1

Trade Between the Soviet Satellites and the West During the Stalinist Era
By Nevin Gussack
During the early stages of the Cold War, the common perception was that the Soviet
satellites were entirely dependent on Moscow for all of its trade, including strategic goods.
Second, mainstream historical textbooks portray the noncommunist world as engaging in a
quarantine of the export and import of all goods between the non-communist world (including
the NATO countries) and the Soviet bloc nations. While the export controls levied by the West
on the communist world did indeed restrict the sale of goods to the East, they were never entirely
successful. Corporate greed and the communist creation of front corporations ensured the flow of
goods between the East and the West. In the wake of the Axis defeat in World War II, the United
Nations (UN) also channeled goods to Albania, Poland, and Yugoslavia. These relief goods were
used to enhance the power of the local communist movements over their respective populations.
In some cases, these UN relief goods were also used to buttress the military and security
apparatus of their communist recipients. Western goods were also exported for sale by
diplomatic and special shops in the Soviet bloc. Lastly, special hotels were also refurbished by
the Soviet bloc in order to attract Western progressives, businessmen, visiting delegations, and
diplomats. A comfortable, pampered hotel guest can easily turn into a lobbyist for increased
trade between the capitalist world and the communist country in question.
In 1944, the communist National Liberation Front of Enver Hoxha defeated the German
forces and their Albanian collaborators. Hoxha and has comrades established a communist
dictatorship aligned with the Soviet Union. The United States via the United Nations Refugee
Relief Agency (UNRRA) channeled aid to the communists. The UNRRA staff in Albania were
strictly controlled by the Hoxha regime. In reference to the UNRRA staff in communist Albania,
it was noted that No Albanian was likely to hazard a complaint in the presence of the
government escort who always accompanied staf f members on their observation tours, and in
Tirana the staff found themselves carefully avoided by most of the populace. 1
In August 1945, the Albanian communists and UNRRA 2 signed an agreement for the
provisioning of the communists with relief supplies. Between August 1945 and early 1947,
UNRRA delivered over $26 million worth of relief supplies to Albania. Some imports from
Albania and the UNRRA supplies comprised all of Albanias imports at this time. 3
During the years 1944 and 1945, the Allies also channeled food and weapons to Albania
through Italy. In August 1944, an agreement was signed between the Allied Command in Italy
and Hoxhas National Liberation Army in Bari, Italy to supply Allied-made war materials to the
Albanian communists. In April 1945, an agreement was signed between the Allied Military
Liaison in Italy and Hoxhas government to supply relief supplies and food to Albania. 4
The Albanians also conducted trade with the West during the early and mid-1950s.
Albanias primary Western trade partners during this time period included Italy, West Germany,
and Switzerland. In December 1954, a trade agreement was signed between Albania and Italy to
the tune of $2.5 million. In 1955, Albania signed commercial trade agreements with private firms
Martin, Hubert. The Heritage of UNRRA The Freeman September 10, 1951 Accessed From:
http://mises.org/journals/oldfreeman/Freeman51-9.pdf
2 The United Nations refugee and relief organization.
3 Skendi, Stavro. Albania (Atlantic Press, 1957)
4 Skendi, Stavro. Albania (Atlantic Press, 1957)
1

in West Germany and Switzerland. Albanias postwar trade with non-communist countries was
small and was carried through the Free Port of Trieste. Albanias import trade with the Free Port
of Trieste included the purchase of foodstuffs, sugar, fishing equipment, precision instruments,
telecommunications supplies, medical supplies, leather, industrial fats, and textiles. Albania
exported herbs, citrus fruits, cotton, timber, raw hides, and chrome ore to non-communist
countries via the Free Port of Trieste. According to the US Department of Commerce, Albania
imported $232,000 worth of goods from non-communist countries in 1954 and exported
$122,000 worth of goods in 1954 to non-communist countries. 5 In 1954, the Italian ITAKIMEX
Society of Trieste shipped 450 tons of sea salt to Albania. 6 In December 1954, Italy and Albania
concluded a trade agreement with a clearing account with a ceiling of $400,000. Albania agreed
to export crude oil to Italy. Albanias communist-controlled trade agencies requested drugs,
chemical products, and cotton from Italy.7
By the late 1950s, Albanias factories exported goods to the West in exchange for
payment in hard currencies. In 1957, it was reported that Soviet-built factories in Albania
exported part of their production to Italy, West Germany, other hard currency countries, and the
Soviet bloc.8 In 1969, a Chinese-built copper wire factory in Shkoder exported its product to
Western countries in exchange for hard currency. 9
Despite the hardline, Stalinist nature of Albanian communism, the Hoxha regime utilized
elements of the old capitalist class in its foreign trade relations with the West. Crony private
capitalists within Albania in the 1950s actually held government office. The leading capitalist in
this arrangement was Peristeri Pilo, whose net worth was a few hundred thousand US dollars. He
kept five and six figure bank accounts in the capitalist world and had large amounts of shares in
Western industrial companies and municipal corporations. Pilo became a delegate of the statecontrolled Albanian Trade Unions and visited Vienna and Paris, where he consummated business
deals. Pilo was also commissioned by the Soviets to participate in international black market
activities to raise money for communist espionage operations. Pilo was requested by the Soviets
to acquire Greek drachmas by selling goods to Greece. 10
Like their Soviet counterparts, the Albanian communists opened special shops whose
purpose was the sale of luxury and imported goods in exchange for hard currencies and precious
metals. The sole purpose of these shops were to soak as many dollars and gold from the populace
and migrs abroad. The Albanian special trade enterprises collected hoarded gold and hard
foreign currencies from the locals. Albanians dubbed these enterprises dollar stores.
According to a November 1950 article in an Albanian communist newspaper special trade
5

Skendi, Stavro. Albania (Atlantic Press, 1957)

Radio Free Europe Research Eastern Europe Italo-Albanian Trade Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:fea3e272-ca0b-49d1-9886-9dba89c34c84
7 Radio Free Europe Research Eastern Europe Italo-Albanian Trade Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:fea3e272-ca0b-49d1-9886-9dba89c34c84
8 Salisbury, Harrison E. Albania Persists as Nation in Arms New York Times September 10,
1957 page 1.
9 On Bus Tour to Albania, Visitor Sees Statues of Stalin in Towns New York Times
September 29, 1969 page 20.
10 Albanias Capitalist No. 1 Radio Free Europe Research Eastern Europe Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:4fd4685b-5000-4551-b82aeda061b96490
6

enterprises were created in the countrys major cities to sell industrial articles and foodstuffs for
gold and platinum, and articles made of platinum, gold, and silver, as well as precious stones
and foreign currencies which are freely exchangeable. 11
During the summer of 1951, the Albanian communists forbade the use of gold for
monetary transactions and instead ordered average citizens to surrender all gold to the stateowned banks in exchange for leks (local currency). Albanians were arrested and threatened with
torture if they did not surrender foreign currency and gold coins to the state. Trusted Albanian
communists were dispatched abroad to illegally obtain foreign currency in exchange for jewels.
The Albanian communists solicited Albanian-Americans to remit US dollars back home. Special
stores were opened for Albanians who retained special vouchers which were exchanged for
foreign currencies or precious metals. These stores were stocked with luxury goods that were
allegedly imported from communist Czechoslovakia.12
By June 1967, Albanians who departed their homeland after the Axis defeat in 1945 were
forbidden by decree to send parcels or hard currencies to their relatives and friends back in
Albania. If they did, the money and parcels would either be returned to the senders or confiscated
by the state. It is noteworthy that this decree did not cover the Albanians who left their homeland
in the years before World War II. Albanians who left their country before World War II actually
counted for the majority who resided abroad (mainly in the United States). They were the
primary source of hard currencies and parcels remitted to their Albanian relatives (and
consequently the Hoxha regime). 13
The resident Western and Soviet diplomats and advisers also lived a pampered life in
Albania. Albanians reportedly commented on the high living standards of resident Soviet
officials in their country: Rrojne si n Amerik-They Live as Though They Lived in America.
They had access to unlimited funds, good quality clothing, Albanian servants, and access to
special shops reserved for the local Albanian Party of Labor (Communist) officials. An Albanian
schoolteacher reported that For six years, they (the Soviets) have also been buying up clothes
and furniture and household goods from impoverished Albanians. Now most of us have nothing
to sell. As of 1951, the French and Italians also maintained embassies in Tirana. The embassies
activities were controlled by the Albanian Foreign Ministrys protocol department. 14 In 1950, the
Soviet missions in Tirana had access to special stores that were stocked with goods purchased in
Western Europe with funds from the accounts of the Albanian government. 15 Soviet engineers
and other technicians in Albania were provided with copious quantities of food, all paid for by
the Albanian government. They also had access to the services of Albanian cooks. The foods
served to resident Soviet advisers and technicians included butter, olive oil, fats, meat, eggs,
11

Skendi, Stavro. Albania (Atlantic Press, 1957)

Central Intelligence Agency. Albanian Government Attempts to Secure Gold and Foreign
Currency January 11, 1952 Accessed From:
www.foia.cia.gov/KoreanWar/DailyReports/1952/1952-01-11b.pdf
13 One Less Source of Hard Currency for Albania Radio Free Europe Research Eastern Europe
August 14, 1967 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:ced7730c-b5a9-41d0-a63d-acf6606b07bd
14 Baker, Francis Noel. Land of the Devil Life Magazine November 26, 1951 pages 135 and
142.
15 Handler, M.S. 3,000 Soviet Officials in Control of Albania New York Times November 19,
1950 page E8.
12

alcoholic drinks, sugar, and honey. The Albanian governments paid these Soviet technicians
35,000 to 50,000 leks per month. Special shops sold imported Western goods such as British
woolens, silk shirts, and Swiss-made Omega and Zenith watches to the Soviet advisers and their
families.16 The hotels in Albania also became oases of luxury for the ruling communist elite,
foreign tourists, and delegations. In 1945, visiting journalist Harry Hodkinson observed that
while Albanians were starving, the Hotel Dajti menu: makes wartime Ritz cuisine look like a
corner house. Hordeuvres as big as a table, ohrid trout, lamb cutlets, steak, asparagus, eggs,
cream cakes and fruit. The Dajti Hotel hosted tourists, political delegations, and balls in their
beautiful rooms. The rooms were bugged while the staff and directors were either Sigurimi
agents or informants. The head waiter of the Hotel Dajtis restaurant, Dasho Kapaj recalled
being part of the team put you more at risk than being abroad. 17
During the Stalinist era, Albania quickly developed a system of privileges for its native
elites. Despite the austere exterior of the Hoxha regime, the communist officials lived in a world
of comparative luxury. Entire agencies were created to cater to their creature comforts. In 1956,
the Directorate of Receptions was created by the Albanian communists to serve the privileged
classes, their families, and close allies. 18 One manifestation of such privileges were the special
shops which sold high quality goods to foreigners and the Party elite. As of 1954, there were four
different kinds of Dyqani Special in Tirana. One shop sold food and clothes to Soviet and other
foreign specialists. The food and clothes were of good quality and sold at low prices. Another
Dyqani Special was for members of the Government and the Central Committee of the Albanian
Party of Labor. It was located near the Blloku, which was a luxurious quarter of Tirana where the
elite resided. The Dyqani Special I Funksionareve te Larte was a shop which sold food and
clothing to high ranking Albanian communist officials. The Dyqani Special I Valutave te Husja
were shops that sold goods for foreign currency. They were located in Tirana, Korce,
Gjinokaster, Vlore, and Durres. It was significant that these cities were largely either port cities
or locations where foreigners resided/worked. Most of the American dollars exchanged at these
stores were remitted by friends and relatives living in the United States.19
The Albanian Party of Labor displayed no compunctions in employing collaborators with
the Italian Fascists and German Nazis. Some were able to transfer their loyalties from one form
of collectivism (fascism) to another (communism). Others sought to save their lives or were
attracted by the privileges bestowed to them by serving the Hoxha dictatorship. This was a
source of embarrassment for the Albanians and their Soviet sponsors. Stavrou commented that
many prominent communists, among them Ramiz Alia, (secretary general of the Communist
Party) started their careers as fascists. Omer Nishani, first president of communist Albania, had
fashioned himself as the theoretician of fascism. But when his fascist past surfaced at the Paris

16

Contrast in Living Conditions of Soviet Engineers and Albanian People Radio Free Europe
Research Eastern Europe July 9, 1953 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:04bf9fc0-1ed5-4d0d-9e9b-d22dd4ec26a2
17 Books: Grand Hotel Dajti Accessed From:
https://gotirana.wordpress.com/2014/10/08/dajtihotel/
18 Finance Minister on Former Leaders Corruption Tirana Bashkimi July 31, 1991
19 Special Shops in Tirana Radio Free Europe Research Eastern Europe August 4, 1954 Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:8b9ff289-bc9b-45ef-8fa7b274c2df89a8

Peace Conference, even V.M. Molotov blushed.20 Hysni Peja was a gendarmerie captain during
the German occupation of Albania. He became a general in the Peoples Army of Albania under
Hoxha. Islam Radovicka was a member of the Albanian General Staff under the Italian Fascist
occupation. In the postwar period, Radovicka became a deputy in the communist Peoples
Assembly. Riza Kodheli was the commander of the Albanian Fascist Party Militia who then
became a colonel in the Peoples Army under Hoxha. Rexhep Plako was the Albanian Fascist
leader who offered the Albanian crown to King Victor Emmanuel of Italy. During the German
occupation of Greece, Plako committed war crimes in the Greek town of Rizo. Plako transferred
his loyalties to the communists and eventually helped Hoxha form the communist National
Liberation Front (NLF) of Albania. Tahir Kandare was a member of the Albanian Fascist Tomori
Regiment, which assisted German and Italian troops in their invasion of Greece. Kandare
switched loyalties and joined Hoxhas troops. Musa Demi was an Albanian VIP who cooperated
with the Germans and Italians. Musa eventually found a new political home in Hoxhas
Albania.21 The Frontier and Internal Communications Protection Department of Albania was
directed by Lt. Col. Iljaz Sevrani. He was originally an officer of the Albanian Fascist Militia
who subsequently became the Secretary of the Communist Party Regional Committee in Barat. 22
Two Albanian Fascists became ardent communists and they were General Maltsiou Spyro and
Captain Roushi Atif. Both retained their military ranks and remained in active service in the
army.23
There were reports that even high-level German Nazi nationals served the Albanians and
their other communist allies in the years following the collapse of the Third Reich. It was
reported that former Gestapo chief Heinrich Muller shifted his loyalties to the Soviets in 1945
and helped reorganize Stalins secret police (NKGB and later the MGB). After Stalins death in
1953, Muller then assisted the Hungarian secret police, known as the AVO. After the 1956 revolt
in Hungary, Muller moved on to assist the Albania secret police, known as the Sigurimi. He
allegedly changed his name to Abedin Bekir Nakoschirl and held the rank as captain in the
Sigurimi. Muller allegedly headed the Sigurimis Western Section.24
While the pro-Nazi collaborators and Albanian Fascists were committed to anticommunism, they hewed to a nationalist form of collectivism which prescribed the authoritarian
regulation of the economy. The state and its organs were responsible for uprooting class struggle
through the cooperation of all elements of civil society. In practice, this translated into strict
control of the economy (the corporative state). When the Albanian Fascist Party was created by
the Italians in 1939, a Central Council for the Corporative Economy was created. It was subdivided into corporations for agriculture, industry, trade, arts, and crafts. The Central Council for
the Corporative Economy worked with the Central Council of the Albanian Fascist Party.
Parliament was henceforth abolished and replaced with the Supreme Corporative Fascist
Council. In 1942, the Ministry of Economy created a Central Committee for Provisioning and
Stavrou, Nikolaos A. KFOR: Repeating history Washington Times August 11, 1999 page
A15 Accessed From: http://www.srpska-mreza.com/Kosovo/NATO-attack/KFOR-Nazis.html
21 Plain Talk Volume 2 1947 page 52.
22 Continental News Service, Issues 39-62 1947 page 9.
23 Albania Turncoat Fascists Radio Free Europe Research Eastern Europe February 22, 1952
Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:984d34b0-8d35-4a9fac9b-643b04ec281c
24 Ex-Gestapo Boss in Albania, Magazine Says The Stars and Stripes January 7, 1964 page 3.
20

Consumption, which was responsible for controlling prices and distribution of goods. Provincial
Economic Councils were created and controlled by the Albanian Fascist Party. 25
With the defeat of the Italian Fascists in 1943, the Nazis installed a sympathetic
nationalist regime in Tirana. It hewed to a classic Nazi doctrine which was anti-communist and
anti-Jewish. An Albanian SS division was created. The propaganda apparatus of the new
Albanian government emitted the typical Nazi-like anti-capitalist, anti-plutocratic complaints. In
August 1944, Albanian Under-Secretary of State Xhelal Mitrovica noted Peje exists no
moreNow with the aid of the Anglo-Americans and in the name of world super-capitalism, the
enemy have bombed the innocent town of Peje.26 The pro-Nazi radicals in Albania had clear
revolutionary intentions. In February 1944, the pro-Nazi newspaper Bashkimi I Kombit noted
Blood-letting is a radical remedy against infection. Blood must flow in torrents through the
streets of Tirana if we are to reestablish peace. One day of terror ensures ten years of
tranquility.27
The extreme nationalist Balli Kombetar (a.k.a Ballists) also cooperated with the Nazis. It
also expounded a racially collectivist ideology. The program of the Balli Kombetar as laid out in
1942 stated: We are fighting for an Albania with a proper economic and social balance so that
there will be no more exploiters and exploited, that is to say, so that no one will live at the
expense of his fellow man, so that there will be no farmers without enough land to live on, so that
there will be no blue and white collar workers without housing and security, i.e. we are fighting
for a stable Albania with a thoroughly reformed economic system in accordance with the wishes
and needs of the Albanian people. The program also noted that We are fighting for an Albania
that, in a strict and exemplary manner, will punish all anti-patriots, traitors, lackeys,
troublemakers, speculators and spies; for an Albania in which there will be no place for
hypocrites, sycophants, feudal oppressors and anyone who hinders the development and
progress of our renascent country.28
By 1948, the Stalinist Communist Party consolidated complete control over Bulgaria.
Despite the close ties and control exerted by the Soviet Union, Bulgaria continued its trade
relations with the West. The trade fair at Plovdiv was a tool used by the Bulgarian Communists
and the Soviets in lobbying and attracting trade and legitimacy from the Western capitalist
countries. In September 1948, the Plovdiv Fair hosted firms from the United States, Switzerland,
the USSR, Czechoslovakia, and the Soviet Zone of Germany (East Germany).29 The 1952
Plovdiv Fair hosted companies from Italy (Microtecnica, Cirardengo & Company, SA Emilio
Bozzi, and S.p.A. Mario Alberti), Austrian firms (forty total), West Germany, Switzerland,
Sweden, Holland, Britain, USSR, China, East Germany, Poland, Hungary, Czechoslovakia, and
Romania.30

