German–Soviet Commercial Agreement (1940)

Economic Agreement of February 11, 1940, Between the German Reich and the Union of Soviet Socialist Republics

In the exchange of letters of September 28, 1939, 2 between the Reich Minister for Foreign Affairs and the Chairman of the Council of People's Commissars and Commissar for Foreign Affairs of the Union of Soviet Socialist Republics it was established that the Government of the German Reich and the Government of the Union of Soviet Socialist Republics, on the basis of and in the sense of the general political understanding achieved, desired by all possible means to develop the commercial relations and the exchange of commodities between Ger- many and the Union of Soviet Socialist Republics. For this purpose an economic program was to be drawn up by both sides, according to which the Union of Soviet Socialist Republics should make deliveries of raw materials to Germany, which should be compensated for by Germany with industrial deliveries over a more extended period of time.

As a result of the negotiations for the establishment and execution of the contemplated economic program, the Government of the German Reich and the Government of the Union of Soviet Socialist Republics have made the following Agreement :

Article 1

In the period February 11, 1040, to February 11, 1941, in addition to the deliveries provided for in the Credit Agreement of August 19, 1939, the commodities enumerated in List 1 to the value of 420 to 430 million reichsmarks shall be delivered from the Union of Soviet Socialist Republics to Germany.

Article 2

In the period February 11, 1941, to August 11, 1941, there shall be delivered, likewise in addition to the deliveries provided for in the Credit Agreement of August 19, 1939, commodities to the value of 220 to 230 million reichsmarks from the Union of Soviet Socialist Republics to Germany, namely, in each case, half of the values or amounts specified for the various commodities in List 1.

Article 3

The Government of the Union of Soviet Socialist Republics pledges itself to take all measures necessary to insure the performance of the deliveries named in Articles 1 and 2. The deliveries shall begin immediately.

Article 4

In payment for the Soviet deliveries provided for in Article 1, German products of the kind designated in List 2 (-war material) 5 and List 3.

(asbestos, sulphur, rags, powdered arsenate, iridium, tobacco, guts, herbs, iodine, turpentine, oils of ether, opium, nicotine, spruce-needle oil, endocrine products, brownstone, mica ore, glycerine, licorice, horn materials, albumin, seeds, vegetable tar, and lime. - a 42 page typewritten list on which contract negotiations were to begin without delay. The principal items in the 14 categories of the list are summarized as follows :

1. Naval construction. Cruiser ex- Lützow: After launching, the hull and all the equipment, armament, spare parts, etc., to be delivered for completion in the USSR, with 80 percent of the total to be delivered within 12 months of the signature of the Economic Agreement, the rest within 15 months. Complete plans, specifications, working drawings, and trial results of ex- Lützow, plus information on the performance of Seydlitz and Prinz Eugen or Admiral Hipper. Plans for battleship Bismarck and a large destroyer with 15 cm. guns ; complete machinery for a large destroyer.

2. Shipbuilding material. Electrodes for welding, 365 tons; armor plate, 31,000 tons ; various types of boiler tubing, 2628 tons ; 175 power shafts of various lengths ; 1 submarine periscope ; several thousand items of electrical equipment ; and various tanks, motors, ventilating systems, etc,

3. Naval artillery. One 381 mm. double turret, fully equipped, to be delivered by Mar. 1, 1941 ; preliminary sketches for a 406 mm. triple turret and working drawings for a 280 mm. triple turret ; 2 noncorrosive submarine guns ; fire control apparatus; etc.

4. Mine and torpedo gear.

5. Marine acoustical devices; precision clocks and watches.

6. Hydrographic instruments ; optical instruments.

7. Aircraft. 10 Heinkel "He-100" ; 5 Messerschmitt 109 ; 5 Messerschmitt 110; 2 Junkers "Ju-88" ; 2 Dornier Do-215" ; 3 Buecker "Bu-131", 3 "Bu-133"; 3 Fokke-Wulf "Fw~152-V-13" ; 2 Fokke-Wulf "Fa-266" helicopters ; all of these for delivery within 12 months. One Messerschmitt 209 in 15 months, if ready ; various motors, instruments, spare parts, armaments, bombs, etc.

8. Field artillery and ballistics instruments. Two 211 mm. heavy howitzers fully equipped; a complete 105 mm, antiaircraft battery comprising 4 guns; a ballistics laboratory like that of Krupp at the proving grounds near Meppen; laboratory equipment.

