Gold War?
LICHTBLAU, JOHN H.
Gold War? By John H. Lichtblau Will Moscow Launch a Most discussions of the new Soviet economic offensive center upon one question: Can the USSR fulfill the vast commitments it is now undertaking...
...In fact, production in East Siberia's famous Lena Basin mines, where the hulk of the gold lies, is based almost entirely on crude hand labor...
...aid payments...
...The total gold and dollar reserves of the entire sterling area come to a mere $2.4 billion...
...Only the United States, with nearly $22 billion, has a bigger gold reserve than Russia, and the Russian hoard is growing...
...The countries concerned will certainly not object to the form of payment as long as the U.S...
...In 1928, at the start of the first Five Year Plan, gold output amounted to less than a million fine ounces...
...Since countries that depend largely on selling a few staple commodities are very sensitive to surpluses, the Soviet Union is bound to reap much good will from such transactions...
...Such purchases do not have to be paid for with exports of like value when one has "expendable" gold...
...According to informed sources, the total Soviet gold hoard today is worth about $7 to 10 billion...
...The Bolsheviks did not inherit this gold wealth from Tsarist Russia...
...Last year's Soviet shipment of 11 million tons of gold to Iran in settlement of a debt received more prominence in the local press than the much larger U.S...
...continues to buy all gold offered at $35 per ounce...
...The rise reflects the growth of the forced labor system rather than any progress in mining technique...
...To be sure, a full-scale "gold war" has not yet been launched by the Soviet Union, but it has the means, and now apparently the determination, to do so...
...But Russia does not need another gold-standard era to bring this weapon into play...
...John H. LICHTBLAU, who prepares a monthly report on world business for the Magazine of Wall Street, has also written for the N. Y. Times...
...Its importance is such that it alone could make up for Russia's long absence from world trade...
...By 1939 it rose to over five million, and since then it has more than doubled...
...With its huge gold stock and no need to worry about the domestic consequences of any change in gold reserves, the USSR would have an extremely high degree of international economic maneuverability...
...How will this gold serve Russia's economic offensive...
...In the final analysis, therefore, the Soviet trade offensive may end up being financed by us...
...True, gold is not used as a monetary reserve in the Soviets and its fluctuations do not affect internal economic conditions...
...Yet its importance was already realized by Lenin, who strongly recommended its hoarding, and his advice has been followed...
...The Communists, upsetting these rules, could deal a serious blow to our economic system if we are not alert...
...Analysis shows that Russia could not ship the quantity or type of goods which Britain would want for her exports gold must have entered into the picture if the offer was serious...
...But a principal reason for this is rarely mentioned either in Moscow or abroad: Soviet gold...
...The answer is a definite, though qualified yes...
...For with the gold acquired from sales of cotton, rice or sugar to Russia, the seller nations can buy American machines, equipment, etc...
...Take Khrushchev's offer in London to raise Anglo-Soviet trade from $90 million to $600 million...
...For instance, she can in some cases already has buy up the agricultural or mineral surpluses periodically piled up by underdeveloped countries, regardless of whether she needs them...
...For the West, gold is a mechanistic fiscal device, used according to specific rules...
...Again, this gold can he used to finance British imports from the dollar area...
...There is evidence of this in some of its latest trade offers...
...By John H. Lichtblau Will Moscow Launch a Most discussions of the new Soviet economic offensive center upon one question: Can the USSR fulfill the vast commitments it is now undertaking in Western Europe, Asia and Latin America...
...Annual domestic gold production in the Soviet Union is currently estimated at 12 million fine ounces a year about a third of the world output and only slightly less than the production of South Africa, the leading producer...
...The answer is partly supplied by some recent articles in Soviet economic journals: The Soviet Union firmly believes that the capitalist countries should return to the pure gold standard, dropped during World War I. Gold would thus become the basic international currency...
...Of course, the Russians can also use their gold to create a world-wide shortage of a commodity, as they did last year with very heavy and sudden rubber purchases in Southeast Asia...
...Russia is already selling substantial quantities on the London gold market to finance her commodity purchases from British colonies and dominions...
...The Kremlin is also aware of gold's traditional appeal in the Far and Middle East, where it is still widely considered the only "safe currency...
Vol. 39 • June 1956 • No. 24