25

Roselli, Alessandro. Italy and Albania (I.B.Tauris, 2006) pages 100 and 109.
Pearson, Owen. Albania in the Twentieth Century (I.B.Tauris, 2006) page 378.
27 Ibid page 326.
28 The Ten-Point Programme of the Nationalist Organization Balli Kombtar Accessed From:
http://www.albanianhistory.net/texts20_2/AH1942.html
29 Handler, M.S. Soviet Exhibits Copy Tools of West; Moscow Shows Eastern Leadership
New York Times September 5, 1948 page 36.
30 International Fair of Plovdiv Radio Free Europe Research November 14, 1952 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:911d8f 07-44cd-48e2-a24c-459c3d74ac76
26

The Bulgarians repaid their Western partners with exports of low cost, shoddy goods. In
August 1952, an Austrian independent newspaper noted that If Austria delivers machinery to
Bulgaria, Bulgaria does not pay in foreign currency, but in low quality goods. Czechoslovakia,
Bulgaria, and Rumania are still behind with their deliverieswhile Austria has done her utmost
in complying with her trade agreements. The communists are responsible for the fact that the
Eastern states, which in the past were punctual in their deliveries, do not care to live up to their
obligations.31
As of 1955, Bulgaria utilized Swiss firms to import strategic goods (such as US-made
machinery) from the capitalist world (including the United States, Belgium, and The
Netherlands). Bulgaria deposited Belgian and Swiss francs and American dollars in the
Schweizerischer Bankverband and Bank von Ernst and Company in Zurich. The Soviets also
used the Bulgarian funds in Swiss banks to make purchases of its own. To this end, the Soviets
contributed hard currency and gold to the Bulgarian funds. 32
In the early years of Bulgarian communist rule, trade relations were maintained between
the United States and Sofia. In December 1947, Bulgaria and the United States agreed to
establish normal trade relations. An agreement was inked between the US Commercial Attach
in Bulgaria, Louis Beck, and Kosta Georgiev, the General Secretary of the Bulgarian Ministry of
Trade. Bulgaria was interested in exporting tobacco, carpets, scent oils, and herbs to the US.
Bulgaria expressed interest in importing items such as mining machinery, spare parts for trucks,
soda caustics, textile plants, and electrical equipment from the United States. 33 In 1949 Bulgaria
exported over $1.9 million worth of goods to the US, which consisted mostly of agricultural
products. However, by the Korean War, the trade relations between Bulgaria and the United
States soured considerably. In 1951, favored nation status (MFN) was withdrawn from Bulgaria
by the US Congress. 34
By the mid-1950s, trade relations were cautiously reestablished between Bulgaria and the
United States. In 1955, the US government granted licenses to Chevrolet to ship over $1 million
worth of passenger cars to Bulgaria. 35 Another report from 1955 indicated that an unnamed
Brooklyn NY auto dealer received a license to ship 500 Chevrolets to Bulgaria. These cars were
five passenger models equipped with heaters intended for the use of Bulgarian officials. 36
Between 1944 and 1954, Bulgaria had a minimal number of tourists and foreign visitors
traveling from the West. These tourists were mostly communists or fellow travelers who were
used by the Bulgarian communists for propaganda purposes. In 1956, a small number of tourists
visited Bulgaria from France and other Western European countries, while the vast majority of
tourists to Bulgaria in 1955 and 1956 traveled from European communist nations such as the
USSR, Romania, Poland, and East Germany. In 1957, Radio Sofia reported that the state tourist

31

Kirk, Grayson. What Is Communism? (Dutton 1955)

Switzerland Buying for Bulgaria in the West Radio Free Europe/Radio Liberty Research
Institute June 25, 1955 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:afb0aca4-1f2e-4cca-9af6-7718d1984d96
33 Sofia Announces Accord: U.S. and Bulgaria to Establish Normal Trade Relations New York
Times December 3, 1947 page 18.
34 US Trade Benefits Denied Bulgaria New York Times September 18, 1951 page 10.
35 Interest on Rise in US-Red Trade: Sales of 100 Autos to Bulgaria Produces Many Inquiries
New York Times July 2, 1955 page 19.
36 Egan, Charles E. Bulgaria to Get 500 Chevrolets New York Times June 17, 1955 page 3.
32

corporation Balkantourist arranged the visit of 20,000 tourists to hotels and international resorts
(Golden Sands and Varna). These tourists originated from the USSR, Czechoslovakia, Poland,
Romania, Germany, Hungary, France, Sweden, and Belgium. Revenues generated from tourism
in 1957 reached 30 million leva in foreign currency. Balkantourist and the Bulgarian Chamber of
Commerce were commissioned to modernize and expand the tourist industry as a means of
winning legitimacy from the West and to garner hard currencies.37
As of 1954, all hotels in Bulgaria were operated and owned by Balkantourist, which was
led by the staunch communist Georgi Barell. First class level hotels were frequented by high
level Party and government officials, along with citizens who traveled to Sofia for specific
duties.38
Special restaurants were reserved for high level Party officials and foreign diplomats. In
September 1951, there were two major restaurants in Sofia: the Bulgaria and the Diplomats. The
Diplomats was open for foreign personnel employed by legations and other missions, while the
Bulgaria was open to high Party and government officials for receptions and other special
occasions. For example, the Bulgaria Restaurant hosted an anniversary meeting of the liberation
of Bulgaria by Soviet troops. The Bulgaria Restaurant served delegations from the USSR and
other satellite countries during this meeting.39
The ruling Bulgarian Communists in Sofia maintained access to special shops to
foodstuffs at reduced prices. Trucks supplied food to these shops for Central Committee
members, Soviet officials, ministers, and other high level people. A bakery produced high
quality white bread on Lavele Street. A Soviet jeep arrived at the bakery every day to buy 80
loaves of bread. A vegetable shop catered to high level Bulgarian officials and Soviet officials.
This shop received its produce by truck delivery.40
Various pro-Nazi Bulgarian industrialists, militarists, and fascists cooperated with the
ruling communists. Before the surrender of Bulgaria to the Soviets in 1944, Nikola Boyaciev was
a merchant, assistant to the chief of police and a member of the Pazarcik District Council. He
quickly became a communist and a sawmill owner. Boyacievs commercial activities were
protected by the Bulgarian Communist Party. He was also nominated as president of the
Rakitovo Soviet.41 Metodi Tachev was a merchant who became the purchasing agent for the
large firm Kobilarov. This firm supplied German Nazi occupation forces in Bulgaria. After 1941,
37

The Growth of Foreign Tourism in Bulgaria Radio Free Europe Research Eastern Europe
October 22, 1957 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:412f80b1-0ea6-4d55-b4c7-4039f03382a1
38 Hotel Organization in Bulgaria Radio Free Europe Research Eastern Europe January 19, 1954
Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:0167e402-3555-47ad81d7-4854083cd95a
39 Bulgaria and Diplomats, the Only Two Restaurants in Sofia Radio Free Europe Research
Eastern Europe September 24, 1951 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:ee636bbe-cf32-43eb-b81d-5d2124b66c0b
40 Special Supply Shops for Communists Radio Free Europe Research Eastern Europe March 19,
1952 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:4a0e8177-040c412b-ae90-63b07816b86f
41 Ex-Fascists Turned Communists Radio Free Europe Research Eastern Europe October 17,
1951 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:c2c7c16d-06c647d8-8c38-3c2e6c532657

Tachev bought, on behalf of the Germans, fruit pulps, fruit, preserves, wheat, meat, medicinal
plants, and 50% of the crops raised in Vratsa and Vidin areas. By 1942, he amassed a huge
fortune and employed 12 purchasing agents and 1,000 employees. Tachev retained close ties
with government banks and high level secret police officers during World War II. Through the
influence of high level communist relatives, Tachev became a high level inspector in the
Ministry of Trade. In 1952, he became a high level administrator in the communist Bulgarian
Chamber of Commerce.42
In this period (from September 1944 to October 1946) the head of the coalition,
communist-dominated Fatherland Front government was General Kimon Georgiev. He had
played a leading part in the military, semi-fascist coup d'etat of 1923, in which tens of thousands
of workers and peasants were massacred. General Georgiev was the direct author of the military
coup of 1934 which led to the terrible persecution of Communists, Socialists and Agrarians, and
to the dissolution of the trade unions. His supporters wielded such influence in the Fatherland
Front government which prompted a Western commentator to remark that the composition of
the government suggests that the group that has now taken over in Sofia is the famous Military
League that took power by coup detat in 1934.43 Spas Andonov was an active member of the
fascist Bulgarian Legion who became a communist officer in the TVO (Labor Educational
Institution). Alexander Vlasev was an assistant in the Bulgarian Legion and a member of the
Tsankov fascist group. He became a communist municipal reception clerk and was actively
engaged in denouncing former fascists. 44
By 1948, the Communist Party in Czechoslovakia achieved total domination. Previously,
the Communists exercised de facto control over Czechoslovakia through the administration of
important ministries and careful infiltration. The United States pumped relief goods into
Czechoslovakia through UNRRA. Unfortunately, these goods boosted the power of the
increasingly communist-dominated government in Prague. In Czechoslovakia, the earnings from
the sale of UNRRA goods accounted for 27% of the government revenue.45 During the mid to
late 1940s, the Czechoslovak Communist Minister of Agriculture under the Benes government
made distribution of farming equipment and supplies from UNRRA 46 and allocation of
expropriated lands dependent on support for communist candidates and programs. 47
During the increasingly communist-dominated government of Eduard Benes, trade
relations were maintained with the United States and other Western countries. By March 1947,
eleven nationalized industries in Czechoslovakia dispatched representatives to the United States.
42

Metodi Tachev: Former Supplier of the Nazi Armies, Now Important Member of the Sofia
Chamber of Commerce Radio Free Europe Research Eastern Europe January 13, 1952 Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:778a41d5-ce48-47be-88ce5c9a45719612
43 Harman, Chris. Class Struggle in Eastern Europe 1945-1983 Accessed From:
http://www.vorhaug.net/politikk/ist/harman/eastern_europe/repression.html
44 Ex-Fascists Turned Communists Radio Free Europe Research Eastern Europe October 17,
1951 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:c2c7c16d-06c647d8-8c38-3c2e6c532657
45 Martin, Hubert. The Heritage of UNRRA The Freeman September 10, 1951 Accessed From:
http://mises.org/journals/oldfreeman/Freeman51-9.pdf
46 Acronym for United Nations Refugee and Relief Administration.
47 Kirk, Grayson. What Is Communism? (Dutton 1955)

10

They received welcoming treatment by American businessmen who offered commercial credits,
raw materials, chemicals, machines, and leather hides. 48
The ruling communists pledged their intention to maintain trade links with the West after
their accession to power in 1948. In March 1948, Czechoslovak Foreign Trade Minister Antonin
Gregor noted to foreign business audiences in the West and the United States that 55% of
Czechoslovakias trade would be with capitalist countries and 45% with Soviet bloc countries.49
In August 1948, the Czechoslovak Ministry for Foreign Trade highlighted the importance of
shipping goods to hard currency countries in exchange for raw materials. Twenty five categories
of Czechoslovak exports were sent to the British pound sterling countries, while 16 percent went
to the countries of the American dollar zone.50
As of May 1952, Czechoslovakia exported massive quantities of food to Switzerland via
Koospol Ltd. Foodstuffs exported to Switzerland included eggs, some wheat, barley, fresh and
tinned vegetables, malt, and beer. In December 1951, the Czechoslovak corporations Centrotex
Ltd. and Chemapol Ltd. exported via dumping chemicals and textiles to the Swiss market.
Czechoslovakia imported machinery, cables, nickel goods, nonferrous metals, and special
chemicals.51
The communists also engaged in unfair foreign trade practices such as dumping in their
commerce with the West. Czechoslovakias commercial offices abroad were taken over by the
state organization Torbred by 1951.52 It was reported in 1949 that Czechoslovakia dumped goods
in the West at subsidized prices set below the costs of production. It was suspected that
Czechoslovakia conducted this dumping in order to generate foreign currency and to serve an
unknown political purpose. In December 1948, the USSR provided a gold loan to the
Czechoslovaks. This loan was used to assist Czechoslovakia in its dumping of exports to the
West. This program was conducted under the auspices of COMECON. The Czechoslovaks
dumped textiles, Tatra cars, and many other products into European and Asian markets.53
During the early years of Stalinist Communist rule, West Germany was an important
noncommunist trade partner. Initially, during the early 1950s, legal and illegal West GermanCzechoslovak trade was greatly reduced due to stoppages conducted by American forces
stationed in Bavaria. These controls negatively affected the Bavarian economy, which depended
on Czechoslovak coal and other materials for the glass and ceramic industries. In midSeptember 1950, US Military Police Customs Units seized 21 licensed railroad cars containing
pipes and fittings sold to Czechoslovakia by the West German firms Mannesmann and
Stahlunion.
Ross, Albion. Czechs Seeking Aid of US on Industry New York Times March 12, 1947
page 14.
49 West is Reassured by Czech on Trade New York Times March 7, 1948 page 10.
50 Czech Seeking Dollars New York Times August 13, 1948 page 8.
51 Czechoslovak Trade with Switzerland Radio Free Europe/Radio Liberty Research Institute
May 5, 1952 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:755216940a25-4b21-8b18-66ca1fbe240d
48

Sulzberger, C.L. Soviet Smuggles Brazil Diamonds, Using Czech Diplomatic Pouches New
York Times September 25, 1951 page 15.
53 Daniell, Raymond. Czechs Dumping Goods in the West New York Times September 11,
1949 page 22.
52

11

In other cases, American occupation officials in West Germany allowed companies to

export products to Czechoslovakia. American officials on the Allied High Commission in West
Germany allowed West German firms to sell 10,000 tons of iron and steel scrap to
Czechoslovakia. West German-Czech trade totaled $15.1 million for 1955, as opposed to the
1949 level of $14.5 million. By 1955, West Germany was Czechoslovakias biggest Western
trade partner. In 1953, Czechoslovakia bought $7.7 million worth of West German goods.
Spaulding wrote that Czechoslovakian exports to Germany were actually larger at the height of
the embargo in 1951 than they were thereafter. 54
The Czechoslovaks also established front companies in the West in order to import
strategic goods. The West German firm Clemens of Hamburg was the main agent for the
Czechoslovak importing agencies Metrans, Chemapol, and Czecho-Fracht. Clemens channeled
Western European goods (especially West German) to the Czechoslovak state importing
agencies. Josef Spiero managed an import-export business based in Hamburg which handled
trade with the Czechoslovaks as well. Mentz Decker & Company of Hamburg handled the
shipping of these to the Czechoslovaks via Soviet Black Sea ports. A wholesale chemist agent
named Josef Lad of Hamburg shipped (via its West Berlin agent) chemicals to East Germany and
Czechoslovakia.55
Representatives of Czechoslovak industries continued to visit the United States after the
communist takeover in 1948. The Czechoslovak representatives noted that their close trade
relations with the USSR should not be an impediment on trade with the US. In January 1949, Dr.
Jaroslav Fukatko, secretary general of the Central Federation of Industries of Czechoslovakia
stated As we see it, through expanding trade between all countries regardless of political creeds
we are contributing towards the maintenance of world peace. 56 By 1948, the United States even
experienced trade deficits in its trade with Czechoslovakia. By June 1948, the Czechoslovaks
exported $10 million worth of goods to the US, while the US shipped $2.7 million per month of
goods to the Czechoslovaks.57 In May 1950, American exports to Czechoslovakia totaled $1.4
million. In May 1951, the US bought $2.1 million worth of goods from Czechoslovakia. 58 In
early 1951, American imports from Czechoslovakia totaled $9.2 million, which consisted of
glassware, costume jewelry, and textiles. These goods were very inexpensive, whose subsidized
production undercut US producers.59
The Stalinist Communists in Czechoslovakia also established a chain of special stores
managed by the Darex Trading Company. Around 1949, the Czech communist government
opened the Darex shops in Prague, Bratislava, Karlovy Vary, Kosice, and Pilsen. Czechoslovaks
and foreigners who possessed American dollars, Swiss and Belgian francs, and British pound
sterling exchanged this foreign currency for special coupons where they purchased exportquality Czechoslovak goods. In April 1949, the communists declared an amnesty for Czech
54

Spaulding, Robert Mark. Osthandel and Ostpolitik: German Foreign Trade Policies in Eastern
Europe from Bismarck to Adenauer (Berghahn Books, 1997) pages 373-375
55 West German Firms Trading in Strategic Commodities with CSSR Radio Free Europe
Research July 15, 1952 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:d7146ff8-e592-45e6-ae2b-b47e584d925a
56 Czechoslovakia Sees No Bar to US Trade New York Times January 16, 1949 page S9.
57 Czechs Industry 95% Nationalized New York Times June 14, 1948 page 8.
58 Czech Trade with US Holds About Steady New York Times July 26, 1951 page 46.
59 Injustice Is Seen in Higher Tariffs New York Times July 28, 1951 page 28.

