How Lenin’s regime turned Russia’s priceless cultural patrimony into armored cars, trains, planes, and machine guns
Historians have never resolved a central mystery of the Russian Revolution: How did the Bolsheviks, despite facing a world of enemies and leaving nothing but economic ruin in their path, manage to stay in power through five long years of civil war? In this penetrating book, Sean McMeekin draws on previously undiscovered materials from the Soviet Ministry of Finance and other European and American archives to expose some of the darkest secrets of Russia’s early days of communism. Building on one archival revelation after another, the author reveals how the Bolsheviks financed their aggression through astonishingly extensive thievery. Their looting included everything from the cash savings of private citizens to gold, silver, diamonds, jewelry, icons, antiques, and artwork.
By tracking illicit Soviet financial transactions across Europe, McMeekin shows how Lenin’s regime accomplished history’s greatest heist between 1917 and 1922 and turned centuries of accumulated wealth into the sinews of class war. McMeekin also names names, introducing for the first time the compliant bankers, lawyers, and middlemen who, for a price, helped the Bolsheviks launder their loot, impoverish Russia, and impose their brutal will on millions.
Received Honorable Mention for the 2010 Ed A. Hewett Book Prize, sponsored by the National Council for Eurasian and East European Research, and awarded by the Association for Slavic, East European, and Eurasian Studies. -- Ed A. Hewett Book Prize ― Association for Slavic, East European, and Eurasian Studies Published On: 2010-11-01
About the Author
Sean McMeekin is assistant professor of international relations, Bilkent University, Ankara, Turkey. He is the author of The Red Millionaire: A Political Biography of Willy Münzenberg, Moscow’s Secret Propaganda Tsar in the West, published by Yale University Press. He lives in Ankara.
List of Abbreviations.................................................................ixA Note on Transliteration, Names, and Translation.....................................xiA Note on the Relative Value of Money Then and Now....................................xiiPrologue: The Patrimony of Imperial Russia............................................xviIntroduction to Bolshevik Gold: The Nature of a Forgotten Problem.....................1I. The Heist..........................................................................91. The Banks..........................................................................112. The People.........................................................................353. The Gokhran........................................................................544. The Church.........................................................................73II. Cashing In........................................................................935. Brest-Litovsk and the Diplomatic Bag...............................................956. Blockade...........................................................................1177. Stockholm..........................................................................1378. London.............................................................................1689. Rapallo............................................................................199Epilogue: From Stockholm to Sotheby's.................................................216Dramatis Personae.....................................................................223Notes.................................................................................233Selected Bibliography.................................................................273Acknowledgments.......................................................................286Index.................................................................................291Gallery follows page 92
Chapter One
The Banks
Three times Lenin has sent down to the Bank to fetch ten million Rubles and three times he has failed to secure them. The last time ... a battalion of soldiers with a band at their head marched to the Bank with the necessary vehicles to carry off the spoil ... all began bawling and shaking their fists.... For a time things looked nasty, but the [Bank] Directors found their champion in a giant peasant, in soldiers uniform, who roared louder than any ten and had a larger fist. - Francis O. Lindley, "Report on Recent Events in Russia," 25 November 1917
THE BOLSHEVIK NATIONALIZATION of Russia's banks in 1917 came right out of the playbook of the Communist Manifesto. "The proletariat will use its political supremacy," Marx had instructed, "to wrest, by degrees, all capital from the bourgeoisie." Such a program "cannot be effected," he emphasized, "except by means of despotic inroads on the rights of property," including the "centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly." Lenin, continuing this line of thought, had written earlier in 1917, "The big banks are that 'state apparatus' which we need for the realization of Socialism and which we take ready-made from capitalism.... This 'state apparatus' ... we can 'lay hold of' and 'set in motion' at one stroke, by one decree, for the actual work of bookkeeping, control, registration, accounting, and summation is here carried out by employees , most of whom are themselves in a proletarian or semi-proletarian position."
This was much easier said than done. Following Marxist theory, Lenin expected bank employees to cooperate in nationalizing bank assets: themselves proletarians, they could hardly object to the transfer of wealth into the hands of the dictatorship of the proletariat. But in practice, as the workers' soviets and Provisional Government had discovered after the February Revolution, the banks could not function without skilled employees trained in Western bookkeeping methods, most of whom had little patience with revolutionary theorizing. Although certain conspicuous assets of the tsarist regime-the imperial palaces, the crown lands and jewels, the royal trains and yachts-had been "nationalized," the Provisional Government stopped well short of sacking the banks. With the German army poised for most of 1917 just a few hundred miles from Petrograd, the workers' soviets and Kerensky's cabinet had resolved that, for the sake of survival, in Norman Stone's words, "the maintenance of the economy must be left to bankers and industrialists who understood these things."
