As a rule, banks and brokers are unwilling to grant to
Soviet Russia an open credit even of short duration and they
yield only to pressure from Soviet trading organisation,
which make the selling of goods conditional upon advances.
In addition to interest charges which are often higher
than the usual rate, the brokers cover the risk connected
with the transaction by charging large commissions
running from 2 to 49%, of the total value of the goods sold
by the Soviet organisations, even if part of these goods
are marketed independently.
It may be remarked that in the ordinary way of business
English brokers would not charge more than 1% to 2%
for their services. If the part of the commission exceeding
the usual rate is regarded as an extra-premium, and the
advance is calculated on an annual basis, it shows that
‘his form of financing costs the Soviet Union approximately
20-22 per cent. per annum, including ordinary interest
charges. High rate of profit explains the attractiveness
of Russian trade financing.
Apart from the more important methods of financing
the trade of the U.S.S.R., which have been described, London
banks transact business to a limited extent by :
(a) Discounting and re-discounting bills with two
Soviet signatures.
(b) Making advances against telegraph communisation
 from representatives of the Soviet Bank to the
affect that export goods are ready for despatch.
(c) Making advances against platinum.
(d) Discounting bills drawn by continental firms,
and accepted by Soviet trading organizations in various
countries.
(e) Discounting bills drawn by English firms supplying
goods to the U.S.S.R.
The last mentioned transaction arises from the purchases
 of Soviet trading organisations. These purchases are
financed by the suppliers themselves or by London banks.
‘When delivering goods to Arcos or to Centrosoyus, or when
signing the contracts, English firms draw bills upon the
ourchasers; these bills either remain in the portfolios
nf the suppliers, or are discounted by or deposited with
English banks, in which event the Soviet bills serve only
as collateral security. The placing on the market of
commercial papers, the average duration of which exceeds
twelve months, encounters many difficulties, to overcome
which, long-term bills are often converted into shortterm
 renewable papers. This conversion is effected by
special agreement between the English supplier and the
Soviet purchasers on the one hand, and between suppliers
and their banks on the other. Invariably English firms

REAL DEBT

Acceptance
and other
hank credits
or financing
imports

Advances of
banks
wrokers etc.,
0 finance
exDorts

3ills drawn
by foreign
suppliers of
mnorts

ist Oct. 1928

?2-DO)



1929

13

QW

ix a certain limit for financing Soviet trade, taking into
;onsideration their own liquid resources and other assets
wailable, as well as the possibilities of insuring part of the
isk involved with the Export Credit Department and
srivate insurance companies. In the case of many indiridual
 electrical equipment producing firms, this limit
onsiderably exceeds a million pounds. The average
avestment of textile and machinery firms is from £500,000
0 £700,000 and of moderate sized engineering firms from
200,000 to £300,000. One well-known chemical concern
avested about £700,000. Such credits are usually regarded
»y English firms as a not fully secured part of their aggre-:ate
 assets, and special reserve funds out of accumulated
rofits are often set up to cover any possible emergency,
s for example, losses in connection with the uninsured
art of such commitments in the event of a debt rejudiation
 on the part of the Soviet Government. This
recessity of allowing in the price for a substantial margin
‘0 build up reserve funds, explains to some extent the
lisparity between the prices quoted by English firms for
joviet orders and for orders of other countries. Those
inglish firms who are unable to secure the assistance
if bankers, of the Export Credit Department or of private
usurance companies, and who do not have the necessary
‘esources for keeping Soviet bills of from 6 to 24 months’
wiration in their own portfolios, prefer to discount these
sills “without recourse” with certain banking houses in
he City of London or with private individuals, who,
villing to invest a part of their capital in speculative
ransactions, are, in the majority of ‘instances, attracted
»y the high rates obtainable on the “‘blackbourse” for
soviet bills, the average rate of which varies from 16 to 359,
er annum, and is determined by conditions in the U.S.S.R.
ind on the foreign money markets.
The extension of the Export Credit Scheme to the
J.S.S.R. in August, 1929, greatly facilitated the financing
»f Soviet orders placed with British firms. The department
vhich insured credits not exceeding six months duration
n the year 1929, extended its guarantees to twelve months
n 1930, and again as a result of an agreement between
he Lord Privy Seal and the Soviet Trade Delegation,
©0 thirty months, including the period in which the orders
vere to be executed. From the date when the scheme
was put into operation up to January, 1932, the guarantees
to Soviet Russia amounted to approximately 15 million
sounds. The outstanding indebtedness in connection
with these guarantees came to about 8 million pounds.
The following table shows the growth of the indebtedness
of the U.S.S.R. to Great Britain (in million roubles)

CONTINGENT LIABILITIES

ixport
goods
pledged
abroad

_iabilities in
sonnection
vith orders
placed and
in state of
axacntion

Grand
Total

Tatal

3A

25

143

134

AR)

3

210

NHR

hb

MG

219