The Coup in the Kremlin
How Putin and the Security Services Captured the Russian State
THE withdrawal of the last French and Belgian police forces from the Ruhr ends the effort of France to use a club in collecting reparations from Germany.
The Ruhr basin--about the size of the State of Rhode Island --furnishes nearly 80 percent of Germany's coal and coke. In it are located 65 percent of her ingot steel and rolling mills. The whole region is covered with a network of railroads, and is highly industrialized. Manufacturers throughout the entire Reich depend upon it directly or indirectly for raw material and half-finished products. It is the heart of Germany's industrial system.
Small wonder, then, that beginning with the armistice, the occupation of the Ruhr was discussed in French and Belgian circles. By controlling it the Allies could regulate the life blood of German industries. Some sought to use it simply as a means of making Germany behave. Others looked upon it as an end in itself. The former believed that only by an act of force could the Germans be persuaded to fulfill the treaty stipulations and make payments. The latter saw that if France could control and operate the coal mines of the Ruhr she would dominate the continental steel industry and so could prevent Germany from re-arming and could keep her industrially weak.
The first threat of occupying the Ruhr was made jointly by the Allies at the Spa Conference in July, 1920, when it was agreed and so stated in the protocol of July 16 that "if on the date of November 15, 1920, it is found that the total deliveries [of coal] August, September and October, 1920, have not reached 6,000,000 tons, the Allies will proceed to the occupation of a new part of German territory, the district of the Ruhr or any other."
Germany met the demands, and so the threat was not carried out. In the spring of 1921, however, relations between the Allies and Germany had again become acute. The Allies were convinced that Germany was deliberately trying to sabotage the treaty and had no intention of carrying it out. At the London Conference in March of that year, Lloyd George made a bitter indictment of Germany, listing her violations of the treaty. At the last session he announced that
"having regard to the infractions [of the treaty] already committed and to the determination indicated in these proposals that Germany means still further to defy and explain away the treaty and to the challenge issued not merely in these proposals but in official statements in Germany by the German Government, we must act upon the assumption that the German Government are not merely in default, but deliberately in default. . . ."
Accordingly, he informed them, the Allies had decided to occupy the towns of Duisburg, Ruhrort and Düsseldorf at the mouth of the Ruhr, by way of sanctions. On March 8, 1921, the Allied troops marched in.
Germany was incensed, but showed no apparent willingness to mend her ways. Throughout 1922 the demand for further occupation of the Ruhr became stronger in France, the people being convinced that in no other way could the Germans be made to understand that the Allies were determined to collect reparations. In Britain this method of enforcing collection was not enthusiastically received, which fact helped to keep France and England apart. The climax came at the Conference of Prime Ministers held in London and Paris in December, 1922, and January, 1923, at which France and Great Britain were quite unable to agree. M. Poincaré there made known his determination to proceed with the occupation of the Ruhr, whether or not Britain sanctioned it. The original project was that a committee of "technical experts" should go in, to take over the control of the properties of the big industrialists, who at the time had great influence on the German Government and believed that they could successfully evade the payment of reparations. M. Poincaré felt that by showing them the futility of resistance it would be possible to persuade them of the necessity of fulfilling the treaty obligations. Belgium and Italy agreed to send such experts, but it became apparent at once that the military would have to accompany them to protect them and enforce decisions. In other words, from the very beginning the occupation took on the nature of a military operation. On January 10, 1923, the French and Belgian troops marched into Essen, Oberhausen and Mulheim. By the 16th the line had spread to include Bochum, Recklinghausen and Dortmund. In February it was extended to include Wesel and Dorsten. A customs barrier between the Ruhr and unoccupied Germany was enforced beginning January 18. Franco-Belgian control was complete. Nothing further was heard of the Italian "experts," and Italy, while giving moral support to France and Belgium, refused to participate in the military control.