The Bolsheviks made no such compromise with Russia's banking community. In part this was for the obvious reason that Lenin, unlike Kerensky (a Social Revolutionary, and not a particularly ideological one), was an avowed Marxist committed to nationalization on ideological grounds. Lenin's maximalist program, well publicized all year, ensured that bank directors would greet the Bolshevik seizure of power, effected in Petrograd on 7 November 1917 and in Moscow one week later, with hostility. Most private banks shut their doors immediately. The State Bank and Treasury remained open but refused to honor the Bolsheviks' requests for funds, lodged on behalf of the Council of People's Commissars ( Sovnarkom* ), all through November.
Like all governments, Lenin's needed ready cash, if only, at first, to pay the Red Guards-armed sailors, mostly from the Kronstadt garrison-who had staged the Bolshevik coup. And so, beginning on 12 November, Sovnarkom issued a decree threatening bank directors, in particular, I. P. Shipov of the State Bank, with arrest if they continued refusing to authorize Bolshevik withdrawals. Led by the stubborn Shipov, the bankers of Petrograd refused to give in. On 17 November, Shipov responded to criticism of his heartlessness by pointing out to the Bolsheviks that the State Bank had paid out, in the preceding week, more than 600 million rubles to the army, representatives of Russia's "real" government, and to public charities, such as soup kitchens for the poor. To the Bolshevik usurpers, he would give nothing, as they did not have the proper paperwork authorizing government withdrawals.
What followed was a tragicomedy of epic proportions, as the Bolsheviks tried, but failed, to steal 10 million rubles from Russia's State Bank. On 20 November 1917, Lenin sent his new commissar of finance, Viacheslav Menzhinskii, along with a battalion of armed sailors to the bank, "with a band at their head," along with "the necessary vehicles to carry off the spoil." The Bolsheviks' armed emissaries, a witness reported, then "began bawling and shaking their fists in the faces of their adversaries who consisted of the [Bank] Directors, some Delegates from the Duma, the Peasants Soviet, and from the workmen employed by the Bank. For a time things looked nasty, but the Directors found their champion in a giant peasant, in soldiers uniform, who roared louder than any ten and had a larger fist."
On 24 November 1917, Menzhinskii returned with a larger force and an ultimatum. Unless Shipov relented and turned over the money requested, Menzhinskii warned, every State Bank employee would be fired, lose his or her pension, and "those of military age would be drafted." By replacing striking bank officials with trusted party comrades, it was hoped, the Bolsheviks could authorize their own withdrawals without filling out official paperwork. But when the Bolsheviks, failing yet again to win compliance, fired Shipov, all but a small handful of State Bank employees walked out in protest, leaving no one in place to advise Menzhinskii's men. The members of the Bolshevik financial team were in over their heads as one of them, Valerian Obolensky-Osinsky, later confessed: "There were people among us who were acquainted with the banking system from books and manuals ... but there was not a single man among us who knew the technical procedure ... of the Russian State Bank. We took possession of an enormous machinery, the working of which was practically unknown to us. How the work was carried on, where things were to be found, what were the basic parts of the business machinery-all these were a closed book to us. We entered the enormous corridors of this bank as if we were penetrating a virgin forest."
Inevitably, the Bolsheviks, after bungling the attempted holdup of the State Bank and failing to find any employees willing to facilitate an inside job, began seizing hostages among the staff. To begin with, they needed to figure out how many cashboxes and vaults the bank contained and where the keys were hidden. As Lenin had instructed his bank-storming squad, "as long as we did not get the keys to the vaults , we were merely talking about the seizure of the bank." By the second day of the State Bank strike (25 November 1917), the Bolsheviks had located and taken into armed custody the Petrograd branch manager, the head cashier, the head bookkeeper, and the guardian of the vaults and demanded, at gunpoint, that the men surrender their keys. This they duly did, whereupon "the keys to the bank's millions were brought to [Bolshevik headquarters at] Smolny and solemnly emptied from a special chamois bag on the table before Lenin." Alas, Lenin, according to Obolensky-Osinsky, "was not satisfied with our first step and demanded from us money and not the keys."