9. Communications. Radio, telephone, and telegraph equipment.

10. Chemical warfare equipment; synthetic rubber (Buna S, SS, N, NN).

11. Engineer equipment. Roadbuilding gear, explosives, pumps, etc.

12. Munitions. Samples of pyroxylin and dinitroglikol powder ; 500 105 mm. mortar charges; 150 parachute flares ; a shell-loading plant (75-150 mm.) -with hourly capacity of. 1000 75 mm. shells, similar to plant at arsenal in Juterbog; installations to produce nitroglycerine, hexogen, TNT, natrium acid, and TNRS.

13. Armored vehicles and accessories. One medium tank, type III, fully equipped ; 5 10-ton trailers ; 2 20-ton trailers ; 5 half-tracks.

14. Machine tools and other equipment. 308 machines of various types.

1. Mining equipment. 146 excavators, 90 of them to be delivered within 10 months; drills worth 8,325,000 RM; electric locomotives; cars; electric motors; compressors worth 3,900,000 RM; pumps with electric motors worth 1,380,000 RM ; etc.

2. Locomobiles and turbines, 7,700,000 RM and 1,900,000 RM respectively, including generators.

3. Equipment for petroleum industry. Diesel engines worth 6,500,000 RM; compressors worth 8,100,000 RM ; drills and parts worth 4,500,000 RM ; electric motors worth 6,250,000 RM ; pumps worth 1,800,000 RM; drill-tubes worth 6,500,000 RM; pump compressor tubes worth 5,000,000 RM; etc.

4. Equipment for electric power plants. Turbines with generators up to 6000 KW, worth 10,000,000 RM; steam generators with armatures, worth 30,000,000 RM ; transformers worth 5,250,000 RM ; oil switches (high power) worth 10,000,- 000 RM ; meters and protection worth 4,000,000 RM ; etc.

5. Equipment for the chemical industry. Turbo-compressors and gas-bellows for nitrogen and sulphuric acid; numerous items of laboratory and industrial apparatus ; plastics machines ; high-pressure tubes ; etc., with a total value of about 12,000,000 RM.

6. Equipment for steel wire works ; machinery worth 6,900,000 RM.

7. Forges and presses, 800,000 RM.

8. Coal and steel tubing. Coal worth 52,500,000 RM, of which 20,000,000 RM worth was to be delivered between Sept. 28, 1939, and Sept. 27, 1940 ; 12,500,000 RM worth between Sept. 28, 1940, and May [Feft.f ] 11, 1941 ; and the rest between Feb. 11, 1940, and May 11, 1941. Steel tubing worth 16,250,000 RM, with 10,- 000,000 RM worth to be delivered between Sept. 28, 1939 and Sept. 27, 1940, and the rest by May 11, 1941.

9. Ships. To be delivered "promptly": one tanker of about 12,000 tons; M/S Memel; M/S Phoenicia; S/S Nurnberg. To be delivered within 12 months: 1 training vessel ; 1 repair ship ; 1 hoist-ship.

10. Metals. 50,000 tons of steel tubing (including the quantities shown in sections 3 and 8 above) ; about 45,000 tons of other metals and metal products.

1. Naval construction. 5 floating cranes, 3 of them having 250 tons capacity; outfitting an electrode shop ;

2. Naval artillery and other materiel. Two 381 mm. double turrets for delivery in 17 and 20 months ; 3 280 mm. triple turrets for delivery within 30-36 months (or alternatively 3 additional 381 mm. double turrets within 23-29 months) ; 4 149.1 mm. triple turrets within 18-22 months ; 14 105 mm. twin mounts (including 4 sets to be included with Lutzow) ; all naval artillery to be fully equipped with fire control apparatus and spare parts; 28m. submarine periscopes, by mid-1941.

3. Hydrographie gear. 1950 stop-clocks ; 2000 stop-watches ; 80 chronometers ; 3 gyro-compasses for training ; 150 deck clocks.

4. Aircraft equipment. Three installations for altitude testing of motors; 2 motion picture theodolite stations ; 5 fully-equipped motor testing establishments ; 1 cylinder-testing device.

5. Machine tools, etc. Seventeen machine tools for delivery in fall 1941; 29 others, delivery dates unspecified ; 1 plant for bimetallic rotating bands for shells, capacity 2000 tons per year, during second half of 1941; 1 plant for widia and titanite alloys, with capacity of 30 tons per year (the exact production formulas to be furnished, and the plants to be set up in working order in the USSR, with a 2-year period for installation and training of personnel). Delivery of these 2 plants will be governed by the conditions stated in List 6.