The Germans at once spread the charge that France was seeking to annex the Ruhr and would remain there permanently. M. Poincaré denied this categorically, and in reply to questions put to him by American newspaper men on January 29, 1923, made the following explicit statement:
"France has no intention of holding the Ruhr permanently. She means to stay there until she is paid, or has assurances that she will be paid. . . . We intend to hold the mining and industrial basin until Germany fulfills its agreement. . . . It may be a matter of five years before Germany gives sufficient proofs of its sincerity of paying reparations, and may be considerably less if the German Government reorganizes its financial system on a sound basis and obtains a foreign loan which would be applied on the reconstruction of the devastated regions of France. But France is unanimously determined not to abandon its guarantees in the Ruhr until then."
By way of showing that he was fully aware of all the factors involved in this action, M. Poincaré added this significant paragraph:
"Paralyzing the mining industry in the Ruhr may inflict hardships on France as well as Germany, but Germany is the greater loser and France will show the endurance necessary to outwit the German Government. . . . French metallurgy is ready to suspend all operations, if necessary, to prove to the Germans that we are in earnest and intend to pursue our policy even if we suffer also."
In view of subsequent developments it is important to note carefully this concise exposition of M. Poincaré's policy. It shows clearly that he had foreseen the course of events, and knew what the results of his policy would be, both within and without Germany. France had counted the cost and was willing to pay.
The effects of the occupation were profound. In the Ruhr factories and mines shut down. Production largely ceased. The railroads and telegraph lines stopped functioning. On every hand the French and Belgians were met with sullen passive resistance, directed and financed from Berlin. There were only a few instances of violence and rioting resulting in deaths, but a good number of Germans were imprisoned for failure to comply with the orders of the occupying forces, and thousands were forced to leave the region. The German papers were full of stories of "atrocities" and depicted the fate of the evicted families in the darkest colors. The entire German people were united in fierce hatred of France.
During the first three months passive resistance thwarted French plans. The occupying forces had originally hoped to be able to supervise the work of the mines and mills. This was impossible as the Germans absolutely refused to coöperate. Neither threats nor deportation was of avail. The French then hoped to get out of the Ruhr the coal and coke reserves ready for shipment. But the refusal of the German railroad men to haul them blocked this move. The occupying forces then established the so-called Franco-Belgian Régie, and took over the operation of the railroads. Such was the complexity of the system that it was several months before these were functioning well. The French even considered operating the mines with non-German labor, but this attempt they never carried out.
From a financial point of view, France in the first months was getting little out of the occupation. Her industries were temporarily handicapped by the shutting off of the supply of German coke and coal and by the expense of importing these materials from England or America. Out of 114 blast furnaces in operation in France when the troops marched into the Ruhr, at one time only 74 kept their fires burning. French metallurgy, as M. Poincaré had foreseen, was making its sacrifices.
In the meantime, however, the Government of Chancellor Cuno misjudged the situation badly. It thought by passive resistance to break down the determination of the French, failing altogether to realize that the shutting down of the coal mines--part of the resistance program--could only have disastrous effects on German industry in the unoccupied territory. Furthermore it sought to peg the mark while at the same time printing paper currency in unlimited quantities. This meant that when the gold reserves were exhausted there would be utter chaos in Germany's finances, which, although giving her an appearance of bankruptcy and so strengthening superficially her argument that she could not pay, would ruin her middle classes. As a result unemployment spread in Germany, followed by an acute food shortage. The country suffered all the pangs of deflation, and was facing the certainty of ultimate defeat.
Outside of Germany, Holland lost much of her Rhine trade. Czechoslovak industries profited from the closing down of their
German competitors, cut off from their accustomed supplies of Ruhr coal. British coal and steel manufactures benefited for a few months from the withdrawal of a large part of German competition. But the economic structure of all Europe suffered from the general dislocation following upon the economic deadlock that had taken place, and by the strained political situation that resulted.