Although it took three more days and a great deal of effort, the Bolsheviks finally did succeed in removing money from the Russian State Bank. A degree of legend surrounds this whole episode, but the basic facts are clear. To acquire additional leverage over the striking employees, the Bolsheviks took other Petrograd bank officials into custody, including Epstein of the Azov-Don, Wavelberg of the Commercial Bank, Sologub of the Volga-Kama, Sandberg of the Siberian Bank, and Krilitichevsky of the Bank for Foreign Trade. Lenin reportedly demanded 1 billion rubles for the release of his hostages, before finally settling for "1,000,000 rubles per head, but cash down only." After reaching an agreement to this effect, the Bolsheviks produced a decree from the Soviet of People's Commissars authorizing the withdrawal of 5 million rubles from the State Bank. Still, there were problems, as Obolensky-Osinsky remembered:
We had to strain our patience to the utmost in order to make the cashier enter this issue of money in the ledger and to make the accountants actually count the money in a steel room and bring it from there on a little pushcart to the cash office ... the time seemed to drag on terribly. There was no guard, and angry murmurs were already heard from the accountants. Piatakov left the room to look for the guard and did not return. Our nerves were overstrained. Suddenly the door flew open and two dozen armed soldiers entered the room and lined up along the table on which the money lay. The murmurs ceased. The soldiers put the money in bags and dragged them to the car. The money was sent to Smolny.
Although grateful to have cash on hand, the Bolsheviks were not home free yet. The employees of the State Bank had made clear they would not cooperate with the Bolsheviks any more than they felt was necessary to save themselves from a massacre. Permitting the withdrawal of 5 million rubles turned out to be a onetime concession: the strike continued on through the winter, ultimately encompassing more than six thousand bank employees in Petrograd alone. Bolshevik "commissars" were stationed at every bank in the capital and those in Moscow as well "in order to supervise that no money was paid out except for wages." Most of these commissars, the Danish manager of the Russian and English Bank lamented, were "ignorant vulgar boys who understood neither accounts or receipts." Not surprisingly, many were disgruntled former employees, fired for incompetence or malfeasance, who now demanded to take over account books they could barely read, let alone understand. Before long, the account books of Russia's leading banks were reduced to "a hopeless condition from which it will take years to recover."
By December 1917, nearly every state employee in Russia was "sabotaging" the Bolshevik government, that is, refusing to recognize Lenin's illegal seizure of power. Not the least irony of the advent of the world's first self-defined "workers' government" was that its first months were largely devoted to strikebreaking. Telegraph and telephone workers walked out as early as mid-November; water transport workers and schoolteachers followed on 20 November; and Moscow municipal staff one week later. Petrograd city employees walked out in mid-December. It was no coincidence that the dreaded Cheka (Chrezvychainaia Komissiia po bor'be s kontr-revoliutsiei, spekulatsiei i sabotazhem, or All-Russian Extraordinary Commission to Combat Counterrevolution, Speculation, and Sabotage) was formed as the state employee strike reached crisis stage. As Lenin instructed Felix Dzerzhinsky, the man chosen to direct the Cheka, on 20 December 1917: "The bourgeoisie are still persistently committing the most abominable crimes.... The accomplices of the bourgeoisie, notably high-ranking functionaries and bank cadres, are also involved in sabotage and organizing strikes to undermine the measures the government is taking with a view to the socialist transformation of society.... exceptional measures will have to be taken to combat these saboteurs and counter-revolutionaries."
Among those "exceptional" measures was a rapid escalation of the Bolshevik war on the banks. On 21 December 1917, the new managing director of the State Bank, Grigory Sokol'nikov, decreed that Bolshevik commissars must be appointed to all the banks in Russia. In a telegram sent simultaneously (and optimistically) to 102 different cities, not all of them, by any means, under Bolshevik control, Sokol'nikov ordered that Bolshevik bank commissars in all of them send weekly reports back to him in Petrograd. Most important, said commissars were to transfer to the State Bank for inspection, as quickly as possible, all "gold coin and ingots discovered" in their banks (nemedlenno peredavat' Gos. Banku obnaruzhivaemoe zoloto monetakh' i slitkakh').