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citizens who possessed foreign currencies. This was an effort by the government to capture
precious hard currencies. 60 In 1951, one report mentioned the existence of ten Darex National
Enterprise shops in nine Czechoslovak cities. Eighty five percent of the customers were
Czechoslovaks who generated foreign currency. High quality Czechoslovak-made goods and
foreign items were stocked for sale in the Darex shops. 61
The hard currency was exchanged through the Czechoslovak banking system and Darex
stores into special certificates for citizens to purchase the goods. In August 1949, Darex assigned
Centex as its agent in the United States. Centex deposited US dollars accrued from its sales in the
Zirnostenal Bank located in Prague. From November 1949 to December 1952, Centex sold over
$3.5 million worth of special certificates. Darexs American agent John Fisher collected over
$578,000 in the first six months of 1953. From November 1950 to 1958, the Czechoslovaks
collected a total of $4.8 million from parcel operation in the US. 62
Even under the Benes government, the Czechoslovak Communists attained many
privileges with the power they quickly achieved. In 1948, many Czechoslovak factory managers
earned 40,000 crowns per month, received a car with chauffer, a villa, and other privileges.
President Benes newspaper Svobodne Slovo noted that the bureaucracy was living in the style
of millionairesenjoy every comfort and luxury, thanks to the villas and limousines which they
have been allocated by the authorities and to their high incomes.63 As of January 1952, five
high level Czech communists and officials received villas located in the High Tatra Mountains
and in Harmonie. These villas were confiscated from reactionaries. The Minister of Defense,
General Secretary of the Slovak Communist Party, Foreign Minister, Industrial Sub-Minister,
and the Chairman of the Council of Commissioners were all recipients of such confiscated
luxury properties.64
Foreign diplomats and visitors were also subjected to luxuries unavailable to the general
public. Taborsky noted that at the height of Stalinism it (tourism from the West to
Czechoslovakia) was limited almost entirely to foreigners coming on official business, such as
accredited diplomats, newspaper correspondents, businessmen, and various official or
semiofficial delegations. Some sympathizers from the West, such as the Red Dean of Canterbury,
were let in for propaganda reasons.65 As of January 1956, the Hotel Alcron in Prague was
reportedly was a pretty good hotel with nice rooms and good service. However, the food was
reportedly poor.66
The Communists also sought to infiltrate the Nazi collaborationist apparatus in an effort
to consolidate power. Other fascists and pro-Nazis exchanged one form of collectivism for
60

Schmidt, Dana Adams. Anatomy of a Satellite (Little, Brown and Comp., 1952) page 368.
Dollars Welcome in Czechoslovakia Reno Evening Gazette February 8, 1951 page 16.
62 Communist Parcel Operation Report by the Committee on Un-American Activities (GPO
1959) Accessed From: http://babel.hathitrust.org/cgi/pt?id=uc1.$b654294;view=1up;seq=5
63 Gluckstein, Ygael. Stalins Satellites in Europe (George Allen & Unwin, 1952) page 100.
64 Red Bosses Living in Luxury Radio Free Europe Research Eastern Europe January 25, 1952
Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:3f7e145c-762a-46ee8f95-7a934f376d4f
65 Taborsky, Edward. Communism in Czechoslovakia 1948-1960 (Princeton University Press
1961) page 475.
66 Raymond, Jack. Tourist Facilities Beyond the Iron Curtain New York Times January 8,
1956 page X38.
61

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another after the Axis defeat in May 1945. The pro-Nazi trade union NOUZ became the first
target for infiltration by the Communist Party of Czechoslovakia. In 1942, communist agents
were instructed to take over the collaborationist Czech union, NOUZ. The communist front
group, the Revolutionary Trade Union (ROH) took over the structure and personnel of the
NOUZ.67 The Czechoslovak scholar Vilem Hejl wrote that The NOUZ organization was too
useful for the KSC to want to shock it or upset it by adherence to some sort of abstract justice. 68
It was also noted that the government unions of the Czech Communist inherited many, many
leading officials of the old NOUZ. 69 An officer of the NOUZ Evzen Erban was made Secretary
General of the official Czech Communist Party union, the URO. Emmanuel Moravecs70 son
served as a high ranking officer in the German Army and became a German citizen. He refused
to be repatriated to West Germany in the fear of punishment of crimes as a Nazi collaborator.
Moravec was re-naturalized as a Czechoslovak citizen. He henceforth became a technical
draftsman at a big state industrial enterprise. 71
Officials and activists from the old fascist Slovak Republic were also incorporated into
the communist apparatus. Political indoctrination courses for released fascist prisoners were held
in Bratislava, Sastin, Rusovce, and several other cities. Imprisoned Slovak fascists received
political re-education at these course. Several of these ex-fascists were given responsible
positions of authority in industry and did well as communists. It was noted that the communists
intend to build up a corps of reliable servants from former fascist prisoners. 72 Former Slovak
Fascist judge Rudolf Gajdos became an agent of the StB at the Bratislava Town Hall. 73
After the Allied defeat of the Third Reich, the Soviets sought to construct a communist
dictatorship in the eastern part of Germany. The Soviets conducted trade with various Western
nations and corporations during the period from 1945 to 1949. Business was also conducted
between Soviet corporations in the Eastern Zone of Germany and the Western occupation area.
In June 1947, the War Department of the US signed an agreement with the Soviet Military
Administration of Germany for over $3.2 million worth (95,000 tons) of Soviet Zone potash. 74 In
May 1947, the Soviet Military Administration in eastern Germany noted that trade agreements

67

Korbel, Josef. The Communist Subversion of Czechoslovakia (Princeton University Press

1959) pages 156-157.
68 Frommer, Benjamin. National Cleansing (Cambridge University Press, 2005) pages 301-304.
69 Frommer, Benjamin. National Cleansing (Cambridge University Press, 2005) page 302.
70 Moravec was the Czechoslovak Nazi Minister of Education and head of the Office of
Enlightenment during the occupation period.
71 Moravec, Nazi collaborator and son of former wartime minister said to have repudiated
adopted German nationality to remain in CSR Radio Free Europe Research Eastern Europe
March 11, 1954 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:07aa38ef-00de-4326-bfe2-961a7c0ba745
72 Czechoslovakia Former Fascists to Become Fellow Travelers Radio Free Europe Research
Eastern Europe July 24, 1951 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:0ee7e8c1-1041-413d-96c9-0125eeb4c44c
73 Fascist Working for StB Radio Free Europe Research Eastern Europe June 7, 1951 Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:7ad869bb-2a4a-4ae8-a53fd16a7d991086
74 Morrow, Edward A. US Buying Potash From Soviet Zone New York Times June 24, 1947
page 12.

14

were signed with The Netherlands, Switzerland, and the USSR. Thousands of tons of fertilizers
were imported by the Soviet Zone from the USSR, France, the French occupation zone of
Germany, North Africa, and The Netherlands. The Soviet Zone also signed an agreement with
Sweden, where the Swedes would receive industrial potash, electric parts, cement, clay and
glassware. The Swedes would ship the Soviet Zone special sorts of steel, materials for
tanning, fish and other goods. The Netherlands was to ship the Soviet Zone fertilizer, fish, and
industrial raw materials. The Soviet Zone shipped the Dutch finished goods, such as textiles,
machines, spare parts, and glassware. The Swiss pledged to supply a glass plant in Thuringia
and molybdenum, wire, and wolfram. 75 In the Leipzig Fair of August 1948, Heinrich Rau,
Chairman of the German Economic Commission in the Soviet Zone signed trade agreements
with Belgium, The Netherlands, and Britain. 76
The Soviets also groomed their German collaborators to administer the economy and
foreign trade of the Eastern Zone of Germany. In February 1948, Soviet Marshal Vassily
Sokolovsky ordered the creation of the German Economic Commission to develop peacetime
industry in the Soviet zone of Germany and centralize economic administration in the SBZ. The
Commission was to carry through according to plan reparations deliveries and to satisfy the
needs of Soviet occupation forces in Germany.77
Soviet Zone companies also dumped goods in the West in exchange for hard currencies.
These companies were: Rasno Export (consumer goods including Meissen porclain and Zeiss
cameras), Techno Export (machinery), and Prima Export (fertilizers and raw materials such as
brown coal). These companies produced German goods and displayed them at the Leipzig Trade
Fairs.78 Many of the Soviet directors of the Soviet export-oriented enterprises such as Rasno in
the Soviet Zone of Germany were trained by the Third Reich between 1939 and 1941. Nettl
commented that these men who ran these firms in Germany were among the most able Soviet
commercial experts, and the results they achieved were impressive. 79
Companies such as the Greater Berlin Trading Company were created by the SEDs
German Economic Commission. These companies requested that West German firms buy their
energy and raw materials in exchange for manufactured products exported exclusively to the
Soviet Zone. One West German industrialist commented Its a swindle, but knowing the
Russians we werent surprised. Another stated We could have gotten our money if we had
agreed to cooperate with the Greater Berlin Trading Company and deal only in East Marks. 80
Soviet Zone export-oriented firms also sold goods to capitalist countries at a lower cost than their
competitors in Western Germany. These goods were then dumped in countries such as Sweden,
Switzerland, and Belgium. Thus, BMW and Siemens had factories in both the Western and
Soviet Zones of Germany which produced exactly the same goods.81

75

Raymond, Jack. Russians Disclose Zone Trade Pacts New York Times May 25, 1947 page

7.
Soviet Zone Seeks Trade with West New York Times August 30, 1948 page 2.
Order Germans to Set Up Own Economic Unit The Gettysburg Times February 13, 1948
78 Morrow, Edward A. Soviet Seeks Funds by German Sales New York Times March 4, 1948
page 12.
79Nettl, J.P. The Eastern Zone and Soviet Policy in Germany 1945-50 (Oxford University Press,
1951) pages 225-230.
80 Evans, Joseph. Currency War Wall Street Journal August 7, 1948 page 1.
81 Illegal Competition Studied in Germany New York Times February 26, 1948 page 3.
76
77

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The profits of these trade corporations also funded subversion in Western Germany. In
1948, it was reported that the Soviet Zone Administration was financing the communist party in
West Germany through hard currency sales of consumer goods through Rasno Export
Corporation outlets.82
The proceeds generated from the sale of cigarettes by Rasno were used to purchase
scientific instruments from Hamburg and antiques and jewelry in West Berlin. During the
Western blockade of the Soviet Zone of Germany in late 1948, Moscows trading companies
attempted to continue to obtain goods from the Western Zone of Germany and nations such as
Switzerland, Liechtenstein, and Austria. The Soviet Zone of Germany concluded trade
agreements with Austria, Belgium, Holland, and Switzerland in 1947, and with Sweden in 1948.
Trading relations were also re-opened with Italy and Norway. The Soviet Zone also generated
hard currency through the export of potash to Switzerland, Sweden, and Western Germany. The
Soviet Zone also shipped coal to Switzerland and Sweden. The Soviet Zone also exported scrap
metal in exchange for hard currency. Pre-war and wartime stocks of German-made products
were also exported from the Soviet Zone to Western Europe. 83
The Soviets and the ruling SED in East Germany used the Leipzig Trade Fair as a tool to
ensnare Western businessmen into concluding trade deals. In 1947, the communist-controlled
Leipzig newspaper described the Trade Fair as exemplary for all German reconstruction.84
In May 1946, the Leipzig Trade Fair was restarted by the Soviet Military Administration.
German businessmen told buyers that they could not sell anything due to Soviet reparations
demands and they could only sell occasional surplus items. Many businessmen used ersatz
materials resulting in low quality items. 85 In May 1946, over 2,750 firms displayed their wares at
the Leipzig Fair. Items ranging from toothbrushes and cars were on display. However, these
displays did not reflect the actual production of goods in the Soviet Zone. For example, the
Bavarian Motor Works produced 400 cars a month, which were then turned over to the USSR.
Dr. Werner Land, the Saxon Secretary of State for Industry, noted that 18,000 tons of steel and
8,000 tons of iron ore was exported from a firm in Dusseldorf to the Soviet Zone. The Soviet
Zone then exported these finished products to the West. Over 250 Western German firms
displayed the following wares at the Leipzig Trade Fair: leather from Offenbach; silver from
Hanau; handmade art work from Munich; and toys from Nuremberg. These firms were located in
the American Zone in Germany. There were a total of 8,000 firms from the American Zone and
9,000 firms from the Soviet Zone at the Fair. Over 15 German civilian trains crossed the SovietUS Zone border without being stopped by the communist authorities. 86
In March 1947, foreign buyers inspecting high quality leatherwear, china, and tableware
at the Leipzig Trade Fair. However, no goods were for sale at the Fair. Britain sent a delegation
at the request from the Board of Trade in London. Meissen and Kahla china were sent to the
USSR as reparations and the remainder was exported to other countries. 87 Eight hundred
Berlin Reds Seeking Western Currency New York Times July 2, 1948 page 2.
J.P. The Eastern Zone and Soviet Policy in Germany 1945-50 (Oxford University Press,
1951) pages 225-230.
84 Crew, David F. Consuming Germany and the Cold War (Berg, 2003) pages 22-25.
85 McLaughlin, Kathleen. Leipzig Fair an Aid to Soviet Prestige New York Times May 10,
1946 page 12.
86 Evans, Joseph E. Leipzig Fair Wall Street Journal May 11, 1946 page 1.
87 Evans, Joseph E. Leipzig Fair Wall Street Journal March 8, 1947 page 1.
82

83Nettl,

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companies from the Western Zones of Germany and 200 West Berlin-based firms participated in
the Leipzig Trade Fair of 1948. 88
In March 1949, the Leipzig Fair opened with the head of the German Economic
Commission for the Soviet Zone Heinrich Rau speaking. 89 The March 1949, Leipzig Fair
displayed and sold mostly poor quality goods such as toys, textile products, and leather goods to
foreign buyers. The exhibitors and the Soviets blamed the Western embargo of imports of raw
materials. One exception was the Meissen porcelain. The man in charge of the display stated:
People say that Meissen quality has changed for the worse because the Russians expropriated
the plant. It is not true. Despite the Western embargo, over 400 Western German firms
participated in the Fair. These firms were small enterprises which maintained branches in the
East. All Soviet satellite countries, a Soviet export company, France, Belgium, Austria, and Italy
also participated in the Fair. The unnamed Soviet export company sold goods in exchange for US
dollars and other hard currencies. 90 All bills for the Fair paid by foreigners had to be settled in
special valuta marks.91
The 1950 Leipzig Fair sought to drive a wedge between West German industrialists and
NATO countries. The communists urged West German businessmen to protect their
investmentssend your business to Leipzig and help to build an economy based on peace. 92
East German officials were on hand to conduct this influence operation directed at West German
businessmen. The East German Representative for Inter-Zonal Trade Josef Orlopp addressed
West German businessmen in attendance at the July 1950 Leipzig Fair. 93
One hundred and four West German firms and 21 West Berlin firms displayed their
products at the April 1951 Leipzig Trade Fair. The USSR, China, Belgium, Czechoslovakia,
Denmark, Finland, Holland, Hungary, India, Poland, and Switzerland also dispatched delegations
and established exhibits at the Fair. Contracts between West German businessmen and East
Germany totaled 230 million DM. Large orders for East German cameras were booked for
American accounts, while Meissen porcelain was exported to Canada, the United States,
Belgium, Switzerland, Italy, and Denmark. Forty eight percent of the East German exhibitors
were from nationalized firms, while the rest were from East German private firms who occupied
smaller booths.94
According to the East German news agency ADN, the following countries displayed their
products at the September 1952 Leipzig Trade Fair: Belgium, Denmark, Finland, France,
Holland, Norway, Austria, Belgium, French North Africa, Britain, Italy, Morocco, and Pakistan.
West Germany was represented by several South German trade offices and the Hanseatic Trade
Chamber based in Hamburg.95

Leipzig Fair Sponsored by Communists The Canberra Times August 31, 1948 page 1.
Leipzig Fair Opens Financial Times March 8, 1949 page 5.
90 Gruson, Sydney. Soviet Promotes Nationalism at Leipzig Fair New York Times March 9,
1949 page 4.
91 Leipzig Fair Has Bleak Opening With Snow and a New Soviet Mark New York Times
March 7, 1949 page 7.
92 Leipzig Fair Appeals for West German Tie New York Times August 28, 1950 page 8.
93 German Zonal Trade Financial Times July 10, 1950 page 1.
94 East Germanys Trade Pattern Financial Times April 3, 1951 page 5.
95 Leipzig Trade Fair Financial Times September 4, 1952 page 8.
88
89

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Five hundred and fifty West German firms were present at the September 1953 Leipzig
Trade Fair. They included 25 cutlery firms from Solingen; 50 shoe and leather manufacturers;
and small fishing companies represented jointly as the Company for Eastern Trade. Exhibits
were also established by Portugal, Brazil, France, Belgium, Holland, Switzerland, Denmark,
Norway, the USSR, and Czechoslovakia (Skoda). 96 In preparation for the September 1953
Leipzig Fair, the Italian communist trading company ASSOCAMBI propagandized among
Italian exporters and importers the desirability to display at Leipzig. East German commercial
organizations supplied ASSOCAMBI with the propaganda materials.97
East German private firms who originally had their properties confiscated found that their
companies were returned and were to be accorded prominence at the Leipzig Trade Fair of
August 1953. Austria, China, France, Italy, and Switzerland also were present at the Fair. 98
At the September 1954 Leipzig Fair, 1,940 firms originated from the Western world (840
from Western Europe) and 1,100 from West Germany. Eighty British companies were partly
represented by agents, while China, Czechoslovakia, and East Germany displayed machinery.
West Germany was represented at Leipzig by all four successor companies to IG Farben,
Kloeckner, and M.A.N. amongst others. 99
West German businessmen traded with the Soviet Zone and East Germany for the
following reasons:
a) Greed.
b) A sentimental nationalist desire to maintain contacts between the two Germanys as a
precursor to unification.
c) As securing protection in the event of reprisals stemming from a Soviet occupation of
West Germany.
Two types of West German businessman existed since the late 1940s: the Inter-Zonal
trader and the so called reinsurer or Ruckversicherer who traded with the Soviet Zone (SBZ)
which became the GDR in October 1949. The Ruckversicherer, as he was contemptuously
known by West Germans, is a businessman who funded the communists and/or extreme
nationalist organizations which maintained strong ties to the Soviets and East Germans. The
Ruckversicherer financed these elements as a means of exempting themselves from arrest or
execution in case the Soviets occupied West Germany. 100 The American High Commissioner for
Bavaria George Shuster reported in 1951 that the Ruhr industrialists were taking out insurance
with the Communist party and that the coffers of the Communist party were filled with their
money.101 The German Communist Party (KPD) also sought to utilize the industrialists to lobby
for freer trade with East Germany. German Communists urged their cadres at a 1950 congress to
launch sabotage in a so-called fighting program. This subversive plan included a program to
induce West German Ruhr industrialists to invest in East Germany. 102 East German officials and
Trade With East Germany Financial Times September 3, 1953 page 8.
The Leipzig Fair Radio Free Europe Research Eastern Europe Satellite Countries September
10, 1953
98 Leipzig Trade Fair Financial Times August 26, 1953 page 8.
99 Western Views of Leipzig Fair Financial Times September 9, 1954 page 5.
100 Tauber, Kurt P. Beyond Eagle and Swastika (Wesleyan University Press, 1967)
101 Pearson, Drew. Germans Cutting Throats by Help To Red Nations Charleston Gazette
March 19, 1951 page 6.
102 German Reds Urge Sabotage in West New York Times August 27, 1950 page 20.
96
97

