"Where the Russian flag has been hoisted, it shall never be lowered." Who and why sold Russian America (Part V)

11:42 01.10.2019 • Yuri Bulatov , Professor of world and Russian history at the Russian Foreign Ministry’s Institute of International Relations, Doctor of Science (History)

The process of signing the handover of Russian territories in North America to the United States was moving ahead at a breakneck speed. Officials at the State Department in Washington signed off on the Alaska sale agreement at 4 am on March 30, 1867. Pointing to this unusual time of signing the transaction, many experts on Russian America describe this as a unique case in the practice of international law. It is hard to agree with this though, since everyone who has studied or is studying the history of international relations and Russian foreign policy at the Moscow Institute of International Relations know how certain agreements were signed in emergency situations. For example, the Rapallo agreement between the USSR and Germany during the 1922 Genoa Conference was signed late at night. This event went down in history as “diplomacy in pajamas,” and symbolized another failure of Western sanctions against our country.  Therefore, any talk about the uniqueness of the “night gatherings” in Washington is simply irrelevant, all the more so since they were not about protecting the interests of Russia, but about the sale of its national treasure – its territory.

The conclusion of the contract for the sale of Alaska somewhat deviated, to put it mildly, from the generally accepted practice of signing international agreements, primarily due to the different status of the signatories on both sides. On the US side, it was signed by Secretary of State William Seward, while the official Russian signatory was Baron Eduard Steckl, the Russian envoy to the United States, which is a bit surprising. After all, it was not some temporary agreement between Russia and the United States on scientific and technical cooperation, or a protocol on cultural exchange. Russia, was ceding a big chunk of its territory, therefore the agreement should at least have been signed by Seward’s Russian counterpart, Alexander Gorchakov.

And again, how come the Russian envoy combined the duties of a political and financial agent? As a diplomat, Baron Steckl was to handle the political aspect of the deal, while the financial side should have been the responsibility of either the Russian Finance Ministry of the State Treasury. What I’m saying is that it was not up to a Foreign Ministry official to tackle financial issues pertaining to that agreement. And still, it was Baron Steckl who, with the tacit consent of the Russian authorities, assumed full responsibility for the implementation of all the political and financial terms of the Alaska sale treaty.

What is also evident from the text of that accord is its inconsistency with the generally accepted practice of concluding international agreements. Article I states that, immediately upon ratification of the agreement, the United States takes over the entire territory of Russian possessions in North America. However, according to Article VI, the United States undertook to pay for the purchase of Alaska within ten months after (!) ratification. This discrepancy contradicts the traditional essence of any sale whereby you pay up front and then start to develop the purchased territory. In this case, however, the Americans felt free to take over Russian America without paying for it for a whole year. Baron Steckl’s accommodating position is really hard to explain from the standpoint of common sense. Why were the Americans allowed to become, right after ratification of the treaty, full-time owners of Russian America, which they immediately began to develop and settle, while Russia had to wait for more than ten months waiting for the United States to pay up? Where is the logic?

The American version of the deal, outlined in the contract, was equally fraught with a potential conflict of interest between Russia and the United States. Any international agreement on financial transactions contains clear-cut provisions on penalties or even on a termination of the agreement should any side fail to meet its contractual obligations. The Treaty of March 30, 1867 features no such clause. Moreover, the Americans, without any explanation, ultimately paid Russia with just a check of the US Treasury in the amount of $7.2 million, and not with the sum’s equivalent in gold, as was stipulated by the agreement. Back in those days, 7.2 million paper US dollars made only 5.4 million dollars in gold. By arbitrarily replacing gold with a paper check, the Americans effectively secured $1.8 million in gold for themselves, while Russia thus found itself on the losing end. Still, no protest was ever lodged by Russia.

When analyzing the provisions of the March 30, 1867 deal, it’s very hard to ignore the exactingness of its wording, whereby the United States always has the right and that Russia invariably must comply. The articles of the Treaty all feature a clear slant in favor of the US buyer, not the Russian seller. The impression is that it was a settlement between the winner and the loser, rather than between equal partners.

The financial side of any transaction is a highly sensitive matter, and the Alaska sale deal is no exception. As you know, the US government failed to meet its obligations under the treaty to remit funds for the purchase of Alaska within ten months of ratification. The deadlines came and went, but the Americans kept delaying the payment without any explanation. The question arises, therefore, whether the Americans actually had the money at the time of the transaction? And if not, then where did the $7.2 million actually come from?

One explanation could be that the US Treasury simply lacked the money, and could not have it in the first place. Indeed, it was just two years since the end of the Civil War, and signs of devastation, desolation and impoverishment of the people were still very evident. Even if, hypothetically, the government did have some extra money at its disposal, it would hardly venture to spend it on buying Alaska instead of using the funds to rebuild the country’s war-ravaged economy.

This is like if, in the immediate wake of the Great Patriotic War of 1941-1945, the Soviet Union decided to spend money to buy some exotic territories to showcase the victorious march of socialism across the planet, instead of using it to restore the national economy. The hard fact, however, is that although there really was no extra money in the US Treasury’s coffers, the purchase still took place. Then who exactly could have lined up such a substantial sum to pay for America’s new territorial acquisitions?