Predictably, the Bolsheviks' extension of their bank offensive throughout Russia produced an equal and opposite reaction: the bank strike went national. While withdrawals for "workers" were everywhere permitted, in the form of checks drawn against the State Bank, Petrograd bank employees consistently refused to authorize the release of state funds for the Bolsheviks. Most bank directors preferred, not without reason, to wait for the formation of a legal government by the Constituent Assembly, elected in November and scheduled to convene in Petrograd on 18 January 1918.
Following their own stubborn logic, the Bolsheviks responded to the "sabotage" represented by a nationwide bank strike with ever more imperious decrees subordinating the recalcitrant banks to their authority. Simply appointing commissars, no matter how untrammeled their authority was in theory, had not been enough to bring the "bourgeois" banking community to heel. To show they really meant business, on 27 December 1917 the Bolsheviks proclaimed, in one of the most infamous of their revolutionary decrees, the abolition of all private banks. Further, the Bolsheviks laid claim to all bank deposits in Russia, with the exception of small savings accounts held by workers not belonging to the "rich classes," this crucial condition being defined as possession of 5,000 rubles, or the income of 500 or more per month. So, too, were private joint-stock companies administered by banks nationalized. The Bolsheviks also planned to cancel all loan obligations contracted by the former government (although this would not be publicly announced until February). Private property, whether in the form of cash, gold, commercial capital, or public bonds, was to be "annihilated."
The reaction of Russia's banking community to this frontal assault was marked by a mixture of bemusement and contempt. After summarizing the gist of the nationalization decrees, the manager of the Russian and English Bank of Petrograd wrote to the bank's London headquarters, "I could continue this list of interesting financial experiments for some time yet, but this may be sufficient to show you that we find ourselves in a lunatic asylum, and consequently no use wasting more time." It was indeed hard for most people to believe the Bolsheviks were serious when they further stipulated in the 27 December 1917 nationalization decree, for example, that "all holders of safe deposit boxes are under obligation to appear at the bank upon notice, bringing the keys to their safe deposit boxes," or that "all holders of safe deposit boxes who fail to appear after three days' notice will be considered as having maliciously declined to comply with the law of search." Who in their right mind would obey a "government" that declared illegal any resistance to its attempted robbery of individual bank accounts-a government, moreover, that had not been elected, that could not compel its own essential employees to show up for work, and the days of which (many hoped) were numbered, with a Constituent Assembly (in which the Bolshevik Party, not incidentally, would be a minority faction) slated to meet several weeks later?
The only factor working in the Bolsheviks' favor with the public employee strikers was constant Cheka harassment and a monopoly of armed forces-at least in Moscow and Petrograd. Showing the regime's contempt for the prerogatives of legality and democratic legitimacy, Lenin-loyal Red Guards and a disciplined detachment of Latvian Rifles blanketed "the entire square in front of Taurida Palace" on 18 January 1918 as the Constituent Assembly finally convened. Armed with "guns, grenades, munition bags, and revolvers," the Lenin-loyal forces intimidated and harassed all non-Bolshevik deputies, which is to say the vast majority of Russia's elected representatives, before dispersing the Assembly outright. Elsewhere in Petrograd, Bolshevik forces actually fired on workers demonstrating in favor of parliamentary authority, killing at least eight and possibly as many as twenty. One might expect this naked display of power would have forced some bank employees to give in and begin dealing with the Bolsheviks as a de facto government. But while most white-collar state employees relented and began serving Lenin's regime, however reluctantly, the bank employees refused to give in. All winter, as the Bolsheviks struggled to pay the Latvian Rifles and to publish party propaganda, the banks persisted in blocking state withdrawals. Both sides were standing on principle, the Bolsheviks unwilling to abandon their bank nationalization program, the bankers unwilling to bow down before Bolshevik tyranny.
How Lenin’s regime turned Russia’s priceless cultural patrimony into armored cars, trains, planes, and machine guns
Historians have never resolved a central mystery of the Russian Revolution: How did the Bolsheviks, despite facing a world of enemies and leaving nothing but economic ruin in their path, manage to stay in power through five long years of civil war? In this penetrating book, Sean McMeekin draws on previously undiscovered materials from the Soviet Ministry of Finance and other European and American archives to expose some of the darkest secrets of Russia’s early days of communism. Building on one archival revelation after another, the author reveals how the Bolsheviks financed their aggression through astonishingly extensive thievery. Their looting included everything from the cash savings of private citizens to gold, silver, diamonds, jewelry, icons, antiques, and artwork.