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propagandists also aggressively lobbied West German businessmen to trade with the SED. In
1952, three East German ministers and the SEDs chief propagandist Gerhardt Eisler regaled
businessmen from West Germany, Switzerland, and Sweden with assurances of good bargains
and great profits if they traded with East Germany. 103
Starting the late 1940s, the West German government provided the East Germans with
swing credits to purchase goods. The swing credit originally dated back to the 1949
Frankfurt Agreement on Interzonal Trade between West Germany and East Germany. As
originally conceived, the swing credit was an interest free account established between the
West German Federal Bank and the East German State Bank to finance temporary imbalances in
the level of trade between the two parts of Germany. In practice the swing has developed into
an interest free foreign trade credit for East Germany. 104
A March 1950 CIA document noted Federal authorities in West Germany display little
desire to cooperate in halting this extra-legal trade, which is already larger than that legally
authorized, and border controls are inadequate. Meanwhile, West German industrialists
apparently believe not only that extensive trade relations can be developed with the Soviet orbit,
including China, but that West Germany cannot exist without this tradeOther effects of this
illegal trade will be to contribute to the fulfillment of the East German Two -Year Plan and to the
war potential of the Soviet orbit generally; accelerate the attainment by East Germany of
economic independence of the West by Western exports of much-needed capital goods; improve
gradually the living standards of the East Germans, who will then be less inclined to resist the
Communist regime; divert capital goods that could be used in the West; provide propaganda
material for German unification to the National Front in East Germany and to ultra-nationalists
in West Germany, many of whom favor a modus vivendi with the USSR. 105
In 1951, SPD Bundestag member Herbert Wehner noted that West German industrialists
legally and illegally shipped $238 million worth of machine tools, ball bearings, steel, and other
strategic materials to the East Germans through third countries and dummy firms in Western
European countries (Belgium, France, Sweden, and the Netherlands) and West Berlin. It was
significant that the CDU-CSU106 Minister of Economic Affairs Ludwig Erhard downplayed the
magnitude of this trade between East and West Germany. It was reported that these firms also
dealt directly with East German firms which acted as fronts for Soviet purchasing agencies. 107 In
1950, Ruhr industrialists were reported by Western Allied authorities to have provided East
German firms with $3.3 million worth of private credits that were outside the inter-zonal trade
treaty.108 Interzonal Trade between the East and West German states were managed by the
Trusteeship for Interzonal Trade, which was under the control of the German Chamber of
103

Asmus, Ronald D. New Inter-German Agreement on Swing Credit Announced Radio Free
Europe Research RAD Background Report/141 June 28, 1982 Accessed From:
http://files.osa.ceu.hu/holdings/300/8/3/text/26-12-74.shtml
105 Central Intelligence Agency. Intelligence Memorandum Number 282: Trade Between East
and West Germany March 28, 1950 Accessed From:
http://www.foia.cia.gov/sites/default/files/document_conversions/89801/DOC_0001117633.pdf
106 Conservative coalition of the Christian Democratic Union and Christian Social Union of West
Germany.
107 German Goods Aid Soviet in Arming New York Times April 14, 1951 page 6.
108 Ruhr Men Give East Undercover Loans New York Times April 12, 1950 page 1.
104

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Commerce and Industry. In 1953, Interzonal Trade totaled $123.3 million and it rose to $270.5
million in 1955.109
The profits derived from Inter-German trade were siphoned into the SEDs subversive
actions against the Bonn government. West German Chancellor Konrad Adenauer noted in 1953
that the SED had 100 million DM at its disposal for subversive activities in the West. This
money derived from the profits of East-West trade.110
As of June 1955, East Germany imported various goods which possessed a strategic
military value. West German firms sold 75,000 tons of coke to East Germany. Coke is used in
steel-making/weapons production. West Germany also sold pipes (nahtlose Rohre or common
barrels) to the East Germans. These pipes were believed to be easily converted to cannon barrels.
In turn, East Germany sold the strategic metal molybdenum to West Germany. Molybdenum is
used in the metallurgical industries, which is tied in with weapons production. 111
The Soviets also provided financial support to the East German SED in its trade deals
with West Germany. Stalin and East German figurehead President Wilhelm Pieck met in 1952 to
discuss a Soviet subsidy for trade with West Germany: Comrade Grotewohl says that they
would need to get short-term credit for 2.5 million dollars to purchase a pipe-rolling complex
from West Germany because of a serious lack of whole-rolled pipes (19 thousand tons less than
needed).
Comrade Stalin says that we can give them credit, and asks what amount of whole -rolled pipes
they need.
Comrade Stalin says that we would give as much as possible. We will give you the 2.5 million dollar credit any time. Tomorrow if you want.
Comrade Malenkov asks where is the rolling complex now, in West Germany?
Comrade Grotewohl responds that the rolling complex was made in West Germany, but it has
already left it, and should be transported to the GDR via England and Switzerland.112
West German industrialists, bankers, and politicians joined together to form lobbying
organizations to support an increase in Inter-German trade. In 1952, West German bankers and
industrialists formed, with the Adenauer governments encouragement, the East Committee to
promote trade with the Soviet Union and other communist countries. Executives from Demag,
Farbwerke, Hoechst (formerly IG Farben), C.S. Corrsen & Company, and Suedeutsche Bank
comprised the board of the East Committee.113

109

Stent, Angela. From Embargo to Ostpolitik (Cambridge University Press, 2003) page 29.
Handler, M.S. Adenauer Charges Foes Got Red Cash New York Times August 16, 1953
page 16.
111 Trade in Strategic Materials February 17, 1955 Radio Free Europe/Radio Liberty Research
Institute Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:68ba8601-3cf8416e-b56c-62899e59ae18
112 Conversations between Joseph V. Stalin and SED leadership April 1, 1952 Cold War
International History Project Accessed From:
http://www.wilsoncenter.org/index.cfm?topic_id=1409&fuseaction=va2.document&identifier=5
034FD88-96B6-175C93105576DC034850&sort=Collection&item=Stalin%20and%20the%20Cold%20War
113 Handler, M.S. Bonn Unit to Seek Soviet Bloc Trade New York Times December 19, 1982
page 5.
110

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Early on, the East Germans also engaged in predatory trade practices in its relations with
various Western nations. In 1954, East Germany sold IFA cars worth $1,500 a piece and
motorcycles to Austria, thus invading its market. 114 As of January 1955, East German companies
such as Rossbach undercut the prices of West German firms by offering silk made frocks (with
the silk from China) at the same price as West German-made rayon frocks. East German
pullovers and cardigans were also displayed at the Dusseldorf Fair at 20% below the prices of
similar West German-made goods. This was an effort to gain hard currency for East Germany
and USSR.115
The East Germans also displayed a gross disrespect for intellectual property. Starting in
early 1951, the West German firm AEG, under the Agreement for Inter-Zonal Trade, delivered
electric equipment valued at 200,000 Deutschmarks to the Soviet-owned company Transmasch
in Leipzig East Germany. The machines were repackaged and sent to East Berlin, where East
German and Soviet officials unpacked the items, photographed them, and produced blueprints.
The East Germans and Soviets then copied these electric machines purchased from AEG.116
In 1955 the Leipzig Fair Agency set up a London office under the British communist
businessman Denis Hayes. LaPorte noted The relative success of the GDRs lobby was reflected
in the doubling of British exports to the GDR between 1955 and 1958. In 1952, East Germany
formed the Gesellschaft fur kulturelle Verbindungen mit dem Ausland (GkV) to undertake such
propaganda work. It targeted politicians and trade unionists as a means of lobbying for
recognition of East Germany. By the early 1950s, the British Board of Trade supported 100
companies that displayed their products at the Leipzig Trade Fair. Regular exhibitors included
Massey Ferguson, Standard Motors, and Rolls Royce. In the fall of 1953, Conservative MP
Burnaby Drayson, who was a director of Dominion Export Ltd and inked the first major trade
agreement worth 3 million pounds. Dominion Export was a major player in the early East
German-British trade, and parliamentary advocates of this trade included Rudy Sternberg,
Silverman, Bill Owen, Drayson, Terence Clarke, and Lord Boothby. Drayson was a Stasi
contact. In 1954, Conservative Minister of Trade Peter Thorneycroft supported increased trade
with East Germany. In April 1955, the Leipzig Fair Agency opened an office in London under
the control of the British communist Denis Hayes. In July 1955, a trade agreement was signed
worth 5.4 million pounds between the Britain and East Germany. In 1955, British exhibitors at
the Leipzig Fair from the communist dominated companies organized within the British Council
for the Promotion of International Trade (BCPIT), established companies such as Standard
Motors, formed the British Exhibitioners Leipzig Fair Association (BELFA). A trade agreement
negotiated between BELFA and East Germany totaled 5.4 million pounds 117
By the early 1950s, the East Germans opened a bank account in the Bank of England.
The British allowed this action because they thought this would lesson Soviet control over East
114

East Germans Begin Selling Cars in Austria Radio Free Europe Research September 28,
1954 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:cfbc2f7c-a5b04250-81b8-4649cb008b4d
115 East German Textile Price Cutting Financial Times January 13, 1955 page 4.
116 East Plagiarizes Western Products Radio Free Europe Research February 25, 1954 Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:6bae6a5a-ac32-49ae-8d0e83d75ea3ef19
117 LaPorte, Norman. Friendly Enemies: Britain and the GDR 1949-1990 (Berghahn Books,
2010)

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German economic life. Since 1949, the British company Sternberg Propane Company Ltd
conducted barter trade with the East German DIA agency for foreign and Inter-German trade.
One historian commented that Sternberg was acting as the DIAs and thus as the GDR
governments UK agent. In 1953, British MP Burnaby Drayson brokered a deal between the
Dominions Export Ltd and the East Germans. In this deal, East Berlin purchased $1.5 million
worth of coffee and cocoa beans from Britain.118
East Germany also served as an intermediary for the trading relationship between West
Germany and Red China. In the summer of 1950 Walter Ulbricht noted that We are sure West
German businessmen will sensibly seek to benefit from foreign trade opportunities developed by
our efforts. As of 1951, West German goods were shipped to China from the free ports of
Hamburg, Luebeck, and Bremen. In April 1950, a Chinese trade delegation visited East Berlin.
This delegation was led by Wu Seng-po and they met with the East German Foreign Trade
Minister Georg Handke. This meeting was attended by private West German observers. When
an East German trade delegation visited China in August 1950, it was accompanied by the
communist West German lawyer Alfred Kroth. Kroth was a member of the Bonn Economic
Council and the leading figure of the West-East Trading Company based in Dusseldorf. Kroth
then traveled to Dusseldorf and met with businessmen and bankers who maintained close ties
with Chancellor Adenauer. Kroth offered to buy over $500 million worth of West German
products in return for payment in 70% Chinese goods and 30% US dollars. 119
Limited trade ties were maintained between the United States and East Germany during
the early years of Stalinism. It was reported that buyers from Chicago attended the Leipzig Trade
Fair in 1950.120 Some European subsidiaries of US companies participated in the Leipzig Trade
Fairs as far back as 1953. 121 In 1956, it was reported the US importers purchased 24,000 Exakta
Varex cameras from East Germany at the Leipzig Trade Fair. 122 In 1955, 100 businessmen from
the US visited the Leipzig Fair and only a book company exhibited at the Fair from the US. 123
East Germany also engaged in predatory dumping of goods in the American market. In
1954, the East Germans dumped 576,000 tons of potash for three years at prices $3-$8 below the
domestic market price. The East Germans sent shiploads of potash into US ports at intervals
calculated to disrupt the US market. 124 By the mid-1960s, trade between the United States and
East Germany increased. Between 1956 and 1962, US-East German trade totaled $4.9 million
per year and rose to $7.5 million in 1964. In 1965, US-East German trade totaled $10 million.125
Top SED leaders and the East German government maintained limited assets in
American banks. The East German Deutsche Notenbank established accounts in American banks
to purchase goods on behalf of Red China by 1952. The US banks having East German dollar
118

Larres, Klaus and Meehan, Elizabeth. Uneasy Allies (UP Oxford, 2000) pages 74-75.
Joesten, Joachim. Red China Trade Barrons National Business and Financial Weekly July
9, 1951 page 9.
120 East German Pact with Soviet Nears New York Times March 6, 1950 page 6.
121 Junker, Detlef. The United States and Germany in the Era of the Cold War, 1945-1990
(Cambridge University Press, 2004) page 325.
122 Americans Buy Reds Cameras New York Times March 6, 1956 page 47.
123 Leipzig Fair Opens New York Times September 5, 1955 page 12.
124 Egan, Charles E. US Acts to Block Dumping by Reds New York Times November 25,
1954 page 50.
125 Crossland, Norman. US Explains Deal Winnipeg Free Press January 2, 1965 page 12.
119

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accounts included Manufacturers Hanover Trust, National City Bank, and Chase National
Bank.126 East German SED party boss Walter Ulbricht was alleged to have an account in an
American bank. His intermediary in this transaction was a niece living in the United States. 127
As far back as the late 1940s, the SED and Soviets maintained special shops, hotels, and
restaurants geared to absorbing precious hard currencies from foreign diplomats, delegations,
and businessmen. Some of the German hotels and restaurants confiscated by the Soviet tourist
corporation Intourist were closed to German customers. In 1947, delegations to the Leipzig
Trade Fair patronized the Auerbach-Keller restaurant, whose foreign customers paid in American
dollars, Swiss francs, and Swedish kroner. 128 In 1947, it was reported that Intourist managed a
hotel in East Berlin which accepted old Reichsmarks, Swedish kroner, francs, and Dutch
guilders.129
Intourist restaurants and hotels were located in East Berlin, Dresden, Leipzig, Weimar,
Rostock, Schwerin, Wurnemuende, Stralsund, and Wismar. Only wealthy Germans and
collaborators with the Soviets could enter these restaurants. These establishments were
transferred to full East German control in 1951. 130
In August 1949, the Leipzig Trade Fair featured restaurants for the delegations. These
restaurants were managed by the SED firm Handelsorganisation (HO) and Intourist. The food
offered was luxurious compared to the average Eastern German diet at the time. Specifically, the
foods and beverages served at these restaurants included vodka, champagne, caviar, soups,
shashlik, and desserts. The only currencies accepted were the Belgian and Swiss francs, Swedish
kroner, and American dollars.131
The SED also used the HO shops to absorb Western currency from visiting residents of
West Berlin. In 1949, it was reported that West Berlin citizens could exchange West Marks into
East Marks and then spend the communist issued money in the Handelsorganisation (HO)
stores. The HO stores stocked plentiful quantities of food and consumer goods, while the regular
state stores were poorly stocked. HO even employed vendors to sell goods at special stands in
East Berlins streets. 132
As of June 1, 1953, the East German Deutsche Notenbank maintained cash reserves of 25
million West German Deutschmarks. The accounts kept were kept in the following accounts:
1) Interzonal Trade.
2) Other Payments.
3) AS-Account.
The Other Payments account received West German Deutschmarks from:
1) S-Bahn passengers/traffic.
Bank Funds Here Aided Red China New York Times March 17, 1952 page 5.
Deriabin, Peter and Gibney, Frank. The Secret World (Ballantine Books, 1987)
128Nettl, J.P. The Eastern Zone and Soviet Policy in Germany 1945-50 (Oxford University Press,
1951) pages 225-230.
129 Russians' Intourist Hotel in Berlin Opened to Allies New York Times November 21, 1947
page 7.
130 Russians Giving Up Exclusive Hotels in East Germany Corpus Christi Times July 27, 1951
page 6.
131 James, Michael. Goods Poor, Hospitality Is Marked As Fall Fair at Leipzig Is Opened New
York Times August 31, 1949 page 12.
132 Soviets Conducting Legal Black Market in Berlin Altoona Mirror October 22, 1949 page 4.
126
127

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2) Confiscated money at East-West border points.

3) The mandatory currency exchanges for visitors to East Germany.
These sources generated 5.6 million Deutschmarks for East Germany. Deutschmarks from the
AS Account was shipped via courier to Czechoslovakia and then to Switzerland. These funds
were then exchanged for Swiss marks. The excess Deutschmarks were used to fund illegal
Interzonal trade and subversive groups in West Germany. 133
The East Germans raised foreign currency through fixing low exchange rates for hard
currency conversions to Ostmarks. These hard currencies included British pounds, Swiss francs,
and Swedish kronas. For example, hard currency exchanges occurred at the 1951 Soviet
front/celebration World Youth Festival that was held that year in East Berlin. The Festival
accumulated a fund reserve of $5 million in various hard currencies, a little more than 5 million
in Deutschmarks, and 35 million Ostmarks in other currencies. The surplus hard currencies were
transferred to the World Federation of Democratic Youth while the Deutschmarks were turned
over to the Bureau West of the FDJ134 for an underground FDJ organization in West Germany. 135
Early on, the SED and Soviet elites constituted a highly privileged oligarchy in the Soviet
Zone. Wolfgang Leonhard, a SED defector, reported that KPD officials lived in the Soviet Zone
of Germany in luxury. They had special food rations, paper, and vehicles which carried Soviet
markings. They lived in large country houses sealed off from the population and guarded by
Soviet Army soldiers. These houses were located in Niederschonhausen and were fenced off and
occupied by Walter Ulbricht, Wilhelm Pieck, Otto Grotewohl, Anton Ackermann, and other top
SED officials. The Rest Home for the Central Committee was specially equipped for the SED
and was located in a park in Bernicke. The fittings were luxurious and the food was plentiful.
Special rations or payoks for the SED and Soviet elites consisted of food, drinks, cigarettes,
tobacco, and chocolate. 136
It was reported that the special HO stores also catered to SED officials, satellite
diplomats, and Soviet personnel. These HO stores sold food, beverages, and select luxuries.
These shops were run by hard-core communists or people deemed trustworthy by the SED and
Soviets. Nine HO stores which operated in Karlshorst were located at:
1) The swimming pool.
2) The German and Soviet buffets at the Opera.
3) Schonfeld International Airport.
4) The High Commissioners office.
The Ministry of Trade and Supply under Kurt Wach administered these stores. The HO stores
only received first class food products. Soviet nationals purchased these goods with ration
tickets, thus avoiding the high prices that average East Germans had to contend with. Items such
as sweet and sour cream, butter, meat, eggs, milk, beef, pork, apple, poultry, bananas, oranges,
potatoes, vegetables, fish, trout, pike, breads, other baked products, West German wines,
133

Western Marks in East Germany Radio Free Europe Research July 9, 1953 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:8d3f27de-c7b6-48ce-958a-e0edc7a26342
134 The FDJ was the acronym for the Free German Youth, which was the official youth
organization of the East German SED.
135 World Youth Festival Serves to Raise Hard Currency Funds Radio Free Europe Research
Eastern Europe September 14, 1951 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:f15d1e0a-4395-4cca-9e43-060fbc5473b8
136 Leonhard, Wolfgang. Child of the Revolution (H. Regnery Company, 1958) pages 377-379.

