The Rope Sellers

Red Carpet.
by Joseph Finder.
New Republic Books/Holt, Rinehart & Winston. 409 pp. $16.95.

The current fascination with the machinations of the KGB—which focuses on Soviet espionage, subversion, disinformation, and assassination—tends to distract from the incredible, and far more decisive, success of Soviet trade policy in the past sixty years. This success, which was crucial both to the Soviet Union’s economic survival and to the development of its military power, proceeded almost entirely from the voluntary cooperation of its declared enemy—the capitalist West.

By 1920 the Soviet economy, torn apart by civil conflict, and cut off by embargoes and military blockades, had literally come to a standstill. It had run out of the drills and bits necessary to produce oil, the components to keep its power stations running, fertilizer for its agriculture, and even replacement parts for its trucks and tractors. Moreover, its gold reserves abroad had been frozen, and it had no credit. The foreign policy of the Soviet Union thus turned by necessity to the task of inducing its main enemies—the United States, England, Germany—to provide it with the wherewithal to build a modern economy.

Lenin explained that inviting Western business to develop concessions “did not mean peace with capitalism but war on a new plane.” This was the sense of the New Economic Policy. Between 1920 and 1930, no fewer than 350 foreign companies accepted concessions, and there followed a vast infusion of machinery, trucks, ships, planes, indeed whole factories from the West—all financed in large part by Western credit. With wartime Lend Lease, this massive transfer accelerated so greatly that Stalin could accurately boast to Roosevelt that most of Soviet industry had been built by the United States.

The dimensions of the success of Soviet policy are traced in Anthony C. Sutton’s three-volume study, Western Technology and Soviet Economic Development. But the story of how American capitalists were enticed to cooperate in the Soviet design is the subject of Joseph Finder’s brilliantly ironic Red Carpet. The cast of characters includes Armand Hammer, the head of America’s ninth largest oil company, Occidental Petroleum; David Rockefeller, the chairman of the Chase Manhattan Bank; Averell Harriman, the railroad heir and former governor of New York; Cyrus Eaton, the Cleveland industrialist (now deceased); and Donald Kendall, the chairman of Pepsi Cola.

Finder, a fellow at the Russian Research Center at Harvard, did not rely on the public-relations legends that have grown up around the careers of these illustrious businessmen. In addition to interviews with the principals (which even involved tracking down Armand Hammer’s Russian nephew in Moscow), he used the Freedom of Information Act to pry open classified FBI files on Hammer and Eaton; he scoured the records at the National Archives, the Henry Ford Library, and the Rockefeller Archives; and he gained access to the Harriman papers and oral-history transcripts. The result is a completely original interpretation of the way the Soviet Union attempted, with varying degrees of success, to bend these captains of industry to its purposes. While Finder explores only five cases, which hardly exhaust the field, each illustrates a different use that capitalists have been put to by the Soviets.



The story begins with Armand Hammer. In his many interviews, public statements, and commissioned biographies, Hammer has carefully advanced the legend that he was a canny American millionaire who visited Russia only for humanitarian reasons and then, through a chance meeting with Lenin in the 1920’s, became involved in Soviet trade. Finder methodically debunks this version, demonstrating that if Hammer’s involvement was an accident, it was an accident of birth. Hammer’s father, Julius, who had been a founder of a wing of the American Communist party and an associate of Lenin even before the revolution, was appointed in 1918 the exclusive agent for handling Soviet trade in America. He proceeded to set up a company in partnership with the Soviet government which specialized in evading the embargo and in shipping supplies to Russia through Estonia. While Armand was still in medical school, his father built up the Soviet connection in an organization that eventually was taken over by Amtorg, the official Soviet trade agency.

Trouble set in when Julius Hammer briefly became the Soviet commercial attaché in New York. His Soviet partner in the venture was deported and Hammer himself was arrested and sent to prison on an abortion charge (which, with some justification, he saw as a screen for political persecution). British intelligence also seized secret documents suggesting that Hammer’s organization was acting as a financial conduit for the clandestine activities of the Comintern, and Hammer was banned from England. Then, after he got out of prison in the United States, he was arrested in Germany. Under these circumstances, Armand became the titular head of the business while his father continued to operate sub rosa.

In 1921 Armand Hammer went to Estonia and Russia as a representative of his father (then still in Sing Sing). At this point, Lenin decided that if the young Hammer were given a concession, he could be used as a sort of shill to attract investments from more substantial American businesmen. “What we want to show and have in print . . . is that the Americans have gone in for concessions. This is important politically,” Lenin wrote in reference to Hammer. On his return Armand Hammer traveled around America talking to businessmen about his Russian concession, while Julius Hammer, back in Moscow after completing his prison term, remained behind the scenes.