By tracking illicit Soviet financial transactions across Europe, McMeekin shows how Lenin’s regime accomplished history’s greatest heist between 1917 and 1922 and turned centuries of accumulated wealth into the sinews of class war. McMeekin also names names, introducing for the first time the compliant bankers, lawyers, and middlemen who, for a price, helped the Bolsheviks launder their loot, impoverish Russia, and impose their brutal will on millions.
From The New Yorker
After the October Revolution, the Bolsheviks were enmeshed in a civil war and desperate for funds for everything from guns and boots for soldiers to a luxury car for Lenin. In theory, they had at their disposal the riches of the deposed Tsar, including one of the world s great reserves of gold. But the gold was the security for Russia s national debt, and most of Europe didn t recognize the new regime or its right to the treasury anyway; in today s terms, it was a rogue state under heavy sanctions whose assets were effectively frozen. What followed, McMeekin writes, was a gold-laundering boom, involving art-thieving commissars, double-dealing smugglers, and a surprisingly nefarious cast of Swedes. The Bolsheviks put teams to work prying pearls from centuries-old icons, cracked open private safe-deposit boxes, and even stripped a necklace from Catherine the Great s tomb. McMeekin s outrage about the crimes occasionally overgilds a good and relevant story, but, given the economic and cultural cost to the Russian people, it is understandable.
Copyright ©2008 Click here to subscribe to The New Yorker
Review
Received Honorable Mention for the 2010 Ed A. Hewett Book Prize, sponsored by the National Council for Eurasian and East European Research, and awarded by the Association for Slavic, East European, and Eurasian Studies. -- Ed A. Hewett Book Prize ― Association for Slavic, East European, and Eurasian Studies Published On: 2010-11-01
About the Author
Sean McMeekin is assistant professor of international relations, Bilkent University, Ankara, Turkey. He is the author of The Red Millionaire: A Political Biography of Willy Münzenberg, Moscow’s Secret Propaganda Tsar in the West, published by Yale University Press. He lives in Ankara.
Excerpt. © Reprinted by permission. All rights reserved.
HISTORY'S GREATEST HEIST
THE LOOTING OF RUSSIA BY THE BOLSHEVIKS By SEAN MCMEEKIN
Yale University Press
Copyright © 2009 Yale University
All right reserved.
ISBN: 978-0-300-13558-9
Contents
List of Abbreviations.................................................................ixA Note on Transliteration, Names, and Translation.....................................xiA Note on the Relative Value of Money Then and Now....................................xiiPrologue: The Patrimony of Imperial Russia............................................xviIntroduction to Bolshevik Gold: The Nature of a Forgotten Problem.....................1I. The Heist..........................................................................91. The Banks..........................................................................112. The People.........................................................................353. The Gokhran........................................................................544. The Church.........................................................................73II. Cashing In........................................................................935. Brest-Litovsk and the Diplomatic Bag...............................................956. Blockade...........................................................................1177. Stockholm..........................................................................1378. London.............................................................................1689. Rapallo............................................................................199Epilogue: From Stockholm to Sotheby's.................................................216Dramatis Personae.....................................................................223Notes.................................................................................233Selected Bibliography.................................................................273Acknowledgments.......................................................................286Index.................................................................................291Gallery follows page 92
Chapter One
The Banks
Three times Lenin has sent down to the Bank to fetch ten million Rubles and three times he has failed to secure them. The last time ... a battalion of soldiers with a band at their head marched to the Bank with the necessary vehicles to carry off the spoil ... all began bawling and shaking their fists.... For a time things looked nasty, but the [Bank] Directors found their champion in a giant peasant, in soldiers uniform, who roared louder than any ten and had a larger fist. - Francis O. Lindley, "Report on Recent Events in Russia," 25 November 1917
THE BOLSHEVIK NATIONALIZATION of Russia's banks in 1917 came right out of the playbook of the Communist Manifesto. "The proletariat will use its political supremacy," Marx had instructed, "to wrest, by degrees, all capital from the bourgeoisie." Such a program "cannot be effected," he emphasized, "except by means of despotic inroads on the rights of property," including the "centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly." Lenin, continuing this line of thought, had written earlier in 1917, "The big banks are that 'state apparatus' which we need for the realization of Socialism and which we take ready-made from capitalism.... This 'state apparatus' ... we can 'lay hold of' and 'set in motion' at one stroke, by one decree, for the actual work of bookkeeping, control, registration, accounting, and summation is here carried out by employees , most of whom are themselves in a proletarian or semi-proletarian position."