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Chinese, Bulgarian, and Hungarian wines, French cognac and rum, Dutch gin, Reis-Schnapps
from China, Soviet vodka, sweets, and chocolates, and Vienna sausage were all sold at the HO
stores. Vienna sausage was prepared by a butcher named Werner in Alt-Freidrichsfeld. These
sausages were sold to the Soviet headquarters in Karlshorst.
These special HO stores also sold furniture, textiles, porcelain, fur coats, pianos, cameras,
radios, TVs, and East German-made chocolates and cigarettes. The turnover generated at these
stores totaled 25 million Ostmarks. The Minister of Trade and Supply Kurt Wach and his
associates inspected these stores once a week. The top East German communists (Ulbricht,
Pieck, Grotewohl), ministers, state secretaries, and members of the SED Central Committee had
access to special HO stores in Pankow. 137 In January 1954, the HO shops reportedly stocked
scarce items in stock such as oranges, British textiles, IFA cars, and aluminum coffee pots. East
Germans could also send flowers via FLEUROP (the state-owned florists organization) to
relatives and friends in West Germany. 138
These stores were also useful in pampering visiting Western delegations. In February
1954, these HO stores were responsible for feeding the delegates of the Allied Four Power
Conference in East Berlin. Much of the items served were purchased from companies in West
Berlin. The imported goods included pineapples, tomatoes, salads, tinned fish, cigars, and
liquors.139 The city of East Berlin was dressed up on the occasion of the Four Powers foreign
ministers meeting (USSR, France, Britain, and the US). The state-owned Handelsorganization
shops were also spruced up by artists and designers from Dresden and Leipzig. 140 In order to
convey an image of a prosperous East Germany, the SED stocked the HO shops with copious
amounts of foreign-made and domestic goods. The HO shops were stocked with British cloth,
French cognac, Lebanese bananas and other luxuries. Shop window designers from Dresden and
Leipzig were called in to refurbish the appearance of the HO shops in East Berlin. The East
Germans concluded special trade agreements with various Western countries for the specific
purpose of importing goods for the Allied delegations. Recent East German trade agreements
included:
1) $900,000 worth of fruit, cognac, and wine from France.
2) $300,000 worth of grapes and oranges worth from Greece.
3) Food imports from Sweden. 141
In the early years of the GDR, the international hotels catered to the tastes of Western
guests. They were also closely monitored by the Stasi (and in all likeliness, the Soviet KGB).
The Stasi and KGB were clearly tasked to gather intelligence and blackmail visiting Westerners
137

Special Shops for SED Functionaries Radio Free Europe Research Eastern Europe Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:ce7e599a-17a5-472b-8ff1f2713ac6891d
138 Hartrich, Edwin. Reds Hastily Dress Up East Berlin on Eve Of Big Four Talks Wall Street
Journal January 18, 1954 page 1.
139 Special Shops for SED Functionaries Radio Free Europe Research Eastern Europe Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:ce7e599a-17a5-472b-8ff1f2713ac6891d
140 Hartrich, Edwin. Reds Hastily Dress Up East Berlin on Eve Of Big Four Talks Wall Street
Journal January 18, 1954 page 1.
141 E. Berlin Shops Re-Stocked The Financial Times (London, England) January 18, 1954 page
5.

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lodged at the international hotels maintained by the HO. As of August 1954, listening devices
were installed in the Leipzig HO Hotel Bayrischer Hof by the Stasi. This hotel maintained
special rooms where the Stasi could eavesdrop on conversations of the hotel guests. The hotel
was reserved for journalists mainly from capitalist countries. Employees at the hotel were
screened by the Stasi, while servants were replaced with politically reliable individuals. A hotel
manager named Kummer maintained close ties with the Stasi. Kummer took over the
management of the Hotel Bayrischer Hof and was said to be a man of excellent manners.142
By 1948, the Hungarian Communists achieved full power in Hungary. It continued to
maintain trade relations with Western countries and corporations as a means of acquiring vital
technologies and goods for Hungarian industries. The Communists made it very clear that
Western trade would not lead to a compromise in its Marxist principles. Laslo Foldes noted to
the communist Hungarian Parliament in January 1950 that We intend to set up foreign trade
representations in fourteen countries next year of which twelve are not peoples democracies.
But we shall make no concessions whatsoever concerning our independence. 143
The Hungarian Communists even sought to maintain trade relations with the United
States. In 1949, Hungarian Embassy Commercial Counselor Lajos Kadar criticized the American
export licensing system on a visit to the United States. He noted that: This system causes the
loss of good business chances to American business men. If we cannot buy the different articles
in the United States we must buy them somewhere else and we can buy them somewhere else. 144
Some of the investments in Hungary were clearly of a military/security nature. For example, the
equipment of Division IX of the Hungarian Intelligence was secretly manufactured by
Communist workers at the plant owned by the local subsidiary of the American multinational
corporation, the International Telephone and Telegraph Corporation (ITT). 145
Hungary established trading companies during the Stalinist period to acquire Westernmade goods that were subjected to embargo controls. Hungarian Communist dictator Matyas
Rakosi recalled Americas Western partners assisted the evasion of the American embargo and
export controls in the hope of receiving the appropriate profits. Israel sold ball bearings in
exchange for the immigration of Jews. Sweden also sold ball bearings to Hungary during this
period. The US Embassy in Vienna named Austria, Egypt, and Finland as important sources for
embargoed goods for Hungary. France sold ball bearings and specialty steel alloys under a trade
agreement. In 1955, capitalist states supplied Hungary with all or the majority of leather, tin,
copper, rubber, coke, and cotton. Hungary exported massive amounts of agricultural products,
including wheat, to earn hard currency. 146

142

SSD Spies on Visitors to Leipzig Fair Radio Free Europe Research Eastern Europe September
24, 1954 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:9adc3ce1-fc40489b-8a34-d37ea045b192
143 MacCormac, John. Hungary Watched on Vogeler Action New York Times January 3, 1950
page 16.
144 Hungarian Commercial Aide Here Deplores Proposal for U. S. to Sever Trade Relations
New York Times February 12, 1949 page 6.
145 The Spy and His Masters Accessed From: http://www.xenu.net/archive/go/felix/ch_ii3.htm
and http://www.xenu.net/archive/go/felix/ch_ii4.htm
146 Borhi, Laszlo. Hungary in the Cold War 1945-1956 (Central European University Press,
2004) pages 278-279.

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In January 1950, it was reported that administrators and experts within the heavy
industrial section of the Hungarian Foreign Trade Ministry maintained reliable sources for
Western exports of strategic goods. These business connections in the West circumvented
embargoes of goods to Hungarian heavy industries, some of which were engaged in weapons
production. Forbidden raw materials were purchased from companies in Austria, West Germany,
and Sweden. In reality, these firms were special front companies where the Hungarian
government was a senior partner. Despite popular perceptions, the European Cooperation
Administration (ECA) was predicated back around 1948 on a revival of trade with the East
Bloc.147
The Hungarian Communists also maintained special hard currency-raising operations
even during the years of Stalinism. By late 1949, the Hungarian government placed the control
of the distribution of relief food and materials under the bureau called IKKA. It sold coffee,
food, clothing, cars, radios, and building supplies. The agency Monimpex succeeded IKKA in
Hungary. From 1950 to 1958, IKKA and Monimpex collected over $9.9 million from the US and
transmitted the money to Hungary. 148 These goods were exchanged for American dollars. 149
In May 1956, an IKKA branch office was opened in Salzburg Austria. IKKA contracted
with the Austrian transportation company Franz Welz to handle the transport of packages from
the West to Hungary. This IKKA office accepted payments for parcels, furniture, watches, and
other items, along with spa vacations for Hungarian nationals.150
The Hungarian Communist Party economic expert Zoltan Vas created the West Orient
Corporation. It was a front company for the Hungarian communists. The West Orient
Corporation engaged in the following operations:
1) It pilfered cars in Austria and sold them in Hungary.
2) It imported scarce goods from the West and sold them at enormous profits in
Hungary.
3) It sold export-quality Hungarian goods to the rest of Europe by means of the
international communist apparatus.
West Orient also smuggled cigarettes through Czechoslovakia to Europe for hard currency. 151
Journalist Fred Sparks reported in September 1949 that The Hungarian Ministry of Trade
distributes the dollars (from the West Orient Company profits) according to the Kremlins quota.
Soon these greenbacks will circulate around the world, supporting Soviet trade, espionage,
diplomacy, and propaganda.152
MacCormac, John. Hungarian Deals in West Reported New York Times January 27, 1950
page 10.
148 Communist Parcel Operation Report by the Committee on Un-American Activities (GPO
1959) Accessed From: http://babel.hathitrust.org/cgi/pt?id=uc1.$b654294;view=1up;seq=5
149 May, George. Behind the Curtain in Hungary New York Times March 15, 1953 page
SM10.
150 IKKA Service Branch Office Established in Salzburg Radio Free Europe Research Eastern
Europe May 4, 1956 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:9ea2062d-d239-4fa7-818c-bb9369182f81
151 The Spy and His Masters Accessed From: http://www.xenu.net/archive/go/felix/ch_ii3.htm
and http://www.xenu.net/archive/go/felix/ch_ii4.htm
152 Sparks, Fred. Black Market Money Juggling Simple Trick for Russ Plotters in Vienna
Oakland Tribune, Sunday, Sept. 25, 1949 page 4A.
147

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As of October 1949, Hungary secretly sold over $4.6 million worth of art treasures for
US dollars. These art treasures were confiscated from wealthy Hungarians after the communists
took over Hungary. The Hungarian communist front company which engaged in this trade was
ARTEX, which was administered by Hungarian Under-Secretary of State Istvan Antos. The
Director of Hungarys Five Year Plan Erno Gero admitted that the industrial part of the Plan
would fail unless a large amount of American dollars were generated to finance imports. One of
the directors of ARTEX was the former priest, Istvan Balogh, who was a specialist in what the
communists termed the socialization of art treasures. 153
The Hungarians also attracted a limited number of foreign visitors to their country in the
early 1950s. In the early 1950s, 15,000 foreigners traveled to Hungary and most of them were
not tourists.154 The foreign delegations of communists, leftwing fellow travelers, and
businessmen were treated to the best the Hungarian Communists had to offer. As of January
1956, most foreigners in Hungary were lodged at the Hotel Dunav. This hotel even cashed
travelers checks denominated in American banks. The food and wines served at the Hotel
Dunav were of a high quality.155 As of September 1955, the Park Hotel in Tihany and the Margit
Hotel on Margaret Island in Budapest compare favorably for luxury with any in the world.
The Park Hotel was a former Habsburg royal palace luxuriously appointed with marble. White
coated waiters at the Park Hotel served one inch thick steaks with fried eggs on top. Some night
clubs had American-style jazz bands and floor shows. The bar at the Hotel Duna was a sleek
establishment frequented by Western businessmen and well-dressed Hungarian nationals.156
By the mid-1950s, the hotels also exchanged hard currency for the domestic Hungarian
forints. A British Communist who visited Hungary in 1956 noted that the Ibusz157 office in
Budapest was near a major hotel and changed British pounds for Hungarian forints. 158
As of 1952, Hungarian hotels were replete with hidden microphones which were located
in wall ornaments, heating, lamps, and headboards of beds. Waiters, chambermaids, and porters
were ordered to report on the visiting foreigners to the AVH. Prostitutes frequented the big
Budapest hotels. They were required to report to the AVH on information acquired from the
guests.159 State-owned night clubs allowed prostitutes to work in a legal capacity. They carried
papers indicating that they were involved in socially useful work.160
Dollar-Shy Hungary Quietly Seeks To Sell Art Treasures Lebanon Daily News October 18,
1949 page 14.
154 Tourist Trade in Hungary Radio Free Europe Research Eastern Europe May 8, 1970
Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:20cab4fe-71d9-454886d4-330aad092e0a
155 Raymond, Jack. Tourist Facilities Beyond the Iron Curtain New York Times January 8,
1956 page X38.
156 Moss, Norman. Tourism in Piercing the Iron Curtain New York Times September 11, 1955
page X29.
157 Ibusz was the Hungarian tourist agency.
158 Fryer, Peter. Hungarian Tragedy (Indexreach Limited, 1997) page 54.
159 New Control System in Hungarian Hotels Radio Free Europe Research Eastern Europe
February 2, 1952 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:ac5f5604-7cea-4cca-858c-5cadc3b64af3
160 May, George. Behind the Curtain in Hungary New York Times March 15, 1953 page
SM10.
153

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In the 1950s, hunting parties traveled to Hungary from West Germany, Belgium, France,
Scandinavia, and Britain. Hungarian communist newspapers quoted often the enthusiastic
comments of West German industrialists and other wealthy capitalists who comprised these
parties.161 These trips provided the Hungarian Communists to favorably lobby Western
businessmen to increase trade relations with Budapest. Such businessmen could also become
emissaries to increase the political legitimacy of the Hungarian Communists in the West.
Special shops sold Western goods at low prices to Soviet garrison forces and privileged
classes in the Hungarian Communist hierarchy. In December 1956, Anna Kethly told a meeting
of the British Parliamentary Labor Party that the Hungarians maintaiend four types of shops
which were patronized by Soviet residents in Hungary. They were staffed by carefully chosen
Hungarian shop assistants who were forbidden to reveal information of the clients inside. 162
In 1956, the AVO secret police officers had their own state-subsidized stores where
Western-made goods were sold at inexpensive prices. 163 A diplomatic shop existed to serve
diplomats and Western goodwill missions. Special shops sold export quality Hungarian goods
to the Party elite.164 Members of the Hungarian Communist Party Politburo used air-conditioned,
heavily armored US-made Chevrolets or West German Mercedes. Ministers drove in Sovietmade ZIS and ZIM cars. Deputy Ministers and AVO personnel were provided with Soviet-made
Pobodas. Deputy Heads of Departments drove in Czech-made Skodas.165
Former officials of the Horthy and Szalasi dictatorships, along with military and fascist
collaborationist figures transferred their loyalties to the Communists. Some were attracted by the
collectivism and anti-Zionism of the Communists, while others were needed for their military
and intelligence expertise. The following Hungarian Nazi collaborators joined the communists:
1) Kalman Zolnay, was formerly a county judge who clung to anti-Jewish prejudices. He
became the director of prisons for the communist Ministry of Justice.
2) Marton Bodonyi was formerly a military prosecutor under the Nazi occupation who
sentenced Hungarian Army deserters to death. He became the communist Chief State
prosecutor in Nyiregyhaza.
3) Gyula Alapi was a fanatical Arrow Cross party agitator who became a communist state
prosecutor who sentenced Cardinal Mindszenty to imprisonment.
4) Vilmos Olty was a pro-Nazi, anti-Jewish official in the Ministry of Justice who was also
an official of the Hungarian-German Society. Olty was trained in Nazi Germany and
subsequently became a judge in the communist Peoples Court.
5) Sandor Zold was an anti-Jewish rioter who became a communist Minister of the Interior;
6) Janos Vikol was a leader of a racial nationalist, anti-Jewish medical association who was
then sent to a communist party school in the USSR.
7) Alajos Rottenbiller was Arrow Cross member who became a communist and an inspector
for public health.
8) Antal Babits was Arrow Cross member who turned communist.
161

East Europe Volumes 7-8 Free Europe Press Free Europe Committee
Urban, George R. The Nineteen Days: A Broadcasters Account of the Hungarian Revolution
(Heinemann, 1957) page 8.
163 Barber, Noel. Seven days of freedom: the Hungarian uprising (Stein and Day, 1974) page 105.
164 May, George. Behind the Curtain in Hungary New York Times March 15, 1953 page
SM10.
165 Barber, Noel. Seven days of freedom: the Hungarian uprising (Stein and Day, 1974) page 105.
162

