How to Get a Breakthrough in Ukraine
The Case Against Incrementalism
TAKING the world as a whole, there appears to be enough manganese to supply all users in all countries for an indefinite period. International struggles to secure certain sources of supply are therefore apt to be short-lived, and are not likely to result in the permanent tenseness which often arises in the competition for possession of more highly localized and exhaustible mineral supplies. It is true that the United States is definitely deficient in manganese, which, as explained in a previous article in FOREIGN AFFAIRS,[i] is essential to the production of steel; yet so are the other great steel-producing countries, like Germany, France and England. Nature has placed the greatest supplies of manganese in Southern Russia, Brazil, India and the Gold Coast of Africa (the newest large producer), all of them remote from great steel industries. With open sea-lanes, there is sure to be keen selling competition among the different producing regions.
In 1925 the principal concession to mine manganese in the Caucasus region, east of the Black Sea, was granted by the Soviets to a syndicate dominated by American capital -- the so-called Harriman syndicate. This concession centers about the Georgian town of Chiaturi, which is connected by rail (part narrow gauge, part broad) with Poti, a port on the Black Sea about a hundred miles distant. The Harriman concession for working a large part of this area seemed to have considerable international significance, and much discussion ensued. Before the war the field in question had been dominated by the German Krupp interests; and German diplomacy was exerted to the full to prevent the concession passing to the American group. Likewise opposed were the other European steel-making countries, including France and Italy. Italy was particularly stirred, because her plans for industrial expansion, conceived before the Mussolini regime and maintained during it, involve steel plants to use the abundant hydro-electric power which her mountain streams are to provide.
It does not appear that American steel interests took any widespread or concerted part in developing the plans which led up to the Harriman concessions. Indeed, the greatest factor in steel production in America -- the United States Steel Corporation -- abstained from the enterprise, inasmuch as its position is adequately assured by the control of Brazilian and Indian deposits. The principal American participants were the Bethlehem Steel Co. and the banking house of W. A. Harriman and Co. The results of the endeavors put forward by various continental interests was seen in the final allotment of interest in the corporation, named the Georgian Manganese Co. Ltd. The American interests held only 51 percent of the stock, German interests 25 percent and British interests 15 percent, the rest being variously allocated.
In granting the concession to this organization, the Soviet Government exacted terms highly favorable to itself, including a flat rate of $4 per ton on mined ore, and a very high minimum tonnage requirement. The richest part of the deposit -- Perevissi Hill -- was excluded from the contract, it apparently being reserved for the future use of Soviet Russia. This, incidentally, is an interesting example of active mineral conservation, a subject much discussed in other countries. It is likely that the terms agreed to by the concessionaires were too high, given the keen competition from other great manganese producing centers. Indeed, the Georgian Manganese Company has barely succeeded in reaching the minimum production and thus holding the concession. It is now asking the Supreme Concession Committee of the Soviets for a modification of some of the stipulations of the contract.
There are rumors today that the United States Steel Corporation, which has been drawing its manganese supplies largely from Brazil, has arranged to get its 1927 supply from the Caucasus, but this move is probably simply part of a natural policy of buying at the cheapest rates in the open market. Brazil, whence the Steel Corporation has been drawing largely, in recent years has raised its export duty on manganese, following the time-honored principle of testing to see how much the traffic will bear. It would appear that the traffic will not bear the last raise, in view of the plentitude of manganese in the world. Other countries which impose heavy export taxes on their natural production may take the lesson to heart; the commercial world is nowadays very keen in discovering competitive sources of supply.
The German desire for a German-controlled supply, balked as far as concerns the Caucasus, has been met by another Soviet concession, granted at Nikopol, in Southern Ukraine, to the Southern Mining Trust, composed of the Rawack & Grunfeld Group. Transportation from Nikopol to Germany must be by rail -- the sole instance of large-scale importation of manganese into a great steel-producing country except by sea. Germany has also during the past year purchased part of the Harriman output. Should the Harriman concession be forfeited, European capital would doubtless be glad to get it, but they would probably demand more favorable terms.
On the Russian side, the Soviets may have hoped that the concession would help pave the way toward the desired recognition by the United States. It has not had this effect. But, since foreign capital must come, they doubtless are glad to have American participation on another score, namely in order to have as much diversification as possible; they may then play one interest and one nation against the other, in the time-honored fashion for countries similarly situated.
[i] "Steel-Making Minerals," by J. E. Spurr, FOREIGN AFFAIRS, July, 1926. In the present article, the author has had the advantage of the advice and collaboration of J. W. Furness, of the Bureau of Mines, Department of Commerce, Washington.
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