This was much easier said than done. Following Marxist theory, Lenin expected bank employees to cooperate in nationalizing bank assets: themselves proletarians, they could hardly object to the transfer of wealth into the hands of the dictatorship of the proletariat. But in practice, as the workers' soviets and Provisional Government had discovered after the February Revolution, the banks could not function without skilled employees trained in Western bookkeeping methods, most of whom had little patience with revolutionary theorizing. Although certain conspicuous assets of the tsarist regime-the imperial palaces, the crown lands and jewels, the royal trains and yachts-had been "nationalized," the Provisional Government stopped well short of sacking the banks. With the German army poised for most of 1917 just a few hundred miles from Petrograd, the workers' soviets and Kerensky's cabinet had resolved that, for the sake of survival, in Norman Stone's words, "the maintenance of the economy must be left to bankers and industrialists who understood these things."
The Bolsheviks made no such compromise with Russia's banking community. In part this was for the obvious reason that Lenin, unlike Kerensky (a Social Revolutionary, and not a particularly ideological one), was an avowed Marxist committed to nationalization on ideological grounds. Lenin's maximalist program, well publicized all year, ensured that bank directors would greet the Bolshevik seizure of power, effected in Petrograd on 7 November 1917 and in Moscow one week later, with hostility. Most private banks shut their doors immediately. The State Bank and Treasury remained open but refused to honor the Bolsheviks' requests for funds, lodged on behalf of the Council of People's Commissars ( Sovnarkom* ), all through November.
Like all governments, Lenin's needed ready cash, if only, at first, to pay the Red Guards-armed sailors, mostly from the Kronstadt garrison-who had staged the Bolshevik coup. And so, beginning on 12 November, Sovnarkom issued a decree threatening bank directors, in particular, I. P. Shipov of the State Bank, with arrest if they continued refusing to authorize Bolshevik withdrawals. Led by the stubborn Shipov, the bankers of Petrograd refused to give in. On 17 November, Shipov responded to criticism of his heartlessness by pointing out to the Bolsheviks that the State Bank had paid out, in the preceding week, more than 600 million rubles to the army, representatives of Russia's "real" government, and to public charities, such as soup kitchens for the poor. To the Bolshevik usurpers, he would give nothing, as they did not have the proper paperwork authorizing government withdrawals.
What followed was a tragicomedy of epic proportions, as the Bolsheviks tried, but failed, to steal 10 million rubles from Russia's State Bank. On 20 November 1917, Lenin sent his new commissar of finance, Viacheslav Menzhinskii, along with a battalion of armed sailors to the bank, "with a band at their head," along with "the necessary vehicles to carry off the spoil." The Bolsheviks' armed emissaries, a witness reported, then "began bawling and shaking their fists in the faces of their adversaries who consisted of the [Bank] Directors, some Delegates from the Duma, the Peasants Soviet, and from the workmen employed by the Bank. For a time things looked nasty, but the Directors found their champion in a giant peasant, in soldiers uniform, who roared louder than any ten and had a larger fist."
On 24 November 1917, Menzhinskii returned with a larger force and an ultimatum. Unless Shipov relented and turned over the money requested, Menzhinskii warned, every State Bank employee would be fired, lose his or her pension, and "those of military age would be drafted." By replacing striking bank officials with trusted party comrades, it was hoped, the Bolsheviks could authorize their own withdrawals without filling out official paperwork. But when the Bolsheviks, failing yet again to win compliance, fired Shipov, all but a small handful of State Bank employees walked out in protest, leaving no one in place to advise Menzhinskii's men. The members of the Bolshevik financial team were in over their heads as one of them, Valerian Obolensky-Osinsky, later confessed: "There were people among us who were acquainted with the banking system from books and manuals ... but there was not a single man among us who knew the technical procedure ... of the Russian State Bank. We took possession of an enormous machinery, the working of which was practically unknown to us. How the work was carried on, where things were to be found, what were the basic parts of the business machinery-all these were a closed book to us. We entered the enormous corridors of this bank as if we were penetrating a virgin forest."
