That Russian Gold

"When we are victorious on a world-wide scale," bragged Lenin in 1921, "we will make public toilets out of gold on the streets of the world's largest cities." Last week Russian gold was indeed flowing into some of the world's largest cities--but for reasons that make Lenin's grand vision seem even more absurd than it did in 1921. Into London and Paris flew ungainly Aeroflot TU-114 airliners bearing gold bars imprinted with hammer and sickle for delivery to Western customers. To cover their huge purchases of Australian, Canadian and U.S. wheat, and their increasing trade with non-Communist nations, the Russians are selling gold in the West at twice last year's pace. They have already delivered about $200 million worth so far this year, and before year's end are expected to sell at least another $350 million worth.

Stalin's Scheme. Though the Soviet Union has somewhat suddenly emerged as the world's second largest exporter (after South Africa), the big influx of Communist gold has failed to upset the West. Actually, the Soviet gold is welcomed by the U.S. Federal Reserve and European central banks, which have formed a consortium--called the London gold pool--to buy up gold as it comes on the market. Reason: the new supply of Soviet gold has eased the West's acute gold shortage and helped stabilize the free market price of gold at very near the official U.S. price of $35 per ounce. The Soviet gold has not only eased the pressure on the dollar but has also alleviated much of the drain on U.S. gold reserves, since European bankers are now able to bolster their holdings with Soviet gold. Chiefly because of the Russian sales, the U.S. partially replenished its own reserves by buying $300 million in gold from the London pool last year.

Gold mining in Siberia, a big business under the Czars, ground to a halt after the Revolution. It did not get started again until 1927, when Stalin, after reading Bret Harte's novels about the California gold rush, set up a gold trust in hopes that renewed mining in Siberia would spur a mass migration to that sparsely settled area. His scheme produced no substantial population shift, but the Russians so rebuilt and expanded their mining industry that by 1938 their annual gold output was worth $183 million.

Party's Call. Russia's main mines are located near a city named Bodaybo in central Siberia, at Magadan on Siberia's east coast, and on the Chukotskiy Peninsula on the Bering Strait. Last month came reports from Russia of new strikes in Kazakhstan and Transcaucasia that promise to be richer than the combined output of the Siberian mines. The Soviets keep as closely guarded secrets the amount of their gold output and reserves, but estimates by gold experts in London and Paris place Russia's current output at $500 million to $1 billion a year and reserves at perhaps as high as $8 billion.

What is not secret is that Soviet gold mining has been plagued for years by thievery--even though trafficking in gold is a capital offense in Russia. When guards were posted and a fence erected around one Siberian mine, production immediately rose 25%. Lax discipline in the mines prompted the Communist Party's Central Committee a few months ago to call on the miners to "exceed output goals and reduce production costs." The exhortation reflected the Soviet Union's growing recognition that so long as Russian agriculture remains disjointed and inefficient, the country's surest breadbasket is its rich gold mines.

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