How Moscow robbed Spain of its gold in the Civil War

By Neal Ascherson

'Arms For Spain'
by Gerald Howson (John Murray, £25).

The darkest secret of the Spanish Civil War has finally been revealed. The Soviet Union - for decades regarded as the bastion in the struggle against Franco's fascist forces - swindled the dying Republic out of several hundred million pounds in arms deals.

The cause of Spain seized the idealism of ordinary people all over the world. Hitler and Mussolini supplied Franco with fleets of modern warplanes and tanks. From Europe and America nearly 60,000 volunteers joined the International Brigades to defend democracy in Spain - where nearly one in six was killed. And the main supplier of arms and aircraft to the Republic was the Soviet Union.

Now secret accounts discovered in the Russian archives by historian Gerald Howson have revealed that far from coming selflessly to the aid of the Republic, Joseph Stalin cooked the books - faking the prices of the guns, aircraft and tanks - to get his hands on the Republic's gold.

Four hundred tons of gold reserves were secretly shipped from Cartagena to the Soviet Union in October 1936 in the face of Franco's advancing army, with the agreement that part of it would stay in Moscow to pay for Soviet aid. The proceeds of the rest were transferred to a Soviet-owned bank in Paris for arms purchases elsewhere in the world.

Long afterwards, Spanish exiles accused Stalin of having stolen much of the gold. But according to Howson's new book, Arms For Spain, they missed the real scam. The gold was almost all spent on arms and the accounts add up, leaving only 0.4 tons missing from the books.

Instead, the Russians fiddled the exchange rates to get their hands on the gold. The equipment was paid for in hard currency - American US dollars or their equivalent. A top-secret 'Operation X' was set up in Moscow to handle arms for Spain, with Marshal Voroshilov reporting to Stalin.

The Soviet Union said there would be generous discounts. Soviet-made material would be priced by European equivalents - less 10 to 20 per cent. Foreign-bought material would carry a discount of 40 to 50 per cent and - said Voroshilov - "despatched in perfect condition".

Studying the secret lists of equipment sent to Spain, Howson was puzzled to find a final column headed in Russian 'Coefficient of Transfer', with different figures opposite each item. Then he realised he was looking at exchange rate indicators.

The official rate was 5.3 roubles to the dollar. But a Russian-built Maxim machine-gun, for example, had a 'coefficient' of 2.5, less than half the real rate. There was no discount, and the Spanish Republic ended up paying twice as much in gold as the real price.

The Soviet Union sent to Spain 93 SB-Katiushka bombers, a formidable aircraft at the cutting-edge of new bomber design. Here the 'coefficient' was 3.95, and for the 276 I-16 'Mosca' fighters, 3.2. On those two aircraft alone, Stalin embezzled £51.6 million from the democratic Spanish government fighting for its life. Howson estimates the overcharge at £377m.

Why the 'coefficient' varied between items, given that this was a command economy that could invent prices at random, remains a mystery. It may have been a childish attempt to cover wholesale fraud with an appearance of rationality.

Previous estimates of the number of weapons the Soviet Union sent to the Republic - 1,200 aircraft, 900 tanks and up to 2,000 artillery pieces - turn out to be wildly exaggerated. The true figures are about 630 aircraft, 330 tanks and fewer than 1,000 guns - many of them ancient junk, with little or no ammunition.

The Russians were not the only suppliers to cheat the Republic. The non-intervention policy, led by Britain, was a charter for gun-runners and conmen.

Even Poland, governed by a right-wing junta which admired Franco, sold the Republicans huge quantities of arms, often overpriced and obsolete. Polish officers afterwards claimed they had made the equivalent of £296m out of these deals. "Why should you worry?" one of them observed. "It's only to the Spanish Republicans!"

But the Soviet scam was special. As Howson writes: "Of all the swindles, cheatings, robberies and betrayals the Republicans had to put up with...this barrow-boy behaviour by Stalin and the high officials of the Soviet nomenklatura is surely the most squalid, the most treacherous and the most indefensible."

Sunday September 27, 1998 © Copyright Guardian Media Group plc.1998

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