Inevitably, the Bolsheviks, after bungling the attempted holdup of the State Bank and failing to find any employees willing to facilitate an inside job, began seizing hostages among the staff. To begin with, they needed to figure out how many cashboxes and vaults the bank contained and where the keys were hidden. As Lenin had instructed his bank-storming squad, "as long as we did not get the keys to the vaults , we were merely talking about the seizure of the bank." By the second day of the State Bank strike (25 November 1917), the Bolsheviks had located and taken into armed custody the Petrograd branch manager, the head cashier, the head bookkeeper, and the guardian of the vaults and demanded, at gunpoint, that the men surrender their keys. This they duly did, whereupon "the keys to the bank's millions were brought to [Bolshevik headquarters at] Smolny and solemnly emptied from a special chamois bag on the table before Lenin." Alas, Lenin, according to Obolensky-Osinsky, "was not satisfied with our first step and demanded from us money and not the keys."
Although it took three more days and a great deal of effort, the Bolsheviks finally did succeed in removing money from the Russian State Bank. A degree of legend surrounds this whole episode, but the basic facts are clear. To acquire additional leverage over the striking employees, the Bolsheviks took other Petrograd bank officials into custody, including Epstein of the Azov-Don, Wavelberg of the Commercial Bank, Sologub of the Volga-Kama, Sandberg of the Siberian Bank, and Krilitichevsky of the Bank for Foreign Trade. Lenin reportedly demanded 1 billion rubles for the release of his hostages, before finally settling for "1,000,000 rubles per head, but cash down only." After reaching an agreement to this effect, the Bolsheviks produced a decree from the Soviet of People's Commissars authorizing the withdrawal of 5 million rubles from the State Bank. Still, there were problems, as Obolensky-Osinsky remembered:
We had to strain our patience to the utmost in order to make the cashier enter this issue of money in the ledger and to make the accountants actually count the money in a steel room and bring it from there on a little pushcart to the cash office ... the time seemed to drag on terribly. There was no guard, and angry murmurs were already heard from the accountants. Piatakov left the room to look for the guard and did not return. Our nerves were overstrained. Suddenly the door flew open and two dozen armed soldiers entered the room and lined up along the table on which the money lay. The murmurs ceased. The soldiers put the money in bags and dragged them to the car. The money was sent to Smolny.
Although grateful to have cash on hand, the Bolsheviks were not home free yet. The employees of the State Bank had made clear they would not cooperate with the Bolsheviks any more than they felt was necessary to save themselves from a massacre. Permitting the withdrawal of 5 million rubles turned out to be a onetime concession: the strike continued on through the winter, ultimately encompassing more than six thousand bank employees in Petrograd alone. Bolshevik "commissars" were stationed at every bank in the capital and those in Moscow as well "in order to supervise that no money was paid out except for wages." Most of these commissars, the Danish manager of the Russian and English Bank lamented, were "ignorant vulgar boys who understood neither accounts or receipts." Not surprisingly, many were disgruntled former employees, fired for incompetence or malfeasance, who now demanded to take over account books they could barely read, let alone understand. Before long, the account books of Russia's leading banks were reduced to "a hopeless condition from which it will take years to recover."
By December 1917, nearly every state employee in Russia was "sabotaging" the Bolshevik government, that is, refusing to recognize Lenin's illegal seizure of power. Not the least irony of the advent of the world's first self-defined "workers' government" was that its first months were largely devoted to strikebreaking. Telegraph and telephone workers walked out as early as mid-November; water transport workers and schoolteachers followed on 20 November; and Moscow municipal staff one week later. Petrograd city employees walked out in mid-December. It was no coincidence that the dreaded Cheka (Chrezvychainaia Komissiia po bor'be s kontr-revoliutsiei, spekulatsiei i sabotazhem, or All-Russian Extraordinary Commission to Combat Counterrevolution, Speculation, and Sabotage) was formed as the state employee strike reached crisis stage. As Lenin instructed Felix Dzerzhinsky, the man chosen to direct the Cheka, on 20 December 1917: "The bourgeoisie are still persistently committing the most abominable crimes.... The accomplices of the bourgeoisie, notably high-ranking functionaries and bank cadres, are also involved in sabotage and organizing strikes to undermine the measures the government is taking with a view to the socialist transformation of society.... exceptional measures will have to be taken to combat these saboteurs and counter-revolutionaries."