(list is prefaced by two general conditions: (1) that the industrial processes revealed by Germany to the Soviet Union be kept secret; (2) that the Soviet Union refrain from competing with German firms in the world market with products of the installations, plants, and processes furnished by Germany.)

Principal items :

1. Mining equipment : various excavators worth 15,000,000 BM ; cars, drills, compressors, and electric motors, totaling 12,500,000 RM.

2. Diesels, locomobiles, turbines, and boilers : 32,500,000 KM.

3. Equipment for electric power plants : 12,000,000 RM.

4. Coal : 40,000,000 RM.

5. Metal-working machines, especially of Hasse & Wrede system, in quantities to be agreed upon.

6. Forges, presses, and equipment for steel wire plants: 2,000,000 RM.

7. Ships : 1 crane ship with 75-ton lift ; 5,450 h.p. tugs ; 1 self-propelled river tanker.

8. Metals : 50,000 tons of drill tubing and compressor tubing ; 15,000 tons of steel cable ; 300 tons of rustproof steel tubing ; 3,000 tons of zinc-coated wire.

The list includes the following items to be ready, depending on conditions, in "normal delivery time":

1. Complete plants for recovering old rubber by analysis (capacity 5 to 10 tons) ; for continuous vulcanizing of fabrics; and for hydrogenation of coal to produce 200,000 tons of oil per year.

2. Plans and equipment for plants to produce Rohgummi Buna [synthetic rubber] ; synthetic urea (2,000 tons annually) ; aniline and chlorbenzol (10,000 tons annually) ; phenol and chlorbenzol (6,000 tons annually) ; 4 types of anilines (5000 tons annually) ; chlorbenzol by continuous chlorination ; betauaftol, tiuram; koptaks, difinilguanidin ; concentrated nitric acid (10-15,000 tons annually) ; hydrosulphate by electrolysis; cellulose wool.

3. A plant for rapid vulcanization.

4. Plans and equipment for Renn and Lurgi [metallurgical] installations, ready in 12 and 12 to 15 months, respectively.

equipment, and processes of production which the Union of Soviet Socialist Republics is interested in acquiring or receiving. Both par* ties shall take all steps that may be necessary in order that commercial contracts for machinery, equipment, and processes of production of the kind enumerated in the list may be concluded as soon as possible.

The payments that become due on the basis of these contracts during the validity of this Agreement shall be made from special ac- counts of the Union of Soviet Socialist Republics in Germany by way of the German-Soviet clearing system. If they become due during the first 15 months of the Treaty they shall be used in settlement of the Soviet deliveries provided for in Article 1, and insofar as they become due in the succeeding 12 months, in settlement of the Soviet deliveries provided for in Article 2.

For this settlement other payments which are credited to the special accounts of the Union of Soviet Socialist Republics, for example for transit traffic, shall also be used.

Article 8

The Government of the Union of Soviet Socialist Republics has declared by the exchange of letters of September 28, 1939, that it is prepared to deliver, in addition to the quantities of petroleum other- wise agreed upon or still to be agreed upon, a supplementary quantity of petroleum equivalent to the annual production of the Drohobycz and Boryslaw oil region, in such proportions that half of this amount shall be delivered to Germany from the oil fields of the said oil region and the other half from the other oil regions of the Union of Soviet Socialist Republics. As compensation for these petroleum deliveries the Union of Soviet Socialist Republics shall receive de- liveries of coal and steel tubing.

It is agreed that the quantities of petroleum and petroleum products to be delivered in accordance herewith during the period September 28, 1939, to September 28, 1940, shall be included in the amount named in List 1. In calculating the value of the compensatory deliveries of coal and steel tubing, it shall be assumed that this first annual amount is equal to the value of 30 million reichsmarks. These petroleum, deliveries shall be compensated by German deliveries of coal to the value of 20 million reichsmarks and steel tubing to the value of 10 million reichsmarks. These deliveries shall be made by September 28, 1940.

Article 9

Both parties take it for granted that the mutual deliveries based on this Agreement are to balance.

The Soviet deliveries made during the first 12 months of the duration of this Agreement shall be compensated by German deliveries by May 11, 1941 ; that is, after the first six months 50 percent of the Soviet deliveries provided for in the first period of the treaty shall be balanced by 40 percent of the German deliveries provided for in the same period of time ; after 12 months 100 percent of the Soviet deliveries shall be balanced by 80 percent of the German deliveries. The rest of the German deliveries shall be made within the following 3 months.

