Soviet gold shipments to the U.S. continued at a good pace, especially after the European war began in September 1939. Some of the shipments went to Chase Manhattan Bank and Guarantee Trust in addition to the Federal Reserve. In the middle of July, the Treasury Department received a message that ten tons would soon arrive in either San Francisco or New York. It came in mid-August. In mid-September $5.6 million worth landed in San Francisco. On October 11, Morgenthau gave the Soviet Union government a $50 million advance to buy weapons in expectation of new gold shipments for the next six months. Later that month the
SS Dneprostroy
arrived in New York with $5.5 million in bullion. On November 6, the
SS Azerbaidjan
pulled into San Francisco with $6 million in bullion, and on December 10, the
SS Transbalt
landed in the same harbor with $6.8 million. The
SS Donbass
also docked in New York with a bullion cargo of $6.6 million. Also that month, Morgenthau told the press that the U.S. had purchased an addition $30 million in gold from Russia.
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Moscow sold plenty of bullion to other western countries during this period. Between December 8 and 26, 1939, the Soviets exported nearly 90 tons. Britain bought 23.2 tons, the U.S. 18.9 tons, Germany 12.5 tons, Holland 27.5 tons, and Switzerland 7.9 tons. In the first three months of 1940, the Swiss acquired an additional 20 tons of Soviet gold. Shipments continued to the U.S. in 1940, with several going via Vladivostok to San Francisco. In the first half of 1941, the bulk of the 60 tons that the Soviets exported went to the U.S. and Switzerland, with only a small amount going to Germany.
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On June 22, 1941, Hitler launched history’s mightiest invasion against the Soviet Union. Armies of the Axis nations attacked on a front 1,800 miles wide. The 150 divisions were made up of three million men, of which two-and-a-half million were Germans. The nineteen panzer divisions had three thousand tanks. There were also 7,000 artillery pieces, 2,500 aircraft, and even 600,000 horses.
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Armchair historians immediately compared the date with Napoleon’s invasion of Russia in 1812. He crossed the Neman River into that country on June 24 with a half million men and reached Moscow on September 14. The Russians, though, refused to surrender, and the French leader left Moscow on October 19 with about 100,000 men and 40,000 wagons filled with war spoils. The retreat turned into a disaster, as Russian soldiers attacked the retreating
Grande Armée
. The French claimed that
Général Hiver
(General Winter) defeated them. Historians estimate that only about 20,000 soldiers made it back to France.
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Would Hitler succeed where Napoleon had failed? The Germans certainly thought so. Göring’s air force expected to be back fighting Britain in the air after two months of duty on the eastern front. Hitler, however, attacked six weeks later than his original plan because of his detour into Yugoslavia and Greece to protect his southern flank.

Stalin had plenty of warning that an attack was coming. His own military had been telling him for months. In late April, Churchill informed him through the British ambassador in Moscow that the Germans would soon attack. Roosevelt sent a similar message. Stalin, though, could not bring himself to believe them, as while he trusted no one else, he trusted Hitler.