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9) Ivan Boldizsar was a self-hating Jew who became a member of the collaborationist
government Ministry for Foreign Affairs. Ivan then became an official of the communist
Ministry for Foreign Affairs.
10) Laszlo Piros was a agitator involved in the communist pogrom of the Jews in 1946. He
became the commander of the communist Frontier Guards.
11) Bela Csikos Nagy was secretary to the pro-Axis Minister of Finance Lajos Remenyi
Schneller. He later became the right hand man in the Planning Bureau under the
communist Zoltan Vas.
12) Tibor Fajth was an Arrow Cross member who served in the Budapest city government.
He was responsible for the death of his Jewish colleagues. Fajth then became a
communist party member.
13) As an Arrow Cross militant, Joseph Takacs was involved in the deportation of Jews.
Takacs then became a section chief in the Communist Planning Bureau.
14) Sandor Schmidt was the director general of the largest coal mining company in Hungary
who was accused of brutally treating Jewish slave laborers. The communists retained
Schmidt in his position after the war.
15) Ivan Bakocz was a member of the Arrow Cross who became the deputy chief of the
Economic Police under the communists.
16) Akos Mayor was an assessor who served on the Military Court during wartime Hungary.
He then joined the communists Peoples Court. 166
17) Division VII of the AVO was headed by a former Hungarian Nazi, Gyula Princz, who
was charged with surveillance and kidnapping. 167
18) Chief Engineer Plati was in charge of the construction of a typewriter factory. This
factory was rumored to have been built for military production purposes. He was
formerly a militant Nazi who later became a devout communist. He was a privileged man
who owned a two story villa in Berva. Another former Nazi was named Koporny, who
became the Chief Engineer and Director of the Machinery Department of the Matyas
Rakosi Works in Csepel. Plati worked at the Mercedes Benz factory in Hungary during
World War II and Koporny worked at the Manfred Weiss Works in Csepel as Chief
Engineer.168
19) Hungarian Royal Army Colonel Janos Sulyan was a former fascist who became a
communist colonel in the Ministry of War under Rakosi. In 1946, Sulyan was Secretary
of the Communist Party in Eger. He became a Colonel/Political Officer in 1948 in the
Hungarian Peoples Army. 169

Fabian, Bela. Hungary's and Rumania's Nazis-in-Red Commentary Magazine November

1951
167 The Spy and His Masters Accessed From:
http://www.xenu.net/archive/go/felix/contents.htm
168 Two More Nazis Who Are Now Communists Radio Free Europe Research Eastern Europe
May 28, 1951 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:f8a36c005c46-4a20-9284-1ac9cc1fa134
169 Nazi Now in Communist War Ministry Radio Free Europe Research Eastern Europe May 28,
1951 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:dc5b4a88-0d124c0d-8b7a-7364f5816640
166

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Ede Bundity noted that The other group joining the MKP (Hungarian Communists) was
low-profile ex-Nazis. In fact, the Party purposefully sought out these war criminals for several
reasons. The Communists needed new members and wanted to present themselves as appealing
to the nationalist, conservative public. For this reason, they recruited many former Nyilas party
members. Rkosi explicitly stated that, in his opinion, it was easier to make good Communists
out of the little Nazis than out of Jewish intellectuals. Both ideological movements promised an
all-encompassing Weltanschauung and rapid social change to the existing conservative order.
These Nyilas men had many reasons to switch sides from far-right to far-left. They received
amnesty and material benefits. At the same time, they also brought with them their deeply
ingrained anti-Semitism. Jews in the MKP sought to assimilate completely and often denied their
Jewish heritage. Many even changed their family names or came from such families(Rakosi)
was also known for making anti-Semitic remarks. In mid-1947, the propaganda chief of the party
in Komrom-Esztergom County travelled to Budapest to attend a Communist training program.
Upon his return he noted that: Szlasi did half-a-job. As long as there are Jews in Hungary,
there will be no real Communism. Hungarian Communist Party demonstrators carried signs
which pictured a Jewish man with peyos (long sideburns) with the caption for your fatherland
proudly, annihilate them without mercy. Another flyer read theyre starting the second
collection now, while the proletariat works, they racketeer, rather we shall collect them for a
ticket to Palestine. A communist mob protested with signs which read Death to Jews and
Death to speculators. This mob also lynched the two Jewish men. The local Hungarian
Communist leader Istvn Oszip, personally convicted two Jewish mill owners for price control
violations.170
Despite its isolationist image, North Korea maintained some trade ties with the
noncommunist world. A large number of North Korean factories were built by the Japanese.
Hence, North Korean industries necessitated a continued supply of Japanese-made parts. The
North Koreans were supported by Stalin in the effort to open limited trade ties with the
noncommunist world. In March 1949, Stalin and Kim il-sung held a meeting where topics such
as foreign trade were discussed. Stalin inquired as to whether North Korea maintained trade
relations with Japan, China, and the Philippines. Kim noted that North Korea had trade relations
with China, despite the fact that it was in the throes of a civil war. Kim noted to Stalin that North
Korea had not traded with other countries. They conduct trade with Hong Ko ng, but
unofficially and on a case by case basis. Stalin then asked Kim whether the government
organized trading societies within North Korea. Kim noted that North Korea created such a
society, which conducted trade in the main with Hong Kong, with the city of Dairen and with
China. Stalin commented to Kim that Stalin says that it is necessary to have such a society,
there is nothing wrong with it. The national bourgeoisie exists; among the bourgeoisie there are,
apparently, also good people, it is necessary to help them. Let them trade and deliver goods,
there is nothing bad in this. I do not have questions. 171
In the early years of the Soviet occupation of northern Korea, the communists covertly
conducted trade with South Korea and other noncommunist countries and zones. As of June
Bundity, Ede. From Horthy to Rakosi: Political anti-Semitism in Hungary under Fascism
and Communism University of Wisconsin-Madison WI, USA 2011 Accessed From:
http://minds.wisconsin.edu/bitstream/handle/1793/53134/Ede%20Bundity.docx?sequence=1
171 Stalins meeting with Kim Il Sung March 5, 1949 Accessed From:
http://digitalarchive.wilsoncenter.org/document/112127
170

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1947, South Korea served as a transit point for Japanese goods destined for China, North Korea,
and Communist-held Manchuria. Imports from China, communist-held Manchuria, North Korea,
and Hong Kong were re-shipped via South Korea. North Korean soap emblazoned with the
hammer and sickle was smuggled to gain hard currency. The Soviet occupation forces in North
Korea established a yen-denominated fund to promote smuggling. The profits generated by these
covert trade operations were expended on imports of rice and warm American Army-issue
clothing. North Korea also imported South Korean rice, American Army clothing, US-made
sulpha drugs, Japanese silk and light bulbs, South Korean shoes, and goods sold at American
Army PX stores (cigarettes, candy, and chewing gum), and American gasoline. Soviet occupied
North Korea exported cement, paper, wood pulp, caustic soda, soap, candies, cotton socks,
apples, fertilizer, and fish in exchanged for goods from the noncommunist world. 172
Even after the declaration of the independent Democratic Peoples Republic of Korea
(North Korean state), the communists continued the smuggling trade with South Korea.
President Syngman Rhee of South Korea noted in 1948 that smugglers carried a profitable illicit
trade across the Demilitarized Zone (DMZ) to South Korea. It was noted that this covert trade
was controlled by the Soviet authorities. 173 As of June 1950, clandestine North Korean trade was
also reportedly carried out with South Korea according to the CIA.174
From 1946 to 1949, North Korea concluded barter trade deals with India, the Philippines,
and various nations located in Southeast Asia. At that time, covert smuggling was also carried
out between Japan and North Korea. Ten to fifteen percent of North Koreas non-communist
trade in 1949 was concluded with Portuguese Macao, Japan, India, and Southeast Asia. North
Korea smuggled industrial machinery, copper wire, radio equipment, steel and manila rope and
wire, paper, ball bearings, and spare parts from Japan.175 Large amounts of Japanese parts and
equipment were imported from Hong Kong to service North Korean factories. 176
During 1949, 85% to 90% of North Koreas trade with the non-communist world was
with Hong Kong. The North Koreans purchased textile machinery, printing presses, machine
tools, textiles, chemicals, pharmaceuticals, paper, electrical equipment, transportation equipment,
dying and tanning material, rubber and other industrial raw materials from Hong Kong. North
Korea exported foodstuffs, animal feeds, fats, fertilizers, and oils to Hong Kong.177 By February
1949, Hong Kong and North Korea had trade relations, where woolen piece goods, tires, cars,
and petroleum jelly for industries were sent to the communist country. Hong Kong received
Cromley, Ray. Oriental Smugglers: Their Business Booms Wall Street Journal June 20,
1947 page 1.
173 South Korea Puts Guards on Border New York Times October 14, 1948 page 14.
174 Central Intelligence Agency. Current Capabilities of the Northern Korean Regime June 19,
1950 Accessed From: http://media.npr.org/documents/2010/june/19June1950.pdf
175 Central Intelligence Agency. Intelligence Memorandum 311 Northern Koreas Dependence
on Outside Supplies August 2, 1950 Accessed From:
http://www.foia.cia.gov/sites/default/files/document_conversions/89801/DOC_0001117734.pdf
176 Department of State. North Korea: A Case Study in the Techniques of Takeover (Washington
1961) Accessed From:
http://babel.hathitrust.org/cgi/pt?id=umn.31951t00466606h;view=1up;seq=3
177 Central Intelligence Agency. Intelligence Memorandum 311 Northern Koreas Dependence
on Outside Supplies August 2, 1950 Accessed From:
http://www.foia.cia.gov/sites/default/files/document_conversions/89801/DOC_0001117734.pdf
172

32

graphite and chemical fertilizer from North Korea. 178 In January 1950, the North Korean trade
representatives were recalled from Hong Kong. This possibly occurred in preparation for the
Korean War of June 1950. 179 However, the trade between North Korea and Hong Kong
continued.
The North Koreans also harnessed the government-controlled private sector to acquire
smuggled raw materials from South Korea. The ruling communists found the private sector
useful in serving as smuggling channels in trade links with South Korea. The scope of this trade
was limited in size and was controlled by the North Korean government. This early Inter-Korean
trade alleviated specific shortages in the North. The state-owned Korean Trade Company
ultimately controlled trade with Hong Kong and South Korea. 180
In 1947, the Soviet-North Korean shipping firm Mortrans carried goods to the USSR,
Soviet-occupied Dairen, ports in communist-occupied northern China, and Hong Kong. In 1949
and 1950, Mortrans exclusively shipped goods to Hong Kong and communist-occupied northern
China. Mortrans also conducted trucking services with used American-made trucks from Soviet
Lend Lease stocks, along with ones procured via Hong Kong.181
The ruling North Korean Workers Party elite maintained access to luxuries and
privileges denied to many average citizens. In 1950, the biggest hotel in Pyongyang was known
simply as the Russian hotel. Obviously, its guest were mainly Soviet nationals who controlled
the Kim-il-sung dictatorship. Resident Soviet diplomats and advisers maintained a special
commissary in Pyongyang which distributed fine wines, vodkas, caviar, and cosmetics. The
Soviet Embassy in North Korea was equipped with expensive radios, photographic equipment,
heavy silver ashtrays, and plentiful food. The Workers Party officials also lived very well. Kim
il-sungs residence had multiple anterooms, a grand office, gaudy rugs, and expensive furniture.
Kims office also had an enormous mahogany desk. Kims private air raid bunker was 70 to 100
feet underground. It was connected by a tunnel to the residence of Kims Soviet advisers. The
bunker itself was equipped with a complete living quarters, a music room with an organ, and a
one-chair barber shop.182 By the late 1940s, the top Workers Party and government officials
received special rations that allowed them to eat meat daily, lived in huge houses that were
usually expropriated from the former Japanese officials, had servants, and sent their children to
special schools that were off-limits for the average North Korean family. 183
Lieberman, Henry. Hong Kong Builds Brisk Trade With Red-Controlled North Korea New
York Times February 24, 1949 page 12.
179 Central Intelligence Agency. Intelligence Memorandum 311 Northern Koreas Dependence
on Outside Supplies August 2, 1950 Accessed From:
http://www.foia.cia.gov/sites/default/files/document_conversions/89801/DOC_0001117734.pdf
180 Department of State. North Korea: A Case Study in the Techniques of Takeover (Washington
1961) Accessed From:
http://babel.hathitrust.org/cgi/pt?id=umn.31951t00466606h;view=1up;seq=3
181 Department of State. North Korea: A Case Study in the Techniques of Takeover (Washington
1961) Accessed From:
http://babel.hathitrust.org/cgi/pt?id=umn.31951t00466606h;view=1up;seq=3
182 Substantial Citizens Time Magazine October 30, 1950 Accessed From:
http://www.time.com/time/magazine/article/0,9171,805551,00.html
183 Lankov, Andrei. All Things Being Equal Korea Times July 19, 2005 Accessed From:
http://www.nkeconwatch.com/page/197/
178

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Since 1948, the North Koreans operated special stores which sold books, newspapers,
stationary, furniture, porcelain and metal products, sports equipment, imported commodities, and
non-rationed goods. These stores were originally set up in the properties originally owned by the
Japanese and national traitors. These properties were confiscated by the state or purchased
from private businessmen. These goods were sold at high prices, hence limiting their customer
base to the top elites. 184
By 1946, the Communists attained near-total power in Poland. The Soviets and their
Polish Communist allies wiped out the opposition and extended total Stalinist control by 1949.
Despite the strict controls, the Polish Communists sought to maintain trade ties with the West.
The Polish Communists and their Soviet masters viewed elements of the Western capitalists as a
self-interested, malleable class of powerful individuals. Important British industrialists were
reportedly visitors to the Polish Embassy during the Stalinist years, along with officials of the
Communist Party of Great Britain. The Embassy at that time was used for intelligence work and
propaganda. Soviet Ambassador Georgi Zarubin noted to Spasowski: Even among the fattest
industrialists there is a decent person here and there who can understand us and attend to his
own interests at the same time. A great deal can be done through them, sometimes a very great
deal, but the opportunities are rare.185
Polish legations and the heads of the propaganda departments of the Polish Communist
Party realized that they could not successfully lobby Western public opinion and especially
business circles in a direct, frontal attack. Therefore, the Polish Communists used their
legations in the Third World and neutral countries to penetrate business circles through Polish
Commercial Attaches. The Poles praised one commercial attach in Pakistan (Karachi) named
Stanislav Pollak, who used the ruse as a Western businessman. Reportedly, he was not only
able to influence opinion (in business circles) but also to successfully organize a political and
economic intelligence service.186
The Poznan Fair was utilized by the Polish Communists and Soviets to extract strategic
goods, intelligence, and influence from visiting businessmen and politicians from the West.
Various large West German firms participated at the 1956 Poznan Fair. They included Bayer,
Salzgitter, Mannesmann AG, and Daimler Benz AG. 187 In April 1949, 11 British companies
which specialized in technical goods, along with 17 other European countries such as the USSR
displayed their goods at the Poznan Trade Fair. The Polish communist economic boss Hilary
Minc opened the Fair in the presence of the foreign diplomatic corps and British Ambassador. 188

184

Department of State. North Korea: A Case Study in the Techniques of Takeover (Washington
1961) Accessed From:
http://babel.hathitrust.org/cgi/pt?id=umn.31951t00466606h;view=1up;seq=3
185 Spasowski, Romuald. The Liberation of One (Harcourt Brace Jovanovich, 1986) page 324.
186 Poles Are to Infiltrate Far Eastern Business Circles Radio Free Europe Research April 4, 1952
Accessed From: http://www.osaarchivum.org/greenfield/re pository/osa:b5c1d685-dc45-40519db4-2f8527ae442d
187 West German Firms Participating in Poznan Fair Radio Free Europe Research June 12, 1956
Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:214836e8-075a-48a194a1-b8ab685d41e7
188 11 U. K. Firms at Pozhan Fair The Financial Times (London, England April 25, 1949 page
5.

34

In 1946, Polish foreign trade became a state monopoly under the communists. The
Ministry of Foreign Trade (MHZ) was formed in February 1949. Foreign trade enterprises that
were administered by the Ministry of Foreign Trade included ANEMEX (Central Import and
Export Office of Animal Products); CETEBE (Export-Import Central Trading Office of the
Textile Industry); ELEKTRIM (Polish Foreign Trade Company for Electrical Equipment);
IMPEXMETAL (Central Bureau for Iron and Steel); PETROL (Central Bureau for Mineral Oil
Products); and WEGLOKOKS (Central Coal Sales Bureau). The Polish Chamber of Foreign
Commerce was formed in September 1949. 189
Between 1946 and the end of the Three-Year Plan in 1949, Poland received $675 million
in loans and grants from the West. 190 In 1949, Poland imported $632 million worth of goods in
its conventional foreign trade. By 1949/1950, the USSR, Eastern European nations, Sweden,
Austria, France, Denmark, Finland, Argentina, Italy, Switzerland, West Germany, and Britain
conducted foreign trade with Poland. A number of the imported goods from the West were of a
strategic nature. Such goods included machinery, chemicals, ball bearings, and conventional
items which garnered hard currency. Poland imported industrial goods, iron ores, and raw
materials such as rubber and wool from the West. Poland exported goods such as coal, food, and
timber to the West. During the Korean War, Polish exports of coal earned the communists $250
million per year. Sweden exported iron ore, ball bearings, generators, and various types of
machines to Poland.191
In July 1950, Poland exported $32.6 million worth of farm products and coal to West
Germany. West Germany exported machines, chemicals, iron and steel products, motor vehicles,
and electrical equipment to Poland. After October 1950, the Poles exported pork products and
live pigs to West Germany. By March 1951, West Germany accumulated a surplus of $5.1
million in their clearing account at the Narodowy Bank Polski. The Poles also imported West
German wheat flour and grain. Poland had difficulty meeting some of its agricultural export
obilgations to West Germany. Since late 1952, the West German Agriculture Ministry became an
agency for the promotion of West German agricultural exports to Poland. 192
Polish firms which purchased machinery from West German firms requested that these
same enterprises dispatch expert mechanics to install these machines. The West German firms
supplied the Poles with a list of mechanics to choose from. The applications were then forwarded
to the Polish Ministry of Trade, who then sent the list of West German mechanics to the Polish

189

Pitzsimmons, Thomas. Poland and Its People (Human Relations Area Files New Haven CT
1958) Accessed From:
http://www.archive.org/stream/polanditspeoplei006974mbp/polanditspeoplei006974mbp_djvu.tx
t
190 Pitzsimmons, Thomas. Poland and Its People (Human Relations Area Files New Haven CT
1958) Accessed From:
http://www.archive.org/stream/polanditspeoplei006974mbp/polanditspeoplei006974mbp_djvu.tx
t
191 Pitzsimmons, Thomas. Poland and Its People (Human Relations Area Files New Haven CT
1958) Accessed From:
http://www.archive.org/stream/polanditspeoplei006974mbp/polanditspeoplei006974mbp_djvu.tx
t
192 Spaulding, Robert Mark. Osthandel and Ostpolitik: German Foreign Trade Policies in Eastern
Europe from Bismarck to Adenauer (Berghahn Books, 1997) pages 373-375