In Britain criticism of France was acute, and it became fashionable to ascribe all of England's troubles to the occupation of the Ruhr. Lord Curzon entered into a belated epistolary duel with M. Poincaré about the legality of the occupation--a question which was really largely academic save in so far as it encouraged the Germans to hope for active help from England against France and so stiffened passive resistance. M. Poincaré reminded Lord Curzon that England had twice signed an ultimatum to Germany threatening the occupation of the Ruhr--at the Spa Conference in 1920 and in the decision of the Supreme Council on May 5, 1921, and that on neither occasion had the British Government seen fit to raise the question of the legality of the action. As for the contention that the illegality resided in the fact that separate action of one or more of the Allies was incompatible with the proper interpretation of paragraphs 17 and 18 of Annex 2 of the Versailles Treaty, M. Poincaré pointed out that the British Government as far back as October 28, 1920, had justified separate action under these clauses. Addressing Parliament on that date concerning the right of the British Government to follow its own course in regard to the seizure of German property, the Chancellor of the Exchequor explained that in the view of His Majesty's Government "section 18 clearly leaves to each of the respective Governments the task of determining what action may appear to it necessary by virtue of the said paragraph."
But time was playing against the Germans. Passive resistance was hurting Germany more than France. During the first few months it had succeeded in preventing the French from obtaining deliveries of coal and coke, and had greatly increased the costs of occupation. But the effect upon unoccupied Germany was too great, and coupled with inflation was inviting chaos and disaster. In September, therefore, Chancellor Stresemann, who had succeeded Herr Cuno, finally abandoned the policy. As a realist he saw that it was futile. Furthermore, he hoped that by so doing he might be able to negotiate favorably with M. Poincaré. To previous German advances the French Premier had always replied that there could be no discussion until passive resistance was abandoned. Now, however, M. Poincaré declined to deal with the German Government, thus losing sympathy abroad and stiffening German distrust of France. His critics felt that even a gesture of friendliness might have hastened a rapprochement. But he remained obdurate and harsh. Ignoring Dr. Stresemann's desires to meet him half way, he entered into direct negotiations with the Ruhr industrialists for the resumption of payments in kind, letting it be known that he valued the agreements with those who would make the deliveries more than he did the mere promise of a Government that had so often shown its bad faith towards France.
On October 9, 1923, M. Poincaré announced to the Reparation Commission that General Degoutte, representing the forces of occupation in the Ruhr, had concluded with two groups of German industrialists, the Phoenix and the Rheinische Stahlwerke, the first successful agreements for the resumption of deliveries in kind. Negotiations with Stinnes and Thyssen and their associates meantime continued, and by the middle of November a series of arrangements between the forces of occupation and the German mine owners and industrialists were concluded for the delivery of coal and coke. These are the famous "Micum" agreements, which take their name from the initial letters of the "Mission Interallié de Contrôle des Usines et Mines." Production in the Ruhr was gradually resumed. Tension slackened. The successful stabilization of the rentenmark by Dr. Schacht at last gave a fixed unit of currency again, enabling people to gauge their income and expenditures on a basis comparable to that of the old days of the gold mark.
Throughout this period the world had lost sight of the fact that the real object of the Ruhr occupation was to force Germany to come to some satisfactory arrangement about the permanent payment of reparations. The German Government, however, was fully aware of this, despite its efforts to make it seem that the French objective was annexation. Accordingly several feelers were put forward. On April 8, 1923, the German Chancellor let it be known that he was ready for a conference. On the 16th, in a speech before the Reichstag, Foreign Minister Rosenberg offered 30,000,000,000 gold marks. On May 2 this offer was put into a formal note, which was rejected on May 6 by Poincaré. On May 11 Lord Curzon also rejected it, and advised a new offer. On May 24 the German Minister of Finance, Dr. Hermes, submitted to the cabinet a plan for Germany to pay 50,000,000,000. On June 7 the German Government sent a note offering to pay 1,500,000,000 gold marks a year. This was rejected by Poincaré. The British considered the offer more satisfactory and sought to induce France and Belgium to consider it as a talking basis. Throughout July and August the differences between France and England kept these two nations from joint negotiations. On August 24, Chancellor Stresemann, having received no reply to the proposals of June 7, in a public speech renewed that offer and suggested that productive pledges might be furnished France. In another speech on September 2 he repeated this offer. Poincaré, five days later in a public address repudiated the suggestion of pledges, saying that he preferred to hold those which France had in the Ruhr. On September 28 Herr Stresemann repeated his offer again, urging that the fact that passive resistance had been given up was a sign of good faith. M. Poincaré, as has already been explained insisted that a mere announcement that passive resistance had ended was not conclusive. Deliveries must be resumed.
