661.1115/346
The High Commissioner at Constantinople
(Bristol)
to the Secretary of
State
Constantinople, August 30,
1921.
[Received September 22.]
No. 447
Sir: I have the honor to enclose herewith copy
of “Special Report No. 1”, dated 23 of August, 1921, marked
confidential, prepared by Mr. Julian E. Gillespie, Assistant Trade
Commissioner of this High Commission.
It is known that in this part of the world the different nationalities
have made every possible endeavor to open up trade with the Caucasus
States as well as with Soviet Russia. In general, it is known that such
attempts have practically resulted in failure of any [Page 779] considerable accomplishment. In some cases
attempts were a complete failure.
The British Government completed a trade agreement which practically
amounted to the recognition of the Soviet Russian Government and, if all
reports are correct, British trade has profited little or nothing by
this agreement. So far as trade through South Russia is concerned the
British have failed.
The Italians have made a special effort to open up trade and have given
particular attention to the Caucasus. Thus far they have not been very
successful in their efforts, though they appear to have done more than
any other nationality. The Germans and Swedes are also doing some
business in the Caucasus.
From the best information obtainable it would seem that in these efforts
of the different nationalities to open up trade with Soviet Russia and
with the Caucasus there was a great deal of profiteering. Thus, the
Caucasus Republics when they formed a trade union for foreign trade
turned to Americans for assistance. Before this some gold had been
brought from the Caucasus by the Italians, but it was utilized to pay
for Italian goods and money was made on the gold transaction as well as
upon the transaction in merchandise. The proposition made by Mr. Day is
to utilize the gold obtained as a revolving credit for the establishment
of a flow of trade between the Caucasus and the outside world.
This proposition of Mr. Day’s seems to me to be a businesslike
proposition that may open up trade based upon business principles
without profiterring where the negotiations of trade conventions and
other schemes have failed.
It has always been my opinion that the first steps in the reconstruction
of Russia would be obtainable by establishing trade relations through
private institutions based upon business principles and conducted in a
fair way without graft or profiteering. I have felt that our American
business men would probably be the first to accomplish this end,
especially when they were backed by our Government, which consistently
has stood out for certain well-established political and economic
principles being recognized by Soviet Russia and the other Soviet
Governments established in Russia.
The first step taken by Mr. Day to establish trade with the Caucasus
Republics has been successful. If the contracts for concessions made by
him with the representatives of these Caucasus Republics are lived up
to, it seems to me that a big step will have been made in bringing about
a reformed policy in these Soviet Governments, and this start may lead
to a steady development of these three Republics into some form of
recognizable governments by other countries.
[Page 780]
It must be remembered that in the past contracts similar to these have
proved to be of little or no value and have generally been repudiated by
Soviet representatives who have violated all old-established rules in
regard to contracts and economic dealings. In spite of this, it must be
remembered that if a change does come in their methods of dealing, there
must be someone that will be the first to recognize this change and to
prove it. It may be that Mr. Day has struck the psychological moment.
For the sake of the benefits to American interests and particularly for
the beginning of reconstruction of some part of the old Russian Empire,
it is to be hoped that Mr. Day will succeed.
In carrying out the Department’s policy as I understand it, Mr. Day
should receive the sympathy and encouragement of our Government so long
as he follows the policy that we demand of a government in Russia which
is a government of the people, by the people, and for the people and
that such a government shall recognize the old-established principles of
property rights.
I have [etc.]
[Enclosure]
Special Report by the Assistant Trade
Commissioner at Constantinople (Gillespie)
Constantinople, August 23, 1921.
No. 1
american penetration in the
caucasus and south russia
I have the honor to report the consummation of a contract between
Henry Mason Day and the Autonomous Soviet Communist Republics of
Azerbaidjan, Georgia and Armenia, whereby Mr. Day becomes virtually
the fiscal agent and Minister of foreign trade for the Union of
Foreign Trade between the three above-mentioned Caucasian Republics.
The contract names Mr. Day as the Trustee for the above-mentioned
countries and gives him, as the Representative of these countries,
the control of all commodities to be exported, and makes him the
purchasing agent for these countries. The signing of the
above-mentioned agreement means that the United States controls and
dominates the commercial activities and the economic resources of
one of the richest territories in the Near East. In addition to
being appointed the Trustee for the Union of Foreign Trade of
Azerbaidjan, Georgia and Armenia, Mr. Day has been given the oil
rights, lumber concession, licorice root and tobacco monopolies for
the Caucasus.
[Page 781]
On August 6th, Mr. Day left Constantinople on an American destroyer,
accompanied by two representatives of the Union of Foreign Trade for
Azerbaidjan, Georgia and Armenia for Batoum and Tiflis. While in
Tiflis, the contract mentioned above was signed. On August 12th, the
American destroyer returned to Batoum for Mr. Day and he proceeded
to Constantinople with an initial deposit of gold to be expended by
him as Trustee for these countries. A sum equivalent to Five Hundred
Thousand Dollars in gold was brought to Constantinople, where it is
deposited in the Imperial Ottoman Bank in his name as Trustee, to be
used as a revolving fund for the purchase of supplies for these
countries.