35

Military Mission in West Berlin. The Mission then selected the names of the desired mechanics
and submitted the paperwork to the government in Warsaw. Before October 1952, the Polish
firm POLIMEX employed 8 technicians from the West German firm Siemens-Schuckert to
establish a paper factory. In October 1953, POLIMEX requested from Siemens two more
technicians to install the papermaking machines. Since 1953, the West German firm Lurgi
manufactured machinery for two coke plants in Poland. 193 The Fiat Company provided diesel
engines for the Polish Navy and 400 trucks, tractors, and other means of transport. It was noted
that Fiat and the Ansaldo Company of Genoa were helping to increase the power of the
East.194 In July 1953, the British firm A.E. Hemsworth & Company Ltd provided Poland with
raw and processed rubber from Indonesia and Ceylon, which was shipped through London. 195
The United States also conducted trade with communist Poland. Such goods were
exported via UNRRA and various disbursements of credits. Between 1946 and the end of the
Three-Year Plan in 1949, the United States provided $90 million in credits to communist
Poland.196 During the period from 1945 to 1947, UNRRA provided Poland with $171 million in
direct aid to industry and agriculture, along with food, clothing and, medicines. 197 Former US
Ambassador to Poland Arthur Bliss Lane noted that, per the agreement with the Polish
government, the political distribution of UNRRA relief supplies could not be prevented. Supplies
such as blankets were only distributed to government employees and members of the Socialist
and Workers Parties who possessed special ration cards. Meanwhile, Catholic institutions had
difficulty acquiring UNRRA supplies. In fact, one Polish municipal official commented that
reactionary organizations such as the Catholic Church were not allowed to receive UNRRA
supplies. Supplies were also sold to Polish state-owned shops, which in turn, charged high prices.
Some UNRRA supplies were even utilized in the state-owned Polonia Hotel. Polish Marshal
Rola-Zymierski requested from Ambassador Lane that American Export-Import Bank credits be
diverted for the benefit of the secret police (UB). Lane ruefully recalled that I observed that
such credits would be interpreted in Poland as an acquiescence on the part of the United States
in UB activities which were repulsive to the American people. 198

193

Expert West German Mechanics Sent to Poland to Install Machinery Supplied by West
German Firms Radio Free Europe Research June 14, 1956 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:8494d2a4-3461-4b54-b494-ef3ec8d8c09b
194 Fiat Company of Turin Collaborates with Poland Radio Free Europe Research February 22,
1952 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:bccd3dcd-863e4e20-b821-9f24f7c27e71
195 London Firm Offers Rubber for Poland Radio Free Europe Research July 28, 1953 Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:f8bc40e6-9ae9-4b94-b5f7364d7c98069c
196 Pitzsimmons, Thomas. Poland and Its People (Human Relations Area Files New Haven CT
1958) Accessed From:
http://www.archive.org/stream/polanditspeoplei006974mbp/polanditspeoplei006974mbp_djvu.tx
t
197 Pitzsimmons, Thomas. Poland and Its People (Human Relations Area Files New Haven CT
1958) Accessed From:
http://www.archive.org/stream/polanditspeoplei006974mbp/polanditspeoplei006974mbp_djvu.tx
t
198 Lane, Arthur Bliss. I Saw Poland Betrayed (Bobbs-Merrill Indianapolis 1948) pages 225-228.

36

The Intelligence Division in the Ministry of Public Security of Poland created a number
of trade enterprises which served as covers for espionage operations abroad. As early as 1946,
Polish foreign trade companies such as the Orbis Travel Agency and Bank Pekao S.A. were staff
with Polish intelligence officers. The Central Committee of the Polish Workers Party received
part of the profits accrued from the business activities of these trade firms. In 1948, the Polish
intelligence services created the following trade companies in Berlin (Dimex); Frankfurt
(Welthandel); and Vienna (Polcomerce). The Poles also dispatched purchasing representatives
to the United States and Belgium. These trade enterprises exported Polish food in exchange for
products and raw materials restricted by embargoes or higher prices. These firms also trafficked
in currencies. In the years from 1947 to 1949, these Polish trade enterprises garnered profits
worth $2.7 million.199
The Poles also fronted for Red Chinese purchases in Western nations. As of March 1954,
Polish trading firms purchased goods from Britain. British firms then shipped these goods to Red
China via Belgium and The Netherlands. These goods were shipped to the Portuguese colony of
Macao and Lisbon (Portugal) and then smuggled them to communist China. The British
company Freight Express Ltd and the Belgian firm Staimann & Company handled the shipping
of such strategic goods.200
The Polish Communists also raised hard currency through parcel operations aimed at
Polish-Americans. In 1948, the Polish communist formed the Pekao Trading Corporation under
the control of Bank Kasa Opiski. Since 1948, Pekao sold food, clothing, livestock machinery,
and building materials from its warehouses in Poland in order to generate hard currency.201 It
was reported in 1952 that Pekao siphoned off hard currency from Polish-Americans to their
relatives in their native country. Polish natives who received this money were forced to exchange
them. These lucky Poles were then able to purchase Polish-made goods in short supply. Pekao
garnered approximately $1 million per year through these operations. 202 From 1954 to 1958, over
$20 million was transmitted to the communists in Poland from the operations of Pekao.203
Even in the days of Stalinism, foreign communist, progressive leftist and business
delegations were feted in Poland. Foreign tourists in Poland received special coupons from the
Orbis travel agency to pay for restaurants and hotel charges. Waiters in the special restaurants
receive commissions based on the bills paid by the host governments for visiting delegations. 204

199

Paczkowski, Andrzej. Civilian Intelligence 1 in Communist Poland, 1945-1989 An Attempt at

a General Outline Institute of Political Studies and Collegium Civitas, Warsaw Accessed From:
http://ece.columbia.edu/research/intermarium/vol10no1/Civilian%20Intelligence%20in%20Com
munist%20Poland,%201945-1989.pdf
200 British and Belgian Firms Involved in Smuggling Forbidden Goods to China Radio Free
Europe Research March 6, 1954 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:ad552327-2a81-4e0a-89c0-91936b2c1a5a
201 Communist Parcel Operation Report by the Committee on Un-American Activities (GPO
1959) Accessed From: http://babel.hathitrust.org/cgi/pt?id=uc1.$b654294;view=1up;seq=5
202 Riesel, Victor. Inside Labor Waterloo Daily Courier February 6, 1952 page 6.
203 Communist Parcel Operation Report by the Committee on Un-American Activities (GPO
1959) Accessed From: http://babel.hathitrust.org/cgi/pt?id=uc1.$b654294;view=1up;seq=5
204 Raymond, Jack. Tourist Facilities Beyond the Iron Curtain New York Times January 8,
1956 page X38.

37

After Poland became communist in the mid-to-late 1940s, the Bristol Hotel was
nationalized and managed by Orbis for foreigners only. The Security Service (UB) spied on hotel
guests from the foyer and phone lines were tapped. The hotel gift shop accepted hard currency
and was considered the best-stocked store in Poland. 205 The Bristol Hotel in Warsaw served
excellent food. However, service at the Bristol was not up to par with Western standards. 206 In
1949, the Bristol Hotel opened the Peoples Tavern. Tips were officially frowned upon by the
hotel management. The Soviet-Polish menu admonished patrons that tipping offends the dignity
of the working man. Orbis took over the management of the Bristol in 1952. Orbis then
launched a program to redecorate and modernize the hotel. Foreign VIPs were lodged at the
Bristol Hotel.207
Other Orbis hotels and restaurants located in Gdynia, Gdansk, and Szczecin charged high
prices. They were frequented by high Party and state officials, along with members of foreign
delegacja. The public called these hotels Bonzosko partyjne schronisko. Food served at the
Orbis hotels included ice cream, vegetables, meat, potatoes, cake, beer, coffee, and liquor. 208
The Orbis restaurant in Szczecin housed foreign industrial experts. It was considered a
first class restaurant or restaurant of special category. Foreign guests who patronized this
Orbis restaurant included Germans, Czechoslovaks, British, and Frenchmen. An adjoining Orbis
hotel had rooms with telephones and bathrooms and the restaurant had dancing. All hotel guests
were assigned a specific table in the restaurant reserved for them where their national flag was
placed on the table. The tables were decorated with flowers (mostly roses). The head-waiters
were dressed in white jackets and black trousers in the day and in tails during the evening.
Soups, vegetarian dishes, roast meats, poultry, and fish were served at this restaurant.209
The Party, military, and secret police officials constituted a privileged class in Stalinist
Poland. As of 1951, the upper class in Poland consisted of Party bosses, UB officers and agents,
army officers, members of the secret police and Militia. The Party elites had access to special
shops where they could purchase goods at prices 30% lower than at regular state-owned shops.
The UB maintained a shop in Szczecin, while the Militia had a shop in Gdansk. These shops sold
unlimited quantities of goods such as meat and textiles. 210 Luxury food shops in Poland sold
imported food to Stakhanovite workers, high-level officials, and Party bosses. This food was
originally confiscated from food parcels that were sent from Polish migrs intended to their

Cater, Nick. Historic Bristols a right royal survivor The Sunday Telegraph (Sydney,
Australia) October 26, 2003
206 Raymond, Jack. Tourist Facilities Beyond the Iron Curtain New York Times January 8,
1956 page X38.
207 Menaker, Drusilla. Poles Trying to Restore Old Elegance of Warsaws Hotel Bristol The
Associated Press April 3, 1989
208 Prices in Orbis Hotels Radio Free Europe Research Eastern Europe February 19, 1955
Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:c6c68696-7f0c-446c8cbc-5f7264eb59ac
209 The Orbis Restaurant in Szczecin Radio Free Europe Research Eastern Europe Accessed
From: http://storage.osaarchivum.org/low/cb/a0/cba07a81-b87f-45b9-a5a5-86da55dcb665_l.pdf
210 Well Stored Shops for Party Bosses October 5, 1951 Radio Free Europe Research Eastern
Europe Accessed From: http://storage.osaarchivum.org/low/24/4c/244c5130-1d2c-4baa-b4905db3bf12de74_l.pdf
205

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relatives in Poland. 211 During the early 1950s, special shops known as Galuks were opened in
Poland. These shops sold imported Western-made goods and export quality Polish goods. One
was located at Szczecin and Gdynia. They sold items such as Pallas and Soviet-made Pobieda
watches and nylon nightgowns. 212
Foreign sailors constituted another privileged class of foreigners in Poland. Foreign
sailors had to spend at least 45% of their hard currency at the Baltona shop in Gdynia and Soviet
sailors were allowed to use rubles. The Baltona store was opened in 1951 and did a brisk
business. The privileged Polish sailors were required to turn in their American dollars in
exchange for special dollar coupons. These sailors received these coupons before they
disembarked from their ships docked at Polish ports. Products sold at the Baltona shops
included:
1) Czechoslovak, British, and Dutch textiles.
2) Export-quality Polish jewelry, porcelain, and glassware.
3) British and Dutch carpets.
4) East German-made cameras and field glasses.
5) Hungarian hats, shawls, and playing cards.
6) German and Czechoslovak radios.
7) Swiss watches and nylon stockings.
8) US-made pens.
9) Perfumes and cosmetics from the United States and France.213
Special restaurants and clubs catered to foreign sailors visiting Poland. The sailors were
required to pay their bills in hard currency. In October 1955, all foreign sailors had to pay in hard
currency at the Interclub in Gdynia. 214 These establishments were also monitored by the UB,
who were always on the lookout for new recruits and tidbits of intelligence. In 1953, the UB
opened the International Restaurant in Gdynia for foreign sailors. The UB hired girl servants
and held variety and floor shows. 215
By the late 1940s, the Romanian Communists consolidated total power over the already
leftwing government of Prime Minister Petru Groza. Despite the hard-line Stalinism of the
Romanian party bosses, Bucharest maintained trade ties with various Western nations. Some
211

Luxury Shops with Food Parcels Radio Free Europe Research Eastern Europe Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:a113f19d-f861-4454-8f2a31e0c4373b66
212 Special Shops for Imported Goods Radio Free Europe Research Eastern Europe Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:20f57c4f-9f8a-4e77-a4b6cd57735bbeac
213 Baltona Privileges for Merchant Seamen and Soviets Radio Free Europe Research Eastern
Europe April 3, 1954 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:298c3492-9efc-4777-b89b-28b622acfe1f
214 Foreign Currency at the Interclub in Gdynia Radio Free Europe Research Eastern Europe
November 4, 1955 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:4a15e402-b6c0-4c04-912b05d12d42ce96
215 Exclusive UB Restaurant for Foreign Sailors Radio Free Europe Research Eastern Europe
September 19, 1953 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:3645abe6-7b87-4a69-a230-32f666509ae6

39

even engaged in the export of strategic goods to Romania. In October 1951, Romanian
government representatives acting in the name of a Romanian-Soviet holding company
negotiated with the Swiss firm Sulzer to repair and reconstruct the naval slipways at Galati. 216 In
April 1953, the French firm I.A. Goldschmidt and Cie of Paris bought 40,000 tons of wheat from
Romania and the French paid the Romanians with francs and unspecified French products. The
Romanian oil industry previously ordered pipelines from the Franco-Belgian Company.217
Throughout 1954, Romania signed trade agreements with India, Indonesia, Denmark,
Holland, Israel, Turkey, Iceland, Greece, Argentina, Austria, West Germany Egypt, Sweden
(SUKAB), France, and Norway (Norsk Kompensation). Dr. Stefan Gall, the head of a
department in the Romanian Ministry of Foreign Trade, departed Romania for the West in May
1954 to launch an export offensive in the West. The 30-man delegation landed in Amsterdam.
The Romanian delegation split up into mini-delegations and visited Canada, Argentina, and
Indonesia. Dr. Gall visited European countries such as Finland, Denmark, Norway, Sweden, and
Holland.218
By 1955, Romania imported machine tools, electric motors, and wool from Britain and
Switzerland. Romanian corn and wheat were dumped into the Swedish market via the British
firm Lamet Trading Ltd of London. Even before 1955, Romanian farming produce was dumped
into Western markets. The Swiss firm Ernst Debrunner AG of Zurich imported and sold the
dumped Romanian products. Since 1952, Ernst Debrunner AG exported electric motors to
Romania worth several million Swiss francs. The British firm B Rush Group of London engaged
in business relations with Romanian state companies such as Machinimport, Energoimport, and
Industrialimport. The Romanians received industrial diesels, machine tools, and generators from
Britain. Romania then exported oil, Vaseline, and other goods to Britain. Romanian goods
exported to Swiss and British firms were then dumped onto the Swedish market. 219
In the early years of Soviet-occupied Romanian, American business interests sought to
restore trade relations with Bucharest. In January 1946, the Romanian-American Chamber of
Commerce and Industry was formed with Max Ausnit as president. It served as a tool to increase
Romanian-US trade.220 In April 1947, the American-Romanian Trading & Development
Corporation was formed to foster and develop trade between Romania and the United States.
Ralph Bolton of Standard Oil was elected president of this group. Shareholders included ITT,
Westinghouse, Continental Grain, Standard Oil, and Occidental Trading and Investing Company.
Most of the shareholders maintained important investments in Romania. 221
216

Negotiations with Swiss Firm Radio Free Europe Research October 18, 1951 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:cb8bc3db-92a0-4cb5-9474-b3863df19013
217 French Company Purchases Romanian Wheat Radio Free Europe Research April 27, 1953
Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:96765863-bb39-4091abb5-60d04f154800
218 Romanian Export Offensive in the West Radio Free Europe Research Eastern Europe May
July 1954 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:ea363e61fd7e-459a-a384-51b2e86d33e3
219 Dumping of Romanian Deficit Goods Radio Free Europe Research Eastern Europe July 30,
1955 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:cb790dd1-5a9448da-83b3-c370581ea107
220 Rumanian-U.S. Chamber Formed New York Times January 28, 1946 page 25.
221 Sees Trade with Rumania New York Times April 26, 1947 page 20.