Even after the Soviet government naturalized all the foreign concessions lured into Russia, Hammer continued both privately and publicly to organize Soviet trade with the West—a role he plays to the present day. In tracing this hidden story, Finder effectively dismantles level after level of the Hammer legend. For example, Hammer claims in an autobiographical memoir that he broke off relations with the Soviet Union in 1930 and more or less escaped from there with his personal art collection, which he then proceeded to sell in the United States. In fact, as Finder shows, the Soviet Union was supplying most of the art from its museums and storehouses, and Hammer was acting as a hidden broker. (The Soviet government could not reveal that it was the principal without risking suit by those from whom the art had been confiscated.)



Cyrus Eaton turns out to be a very different story. Up until the age of seventy-one, Eaton was such a dedicated capitalist that the National Review could describe him as “the most fearsome living incarnation of the old-time competitive spirit.” He had founded a steel company, Republic Steel, and he ran a railroad, the C & O.

In 1954 Eaton negotiated a secret deal under which the Soviet Union would buy his surplus steel in Canada. At this point, it was merely business. But things changed when a delegation of Soviet journalists came to visit Eaton in Cleveland the following year, and he found himself publicly surrounded by hecklers. Assuming that this harassment had been organized by the FBI, Eaton, a fierce individualist, responded by openly befriending the Soviets.

The Soviet leadership took full advantage of the situation by giving this capitalist a hero’s welcome in Moscow. Yet unlike Hammer, who played an active role in organizing Soviet trade with the West, Eaton was used mainly as a showpiece. Perhaps his major contribution was arranging a series of peace conferences at which Western intellectuals encountered Soviet scientists and diplomats.

Soviet leaders also attempted to cultivate Averell Harriman, who had served as wartime ambassador to Moscow, and David Rockefeller, who ran the Chase Manhattan Bank. They assumed that both men, as leading members of the “ruling class,” could help open doors. The fruits, according to Finder’s research, proved meager. With Donald Kendall, however, the Soviets acquired tangible results—Pepsi Cola syrup and some access to the inner circle of Richard Nixon (who depended on Kendall as a fund-raiser and supporter).



As Finder shows, these various stories became woven together when, in 1972, Hammer, Eaton, Rockefeller, and Kendall all got involved in the lobbying effort to override the Jackson amendment tying Soviet trade to Jewish exit permits. During this period, Rockefeller helped Kendall in forming a Soviet-American trade organization, and Hammer bought a majority interest in Eaton’s Soviet trading company. Hammer even provided Nixon with an illegal cash contribution (which helped secure the silence of the Watergate burglars), and Nixon pressed William Casey, then director of the Import-Export Bank (and now head of the CIA), into giving the Soviet Union a $180-million loan to build a gas pipeline which Nixon claimed was in “the national interest” and certainly was in Hammer’s interest. The other Americans also no doubt saw their own interests being furthered; but whatever the motives that were involved in this odd world of détente, strange alliances were forged.



Although Red Carpet is rich in vignettes that illuminate both the vanities and vulnerabilities of American capitalists, its real strength lies in unraveling the web of relationships that was used to promote economic help of all sorts to the Soviet Union. Hammer, for example, not only opened up business channels, he also cultivated relations with the family of President Roosevelt and, through his dealings in art and his philanthropy, developed connections for the Soviets throughout Washington. Indeed, the most revealing aspect of this book has to do with the way art, opportunities for profit, cultural and intellectual exchanges, and social contacts can be mobilized to influence American foreign policy.

To be sure, the Soviet Union had recourse to official channels as well in order to achieve its objectives. Finder, unfortunately, does not provide a final evaluation of the relative importance of the “red-carpet” strategy as against other avenues of approach. Was it Hammer who provided the “path” to American business that Lenin outlined in a letter to Stalin, and if so, did the Soviets get from him what otherwise would have been unobtainable? Did the stamp of approval Harriman and Rockefeller gave to Soviet trade assist in obtaining more favorable credit and trade terms? Did Eaton provide anything more than a momentary propaganda circus? Did Kendall play an active role in influencing Nixon toward détente? Did the corporate entities these men represented gain or lose from their activities?

Although it does not answer these questions, Red Carpet does offer an unparalleled view of the way the Soviet Union established back channels to American business by courting selected capitalists, and that view is a greatly illuminating one.

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