Among those "exceptional" measures was a rapid escalation of the Bolshevik war on the banks. On 21 December 1917, the new managing director of the State Bank, Grigory Sokol'nikov, decreed that Bolshevik commissars must be appointed to all the banks in Russia. In a telegram sent simultaneously (and optimistically) to 102 different cities, not all of them, by any means, under Bolshevik control, Sokol'nikov ordered that Bolshevik bank commissars in all of them send weekly reports back to him in Petrograd. Most important, said commissars were to transfer to the State Bank for inspection, as quickly as possible, all "gold coin and ingots discovered" in their banks (nemedlenno peredavat' Gos. Banku obnaruzhivaemoe zoloto monetakh' i slitkakh').
Predictably, the Bolsheviks' extension of their bank offensive throughout Russia produced an equal and opposite reaction: the bank strike went national. While withdrawals for "workers" were everywhere permitted, in the form of checks drawn against the State Bank, Petrograd bank employees consistently refused to authorize the release of state funds for the Bolsheviks. Most bank directors preferred, not without reason, to wait for the formation of a legal government by the Constituent Assembly, elected in November and scheduled to convene in Petrograd on 18 January 1918.
Following their own stubborn logic, the Bolsheviks responded to the "sabotage" represented by a nationwide bank strike with ever more imperious decrees subordinating the recalcitrant banks to their authority. Simply appointing commissars, no matter how untrammeled their authority was in theory, had not been enough to bring the "bourgeois" banking community to heel. To show they really meant business, on 27 December 1917 the Bolsheviks proclaimed, in one of the most infamous of their revolutionary decrees, the abolition of all private banks. Further, the Bolsheviks laid claim to all bank deposits in Russia, with the exception of small savings accounts held by workers not belonging to the "rich classes," this crucial condition being defined as possession of 5,000 rubles, or the income of 500 or more per month. So, too, were private joint-stock companies administered by banks nationalized. The Bolsheviks also planned to cancel all loan obligations contracted by the former government (although this would not be publicly announced until February). Private property, whether in the form of cash, gold, commercial capital, or public bonds, was to be "annihilated."
The reaction of Russia's banking community to this frontal assault was marked by a mixture of bemusement and contempt. After summarizing the gist of the nationalization decrees, the manager of the Russian and English Bank of Petrograd wrote to the bank's London headquarters, "I could continue this list of interesting financial experiments for some time yet, but this may be sufficient to show you that we find ourselves in a lunatic asylum, and consequently no use wasting more time." It was indeed hard for most people to believe the Bolsheviks were serious when they further stipulated in the 27 December 1917 nationalization decree, for example, that "all holders of safe deposit boxes are under obligation to appear at the bank upon notice, bringing the keys to their safe deposit boxes," or that "all holders of safe deposit boxes who fail to appear after three days' notice will be considered as having maliciously declined to comply with the law of search." Who in their right mind would obey a "government" that declared illegal any resistance to its attempted robbery of individual bank accounts-a government, moreover, that had not been elected, that could not compel its own essential employees to show up for work, and the days of which (many hoped) were numbered, with a Constituent Assembly (in which the Bolshevik Party, not incidentally, would be a minority faction) slated to meet several weeks later?
The only factor working in the Bolsheviks' favor with the public employee strikers was constant Cheka harassment and a monopoly of armed forces-at least in Moscow and Petrograd. Showing the regime's contempt for the prerogatives of legality and democratic legitimacy, Lenin-loyal Red Guards and a disciplined detachment of Latvian Rifles blanketed "the entire square in front of Taurida Palace" on 18 January 1918 as the Constituent Assembly finally convened. Armed with "guns, grenades, munition bags, and revolvers," the Lenin-loyal forces intimidated and harassed all non-Bolshevik deputies, which is to say the vast majority of Russia's elected representatives, before dispersing the Assembly outright. Elsewhere in Petrograd, Bolshevik forces actually fired on workers demonstrating in favor of parliamentary authority, killing at least eight and possibly as many as twenty. One might expect this naked display of power would have forced some bank employees to give in and begin dealing with the Bolsheviks as a de facto government. But while most white-collar state employees relented and began serving Lenin's regime, however reluctantly, the bank employees refused to give in. All winter, as the Bolsheviks struggled to pay the Latvian Rifles and to publish party propaganda, the banks persisted in blocking state withdrawals. Both sides were standing on principle, the Bolsheviks unwilling to abandon their bank nationalization program, the bankers unwilling to bow down before Bolshevik tyranny.
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Excerpted from HISTORY'S GREATEST HEISTby SEAN MCMEEKIN Copyright © 2009 by Yale University. Excerpted by permission.
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