A partial list of the commodities offered and to be offered for sale
by Mr. Day, Trustee, include four hundred thousand poods of
Caucasian tobacco, one million poods of coal equal in quality to A
No. 1 American Pocahontas, eight hundred thousand poods of licorice
root, (on which one million dollars will be put up as a guaranty for
delivery), one million poods of kerosene and important stocks of
mazoot, machine oil, lubricating oil and spindle oil from Baku.
I beg to report further that I have been informed by reliable sources
that the manganese rights at Poti, near Batoum, have been offered to
the Germans. At the present time this concession is in Berlin. It is
not believed, however, by local people that these rights will be
acquired by the Germans. There are approximately three hundred
thousand tons of ore now on the ground at Poti which will run better
than 48% manganese.
In addition to having at his disposal Five Hundred Thousand Dollars,
a credit of One Million Dollars has been opened at Batoum subject to
his order. All of this money is to be used for the purchase of
necessities and machinery, or articles of prime necessity. (See my
letter dated March 11, 1921,89 giving details of new import program of the
Soviets.). One shipload of flour has been bought on the local market
and is being sent to Batoum this afternoon. Two additional shiploads
will be shipped next week. Negotiations are being entered into at
the present moment by Mr. Day for the purchase of agricultural
machinery, reapers, harrows, etc., etc. There is a stock of American
agricultural implements in Constantinople which will be the first
considered.
I desire to make clear Mr. Day’s position. First, as an American
citizen, he is acting fiscal agent and to all intents and purposes,
an official of the three republics of Azerbaidjan, Georgia and
Armenia. As a representative of these countries, he is in sole
charge of disposing [Page 782] of all
the stocks of raw material in the Caucasus. As an American citizen,
a private individual Mr. Day has obtained these rights not for any
one corporation or group, but while acting as a real government
official of the countries named above, he hopes that all trade
relations in these countries will be handled by American concerns.
As the President of the American Foreign Trade Corporation, Mr. Day
does not enter into the matter one way or the other. He may,
however, as “Trustee”, accept the proposals of the American Foreign
Trade Corporation just as he would those from any other individual
or corporation. I desire to state that in consideration for his
services as Trustee and fiscal agent for Azerbaidjan, Georgia and
Armenia, Mr. Day is receiving no compensation but is acting as if he
were a public-spirited government official of these countries.
The conclusion of the contract between Mr. Day and the Union for
Foreign Trade of Azerbaidjan, Georgia and Armenia marks an important
epoque in American foreign trade. It places the United States in a
preferred position; it is the beginning of the end of Italian
commercial domination in the Caucasus, and is the strangulation of
British influences. These statements are true, subject to the
successful working out of the details of the contract, dependent
upon financial support.
That the leaders of Bolshevism have seen their inability to maintain
a Soviet Government in Russia as long as they continue their extreme
policies of confiscation of private property, suppression of the
freedom of the press and the principle of governing by small groups
of individuals for their own benefits and not for the common welfare
of the people, has been the belief of many for several months. It
has been a matter of common knowledge that the extreme policies of
Lenin and Trotsky were gradually being replaced by more liberal
ones. One of the first instances of the Moscow Government’s change
in heart was its attitude toward the republics of Azerbaidjan,
Georgia and Armenia. These three republics were all recognized
autonomous states which accepted a form of Soviet Communist
Administration, and while amenable to the jurisdiction of Moscow,
there was little confiscation of private property and practically no
reign of terror such as prevailed in other parts of the old Russian
Empire, upon the acceptance of the Soviet regime by them. Each of
these three republics when originally founded, attempted to organize
themselves along the lines of the United States of America, adopting
the principle of government by, of and for the people. These three
republics have never been classed as part of Bolshevik Russia, but
fall into a separate category of independent, autonomous republics
which have been recognized by world powers as such, each of whom
have [has] adopted a Soviet form of
government.
[Page 783]
Recently, the autonomous Soviet Communist republics of Azerbaidjan,
Georgia, and Armenia, formed a Union for Foreign Trade. This was
undoubtedly worked out and done with the consent of the Bolshevik
Government in Moscow and probably upon the advice of Mr. Krassin.
The move is undoubtedly a political one which they expect to further
through commercial relations with the outside world.
Apparently, the Bolsheviks, seeing the failure of their present
policies, have decided on another plan, namely, the establishment of
autonomous Soviet Communist republics which permit free trade. The
Union for Foreign Trade in the Caucasus is an experiment, and if
successful in opening trade relations with the outside world, I am
reliably and confidentially informed that on the Black Sea there
will be within the next six months, seven similar autonomous
independent states. All of these will be linked together in a manner
similar to the Confederation of the colonies of the United States of
America before the adoption of our Constitution. The first new
autonomous state that will be formed will be Novorossisk. Mr. Day
has been offered all concession there and has been requested to act
for this proposed new state in the same capacity as he is at present
for the States of Azerbaidjan, Georgia and Armenia. The proposed
plans contemplate the independent states of the Crimea,—Rostov,
Odessa, Nikolaev and others. Mr. Day believes that if the proper
financial and governmental support is given him in America, that
South Russia and the Caucasus will, in time, because of these trade
relations, the investment of American capital and the control of the
Baku and Grozny oil fields, the mineral resources of the Caucasus,
the coal deposits of the Crimea and Novorossisk and other
undeveloped resources in South Russia, become practically an
American colony.