The Soviet deliveries made during the period from the 13th to the end of the 18th month of the duration of this Agreement shall be compensated by German deliveries to be made during the period from the 16th to the end of the 27th month, computed from the date this Agreement goes into effect, in equal quarterly amounts. It is pro- vided that during this second period of the Agreement a balance sheet of the mutual deliveries shall be drawn up every three months.

Article 10

Each of the two Governments shall appoint plenipotentiaries who shall meet on the date specified in the previous Article. The task of these plenipotentiaries shall be to study currently the total commercial intercourse between Germany and the Union of Soviet Socialist .Republics and the observance of the percentage relationship between the German and the Soviet deliveries mentioned in Article 9, and to take all measures necessary to carry out the economic program agreed upon between the Governments, especially to balance the above-mentioned percentage relationship.

The Plenipotentiaries of both Governments shall be empowered within the scope of their duties to communicate with each other directly, either in writing or orally. They may from time to time draw the experts needed in their work into their consultations.

If the percentage relationship fixed by Article 9 for the mutual deliveries is disturbed in one of the periods of time, both parties shall take measures in the shortest possible time for the removal of the disproportion, in which connection supplementary deliveries, espe- cially of coal, shall be used by Germany as a means of settlement. In case this cannot be arranged, the interested party shall have the right to discontinue temporarily its deliveries until the stipulated relationship is attained.

Article 11

In the execution of this Agreement the following shall be applied:

a) the Agreement regarding exchange of goods and payments: of December 31, 1939 ;

b) the provisions of Article IV and of section 3 of Article V of the Credit Agreement of August 19, 1939.

Besides, in connection with the payment of Soviet obligations arising from orders made on the basis of this Agreement, the provisions of section 5 of Article V of the above-mentioned Credit Agreement shall be correspondingly applicable;

c) the Confidential Protocol of August 26, 1939.

Article 12

Both Parties have agreed that the accommodations granted or transit traffic on the basis of the exchange of letters of September 28,, 1939 (freight reductions of 50 percent on soybeans and the payment of all railway freight charges in the transit traffic through the Ger- man-Soviet clearing system) shall remain in force during the entire period of the validity of this Agreement. In order to facilitate use of the sums paid in reichsmarks by Germany for freight charges, Germany shall lend her cooperation to the Soviets in placing orders in Germany and in acquiring goods and techniques of production there.

Article 13

This Agreement shall not affect the Credit Agreement between the German Reich and the Union of Soviet Socialist Republics of August 19, 1939, which shall remain completely in force.

Article 14

This Agreement shall become effective upon signature.

Done in two original copies in the German and the Russian lan- guages respectively, both texts being equally authentic.

Done in Moscow, February 11, 1940.

For the Government Representing the Government of the

of the German Reich : Union of Soviet Socialist Republics :

K. RlTTER A.MIKOYAN

K. SCHNTORE N. BABURIN

CONFIDENTIAL PROTOCOL

In connection with the Economic Agreement signed today between the German Reich and the Union of Soviet Socialist Republics, the 1 undersigned Plenipotentiaries of the Governments of both Parties have agreed concerning the following :

The Government of the Union of Soviet Socialist Republics shall instruct the proper Soviet commercial organizations to enter into negotiations with the German organizations and firms designated by the Government of the German Reich in regard to the purchase by the Soviet Union of metals and other goods in third countries and in

regard to the sale of these metals and goods to Germany. Such sales shall be made by the Soviet organizations on the following basis :

Payment for the goods by the German purchasers up to 70 percent in transferable foreign currency to be designated by the Soviet commercial organization making the delivery and 30 percent in reichsmarks in accordance with the German-Soviet Agreement regarding exchange of goods and payments of December 31, 1939. If the German purchaser is not in a position to make payment in the currency suggested by the Soviet commercial organization, he may offer to make payment in another transferable currency. If the Soviet commercial organization refuses this currency, payment shall be made in gold on conditions to be agreed upon between the purchaser and the Soviet commercial organization making delivery.

In this connection the Germans shall, for the purpose of utilization of the sums in reichsmarks paid by the Germans to the Soviet commercial organizations, lend their cooperation in placing orders in Germany and in the acquisition of goods and production techniques in Germany.

Moscow, February 11, 1940.

For the Government Representing the Government of the

of the German Reich : Union of Soviet Socialist Republics :

K. RlTTER A.MIKOYAN

K. SCHNTORE N. BABURIN