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The Romanian Communists also developed various operations which generated hard
currency revenues for the Party. Romania depended on the Jewish emigration to Israel as a
means of getting hard currency according to a 1951 government report: It is difficult for the
state, at this point, to renounce a yearly income in hard currency of about two million. 222
The trading firm Carpati was supervised by the Romanian Communist Party through an
agency called the Housekeeping Unit. Profits earned from Romanian exports were sold via
Carpati.223 Carpati also managed the international tourist trade in Romania. As of 1955, Carpati
and its hotels accepted hard currencies such as American dollars, British pounds, West German
deutschmarks, and Swiss francs. 224 Carpati also constructed the hotels at Romanian mountain
and sea resorts. 225 In 1955, when Carpati was formed, 1,000 tourists visited Romania.226 Some of
the most luxurious international hotels were located in Bucharest. As of January 1956, the Hotel
Athenee Palace was considered a pretty good hotel by Eastern European standards. The
dining room at that hotel offered a good variety of food, including high quality fish. Waiters in
the special restaurants receive commissions based on the bills paid by the host governments for
visiting delegations.227
The Soviet front World Youth Festival of 1953 was held in Bucharest. It presented the
Party leaders with an opportunity to influence large groups of friendly foreign visitors. In August
1953, the Communists spruced up Bucharest in preparation for the Festival. Over 30,000
Western Europeans and other foreigners from 102 countries attended this event. Battalions of
soldiers and workers worked for over three months to repair and paint the houses and buildings
in Bucharest. Youth delegates received packages of meat, cheese, fruit and white bread. Western
communist parties provided financial support for delegates to travel to Bucharest in order to
attend the Festival.228 The Festival attendees were ferried in Soviet-built ZIS limousines and
were lodged at the luxurious Athenee Palace Hotel. They enjoyed two types of coffee and drank
vodka, Romania tuika, imported Czech Pilsener beer, and Romanian white and red wines. The
delegations ate three meat meals a day at the luxurious and refurbished Athenee Palace Hotel. 229
The Party and government elites enjoyed vast privileges during the early years of
Stalinism. As of January 1952, Central Committee members of the Romanian Communist Party
could shop at the Bonaparte Soviety food store, while Central Committee members could
purchase food and clothing at the Jianu Society store. The unmarked shop on Number 12 Diana
Street sold food and clothing for the diplomatic corps. A plainclothes security agent checked the
ration card of each customer. The goods had no prices marked on them. The special shops were
elegantly furnished, with carpets and window curtains added to enhance the hidden and luxurious
222

Ioanid, Radu. The Ransom of the Jews (Ivan R. Dee 2005) page 63.
Possamai, Mario. Money On the Run (Viking, 1992) page 218.
224 Romania Tourism Radio Free Europe Research Eastern Europe October 5, 1955 Accessed
From: http://www.osaarchivum.org/greenfield/repository/osa:90d86a5b-e470-455f-a94194b1d23e46db
225 News From Behind the Iron Curtain Volumes 4-5 1956 Free Europe Press page 9
226 ASTA Travel News Volume 34 American Society of Travel Agents 1965 page 22.
227 Raymond, Jack. Tourist Facilities Beyond the Iron Curtain New York Times January 8,
1956 page X38.
228 Rumania Spotless for Peace Rally New York Times August 3, 1953 page 4.
229 MacCormac, John. Rumania Primps for US Reporters New York Times August19, 1953
page 13.
223

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appearance of these establishments. Products sold at these special shops included carp, Sibiu
salami, fish, caviar, veal, chicken, beef, pork, oil, fats, American-made chocolates, coffee, first
quality MAT wines, cakes, fruit, cheese, bread, imported non-Soviet dress materials, and
preserved meats. These goods were sold at half price to Central Committee members. 230
Even certain high level Nazi collaborators also enjoyed vast privileges in communist
Romanian. As of June 1956, the ex-Liberal Party boss and Nazi collaborator Gheorghe
Tartarescu lived in a luxurious nationalized mansion off of Boulevard Stalin. Tartarescu also
drew a comfortable salary and possessed a big car. Tartarescu lectured the old politicians on the
bright future the Communist Party is reserving to the country. 231
The Romanian communists also invited officials and participants in the wartime
Antonescu governments and Iron Guard movement to join the new regime. Both the Communists
and fascists retained hostility towards Zionism and capitalism. Other fascists and pro-Nazi
collaborationists possessed various technical, military, and propaganda skills that were valued by
the communists. Top Romanian Communist Ana Pauker publicly called upon the Iron Guardists
to join the communists in 1945. 232 Gheorghiu-Dej quoted Ana Pauker as having said in a speech
that we are glad to receive them (the legionnaires) and to shake hands with them. In 1944,
Iron Guard leader Horia Sima dispatched a delegation to establish relations with the Romanian
Communist Party. Teohari Georgescu, who was Minister of the Interior, a Party Secretary and
member of the Politburo, inked the final agreement with the Iron Guard which re-legalized their
movement.233
After the surrender of the Romanian government of King Michael to the Soviets, various
fascists and collaborators were retained for their technical skills. The coalition government
consisted of the Stalinist Romanian Communist Party and the pro-fascist, pro-Axis Vice-Premier
Georges Tatarescu and his political allies. This regime was referred to as a queer coalition of
the local Darlans and the parties of the Left by The Economist in late December 1944. A New
York Times correspondent based in Romania reported in March 1945 that Industrialists,
businessmen and hankers will escape punishment as war criminals under a law being drawn up
by Lucretsiu Patrascanu, Minister of Justice and Communist member of the Government, it was
learned today. Rumania could not afford to lose the services of merchants and industrialists, M.
Patrascanu said. He expressed the opinion that the country would pursue a more liberal policy

230

Special Distributing Stores Instituted for the Families of Central Committee Party Members
Radio Free Europe Research Eastern Europe January 29, 1952 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:eaa30f2d-a554-4b4c-9798-01fc8dacf873
231 Ex-Liberal Tartarescu Lives in Luxury Radio Free Europe Research Eastern Europe June 16,
1956 Accessed From: http://www.osaarchivum.org/greenfield/repository/osa:cf50076e-fb364994-9073-22a67289bce0
232 Fabian, Bela. Hungary's and Rumania's Nazis-in-Red Commentary Magazine November
1951
233 Gheorghiu-DEJ Shifts the Blame December 11, 1961 Accessed From:
http://www.osaarchivum.org/files/holdings/300/8/3/text/49-5-21.shtml

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toward this class than the French have.234 The pro-Nazi, Iron Guardist industrialist Malaxa sold
Stalin steel after Soviet troops occupied Romania in 1944. 235
The President of the Military Tribunal was the former wartime Director General of
prisons and concentration camps under the fascist, pro-Nazi regime of Prime Minister Ion
Antonescu. Lieutenant-Colonel Nicolas Cambrea, the former commander of Romanian troops
that fought the Soviets at Stalingrad, was promoted to the rank of General and appointed
Assistant Chief of Staff by the pro-Soviet, pro-communist government of Prime Minister Petru
Groza. Major Popescu-Argetoia, a prominent wartime fascist, was made the head of the
Romanian communist secret police. General Vasiliu Rascanu, Chief of Military Police during the
war against the Soviet Union, was appointed Minister of War under the postwar pro-communist
regime. Another Antonescu-era general named Pretorian was appointed Chief of Staff under the
Groza regime. General Lascar, Brigadier-General in the war against the Soviet Union and
recipient of the Iron Cross from Hitler, joined the Romanian Communist Party after the war and
was considered loyal enough to be appointed Minister of War under the Groza regime.236
A Radio Free Europe/Radio Liberty report noted that Many former Iron Guards are
today among the Romanian Communist Partys most fanatic activists and propagandists. Two
such former Iron Guardists-turned communists in Braila were V. Virforeanu and N.
Kotsofanu.237 Former Iron Guard official and priest Ion Burdycea joined the communists and
even became the Minister for Education in 1946. He was responsible for the brutal progrom of
Iasis Jews. Witnesses working on the slave labor project for the Danube-Black Sea Canal noted
that many guards were former Iron Guardists. Other pro-Nazi collaborators and fascists who
served the Communists included:
1) Stefan Vojtec, who was the editor of Sentinell, a publication of the joint GermanRomanian General Staff during World War II. He then became Minister of Education,
director of the state-owned cooperatives, and Politburo member under the communist
regime.
2) Aurel Vijoli was a legionary commander in the Iron Guard who subsequently became
Assistant Minister of Finance and governor of the State Bank under the communists.
3) Lotar Radaceanu was a German agent during World War II who then became a
member of the Politburo and Minister of Labor and Social Security. He was also an
official of King Carols totalitarian Renaissance Front.

Cliff, Tony. On the Class Nature of the Peoples Democracies Written in 1950 Accessed
From: http://www.revolutionaryhistory.co.uk/eastern-europe-after-wwii/on-the-class-nature-ofthe-peoples-democracies.html
235 Rashke, Richard. Useful Enemies: John Demjanjuk and Americas Open-Door Policy for
Nazi War Criminals (Open Road Media, 2013)
236 Cliff, Tony. On the Class Nature of the Peoples Democracies Written in 1950 Accessed
From: http://www.revolutionaryhistory.co.uk/eastern-europe-after-wwii/on-the-class-nature-ofthe-peoples-democracies.html
237 Two Former Fascists in Braila Now Communists Radio Free Europe Research Eastern
Europe March 12, 1952 Accessed From:
http://www.osaarchivum.org/greenfield/repository/osa:8518f462-73d9-4662-8e65-089baf8d206b
234

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4) Victor Vojen was a former Iron Guard commander who became private secretary to
communist bigwig Ana Pauker. Witnesses working on the slave labor project for the
Danube-Black Sea Canal noted that many guards were former Iron Guardists. 238
5) The Minister of Culture in the pro-communist regime, Mihail Ralea, was a former
minister under King Carol and a fanatical pro-Nazi personality. The Minister of Cults
under the pro-communist regime was Father Burducea, who was a notorious member
of the Fascist Iron Guards.239
6) Nichifor Cranic was a fascist ideologist and Propaganda Minister in the Antonescu
government who then wrote for Glasul Patriei (Voice of the Fatherland), a rabid antiJewish communist newspaper in Romania. He later became a propagandist for the
communists. Former Iron Guard priest Father Dumitrescu Borsa and former LANC
(Christian League for National Defense) journalist Alexander Hodos all became
propagandists for the communists. 240
In the immediate years after the 1944 takeover of Yugoslavia by the USSR and the
communist forces of Marshal Josip Broz Tito, the new dictatorship sought to deceive the West
and the United States in order to acquire valuable goods and technologies. Yugoslav deception
plans were also aimed at securing increased political legitimacy of the ruling communists.
Defector Bogdan Raditsa revealed that the Yugoslav communists bragged in 1945 on their
abilities to deceive the West: Tito and Kardelj as well as the smaller communist leaders were
confident that they could outsmart any Anglo-American representative sent to deal with them.
We tried to convince them of the subtlety of Western diplomacy but they only laughed at us. We
know better than you how to fool those innocents in London and Washington, they said again
and again. As things turned out, who can deny they were right. 241 In 1946, Yugoslav
communist dictator Josip Broz Tito allegedly stated in a secret speech: Our collaboration with
the capitalistic powers during the last war must not be regarded in any way as collaboration and
allegiance with them in the future. On the contrary, those powers are our natural enemies even
though they helped us through force of circumstances to destroy the most aggressive section of
their own ranks. It may well be that we shall be able to make some use of their help to
accomplish their own definite and final destruction. 242 Perhaps it was no surprise that the
Yugoslav Communists actually coined a variation of the Leninist term useful idiot. In 1946,
former high-level Yugoslav communist official Bogdan Raditsa reported that In the SerboCroat language the communists have a phrase for true democrats who consent to collaborate
with them for democracy. It is Koristne Budale, or Useful Innocents. 243
The United States channeled goods to communist Yugoslavia through UNRRA and more
traditional commercial transactions. After the conclusion of World War II UNRRA delivered
Fabian, Bela. Hungary's and Rumania's Nazis-in-Red Commentary Magazine November
1951
239 Harman, Chris. Class Struggle in Eastern Europe 1945-1983 Accessed From:
http://www.vorhaug.net/politikk/ist/harman/eastern_europe/repression.html
240 Lehrman, Harold Arthur. Rebellion in Russias Europe: fact and fiction (Government Printing
Office 1965) Accessed From: http://babel.hathitrust.org/cgi/pt?id=uc1.$b643079
241 Ibid, page 124.
242 Von Wiegand, Karl H. Light Thrown On U. S. Policy: Reported Tito Talk Stirs San
Antonio Light October 7, 1946 page 5A.
243 Useful Idiot Accessed From: https://en.wikipedia.org/wiki/Useful_idiot
238

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American goods to Yugoslavia totaling $430 million. Seventy three percent of these goods were
financed by the United States. Sadly, Tito sold this aid to the people at six times their real value.
Hence, the Yugoslav communists collected $600 million dollars derived from the sales of this
aid. The United States also allowed a Soviet Colonel Sergeichik to be appointed as the Director
General of the UNRRA Mission in Yugoslavia. One Yugoslav Colonel commented that the
UNRRA aid was misused from the humanitarian perspective, but not from that of building
communismnothing your country does makes much sense politically 244
From 1945 to 1947, UNRRA provided Yugoslavia with over $415 million worth of
reconstruction aid. It consisted of food, medical supplies, clothing, footwear, livestock, 4,000
tractors, (which were dispatched to collective farms), coal, mining and milling equipment,
locomotives, rolling stock, barges, and port facilities. The Supreme Economic Council and
Ministry of Commerce and Supply distributed these supplies through the Reconstruction Fund.
Concerns were expressed about the diversion of the UNRRA goods to the Yugoslav Army and
for export to foreign countries.245 By the end of the summer of 1947, UNRRA had spent $415.6
million in Yugoslavia. Yugoslav communist Vladimir Dedijer wrote There is no doubt that the
aid UNRRA extended to Yugoslavia during those days played an enormous role in alleviating
hardship. It was sent urgently, when it was most required. The US Embassy reported that the
Yugoslav communists distributed the UNRRA goods to the army and secret police. The
Yugoslavs also refused to grant the right of UNRRA officials to inspect the factories that were
reconstructed with UNRRA funds. New York dock workers refused to load a UNRRA ship with
goods bound for Yugoslavia. A spokesman for the New York dock workers commented that they
would rather see the cargo going to Greece or any other country that gave us some help in the
war. The American Federation of Labor (AFL) and the International Labor Association (ILA)
sympathized with the work stoppage. 246
The Yugoslavs also maintained trade ties with their communist allies, along with the
West and the United States. In 1946, Yugoslavia signed trade agreements with the USSR and
communist-dominated Czechoslovakia. In 1947, the Yugoslavs invited Ford Motor Company to
set up an assembly plant in Yugoslavia. Tito expressed interest to the US Ambassador for
increased trade in January 1948. 247 Despite Titos pleadings for US food aid, Yugoslavia fed its
700,000 troops with good wheat bread and exported wheat to Romania and Albania. In 1947, a
Swiss newspaper reported that Yugoslavia exported 5,000 pigs to Switzerland. Trade agreements
were signed between Yugoslavia and Hungary, Poland, Italy, and Sweden. 248
The Party and government elites in Yugoslavia also enjoyed privileges and imported
foreign made goods from the capitalist world. The homes and property of the old wealthy elites
were confiscated by the communists and redistributed to generals, Party officials, foreign
diplomats, and government ministers. Meals for these VIPs were ordered from the central, state244

Kalvoda, Josef. Titoism and Masters of Imposture (Vantage Press Inc New York 1958) pages
106-107.
245 John R. Lampe, Russell O. Prickett, Ljubisa S. Adamovic. Yugoslav-American Economic
Relations Since World War II (Duke University Press, 1990) pages 21-29.
246 Lees, Lorraine M. Keeping Tito Afloat: The United States, Yugoslavia, and the Cold War
(Penn State Press, 2010) pages 19-21.
247 John R. Lampe, Russell O. Prickett, Ljubisa S. Adamovic. Yugoslav-American Economic
Relations Since World War II (Duke University Press, 1990) pages 21-29.
248 Korbel, Josef. Titos Communism (University of Denver Press 1951) pages 67-70.

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owned hotel. The Yugoslav communists were also passionate hunters. Their apartments and
villas retained the same furnishings as their previous owners. The Yugoslav leaders traveled in
luxurious American cars and sports cars imported from Italy and Switzerland. 249 In 1950, the
Neue Zurcher Zeitung noted that in Yugoslavia The proletarians who stands in the queues near
the bus stops looks with greedy eyes at the lit up American cars of the state leaders, resplendent
in chrome and colored varnish, which pass swiftly by them. The higher ups of the State and Party
travel in the latest cabriolets, the great ones of second rank travel in limousines. Skoda and
Opeldienst cars are at the disposal of high officers and officials. In the entrance to the Peoples
Front Street in Marshal Tito Boulevard stands a big warehouse. Men in khaki or white uniforms
with gold epaulettes go in and out. The warehouse is reserved for officers and their families.
There they can buy clothes, shoes, furniture, carpets, and other goods of better quality and
cheaper price than the common mortal can buy. The officers get their food rations there too -far
larger rations than those of workers and clerks. So large are these rations, that in the spring, at
the time of the great food scarcity, peasants came to town in order to buy from the officers their
surplus fat and flour at black market prices. Soviet experts in Yugoslavia reportedly earned
even more than military commanders and Federal Ministers, while Yugoslav generals received
apartments, servants, and plentiful quantities of food.250
Lastly, the Yugoslav Communists welcomed into their ranks converted fascists and
pro-Nazi collaborationists from the puppet governments and movements in Croatia and Serbia.
Seventy three of the signatories of the pro-fascist Appeal to the Serbian Nation of 1941 later
became prominent members in communist Yugoslav society. Twenty eight of the signatories of
the Appeal became members of the Academy of Arts and Sciences under communism. Twelve
received state honors from the communist state for allegedly opposing fascism. Historian Philip
Cohen noted that Tito included several pro-Nazi Serbian collaborators in his postwar
dictatorship.251 I. Andric was the Deputy Foreign Minister to the pro-German government of
Prime Minister Stojadinovic and Yugoslavias Ambassador to Nazi Germany. He became the
Chairman of the Communist-controlled organization of Yugoslav writers. Franz Pierts was the
head of the Ustashas air force who became a colonel in Titos communist partisans. Marko
Mesitch served in Ustasha units and then switched sides and became the commander of Titos
Guards. Sulejman Filipovitch was an Ustasha officer who committed war crimes in Croatia who
subsequently became a cabinet minister in Titos communist regime. Titos Ambassador in
London, Dr. Ljuba Leontitch, was the founder of the Yugoslav fascist movement called
ORJUNA. The Croatian sculptor, Antun Augustinchitch, was previously a sycophant for the
Croatian fascist dictator Dr. Ante Pavelich. Vladimir Nazor was a court poet of the Ustasha who
became the President of the communist Anti-Fascist Council of Croatia. Monsignor Svetozar
Rittig of the Roman Catholic Church was a court priest for Tito. He was previously a supporter
of the Ustasha and its repression of the Serbian Orthodox Church. Markham reported that There
are many active war criminals in the ranks of Titos Partisans--I mean men who killed women
and children and massacred civilians for political reasonsSuch Ustasha war criminals are
now sheltered in Partisan ranks and are active in the Partisan regime. Not only will they never

Korbel, Josef. Titos Communism (University of Denver Press 1951) pages 67-70.
Gluckstein, Ygael. Stalins Satellites in Europe (George Allen & Unwin, 1952) page 103.
251 Cohen, Philip. Serbias Secret War (Texas A&M University Press, 1996) page 137.
249
250

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be tried, but they are clamoring for the extermination of persons who fought for the Allies
against these Nazi agents.252
Despite the hard-line Stalinism-Leninism of the Soviet bloc satellites, trade ties with the
West and even the United States were maintained. They clearly valued the technology that the
capitalist world had to offer to the communist bloc. Despite their anti-fascism, the same satellite
countries conscripted former Nazi collaborators for their technical expertise. Other collaborators
joined the communists on the account of easily shifting from one form of collectivism (fascism)
to another (Marxism-Leninism). Lastly, the Stalinists sought to improve the tourist facilities for
visiting delegations of businessmen, resident diplomats, and foreign sympathizers. Such a
strategy would help create lobbyists for the communist cause once the visitor(s) in question
returned to their native countries. Hence, the Stalinist-Communists of the 1940s and early 1950s
clearly adhered to what I have termed in other writings The Theology of Power.

Markham, R.H. Titos Imperial Communism (University of North Carolina Press 1947) pages
194-204.
252