The Soviet leader at the time was also receiving secret notes from Hitler. The Nazi leader wrote him at least two known letters, one on December 31, 1940, and another on May 14, 1941. In the second one Hitler admitted that there was a Nazi military build-up on the Soviet border, but said it was being done to prepare for an invasion of Britain “away from the eyes of the English opponent and in connection with the recent operations in the Balkans.” He added that “on my honor as a head of state” there would be no attack on the Soviet Union. As Alexander Solzhenitsyn later wrote, Stalin, the man who trusted no one, trusted Adolf Hitler.
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At 8:00 P.M. on June 21, Stalin was in a meeting at the Kremlin, when he received a phone call from General Georgy Zhukov, the chief of the general staff, telling him that a German noncommissioned officer had just surrendered to Soviet troops and told them that an invasion would start the next morning at 4:00. Zhukov asked for permission to mobilize, but Stalin barked back, “Permission not granted. This is a German provocation.” The Soviet leader then soon departed for his dacha just outside Moscow and went to bed. Semen Timoshenko, the People’s Commissar of Defense, and Zhukov slept that night in their offices.
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At 3:45 A.M., Zhukov again telephoned Stalin, but the duty officer at the dacha said he was sleeping. The general replied, “Wake him immediately. The Germans are bombing our cities.” Three minutes later, Stalin was on the phone, and Zhukov repeated the news. There was a long silence on the phone, and the general asked, “Did you understand what I said?” More empty air and finally the Soviet leader said, “Tell Poskrëbyshev [his executive assistant] to summon the whole Politburo.”
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The first day of the war was a monumental disaster for the Soviet Union, whose air force lost 1,200 aircraft that day alone. The Politburo met and agreed that a speech to the nation had to be made, but Stalin was too shattered to do it. For most of the day, he was also still in denial, believing the invasion might be Hitler’s plot to get him to attack first. So the task fell to V. M. Molotov, the People’s Commissar for Foreign Affairs and Stalin’s closest toady. The announcement was more propaganda than news, claiming that only two hundred people were dead. It concluded with a stirring call, “Our cause is just. The enemy will be crushed. Victory will be ours.” Many believe that Stalin wrote the final three sentences.
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Historians have hotly debated Stalin’s role in his country’s defense during the first week of the war. Nikita Khrushchev in his memoirs indicated that the Soviet leader went into shock and became dysfunctional. Khrushchev, though, was not in Moscow and based that opinion on hearsay. At the time, he was in Ukraine with Zhukov attempting to stop the Nazi invasion. The Kremlin kept logbooks of Stalin’s meetings during that period, and those show he was active most of the time. He always had strange working habits, so his schedule was not unusual. On June 26, for example, he was at the Kremlin from 12:10 P.M. until just before midnight, meeting with twenty-eight different people. He normally arrived at the Kremlin at about 2:00 in the afternoon, pulling up in a small caravan. For security reasons, no one ever knew out of which one he would emerge. Then he worked late into the night.
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On June 27, Stalin arrived for work at 4:30 in the afternoon. He immediately summoned the Politburo and met with them until 9:30. Some military leaders also attended. On the agenda was what to do with the country’s most valuable properties to protect them from the invasion rolling from the west. The four most precious items were the country’s gold stocks, the Romanoff crown jewels, diamond holdings, and artworks of the famed Hermitage Museum in Leningrad. The group also discussed safeguarding industrial valuables and important raw materials, but decided that those four most important items had to be shipped far inland, safely away from the invaders.
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The Ural Mountains run through Russia from north to south, from the Arctic Ocean to the Ural River. This chain of mountains is generally considered the natural boundary between Europe and Asia. The highest peak at 6,217 feet is Mount Narodnaya. The Politburo plan was to evacuate the country’s most precious properties to the foothills of the eastern side of the mountains, so they would be behind the Urals. The title of the Council of People’s Commissars document No. 144: “On the Evacuation from Moscow of the State Deposits of Precious Metals, Precious Stones, the Diamond Fund of the U.S.S.R., and the Treasures of the Kremlin Armory.”
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Item one in the order dictated that all the listed goods be sent to the cities of Sverdlovsk and Chelyabinsk. The directive did not state how, but they went by train. The first city was the administrative center of the Urals. It was then called Sverdlovsk, but today is known as Yekaterinburg. It was just shy of 900 miles due east of Moscow. The second destination was 120 miles south and slightly east. It was named Chelyabinsk. Both locations are on the eastern side of the Urals. The seven-point document also gave general instructions to several state agencies. The People’s Commissariat of Forestry, for example, was to supply the wooden boxes to carry the valuables. The People’s Commissariat of Communications Lines had to obtain the necessary trucks and trains. The People’s Commissariat for Internal Affairs, the feared secret police, was assigned to get “the necessary number of employees and military guards for escorting and guarding the evacuated treasures.” The final instruction to both the secret police and the Ministry of Finance was that the whole operation had to be completed “within three days.” Nikolai Bulganin, the deputy prime minister and head of the State Bank of the Soviet Union, signed the document.

Since the Russian Revolution, the Soviet State Bank’s holdings had been a closely guarded secret, and starting in the 1930s, the Soviet State Bank had been under the thumb of the country’s secret service. The official gold holdings remained stable at 375 tons, which was the amount the country held to back its paper currency. The nation’s total gold holdings, though, had recently reached nearly 3,000 tons. Most of that was to be sold to the west.

The Politburo gave overall responsibility for executing its directive concerning the nation’s most precious items to Gokhran, the State Precious Metals and Gems Repository, which dated back to Peter the Great in the early eighteenth century. Its most important job before the Russian Revolution was to safeguard the czar’s crown jewels, but it was also responsible for the safety of all the country’s gold. Traditionally, valuables were stored in safety boxes that had three locks to which three different people held the keys. The head of the organization after the revolution was Yakov Jurovsky, who had also carried out the royal family’s execution in July 1918. Following some charges of missing gold, the agency was put under the state secret service, which still had that job in June 1941. Gokhran’s headquarters were immediately transferred to Sverdlovsk, and gold as well as diamonds were stored in facilities in the cities of Novsibirsk and Chelyabinsk.
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The first of three trains carrying 2,800 tons of gold left Moscow on June 30, and the last one departed on July 2. It took some 100 Pullman carriages to do the job. It left from the Northern railroad station and traveled along the Trans-Siberian railroad line. Soldiers from the Kremlin garrison took care of loading the gold into wooden crates. They were all numbered and recorded. Military guards traveled on each train. The first shipment proceeded without any stops until it reached the Kirov region about halfway to its destination. The commanding officer then halted the train after noticing cracks in the floor of one of the carriages, which undoubtedly was due to the weight of the gold. After the floor was repaired, the trip continued. It took four days to reach the final destination, where cadets from a military school helped with the unloading. Youngsters were selected because officials thought they were less likely than their parents to steal any gold. The last train arrived in Sverdlovsk the night of July 5.
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The Politburo was also determined to protect the Soviet Union’s most revered relic: the embalmed body of the nation’s founding father, Vladimir Lenin. General Nikolai K. Spiridonov, the commandant of the Kremlin, proposed to Lavrentiy Beria, a candidate member of the Politburo and head of the secret service, that it be sent “deep inside the country.” Lenin’s waxen figure had been on display for a decade in a darkened mausoleum in the center of Moscow’s Red Square. Soviet citizens often waited for hours to file past the open casket and pay homage to the body. It was the communist version of making a pilgrimage to Mecca or Lourdes. Lenin had to be protected as much as the country’s gold, diamonds, and paintings by being safely on the other side of the Urals. The Politburo discussed the issue on June 26 and decided to send it to a remote location where there were no military installations, which might be a target for Nazi bombers. The following day the Politburo took the decision to move the body. General Spiridonov suggested that several professors travel on the train “to take care of the body.”
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