There is a very interesting personality, whose name is never mentioned by Russian researchers of and journalists writing about Russian America, and this the American financier August Belmont, who was also closely associated with the sale of Alaska. The career growth of this young man was simply mindboggling. Prior to his arrival in the United States as a 23-year-old financier, Belmont worked as a manager with the de Rothschild Frères bank branch in Frankfurt, where he caught the attention of the “holy family” of the Rothschild bankers. At the turn of the 1850-60s, the young banker became the right-hand-man of the omnipotent financial tycoon, who eventually dispatched him to the United States, where Belmont’s career literally went through the roof landing him the job of an economic adviser to the President of the United States and a creditor to the government. It is likely that it was Rothschild who gave his trusted financier the necessary sum the US government needed to buy Alaska. Even though information about this is rather scarce, some facts still deserve close attention.

First, I would like to note that the Rothschild set up a think tank in New York, tasked with developing the roadmap for the purchase/sale of Alaska. Acting on Rothschild’s instructions and using his money, August Belmont bought a bank in New York and headed it. After joining public service within the US administration, Belmont continued to oversee his brainchild in New York, which as the events of those days indicate, was playing a significant role in financing the Alaska sale transaction. It is worth remembering that on his way from St. Petersburg to Washington in February 1967 for the signing of the Treaty of Cession of Alaska, the Russian envoy to the United States, Eduard Steckl, made a three-week stopover in New York, allegedly for reasons of bad health. It was New York, not Washington, as stated in the contract, that was listed as the place where the US was to pay Russia for the purchase of Alaska. It was also New York where another American financier, J.W. Riggs, transferred funds to Eduard Steckl for the sold Russian territory. August Belmont apparently provided both external cover for this transaction and facilitated the transfer of ostensibly official American money from Washington to New York via Riggs' private bank.

Therefore, it could be assumed that in the Alaska sale project, the US government was indeed a fictitious buyer, while Rothschild, as the real customer, preferred to remain in the shadows. If so, then exactly what benefits this international tycoon, who ensured Alaska's transition under US jurisdiction, really expected to reap? The Rothschild family apparently sought to gain a free hand doing business in the United States. The unhindered financial enrichment of that “holy family” was also facilitated by the fact that in the newly acquired American territories, the laws of the United States were not fully valid and could easily be sidestepped. It wasn’t until 1959 that Alaska finally got the status of a full-fledged US state. It looks like in the intervening years the Rothschild clan managed to get their money back many times over, if only they had really invested in the purchase of Alaska.

With the arrival of funds for the purchase of Alaska from Riggs’ New York bank to London, where Russia traditionally held its assets in the state-controlled Bank of England, the shady transaction with the sale of Russian America got a new boost. On instructions from Foreign Minister Alexander  Gorchakov, the money for the sale of Alaska was transferred to the Baring brothers' private bank in London, where, as it turned out, the Romanov family held their personal savings. It was later announced that the money from the sale of Alaska was used to finance the construction of the Moscow-Ryazan and Moscow-Kiev railways in Russia. What historians often “forget,” however, is that the money was used to finance private business projects. Proceeds from speculation with private railway company shares, done by Reitern through his proxies, went right into the pockets of the Romanov family and members of their inner circle. As for the $7.2 million received for the sale of Russian America, that money never reached the Russian treasury.

There is one more amazing fact I would like to mention here though. For a whole 20 years (!) after Alaska was sold to RAC shareholders, including members of the imperial family, they kept earning interest on profits from the company’s mythical activities. Even with the Russian-American Company long gone, its shareholders continued to earn their interest until 1888. Where that money was really coming from is anyone’s guess. Most likely, it was just a hidden form of payment for the shareholders’ silence about the shameful end of Russian America. In a laconic entry in his diary, the poet Fyodor Tyutchev, a contemporary of Emperor  Alexander II, made this scathing remark about the consequences of the government’s deal to sell Alaska: “Russian history before Peter the Great is one big memorial service, and after Peter the Great - one big criminal case.” Tyutchev's innermost thoughts did not become public at that time though. Neither did the scandal over the voluntary concession of Russian territories in North America.

The transfer of Russian possessions in North America to the United States   changed the balance of forces in the region. Finding themselves in close proximity to the Russian border, the Americans began to use Alaska as a bridgehead to expand their military-political presence in this part of the Pacific Ocean, as well as to strengthen their influence in the Western Hemisphere as a whole. The deal seriously damaged Russia's strategic interests, and threw in question the country prestige as a maritime power. All this eventually resulted in the Americans eventually turning Alaska into a sort of their unsinkable aircraft carrier off the coast of Russia.

The sale of Alaska also deprived Russia of a major source of raw materials and economic benefits from the development of the region’s reserves of gold, land and offshore oilfields, etc.

The years that have passed since the signing of the Treaty of March 30, 1867 show that in its relations with Russia, the United States has never sought good-neighbor relations and has traditionally acted as a rival. It looks like the lessons of the past haven’t been learned though.

On June 1, 1990, a new, this time a Soviet-American agreement, was signed on the delimitation of areas in the Bering Sea. On the eve of the breakup of the Soviet Union, Mikhail Gorbachev and his team, following the example of the Romanov family, agreed to make yet another concession to the United States – the second in the history of Russian-American relations of the past 150 years. In keeping with the June 1, 1990 agreement, the “foremen of perestroika” ceded 55,000 square kilometers of the Bering Sea shelf to the Americans. This is a different story, however, which awaits its researchers.


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