replaced the long-term capital market which was
no longer accessible to Russia after the revolution.
While, as was stated in Memorandum No. 3,
restoration of national production was chiefly
due to mobilisation of internal capital resources,
the part played by foreign capital, more particularly
in the decisive years of the Five Year Plan should
aot be overlooked. During this period, financial
support was forthcoming from abroad to an
ncreasing’ extent, and in the last two years
foreign indebtedness, as was shown above, more
than doubled and imports from foreign countries
greatly increased in importance, and in some
branches of economic life became essential to
further the Soviet programme of industrialisation.
Taking into account the fact that Soviet Russia’s
mports and exports are considerably below prewar
 level, and that the security normally considered
requisite by financiers and industrialists is not
forthcoming, there is little justification for the
assertion, frequently made in some quarters, that
‘he U.S.S.R. is the victim of an economic or financial
slockade. On the contrary, the willingness of the
capitalist world to co-operate with the U.S.S.R. in
its attempt to fulfil the import programme of the
Five Year Plan appears to be remarkable, and
oresents a problem which, however, lies outside
the scope of the present enquiry.
(2) Since the revolution the composition of
che short-term creditors of Russia has changed.
Before the War, 369%, of all short-term credits were
contributed by industrial and commercial concerns,
and 649, by foreign banks; in 1930/31, 809%, of
all credits were contributed by industrial firms
{if export brokers were included the percentage
would be still higher) and only 209%, by banks
and banking houses. Though these figures show that
foreign banks are disinclined to invest money directly
in the U.S.S.R., they are, to all intents and purposes,
carrying the whole burden of Soviet Russia's
foreign debt, for inasmuch as they discount Soviet
sills drawn by industrial firms, they are, as a matter
rf fact, supplying the capital necessary for her
purchases abroad and for the production and

lelivery of commodities which she exports,
imultaneously shifting the risks arising from
uch transactions to governments and firms.
(3) While before the War, Russia’s foreign
sommercial debt consisted of shares and debentures
1p to 809%, and was widely distributed amongst
the numerous classes of well-to-do people in
“ingland, France, Germany, Holland, Belgium
ind to a lesser extent in the United States, the
foreign debt of Soviet Russia is concentrated in the
rands of a limited number of banks and industrial
ind commercial concerns in Europe and America.
The financing of the U.S.S.R. is therefore mainly
a business of big finance and foreign governments.
These governments assumed a responsibility not
altogether devoid of political character when
they guaranteed up to 509%, on the average, and
n certain countries up-to 70%, of the total debt
»f the U.S.S.R.
(4) Owing to its short-term structure, the
nternational indebtedness of the U.S.S.R. contains
slements of uncertainty and instability. Soviet
Russia has to pay off yearly roughly two-thirds of
aer outstanding debt. For this purpose the money
‘orthcoming from exports is insufficient, and hence
:he contraction of new short-term debts is necessary.
[n other words, the financial account of the U.S.S.R.
abroad can only be made good on the assumption
hat new loans will not be refused for the purpose
of meeting the old ones. Should such a refusal
:ake place and coincide with a serious drop in
Soviet exports (a failure of crops for instance),
1 dangerous situation would arise. But as creditors
asually do not wish to place their clients in
lifficulties and seem satisfied so far with the present
modus vivends, there is no reason to expect that
rew credits will be refused to the US.S.R. We
think, however, that both in the interest of the
world and of the Russian people it should be
realised that a lasting solution of the difficulties
des not in external secarity of government guarantees
 combined with high rates of interest, but in
the creation in Russia of such conditions of life
as would in themselves offer security.