Profit under the Soviets: Timber Concessions, Western interests and the Monetary Reforms under NEP

In 1921, at the beginning of the New Economic Policy (NEP), V.I. Lenin pointed to the timber industry of the North as a promising opportunity for cooperation with Western interests and the Soviet state soon introduced timber concessions. However, these concessions were not particularly profitable and ended up as a short-lived experiment. This article analyses why timber concessions failed to make a profit, a critical question for the NEP’s semi-capitalist economy. It finds that monetary reforms that began with the re-establishment of central banking in October 1921 and ended in May 1924 with the new ruble clearly contributed to the failures of the timber concessions. The relative stability of the new currency was seen as an important achievement, but with the exchange rate initially fixed, the new ruble became overvalued. Thus, the export of goods purchased in new rubles became less profitable, or simply unprofitable. This led to severe difficulties for timber concessions such as Russangloles, Russhollandoles and Russnorvegoles. We focus on the important Russnorvegoles concession. We also find that there were two occasions when this concession succeeded in circumventing the problem of the overvalued ruble for short periods, yet acting contrary to Soviet interests in this way contributed to the end of Western interests in the company.