II. MOVEMENTS OF CAPITAL.

Movements of capital to and from the Soviet
Union consist of investments in various trading
enterprises, in foreign currencies, in government
securities, in foreign enterprises in the U.S.S.R.
and in financing foreign trade, also of credits
granted to foreign firms, interest charges on
the foreign debt of the U.S.S.R., and of credits
given by the U.S.S.R.
The Soviet Government has substantial investments
 in commercial, banking and insurance
undertakings abroad. On January Ist, 1930,
the paid up capital of all Soviet commercial
institutions abroad amounted to 110 million
roubles, out of which 35 million roubles were
invested in Great Britain. On the same date the
paid up capital of the seven Soviet banks, domiciled
in Europe, amounted to 34 million roubles. The
origin of this capital is two-fold. Part of it consists
of the balances of gold transferred by the Soviet
Government abroad in order to pay for the large
orders placed in 1920/22, in accordance with the
provisions of the First and Second Import Plans ;
part of it consists of accumulated profits. Only
in exceptional cases when new banks were established
 did actual transfers of currency to pay up
share capital take place.
The transfer of net profits to the Treasury
by various Soviet commercial undertakings abroad,
must be mentioned. These transfers were not
large. In particular they diminished since 1927,
when, as a consequence of various governmental
orders, the commission charged by Soviet commercial
 undertakings was fixed on a relatively
lower level, thus diminishing their net profits.
Liquid currency reserves abroad were considerable
 during the period of 1920/26. This was the
period when trade relations were being established
with foreign countries, and most industrial firms
in Germany, England and Czecho-Slovakia could
not overcome their distrust of a government which
repudiated all principles upon which international
commerce is based. Credits were refused and big
orders, the execution of which required substantial
outlays of capital, were accepted on confirmed
letters of credit of a first class bank which were
obtainable for a Soviet institution, only against

a deposit in a stable foreign currency. Most of
these orders were carried out by the end of 1924/25,
and currency deposits for that year therefore
decreased to the amount of 52 million roubles.
Since then foreign banks gave credits to the U.S.S.R.
onditional upon a fixed percentage being secured
by currency deposits. In countries, where close
relations existed between Central Banks and
Treasury Departments, a government guarantee for
Soviet orders was in few instances granted on an
anderstanding that a deposit of gold should be
made in the central credit institution of the
country.
The U.S.S.R. has to make substantial payments
abroad which amount to at least 4 million roubles
per one paying day. These payments are distributed
 very unevenly during the whole year
and do not coincide with the inflow of foreign
currency received for goods sold abroad. It is
also necessary to bear in mind that while the
payments abroad are fixed for certain dates and
are largely necessitated by the substantial debt
incurred, the currency income is chiefly determined
by the harvest of grain, flax and other agricultural
commodities, the production and collection of
which is exposed to climatic and other risks.
These considerations persuaded the Soviet Governnent
 to keep abroad funds of foreign currencies
sufficient to meet current payments.
Even before the war it was estimated that the
foreign currency and gold reserve abroad of the
Government, amounted at least to 25-30%, of the
otal indebtedness abroad. The concentration in the
hands of the Soviet Government of all trading
transactions in foreign countries allows of a slight
decrease in available reserves of foreign currencies.
But the Moscow authorities, in view of fact
that the major part of the foreign debt of the
U.S.S.R. is of a short-term character and that
export commodities are continuously undergoing
drastic changes as regards production and marketing,
 always insisted on retaining abroad reserves
in foreign currencies and gold amounting to
at least 22-259, of the total foreign indebtedness
of the U.S.S.R. In order to ensure that all obligations
 be punctually met, these reserves should
not be allowed to fall below 250 million roubles.