German–Soviet economic relations (1934–1941)

In August of that year, the countries expanded their economic relationship by entering into a Trade and Credit agreement whereby the Soviet Union sent critical raw materials to Germany in exchange for weapons, military technology and civilian machinery.

Thereafter, Germany received significant amounts of critical raw materials necessary for its future war efforts, such as petroleum, grain, rubber and manganese, while sending weapons, technology and manufacturing machinery to the Soviet Union.

After unresolved negotiations regarding a potential Soviet entry into the Axis Pact, the two governments settled several disputes and further expanded their economic dealings with the January 1941 German–Soviet Border and Commercial Agreement.

[6] In addition, after the Russian Revolution of 1917, the young communist state assumed ownership of all heavy industry, banking and railways, while the 1921 New Economic Policy left almost all small-scale production and farming in the private sector.

[16][17] In 1934, Hitler spoke of an inescapable battle against "pan-Slav ideals", the victory in which would lead to "permanent mastery of the world", though he stated that they would "walk part of the road with the Russians, if that will help us.

[33] The crisis resulted in Hitler writing one of the few documents of any length that he drafted in his 12 years as Reich leader—a six-page memorandum that focused upon building a military larger than all possible enemy combinations and forcing upon the economy its racial duty of eschewing all inessential tasks in favor of large-scale war making.

[7] His harangued German economist counterpart, Schacht, would face similar treatment many years later, being sent to a Nazi concentration camp after being accused of being part of the July 20 Plot to assassinate Hitler.

[47] The pressure to fulfill Soviet Second and Third Five Year Plan goals was more keen where managers faced the risk that every failure might be interpreted as an act of economic sabotage.

[49][50] Hitler's Four Year Plan called for a modernized expanded agricultural sector to free Germany from the fear of a blockade, a network of motorways, remodeled cities, a massive program of import-substitution to supply synthetic strategic material and military industries capable of out-producing the largest enemy economy.

[33] It made heavy demands on resources already in short supply because of high military spending, resulting in the delay or postponement of most programs while scrambling for raw materials, building workers and engineering equipment.

[1] Germany suffered from the same supply problems for metal ores such as chrome, tungsten, nickel, molybdenum, and manganese, all of which were needed for hardened steel used in tanks, ships and other war equipment.

[61] In 1936, Hermann Göring told several German industrialists that "obtaining raw materials from Soviet Union is so important that he shall raise this issue with Hitler himself—however much the latter might be ill-disposed to accept this.

"[74] After hearing the dire reports of German planners, in a November 5, 1937, Hitler told his generals that he would have to take over a neighbouring country to ensure the supply of agricultural land and raw materials, now equating this massive economic need with Lebensraum.

[75] The day German forces entered the Czech Sudetenland, Hermann Göring pored over figures with generals covering every item of Sudeten economic resources, from lignite to margarine, so that it could be allocated to the Four Year Plan.

[75] In January 1939, the huge Four Year Plan goals combined with a shortage of foreign hard currencies needed to pay for raw materials forced Hitler to order major defense cuts, including a reduction by the Wehrmacht of its allocations by 30% of steel, 47% of aluminum, 25% of cement, 14% of rubber and 20% of copper.

[94][95] The agreement provided for roughly 200 million in Soviet imports of raw materials (for which they would receive a seven-year line of credit), German exports of weapons, military technology and civilian machinery.

[95][96][97][98] German Foreign Ministry official Karl Schnurre noted at the time that "[t]he movement of goods envisaged by the agreement might therefore reach a total of more than 1 billion Reichsmarks for the next few years.

"[100] Soviet foreign minister Vyacheslav Molotov wrote in Pravda that day that the 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.

[111] In the face of a British blockade, the only remaining state capable of supplying Germany with the oil, rubber, manganese, grains, fats and platinum it needed was the Soviet Union.

"[66] It continued "for this purpose an economic programme is to be set up by both parties, according to which the Soviet Union is to deliver raw materials to Germany, who will balance these out by means of long-term industrial shipments.

[126] The agreement also contained a "Confidential Protocol" providing the Soviet Union would undertake purchases from third party countries of "metals and other goods" on behalf of Germany.

[94] The Soviets also granted Germany the right to transit for German traffic to and from Romania, Iran, Afghanistan and other countries in the east, while reducing by 50 per cent freight rates to Manchukuo, which was under Japanese control.

[132] Germany did initially deliver some floating cranes, five aircraft, an electrode shop, several gun turrets (with fire control apparatuses and spare parts), two submarine periscopes and additional ship construction tools.

[157] Ribbentrop wrote a letter promising Stalin that "in the opinion of the Fuhrer ... it appears to be the historical mission of the Four Powers – the Soviet Union, Italy, Japan and Germany – to adopt a long range-policy and to direct the future development of their peoples into the right channels by delimitation of their interests in a worldwide scale.

[174] At the same time, German war planners were aware of the potential fragility of Soviet oil, agreeing with Allied military assessments that they had captured in France saying that "a few incendiary bombs would have sufficed to shut down Baku for years.

[197] Although many of the machine tools and other equipment exported to the Soviet Union was destroyed or captured in the Nazi invasion, the remainder likely still played an important role in reequipping the Red Army.

[198] More importantly, between July and December 1941, the Soviets had moved 2,593 enterprises—most of them iron, steel and engineering plants—and 50,000 small workshops and factories to the Ural Mountains in the Volga region, to Kazakhstan and to Eastern Siberia, away from the Nazi forces who had already occupied vast quantities of European Russia.

[201] The German southern campaign began with a push to capture the Crimea which ended in disaster for the Red Army, and caused Stalin to issue a broad scolding of his generals' leadership.

[203] Although the Soviets suffered in excess of 1.1 million casualties at Stalingrad,[204] the victory over German forces, including the encirclement of 290,000 Axis troops, marked a turning point in the war.

[143][190] In terms of supplies, oil was the main obstacle, with shortages in some places by the end of 1941 and forcing Germany to turn south to attempt to invade the oil-rich Caucasus in 1942.