File No. 861.51/443

The Chargé in Russia (Poole) to the Secretary of State

[Telegram]

704. In the British financial scheme, as the Department is aware, 40 new rubles are the fixed equivalent of one pound; the same quantity of the new rubles are declared for the present to be worth 48 old rubles. The official sterling rate of the Archangel branch of the Russian State Bank is 45. The provisional government contends that 40:45 and not 40:48 should therefore be the exchange rate between the old and the new ruble. The British reply that 45 is unreal as a selling rate since the bank rarely, if ever, has sterling exchange for sale. This is correct, the rate having been established apparently with a view to the advantageous purchase of foreign exchange. The group of local merchants and bankers who direct the economic policy of the provisional government are aware of this and profit by it. For [Page 99] other Russians, accustomed as they are to having everything adjusted by governmental fiat, it is sufficient that this is the official rate. It results that the British are incurring odium for what seems an attempt to devaluate the ruble although, owing to the amounts of unsecured currency put out by the Bolsheviks, the real worth of the ruble is probably much less than the British rate makes it out to be.

It may be also as a result in part of this 45 rate that British have been so far unsuccessful in selling new, rubles for old at 40 [to 48], as per my 665 of December 17, 6 p.m., that they now find it necessary to offer kopeks for sale against new rubles only, in order to give these an adventitious desirability. As an additional stimulant, they are causing articles to be published in the local press which compare the old issues unfavorably with the new. This adds of course to the resentment of holders of the old.

Both the above situations may be accounted for in part by mental confusion arising from the issuance under the name of ruble of a monetary unit which in reality is not a ruble but the fortieth part of a pound. Had it been called what it really is—a sixpence or almost anything except ruble—it would probably have been easier for the Russians to understand that it is not worth a ruble but one ruble and twenty kopeks—a view which is supported by the fact that a pound (sterling) note can usually be sold in the streets of Archangel for seventy rubles or more. Having studied the Siberian currency project (War Trade Board’s No. 20 to Cole1) in the light of the foregoing, Cole and I venture to suggest that it might be advantageous to call the new Siberian token “American trade dollar” or “Siberian” or almost anything except ruble. The difficulties developed at Archangel seem the more threatening in Siberia since the value difference between the proposed Siberian unit and the ruble is so much greater, than the difference between the issues here. It will be difficult to convince ignorant peasants that one ruble is worth more than another, especially when the difference is five per [sic] or more; and in endeavoring so to convince them we may—to judge from British experience—quite innocently bring upon ourselves blame for the further depreciation of the old ruble, which is certain to come about sooner or later through the operation of forces beyond our control.

Cole adds the following observation which seems well grounded:

Unless American merchandise makes its appearance simultaneously and at the same places and in sufficient quantities to be worth a value commensurate with that of the trade notes put out by Czecho-Slovaks and American Army, the notes must either circulate as currency among Russians in local transactions or else compulsory hoarding [Page 100] will result. In the latter ease, there may be a speculative traffic in the notes on the part of middlemen buying the notes at a substantial discount to resell to banks, etc., which need them to buy American products.

Please communicate to War Trade Board. Not sent to Paris.

Poole
  1. Ante, p. 93.