Early in October, Lloyd George on a lecture tour in America urged that the Allies take up the proposal of Mr. Hughes made in his speech in New Haven in December, 1922, for the appointment of an international commission to discuss Germany's capacity to pay. Ambassador Harvey echoed the suggestion. On October 12, 1923, Lord Curzon officially proposed that the United States Government join such a commission. Mr. Hughes replied on the 15th, making acceptance conditional upon full and unfettered acceptance by France, and upon assurances that the question of interallied debts would not be discussed. M. Poincaré, however, insisted that the experts should make no attempt to reduce France's claims against Germany, and that the occupation of the Ruhr should not be considered. In a speech on October 28 he elaborated his reservations, and on November 3 embodied them in a communication to Lord Curzon. On November 10 the American State Department let it be known that it refused to accept these limitations. In so doing it reflected the unwillingness of the British to see the work too rigidly circumscribed in advance.
Towards the middle of November M. Poincaré became alarmed at the reaction to his attitude. On November 16 he suggested that the Reparation Commission designate a committee of experts. Negotiations between himself and Colonel James A. Logan, Jr., the American unofficial observer at the Reparation Commission, continued during the next ten days, and resulted finally in the acceptance by all the Powers, including the United States, of the proposal to appoint delegates to such a commission. Mr. Hughes made it known on December 11 that America would attend. Thus was the famous Dawes Committee called into life.
This committee ostentatiously refrained from discussing the Ruhr. It was tacitly accepted, however, throughout the conferences, that the region would be evacuated when and as Germany showed her good faith. At the London Conference in August, 1924, the evacuation of the Ruhr was provided for in a special agreement as part of the bargain which made the Dawes Plan effective. France and Belgium undertook to remove the customs barrier between the Ruhr and the rest of Germany by September 9. On September 22 the final restrictions on taxes and the movement of goods were withdrawn. On October 22 the economic evacuation was completed--that is, all restrictions of an economic nature were removed. The garrisons were gradually reduced, the railroads were turned over to German control, but not until July 31, 1925, did the last troops withdraw from the territory occupied in January, 1923. By the third week in August the evacuation of Duisburg, Ruhrort and Düsseldorf, which had been occupied in March, 1921, by way of special sanctions, was completed.
So ended the Ruhr episode. How much it paid in cash is a debatable problem, despite the official figures of the French Government which showed a net profit for the year ending January 10, 1924, of 479,195,000 paper francs and thereafter throughout the first seven months of 1924 of about 500,000,000 paper francs a month. A satisfactory accounting would have to make allowances for such items as deliveries and payments which Germany might have made had the region not been occupied, and for losses and gains of trade.
As a diplomatic weapon, however, the Ruhr occupation may be said to have been successful. It was an extreme measure. To the Germans it drove home the futility of further resistance. To the French it made clear the impossibility of jailing a debtor and yet making him pay. It thus clarified the atmosphere. At the time the Dawes Committee first met General Dawes remarked: "If the French were not in the Ruhr we experts would not be here." In other words, this use of a club made it possible for the Allies to discuss terms which Germany could and would respect. At the same time the desire of the Germans to get the French out of the Ruhr was so great that they were prepared to make big concessions.
In looking back it is striking how completely M. Poincaré's words of January 29, 1923, were vindicated. France, he declared, had no intention of holding the Ruhr permanently, but would stay until Germany gave sufficient proof of her sincerity in paying reparations and set her finances on a sound basis and obtained a foreign loan. These conditions have all been met with the exception that the loan, instead of being applied to French reconstruction, is being used to enable Germany to get on her feet and commence making payments. Perhaps the best gauge of the value of the enterprise is in comparing conditions in January, 1923, and August, 1925. Before the French went in, relations with Germany were strained. All efforts to reach a working agreement for the regular payment of reparations had failed. Germany was in default on certain deliveries in kind. Apparently she was determined to resist her obligations. Today Franco-German relations are friendly, the Dawes Plan for the payment of reparations is functioning smoothly, and Germany is paying loyally.